Quiz #2 Government intervention and economics
1. Identify which of the following activities should be included in US GDP (check all that are correct)
a. A Singapore citizen builds a factory in CA which produces $5M goods
b. US farmers export 100 tons of corn and beans to China
c. Walmart imports $2M durable goods from Mexico
d. 40,000 cars are made in a GM factory in US
e. 10,000 shoes are made in a Nike factory in Vietnam and sold all over the world
2. Last three quarters’ GDP of a county are 3%, 2%, and -0.5%. This indicates that this country is in recession. (True or False)
3. During economic expansion period, which of the following usually happen(s)? (check all that are correct)
a. High unemployment rate
b. High housing price
c. High GDP
d. Low inflation rate
e. Low salary
f. High Consumer Confidence Index
4. During recession or economic downturn, government should use ____ (expansionary or contractionary) fiscal policy by _____ (increase or decrease) government spending and ____ (increase or decrease) taxes.
5. It is a good idea to acquire devalued assets during recession. (True or False)
6. When economy is too hot, federal reserve should ____ (buy or sell) Treasury bonds, ____ (increase or decrease) reserve requirement, and _____ (increase or decrease) discount rate in order to _____ (increase or decrease) money supply. As a result, inflation rate will go ____ (up or down).
7. When federal reserve decrease interest rate, cost of borrowing will ____(increase or decrease); return of savings and investment will ____(increase or decrease); therefore, business will _____ (increase or decrease) investment, consumers will _____ (increase or decrease) spending, _____ (increase or decrease) borrowing, and ______ (increase or decrease) savings.
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