Economic Matters


​If the Federal Reserve System buys government securities from commercial banks and the public:

​a. the money supply will contract

​b. commercial bank reserves will decline

c. ​it will be easier to obtain loans at commercial banks

d. ​commercial bank reserves will be unaffected                                                


Normal profit is:​

​a. the average profitability of an industry over the preceding 10 years

b. ​determined by subtracting explicit costs from total revenue

​c. the return to the entrepreneur when economic profits are zero

​d. determined by subtracting implicit costs from total revenue          


The term “recession” describes a situation where:​

a. an economy’s ability to produce is destroyed

​b. output and living standards decline

​c. inflation rates exceed normal levels

​d. Government takes a less active role in economic matters

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