Virtual SC economics CP final exam

The study of economics involves ________________

a) explaining how people deal with scarcity

b) studying how things are made, bought, sold, and used

c) explaining how incomes are earned and how jobs are created

d) all of these

Correct Answer: D

When a nation's total output increases over time, the nation is experiencing _____________

a) a decrease in gross domestic product

b) economic growth

c) economic interdependence

d) an expansion of the possibilities curve

Correct Answer: B

Which of the following descriptions best explains the meaning of opportunity cost?

a) the initial cost of starting a new business

b) the cost of business failure

c) the cost of choosing one alternative over another

d) the risk associated with producing a new item

Correct Answer: C

A nation's wealth is determined by its ______________

a) accumulation of all tangible and intangible resources

b) natural resources

c) accumulation of all tangible products

d) product possibilities frontier

Correct Answer: C

Consumers waiting in long lines for a new product is an example of ___________

a) consumerism

b) consumer rights

c) consumer responsibilites

d) scarcity

Correct Answer: D

Paradox of value refers to the ___________

a) a high value of an essential item and the low value of a nonessential item

b) high value of a nonessential item and the low value of an essential item

c) contradiction of what consumers want and what they need

d) contradiction between gross domestic product and market value

Correct Answer: B

The efficient use of scarce resources leads to an increase in ____________

a) productivity

b) investment

c) scarcity

d) capital

Correct Answer: A

The most comprehensive measure of a nation's wealth is provided by its ______________

a) gross domestic product

b) TINSTAAFL rating

c) product possibilities curve

d) capital goods

Correct Answer: A

When a business needs to decide whether a certain action is worth the cost, the most helpful analysis would be a(n) ___________

a) production possibility comparison

b) cost-benefit analysis

c) economic model

d) needs assessment

Correct Answer: B

Which of the following statements best describes the purpose of the production possibilities curve?

a) it predicts the future production of a nation

b) it identifies trends in production

c) it shows which products are most profitable

d) it identifies all possible combinations of goods and services an economy can product

Correct Answer: D

The market structure called perfect competition is best described as ____________

a) theoretical and a goal

b) commonplace and normal

c) small and uncommon

d) natural and abundant

Correct Answer: A

What is the main cause of a change in quantity demanded?

a) substitution

b) changes in revenue

c) change in price

d) the income effect

Correct Answer: C

What is the major difference between perfect competition and monopolistic competition?

a) price

b) competition

c) product differentiation

d) number of firms

Correct Answer: C

What is the relationship between income and demand?

a) a decrease in income increases demand

b) a decrease in price decreases income

c) an increase in price increases income

d) an increase in income increases demand

Correct Answer: D

When the price of something increases, the quantity demanded ___________

a) increases

b) decreases

c) remains unchanged

d) reverses

Correct Answer: B

Which is an example of a public good?

a) a rock band

b) a car

c) the army

d) bread

Correct Answer: C

Which market structure is defined by a single producer?

a) pure competition

b) monopolistic competition

c) oligopoly

d) monopoly

Correct Answer: D

Which of the following do economists use to classify markets?

a) number of firms

b) size of firms

c) type of product

d) all of the above

Correct Answer: D

Which of the following replaces a costly item with a less costly one?

a) the substitution effect

b) the income effect

c) change in demand

d) consumer taste

Correct Answer: A

Which of these best describes the influence of high prices on the behavior of producers?

a) they are an incentive for producers to produce more

b) they are an incentive for producers to buy less

c) they encourage producer to modify their supply schedules

d) they have no significant overall effect on producer behavior

Correct Answer: A

Why is the Law of Demand called "law"?

a) because it is legally required

b) because there are no exceptions to it

c) because it has been demonstrated repeatedly

d) because it is an economic term

Correct Answer: C

According to Keynesian economics, which sector of the economy could offset a decline in business spending?

a) consumer

b) business

c) government

d) foreign

Consumer Answer: C

Equilibrium is reached when what occurs?

a) quantity demanded equals quantity supplied

b) there is no change in the quantity supplied

c) price increases

d) prices are inelastic

Correct Answer: A

Fiscal policy may involve _________

a) estimating the GDP

b) regulating labor unions

c) recognizing an economic problem

d) taxing corporations

Correct Answer: D

In the economic term oligopoly, the word part "olig-" probably means __________

a) few

b) single

c) all

d) one

Correct Answer: A

It is generally believed that a sales tax

a) hurts the poor

b) hurts the wealthy

c) is the only fair tax

d) is unfair to the middle class

Correct Answer: A

The Federal Income Tax system is

a) efficient

b) simple

c) regressive

d) equitable (fair)

Correct Answer: A

Which of the following groups does supply-side policy target through stimulation?

a) producers

b) consumers

c) workers

d) government

Correct Answer: producers

"The most important source of state government revenue"

"Primarily transferred from federal government to state governments"

"The most important source of local government revenue"

All of these statements are true of

a) taxes

b) income tax revenue

c) transfer payments

d) intergovernmental revenue

Correct Answer: D

Elementary schools, police departments, and electrical service are typically paid for by

a) the federal government

b) state governments

c) local government

d) natural monopolies

Correct Answer: C

Policies that make production more efficient are favored by _____________

a) supply-siders

b) demand-siders

c) neither supply-siders nor demand-siders

d) both supply-siders and demand-siders

Correct Answer: D

President Reagan tried to reduce government spending by _____________

a) raising taxes

b) reducing the federal deficit

c) deregulating corporations

d) lowering taxes

Correct Answer: D

The government does not try to eliminate all monopolies. Why?

a) it would be impossible

b) not all monopolies (such as natural monopolies) are bad

c) the government itself is a monopoly

d) there aren't any monopolies anymore

Correct Answer: B

What level of government is most closely associated with zoning restrictions?

a) federal

b) interstate

c) state

d) local

Correct Answer: D

Which of the following be identifies the incidence of the individual income tax?

a) frequency

b) workers

c) corporation

d) wages

Correct Answer: B

Approximately what percent of all U.S. banks are members of the Fed?

a) 20%

b) 25%

c) 40%

d) 50%

Correct Answer: C

During the Civil War, Congress enacted the National Currency Act, which

a) created a National Banking System

b) raised money for the Union

c) created a national currency

d) all of these answers

Correct Answer: D

How does new money enter into circulation in the United States?

a) it is distributed by banks, which get it from the Fed

b) it is distributed to taxpayers each year in the form of tax refunds

c) large businesses use the Fed to exchange their old money for new

d) the FDIC distributes new money when insurance claims are paid out to Fed stockholders

Correct Answer: A

In the early 1800s, currency in the United States was issued by

a) the fed

b) congress

c) banks

d) a central bank

Correct Answer: C

Most banks are established

a) as corporations

b) by local governments

c) to be credit unions

d) to fulfill reserve requirements

Correct Answer: A

Printed on a Federal Reserve note is this statement "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE." This reflects money's function as

a) a medium of exchange

b) a measure of value

c) a store of value

d) any of these answers

Correct Answer: A

The United States went on the gold standard in _______ and then went off the gold standard in _______

a) 1787, 1811

b) 1863, 1876

c) 1900, 1933

d) 1941, 1945

Correct Answer: C

What are the Fed's three main tools for conducting monetary policy?

a) the reserve requirement, open market operations, and the discount rate

b) easy money policy, the discount rate, and the quantity theory of money

c) easy money policy, tight money policy, and the quantity theory of money

d) the reserve requirement, open market operations, and wage-price controls

Correct Answer: A

What do Fed member banks do with customer deposits?

a) they use them to conduct monetary policy

b) they use them to enforce wage-price controls

c) they keep a portion as legal reserves and loan out a portion at interest

d) they use a portion to calculate interest rates and keep a portion as legal reserves

Correct Answer: C

Which agency manufactures U.S. paper money?

a) the Bureau of the Mint

b) the Comptroller of the Currency

c) the Federal Deposit Insurance Corporation

d) the U.S. Bureau of Engraving and Printing

Correct Answer: D

Which of the following can cost you money in large interest payments?

a) a debit card

b) a credit card

c) a checking account

d) a savings account

Correct Answer: B

Which of the following is a DDA?

a) a debit card

b) a credit card

c) a checking account

d) a savings account

Correct Answer: C

Which of the following is an example of fiat money?

a) tobacco

b) hemp

c) gold

d) federal reserve note

Correct Answer: D

Which of these best describes the effectiveness of wage-price controls on inflation?

a) they tend to halt inflation

b) they tend to be unsuccessful

c) they tend to slow inflation but not halt it

d) they tend to increase the rate of inflation

Correct Answer: B

Which of these describes a general connection between the money supply and interest rates?

a) an expansion of the money supply is associated with higher interest rates

b) a contradiction of the money supply is associated with higher interest rates

c) a contraction of the money supply is associated with a freeze in interest rates

d) an expansion of the money supply is associated with a freeze in interest rates

Correct Answer: B

Which of these ensures that the U.S. government does not own the Fed?

a) private state banks are required to buy shares in the Fed

b) private state banks are not allowed to buy shares in the Fed

c) private individuals are not allowed to buy shares in the Fed

d) private national banks are required to purchase shares in the Fed

Correct Answer: D

Which of these interest rates is set by individual banks?

a) the prime rate

b) the reserve rate

c) the discount rate

d) the monetary rate

Correct Answer: A

Why is the Federal Open Market Committee considered the Fed's primary monetary policy-making body?

a) it has the power to raise and lower interest rates

b) it has the power to enforce consumer protection regulations

c) it maintains the payments system for checks and electronic money transfers

d) it ensures that the public has accurate information about the terms of credit cards and loans

Correct Answer: A

You can easily carry money in a pocket or purse. This reflects what characteristic of money?

a) legal tender

b) limited supply

c) durability

d) portability

Correct Answer: D

You pick up a $1 bill. What are you holding?

a) currency

b) a Federal Reserve note

c) fiat money

d) all of these answers

Correct Answer: D

One of these characteristics of a capitalist free enterprise economy is

a) the minimum wage

b) consumerism

c) voluntary exchange

d) central planning

Correct Answer: C

The economic system of the United States is considered a

a) free market capitalist economy

b) command economy

c) socialist economy

d) traditional economy

Correct Answer: A

What kind of economy offers uniformity in wages regardless of individual productivity?

a) all economies

b) traditional economies

c) command and socialist economies

d) market and free-enterprise economies

Correct Answer: C

Which of the following is a disadvantage of a market economy?

a) it sustains a high degree of uncertainty and doesn't provide for everyone's needs

b) it restricts to personal freedom

c) it discourages creativity and new ideas for doing things

d) it does not allocate resources as efficiently as other types of economies

Correct Answer: A

Which of the following were a direct result of union activity?

a) the adoption of immigration quotas

b) consumer boycotts

c) a higher rate of pay for overtime hours worked

d) an increase in jobs for migrant workers

Correct Answer: C

Which statement describes a disadvantage of a command economy?

a) items tend to be produced solely for the sake of profit

b) it cannot "change direction" easily if the need arises to do so

c) it does little to help the less advantaged obtain the goods and services they need

d) numerous consumer inconveniences are present

Correct Answer: D

___________ protect consumers against harm from products on the market

a) franchises

b) profit motives

c) private property rights

d) government regulations

Correct Answer: D

A general rise in the level of prices over time is known as

a) a catalyst

b) voluntary exchange

c) profit

d) inflation

Correct Answer: D

Consumers in a free enterprise economy ultimately determine ___________ to produce

a) when

b) how

c) what

d) where

Correct Answer: C

During the Great Depression, union promoters ____________

a) renewed their efforts because hard times united workers

b) stopped organizing labor because the economy slowed

c) tried to organize labor but workers refused to cooperate

d) had no success because most people did not have jobs

Correct Answer: A

Economic equity means that it is illegal to discriminate on the basis of age, sex, race, religion, or

a) income

b) status

c) disability

d) political views

Correct Answer: C

How is the principle of "There's No Such Thing As A Free Lunch" illustrated in a socialist economy?

a) socialist economies tend to collapse when they become too large

b) the marketplaces in a socialist economy are free for anyone to enter

c) socialist policies offer advantages to the wealthy at the expense of those less well-off

d) socialist economies tend to offer extensive government services but they have high tax rates

Correct Answer: D

Markets in the free enterprise system are seldom regulated by

a) businesses

b) the government

c) consumers

d) entrepreneurs

Correct Answer: B

The four factors of production are land, labor, capital, and

a) entrepreneurs

b) franchises

c) inflation

d) the government

Correct Answer: A

What have some states done to protect workers from adverse economic events such as layoffs and illnesses?

a) they set up support groups

b) they set up unemployment compensation programs

c) they provided every worker with insurance

d) they gave workers more time off

Correct Answer: B

Which of the following best expresses the idea that higher education often results in higher earnings?

a) fact-finding

b) signalling theory

c) the theory of negotiated wages

d) the market theory of wage determination

Correct Answer: B

Which of the following describes a move away from capitalism?

a) Sweden's 1980s cutback on social programs

b) the transformation of the former Soviet Union to today's Russia

c) the nationalization of major industries in Hugo Chavez's Venezuela

d) economic reforms following the Great Depression in the United States

Correct Answer: C

Which of the following illustrates why the wage gap between women and men is discriminatory?

a) giveback

b) two-tier wage system

c) glass ceiling

d) Equal Pay Act of 1963

Correct Answer: C

Which of the following is a term for a labor-dispute tactic used by neither unions nor management?

a) seizure

b) boycott

c) mediation

d) arbitration

Correct Answer: A

Which of the following is largely responsible for the growth of a free enterprise system?

a) government

b) profit motive

c) Gross Domestic Product

d) market efficiency

Correct Answer: B

Which of the following is the most responsible for increases in the federal minimum wage?

a) supply of labor

b) demand for labor

c) two-tiered wage system

d) inflation

Correct Answer: D

Which of the following tactics is used only by management?

a) picket

b) lockout

c) boycott

d) negotiation

Correct Answer: B

Which of the following were the first types of unions formed in the United States?

a) craft unions and industrial unions

b) craft unions and independent unions

c) company unions and industrial unions

d) company unions and independent unions

Correct Answer: A

Which of these is an accurate statement about mixed economies today?

a) there are more mixed economies in the world than any other kind

b) very few economies today can be accurately described as "mixed"

c) mixed economies exist mostly in nations with communist governments

d) most nations that once had a mixed economy have evolved into command economies

Correct Answer: A

Which statement is the best explanation of the market theory wage determination?

a) management tends to pay a lower wage to workers who support unions

b) a worker's pay rate is set by supply of and demand for that worker's skills

c) management is more willing to pay a high wage to a worker with advanced education

d) a worker's value in the labor market is determined primarily by that worker's seniority

Correct Answer: B

Who did Karl Marx believe would be the beneficiaries of socialism?

a) property owners

b) the government

c) workers

d) capitalists

Correct Answer: C

Why did Sweden move from socialism to a more mixed economy in the 1980s?

a) its citizens objected to the nation's high rate of taxation

b) its citizens demanded that elements of communism be adopted

c) its government decided that welfare and health benefits were no longer needed

d) its government decided that opening the country's petroleum industry would boost the economy

Correct Answer: A

What best explains why a nation's GDP is an indication of its citizens overall well-being?

a) it tracks the growth of imports into the U.S.

b) it measures the increased effects of government spending

c) it gauges the number of voluntary economic transactions occurring in that nation

d) it measures how well the government is regulating the depreciation of the value of money

Correct Answer: C

What conditions stop the economy from growing and turn an expansion into a contraction?

a) decrease in foreign investment

b) low-interest capital expenditures

c) increase in exports

d) external shocks

Correct Answer: D

What type of unemployment occurred when the government closed military bases in the 1990s?

a) cyclical

b) seasonal

c) frictional

d) structural

Correct Answer: D

Which of these are the two mot significant causes of income inequality?

a) changes in family structure and monopoly power

b) differences in wealth and differences in education

c) advances in technology and gender discrimination

d) an increase in service jobs and declining union membership

Correct Answer: B

A trend line is ____________

a) a trough on a graph

b) a reflection of an external shock

c) a hypothetical graph line

d) a peak on a graph

Correct Answer: C

During which decade were government assistance programs most effective at reducing the poverty rate?

a) the 1960s

b) the 1970s

c) the 1980s

d) the 1990s

Correct Answer: A

How are the effects of the U.S. inflation rates felt around the world?

a) the effects of U.S. inflation rates are not felt around the world

b) the number of goods and services that each dollar will buy increases

c) the dollar's exchange rate rises

d) U.S. inflation makes U.S. exports more expensive overseas

Correct Answer: D

How did business cycles change after World War II?

a) there were no external shocks

b) business cycles became more extreme

c) recessions occurred more frequently

d) recessions became shorter and periods of expansion became longer

Correct Answer: D

What does a trough indicate?

a) the GDP has stopped increasing and has begun to decline

b) the GDP is stagnant

c) there is a GDP gap

d) the GDP has stopped declining and has begun to increase

Correct Answer: D

Which economic sector is not determined by measuring specific sources of income?

a) the household sector

b) the net foreign sector

c) the public or government sector

d) the business or investment sector

Correct Answer: B

Which of the following is a form of instability that reverses economic growth?

a) recession

b) deflation

c) frictional unemployment

d) creeping inflation

Correct Answer: A

Which of the following is included in the unemployment rate?

a) people who hold only part-time jobs

b) people who are too frustrated to look for work

c) the jobless who made an effort to find a job during the past month

d) all of these answers

Correct Answer: C

Which of the following is NOT a cause of inflation?

a) wage-price spiral

b) demand-push

c) excessive monetary growth

d) none of these answers

Correct Answer: B

Which of the following is true about inflation?

a) inflation has a tendency to make people change retail spending habits

b) economists have agreed on a single explanation for the cause of inlfation

c) inflation tempts some people to speculate in an attempt to take advantage of rising prices

d) inflation is a decrease in the general level of the prices of goods and services

Correct Answer: C

Which of these does a Lorenz curve compare?

a) levels of income and rates of taxation

b) equal income distribution and actual income distribution

c) the distribution of wealth and the distribution of income

d) levels of education and levels of participation in assistance programs

Correct Answer: B

Which of these groups is most vulnerable to poverty?

a) people over 65 years of age

b) children

c) people who live in an enterprise zones

d) people without high school diplomas

Correct Answer: B

Which of these states a difference between personal income (PI) and disposable personal income (DPI)?

a) PI is measured before taxes are taken; DPI is measured after taxes are taken

b) PI is measured after taxes are taken; DPI is measured before taxes are taken

c) PI refers to an individual's income; DPI denotes income from an entire sector

d) PI denotes income from an entire sector; DPI refers to an individual's income

Correct Answer: A

Which of these would economists count as a member of a household, but not part of a family?

a) a woman sharing an apartment with her brother

b) a single person with relatives who live elsewhere

c) an adult male sharing an apartment with relatives

d) an adopted child whose birth parents live elsewhere

Correct Answer: B