Economics and Personal Finance Practice Flashcards

One hundred and fifty practice flashcards based on lecture notes covering macroeconomics, microeconomics, and personal finance fundamentals.

In economic terms, what does the word aggregate mean?

Total

In an economic context, what is an example of a public good?

National defense spending

All of the following are characteristics of monopolistic competition except

No market power among individual firms

One of the reasons consumers choose substitutes is that

They are relatively cheaper

Being able to make something using fewer resources than other producers require would give you a(n)

Absolute advantage

Most economies today are

Mixed economies

Which of the following pairs are resource complements?

Cab drivers/cabs

According to Adam Smith, market forces coordinate production as if by

An invisible hand

The demand curve for a resource

Slopes downward

To decide whether to have dessert, you consider the extra time you would spend eating the dessert and the extra calories. This type of decision considers

Opportunity cost

Which of these indicates a person has collateral that will help him or her obtain a loan?

The person owns a house

Suppose more businesses began providing health insurance to their employees. How would this affect the labor market?

The quantity of labor demanded would increase

If U.S. production falls short of consumption, Americans buy the difference from

Foreign nations

Which productive resources include factories, tools, trucks, machines, and computers?

Capital goods

Farmers operate in a perfectly competitive market. Why?

The amount one farmer sells has no effect on the market price

Which of these workers at a manufacturing company would likely earn the most?

A $45\text{-year-old}$ manager with a professional degree

Changes over time in the cost of a fixed market basket of goods and services purchased by a typical family are measured by the

Consumer price index

What types of stock might an index mutual fund purchase?

Only stocks in the $500$ largest corporations in the United States

All of the following are problems with monopolies except

Increased consumer surplus

Which situation demonstrates the law of diminishing marginal utility?

You will only purchase succeeding slices of pizza if they cost less

A partnership

Ends when one partner dies or leaves the business

When price decreases, a producer becomes _______ to supply the good

Less willing and less able

An individual stockholder

Has little say in a firm’s operation

The opportunity cost of a chosen item or activity is

The value of the best alternative you must pass up

What does capital refer to in the three Cs of credit?

The value of the things you own that could be sold or cashed in to repay a loan

For which level(s) of government do property taxes make up a large portion of revenue?

Local

Which of these workers is most likely to be considered underemployed?

A mother who has a part-time job selling cosmetics during school hours

The intellectual property rights of a song writer are protected by a

Copyright

When a product’s price increases there will be

Movement along the supply curve/increase in quantity supplied

The sum of consumption, investment, government purchases, and net exports equals

Aggregate expenditure

Which of these is an example of production that takes place in the underground economy?

A mother who is paid $10$ to watch her neighbor’s baby but does not report the income

Which of these is the best reason for why surgeons earn more than barbers?

They have more human capital

A recession is a decline in total production lasting

At least $6\text{ months}$

U.S. gross domestic product includes all of the following except

A car produced by General Motors in a plant in Mexico

Wage rates differ because of each of the following except differences in

Workers’ needs

In order to have an effect, a price floor must be set

Above the equilibrium price

An economic system is the set of mechanisms and institutions that resolves the questions of what, how, and

For whom

If you want to increase your liability protection to $1 million or $2 million in covered losses, you should buy an additional

Umbrella policy

Scarcity arises because all societies have

Limited productive resources to satisfy unlimited wants

An example of a commodity is

A bushel of wheat

A shift to the right of the demand curve for pizza will

Cause the supply curve for pizza to shift to the right

As long as the demand curve slopes downward, a leftward shift of the supply curve

Increases price but reduces the quantity

What should you do if you find you are a victim of identity theft?

You should take all of these actions

A budget worksheet should contain each of the following except

Expected taxes

The most important economic decision maker in market economies is

Households

Which of these is most clearly an example of a benefits-received principle tax?

A fee charged to enter a national park

Which of the following is NOT a determinant of supply?

Consumer expectations

Which of these is not a change that could shift an economy’s production possibilities frontier?

Change in the inflation rate

How often should you review and revise your budget?

At least once every month

A rightward shift of the supply of loans curve would

Reduce the interest rate

Which of these is typically a secured loan?

Borrowing to buy a home

Which of the following is an example of a government-imposed price ceiling?

Rent-controlled housing prices

How does a right-to-work law affect unions?

It reduces union membership

Any price that is below a product’s equilibrium price will result in a

Shortage that will force the price to rise

The economy of the United States can be described as a

Mixed economy

All of the following reduce demand except

An increase in consumer income

An oligopoly is comprised of how many firms?

A few

Which of the following is an example of personal insurance?

Term life insurance

The largest source of revenue for local governments is

Property taxes

The law of supply states that the quantity of a good supplied is usually directly related to its

Price

In a pure command economy all of the following occur except

Competition is encouraged

Specialization occurs when individual workers focus on

Single tasks

According to the law of diminishing marginal utility, if Sandra is willing to pay $50 for a sweater, the value of a second sweater to her will be

Less than $50$

What is the best way to protect yourself from defective or dangerous products?

Use your own common sense

About half of all union members are

Government workers

What is a person’s record of paying bills and debts over time called?

Credit history

Compared with competing firms, cartels usually

Earn more profit

Which of the following is a social insurance program?

Medicare

Studies have shown that union members earn an average of roughly ? more than similarly qualified nonunion workers.

$$10\text{ percent}$$

If suddenly a large population increase occurred, what impact would it have on the housing market?

It would shift the demand curve to the right

A private corporation issues stock to ?, while a publicly traded corporation issues stock to ?

Members of a small group; anyone who chooses to buy shares

Which of the following is true of fees and interest charged for credit cards?

Many cards charge no annual fee

In 1981 President Ronald Reagan implemented supply-side economic policy by leading the government to

Reduce personal income tax

Monetary policy involves

Regulating the money supply

Suppose your car is destroyed by something other than a traffic accident, such as a fire. What type of insurance will help pay for a replacement?

Comprehensive insurance

Which of these workers is seasonally unemployed?

A construction worker who cannot find employment in February

The purpose of the Troubled Asset Relief Program (TARP) was to

Stabilize banks

Elasticity, in economic terms, is another word for

Responsiveness

Businesses typically borrow for each of these purchases except

To offer lower prices to consumers

What is a rational consumer choice?

One that results in the greatest possible satisfaction per dollar spent

Which of these is an example of a long-term goal?

Completing an accounting degree

Which of these will be counted as part of U.S. GDP?

The value of a Toyota car produced in the United States

You deposit $200 in a certificate of deposit at 5% interest for one year. What is the future value of this deposit at the end of the CD’s term?

$210

On a graph of the production possibilities frontier, points inside the PPF are

Inefficient

Suppose an American union runs a successful campaign to convince consumers to buy American-made products. How would this affect the supply and demand graph for union labor?

The demand curve would shift to the right

Interest rates on credit cards are generally higher than interest rates on other types of loans because

The credit card company does not require collateral on credit card debt

Interest rates tend to be highest on

Personal loans

What type of life insurance can young people purchase at a relatively low cost?

Term life insurance

Suppose you own a company that silkscreens t-shirts. The cost of producing one t-shirt image is $1.50. The revenue you earn on each t-shirt is $3.75. What is your profit per t-shirt?

$2.25

Each of the following is true of firms in perfect competition except

They all earn the same profit per item sold

What does a leftward shift of a supply curve indicate?

A decrease in supply

Adam Smith’s description of the invisible hand supported the doctrine of

Laissez-faire

The process of turning an invention into a marketable product is called

Innovation

A joining of Ford, Daimler-Chrysler, and General Motors to form a single firm would be an example of

A horizontal merger

All of the following are features of perfect competition except

Differentiated products

The headlines in the local paper read: Business Orders Down Nationwide, Fewer Machines Sold, Workers Laid Off, Households Cut Back on Spending. What conclusion can you draw?

A possible recession is looming

Who owns a corporation?

Its stockholders

Compared to stocks, bonds are generally

Less risky

Sales of intermediate goods and services are excluded from gross domestic product to avoid the problem of

Double counting

Why shouldn’t consumers expect the government to protect their rights in every transaction they complete?

There are too many transactions for the government to be involved in all of them