Economics Exam 2025: Multiple Choice Questions

Fundamental problem of economics?

Scarcity

Economics is primarily concerned with...

Allocating limited resources

Opportunity cost is...

The benefit given up when choosing one alternative over another

Factor of production?

Capital

Entrepreneur

A person who organizes resources to produce goods

Law of demand

As price increases, demand decreases

Unemployment rate

Percentage of labor force without a job

Not counted in GDP

Used car sales

CPI (Consumer Price Index)

Used to measure inflation

Free trade

No restrictions on international trade

Benefit of international trade

Greater efficiency

Comparative advantage

Can produce a good at a lower opportunity cost

NAFTA

An agreement between U.S., Canada, Mexico

Function of money

Medium of exchange

Federal Reserve System

Controlling monetary policy

Inflation

General rise in prices

Gross Domestic Product (GDP)

Measures the economic performance of a country

National happiness

A measure of the overall well-being and satisfaction of a country's citizens.

Total government spending

The total amount of money that the government spends on goods, services, and public projects.

Value of all goods and services produced

The total monetary value of all finished goods and services produced within a country's borders in a specific time period.

Total imports and exports

The total value of goods and services brought into a country (imports) and sent out of a country (exports).

Recession

A period of economic decline characterized by a fall in GDP for two consecutive quarters.

Decrease in interest rates

Typically encourages more spending and investment, while discouraging saving and borrowing.

Fiat money

A type of currency that has no intrinsic value but is declared by the government to have value.

Surplus in the market

Occurs when the supply of a product exceeds the demand for it, leading to a decrease in prices.

Demand for tea when coffee prices rise

The demand for tea is likely to increase when the price of coffee rises.

Shift in the demand curve to the right

Indicates an increase in demand.

Equilibrium

The point where supply and demand curves intersect.

Oligopoly

A market structure characterized by a few firms controlling the market.

Perfect competition

A market with many sellers and identical products.

Monopoly

A market structure where a single seller has no close substitutes.

Advertising in market structures

Most common in monopolistic competition.

Prices in perfect competition

Determined by market forces of supply and demand.

Price floor

Results in a surplus when set above the equilibrium price.

Social Security

An example of a transfer payment made by the government.

Fiscal policy

Involves changing tax and spending levels to influence the economy.

Role of the government in a market economy

Includes providing public goods.

Tariff

A tax on imported goods.

A strong U.S. Dollar makes American goods...

More expensive for buyers

A budget is...

A plan for spending and saving

Compound interest is best defined as...

Interest on both principal and accumulated interest

credit score affects...

Loan eligibility and interest rates

A savings account earns ...

Low, steady interest

Insurance is used to...

Protect against financial risk

Capitalism emphasizes...

Private ownership and profit

A command economy is one where...

Gov controls production

Socialism includes...

Public ownership of major industries

Traditional economies are typically found in...

Isolated, rural societies

Mixed economies combine...

Market and command elements

Which would likely increase productivity?

Better tech

Which is an example of a public good?

Streetlight

If wages go up and productivity stays the same, what may result?

Inflation

Which of the following best represents a business cycle?

Periods of growth and contraction

Which group is hurt most by unexpected inflation?

Borrowers?