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Macroeconomics CLEP Practice Test
1) What is barter?
A) The gifting of an item
B) When someone agrees to do work for food
C) When money is exchanged for an item
D) When a receipt is exchanged for an item
2) When was the first recorded production of minting of currency?
A) 1789 B.C.
B) 10th century A.D.
C) 640-630 B.C.
D) Golden age of Greece
3) Explain the fractional reserve system.
A) The depositor keeps only a fraction of the deposit
B) The bank keeps a fraction of a deposit on premises or with the Fed
C) The bank keeps a fraction of a deposit and borrows funds from other banks or the Fed to multiply the amount of money it has to loan
D) The depositor can borrow funds on a fraction of the deposit left with the bank as collateral
4) Why does the banking system work?
A) Careful administration by the Fed
B) Gold backing of the currency
C) Legal recourse
D) Trust between depositors and the bank that if needed, the bank will have sufficient assets on hand
5) When a person purchases a home but lacks enough for the total down payment, what might they be looking for?
A) A first mortgage
B) An equity loan
C) A line of credit
D) A second mortgage
6) The main responsibility of the Fed is:
A) Promote high employment
B) Promote low inflation
C) Control money supply
D) Prevent and mediate any potential economic financial crisis
7) The Fed will raise interest rates by:
A) Purchasing securities on the open market
B) Selling bonds on the open market
C) Ordering banks to raise their Prime rate
D) Lowering the Reserve Requirement
8) What is a floating currency?
A) When a nation’s currency is allowed to adjust to the market
B) when a currency is pegged to another nation’s exchange rate
C) The value of a nation’s currency is decided by the market
D) The Central bank decides what the exchange rate will be
9) What is the advantage of having a devaluing currency?
A) Imported goods will be less expensive
B) There is no advantage
C) Exported goods will be less expensive and thus more competitive
D) Domestic prices will move lower
10) What is a potential risk of globalization?
A) One nation dominating the world
B) A transfer of wealth from the developed world to the underdeveloped.
C) An unforeseen financial crisis which could affect the entire world
D) The Sultan of Brunei could become the Sultan of the World
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CLEP Practice Test Answer Key:
- B:) When one thing of value is exchanged for another thing of value.
- C:) 640-630 B.C. by the Lydians.
- C:) The bank keeps a fraction of a deposit and borrows funds from other banks or the Fed to multiply the amount of money it has to loan.
- D:) Trust between depositors and the bank that if needed, the bank will have sufficient assets on hand.
- D:) A second mortgage.
- D:) Prevent and mediate any potential economic financial crisis. (The other answers are correct but not the main responsibility.)
- B:) Selling bonds on the open market.
- C:) The value of a nation’s currency is decided by the market.
- C:) Exported goods will be less expensive and thus more competitive.
- C:) An unforeseen financial crisis which could affect the entire world.