Consumer Test 1

LOCKTF INNNNNNN

 Which type of economic system allows private citizens to own businesses but also has government programs like Social Security?

 a) Command economy
b) Market economy
c) Mixed economy
d) Traditional economy

c) Mixed economy – U.S. combines free-market with government regulation (e.g., Social Security).

2. What is the central economic problem that forces individuals and societies to make choices?
a) Inflation
b) Scarcity
c) Competition
d) Surplus

b) Scarcity – Limited resources vs. unlimited wants forces choices.

3. Choosing to buy a video game instead of going to the movies best illustrates:
a) Opportunity cost
b) Fiscal policy
c) Scarcity
d) Labor

 a) Opportunity cost – Concert is the next-best choice given up.

4. Which of the following is not a factor of production?
a) Entrepreneurship
b) Capital
c) Land
d) Money

 d) Money – Money buys resources but is not a productive factor.

5. Which government program is mainly designed to provide financial support to retired and disabled citizens?
a) Medicare
b) Social Security
c) Food stamps
d) Unemployment insurance

b) Social Security – Primary purpose is retirement/disability income

6. The federal government raises most of its revenue from:
a) Tariffs
b) Income taxes
c) Property taxes
d) Lottery sales

 b) Income taxes – Largest revenue source for federal government.

7. Local governments raise most of their revenue from:
a) Income taxes
b) Property taxes
c) Sales taxes
d) Excise taxes

 b) Property taxes – Main local revenue for schools, parks, fire/police.

8. A tax that increases as income increases is known as a:
a) Progressive tax
b) Regressive tax
c) Flat tax
d) Sales tax

a) Progressive tax – Higher income = higher tax rate.

9. If a business sets the price of a product above the equilibrium point, the result will be:
a) Shortage
b) Surplus
c) Balance
d) Inflation

b) Surplus – Price above equilibrium = too much supply.

10. Which of the following would most likely cause demand for winter coats to rise?
a) A very mild winter
b) A population increase in a cold region
c) A drop in consumer income
d) Warm fashion trends replacing coats

b) Population increase in cold region – Raises demand for coats.

11. Which of the following is NOT a benefit of competition among businesses?
a) Lower prices for consumers
b) More innovation
c) Greater product variety
d) Higher barriers to entry

 d) Higher barriers to entry – Competition lowers barriers, not raises.

12. The total dollar value of all final goods and services produced in a country in one year is:
a) GDP
b) Inflation
c) Unemployment rate
d) National debt

a) GDP – Measures total value of final goods/services in a year.

13. When the federal government adjusts taxes and spending to influence the economy, this is:
a) Fiscal policy
b) Monetary policy
c) GDP
d) Supply-side policy

a) Fiscal policy – Taxes & spending by government.

14. If inflation rises faster than a retiree’s pension payments, what happens?
a) Their purchasing power decreases
b) Their purchasing power increases
c) They break even
d) They owe higher taxes

a) Their purchasing power decreases – Inflation (6%) outpaces pension (2%).

15. In which phase of the business cycle would unemployment be highest?
a) Peak
b) Recovery
c) Recession/Trough
d) Expansion

c) Recession/Trough – Unemployment is highest.

16. Which economic indicator measures the percentage of people who want a job but cannot find one?
a) GDP
b) Unemployment rate
c) Inflation rate
d) Budget deficit

 b) Unemployment rate – Tracks % of job-seeking people unemployed.

17. Which of the following is an example of capital in production?
a) A farmer’s tractor
b) A coal mine
c) The land a store is built on
d) A manager’s decision-making

 a) A farmer’s tractor – Machines/tools = capital.

18. Which of the following best describes entrepreneurship?
a) The natural resources used to make goods
b) The effort people use to produce goods and services
c) The risk-taking and innovation needed to start businesses
d) The machines and tools used to produce products

 c) Entrepreneurship – Innovation + risk-taking.

19. A decline in consumer spending across the nation would most likely lead to which stage of the business cycle?
a) Expansion
b) Peak
c) Contraction/Recession
d) Trough

c) Contraction/Recession – Spending declines = economic slowdown.

20. Which is considered a regressive tax?
a) Federal income tax
b) Property tax
c) Sales tax
d) Corporate income tax

c) Sales tax – Regressive: takes larger % of income from poor.

21. What is the government’s largest area of spending?
a) Education
b) National defense
c) Social programs like Social Security and Medicare
d) Infrastructure

c) Social programs – Social Security/Medicare = largest spending.

22. A grocery store lowers the price of milk. As a result, the quantity demanded rises. This is an example of:
a) Law of Supply
b) Law of Demand
c) Scarcity
d) Opportunity cost

b) Law of Demand – Lower price → higher demand.

23. When government spending is higher than its revenue, the result is called a:
a) Budget surplus
b) Budget deficit
c) Balanced budget
d) Tax credit

b) Budget deficit – Spending > revenue

24. Which policy is controlled by the Federal Reserve and involves interest rates and money supply?
a) Fiscal policy
b) Monetary policy
c) Supply-side policy
d) Inflationary policy

b) Monetary policy – Federal Reserve uses interest rates/money supply.

25. A company makes only 200 pairs of shoes a month because it lacks enough workers. This is an example of:
a) Scarcity of resources
b) Opportunity cost
c) Demand shortage
d) Surplus

a) Scarcity of resources – Not enough labor limits production.

26. If the government lowers income taxes, what is the most likely short-term effect?
a) People will spend more, boosting demand
b) People will save less
c) Prices will immediately fall
d) The unemployment rate will rise

a) People will spend more – Tax cuts increase disposable income

27. A situation where demand exceeds supply at a given price is called a:
a) Surplus
b) Shortage
c) Equilibrium
d) Inflation

 b) Shortage – Demand > supply.

28. Which of these is considered an economic indicator of inflation?
a) GDP
b) Consumer Price Index (CPI)
c) Unemployment rate
d) Federal spending levels

b) Consumer Price Index (CPI) – Measures inflation trends.

29. If demand for electric cars increases while supply stays constant, what will likely happen to prices?
a) Prices will rise
b) Prices will fall
c) Prices will stay the same
d) Prices will become unpredictable

a) Prices will rise – Demand increase with constant supply = higher prices.

30. Which principle explains why businesses in a competitive market must keep prices reasonable?
a) Law of Supply
b) Scarcity
c) Competition
d) Fiscal policy

c) Competition – Businesses lower prices, improve quality to attract buyers.