Which of these statements is descriptive of a market economy?

Major economic decisions are made by individuals, not for them.

Which of the following is included in the unemployment rate?

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

What are the characteristics of demand?

the desire, ability, and willingness to buy a product

Why are intermediate products excluded from macroeconomic calculations of GDP?

becuase their value is included in that of the final product

What does a Lorenz curve of the U.S. economy show?

that distribution of income has become increasingly unequal over time

Which statement best explains why money was invented?

Money was invented to facilitate the exchange of goods and services.

Bond prices are determined by ___________________.

supply and demand and the buyer's assessment of the repayment risk.

Which of these best describes the Federal Reserve System (the Fed)?

A mostly independent agency that supervises & manages the financial system

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

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

What is the basic purpose of the consumer price index (CPI)?

to track monthly changes in prices paid by urban consumers

How does inflation affect the minimum wage?

it decreases the buying power of the wage.

What happens at the "equilibrium price"?

the number supplied equals the number demanded

Which person would not be included in the civilian labor force?

an army general who works in Washington, D.C.

Why is the Law of Demand called a "law"?

because it has been demonstrated repeatedly

How do production costs affect aggregate supply?

Aggregate supply increases when production costs decrease.

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

A worker's pay rate set by supply of and demand for that worker's skills.

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

Socialist economies offer extensive gov. service but have high tax rates

Which of the following is an advantage of sole proprietorship?

All of the above statements are true.

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Economics Final Exam Review

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Questions 66

Answers

1
Which of these statements is descriptive of a market economy?
Most media is state-owned and operated.
The government determines what is produced and by whom.
Major economic decisions are made by individuals, not for them.
Major economic decisions are made for individuals, not by them.
2
Which term denotes the change in total income when one additional unit of output is added?
marginal revenue
supply schedule
total product
change in supply
3
What do most economist believe is the most efficient way to allocate resources?
distorted incentives
rationing
competitive markets
government action
4
Which of the following is included in the unemployment rate?
the jobless who made an effort to find a job during the past month
people who hold only part-time jobs
people who are too frustrated to look for work
all of the above
5
Which of the following statements best describes trade between two nations?
It is legally required.
It is mutually beneficial.
It involves low cost for both nations.
It avoids specialization.
6
A general rise in the level of prices over time is known as
voluntary exchange.
a catalyst.
inflation.
profit.
7
When making a risky investment, investors usually demand a _______________.
lower purchasing price
lower compensation
higher selling price
higher compensation
8
When a business needs to decide whether a certain action is worth the cost, the most helpful analysis would be a(n)
production possibility comparison.
needs assessment.
cost-benefit analysis.
economic model.
9
What are the characteristics of demand?
the desire and ability to buy a product
the desire, ability, and willingness to buy a product
the willingness and desire to buy a product
the ability and willingness to buy a product
10
On a supply and demand graph, the demand curve generally does what?
slopes up
slopes down
slopes up and then down
slopes down and then up
11
Why are intermediate products excluded from macroeconomic calculations of GDP?
becuase their value is included in that of the final product
because the GDP is a measure of market output on a local level
because those products are goods, not services
because the GDP is a measure of market output on a national level
12
How many Federal Reserve districts are there?
1
6
50
12
13
Who or what is behind an "automatic stabilizer"?
federal government
labor unions
owners of stock
large corporations
14
Under perfect competition, what sets the equilibrium price in the market?
supply and demand
nonprice competition
a monopoly
the government
15
The National Banking System was created in ____ to standardize currency and banking practices in the US.
1861
1900
1863
1933
16
What does a Lorenz curve of the U.S. economy show?
that distribution of income has become more equal over time
that distribution of income has increased over time
that distribution of income has become increasingly unequal over time
that distribution of income has remained the same over time
17
Pure competition and monopoly _______
are the same.
are opposites.
are almost the same.
should not be compared.
18
Which term means something very similar to "government taxing and spending"?
fiscal
entitlement
multiplier
aggregate
19
Which of these is always true of an "underground economy" transaction?
It is illegal.
It is unreported.
It is taxed.
It is legal.
20
What level of government is most closely associated with zoning?
federal
state
interstate
local
21
Which of the following best identifies the incidence of the individual income tax?
wages
workers
corporation
frequency
22
Which statement best explains why money was invented?
Money was invented to lift people out of poverty.
Money was invented to strengthen government power and control.
Money was invented to facilitate the exchange of goods and services.
Money was invented to support a barter economy.
23
Bond prices are determined by ___________________.
supply and demand and the buyer's assessment of the repayment risk.
the maturity life of a bond and its coup0on rate.
supply and demand and the buyer's assessment of the bond's par value.
the maturity life of a bond and its bond rating.
24
Which of these best describes the Federal Reserve System (the Fed)?
Agency through which judiciary supervises & manages the financial system
Agency through which executive branch supervises & manages financial system
A mostly independent agency that supervises & manages the financial system
Agency through which Congress supervises & manges the financial system
25
What are the Fed's three main tools for conducting monetary policy?
easy money policy, tight money policy, and the quantity theory of money
the reserve requirement, open market operations, and wage-price controls
easy money policy, the discount rate, and the quantity theory of money
the reserve requirement, open market operations, and the discount rate
26
When two companies that produce the same kind of product merge, this is called a
horizontal merger.
conglomeration.
vertical merger.
multinational merger.
27
What is the basic purpose of the consumer price index (CPI)?
to track consumer spending on thousands of goods & services
to predict future price increases for representative goods and services
to track monthly changes in prices paid by urban consumers
to predict and avoid deflation, or a decline in the general level of prices
28
In what kind of economy does the government own some of the factors of production?
communist
socialist
market
traditional
29
Consumers in a free enterprise economy ultimately determine _____ to produce.
when
how
what
where
30
Which is a recognized problem with rationing?
neutrality
efficiency
flexibility
expense
31
How does inflation affect the minimum wage?
it decreases the buying power of the wage.
it creates a conversion of wage from current dollars to constant dollars.
it increases the buying power of the wage.
it creates a conversion of wage from constant dollars to current dollars.
32
Which of the following terms describes a strong stock market?
spot market
futures market
bear market
bull market
33
What do prices help buyers and sellers make?
products
decisions
models
targets
34
In the economic term oligopoly, the word part olig- probably means
"one."
"single."
"few."
"all."
35
Which of the following is a factor in preventing economic growth?
recession
GDP
civilian labor force
frictional employment
36
A document certifying ownership of part of a corporation is a
dividend check.
stock certificate.
charter.
bond.
37
In a competitive market economy, prices are considered
dictated.
uncompromising.
favorable.
neutral.
38
What happens at the "equilibrium price"?
the price stops changing
the prices are all the same
the quantity of sellers is the same as the quantity of buyers
the number supplied equals the number demanded
39
Which person would not be included in the civilian labor force?
an accountant who works on contract
an army general who works in Washington, D.C.
a sixteen-year-old customer service representative
a government employee who works in Indiana
40
Why is the Law of Demand called a "law"?
because it has been demonstrated repeatedly
because there are no exceptions to it
because it is an economic term
because it is legally required
41
How do production costs affect aggregate supply?
Aggregate supply increases when production costs decrease.
Aggregate supply increases when production costs increase.
Aggregate supply decreases when production costs remain the same.
Aggregate supply decreases when production costs decrease.
42
A business's net income is defined as
total dividends paid to investors.
total expenses before sales.
total sales before expenses.
total income after expenses.
43
In American free enterprise capitalism, the profit motive can be best though of as what?
an efficiency
a regulation`
an incentive
a market
44
Which type of economy is most prevalent in the world today?
market
mixed
command
traditional
45
The equilibrium price is determined by ___________.
the market
the government
tax rates
big corporations
46
Country A can produce more coal than Country B. An economist would say that Country A has ____ over Country B.
an absolute advantage
a production possibility advantage
an export advantage
a comparative advantage
47
Which statement is the best explanation of the market theory of wage determination?
Management more willing to pay high wage to worker with advanced education.
Worker's value in labor market determined primarily by worker's seniority
A worker's pay rate set by supply of and demand for that worker's skills.
Management tends to pay a lower wage to workers who support unions.
48
How is the principle of "There's No Such Thing As A Free Lunch" illustrated in a socialist economy?
The marketplaces in a socialist economy are free for anyone to enter.
Socialist policies offer advantages to wealthy at expense of less well-off.
Socialist economies tend to collapse when they become too large.
Socialist economies offer extensive gov. service but have high tax rates
49
Which of the following is an advantage of sole proprietorship?
The owner makes all the decisions.
All of the above statements are true.
The owner keeps all the profits.
There are almost no requirements to start up a sole proprietorship.
50
Corporations such as Ford Motor Company, Shell, and BP, which produce & sell products in different countries, are called
multinationals.
industries.
mega companies.
globals.
51
Which of these names a non-economic factor that can block formation of effective economic policy?
ideology
supply-side
monetarism
demand-side
52
What is the name of the fee paid for an insurance policy?
pension
premium
contribution
interest
53
A demand-sider is most likely to support what?
government spending
reduced taxes
deregulation
the Laffer curve
54
Who appoints members of the Fed's Board of Governors?
president
House of Representatives
Chair of the Board of Governors
Senate
55
Which of the following descriptions best explains the meaning of opportunity cost?
the risk associated with producing a new item
the initial cost of starting a new business
the cost of choosing one alternative over another
the cost of business failure
56
Which of the following groups does supply-side policy target through stimulation?
government
workers
consumers
producers
57
Economics is best defined as the study of how societies deal with
the division of labor.
the factors of production.
the paradox of wealth.
the problem of scarcity.
58
Diminishing marginal utility results from lessened
income.
elasticity.
demand.
satisfaction.
59
The four factors of production are land, labor, capital, and
franchises.
inflation.
the government.
entrepreneurs.
60
Which is an example of a public good?
bread
a rock band
the army
a car
61
Which state of production is distinguished by negative marginal returns?
Stage I
Stage III
Negative marginal returns are a dynamic of the entire production process.
Stage II
62
Factors that can cause a change in supply include
increased or decreased government subsidies.
technology and government regulations.
increases in the number of sellers and market expectations.
all of the above.
63
Which of these is a prominent feature of monetary policy?
adjusting interest rates to stimulate the economy
adjusting discretionary spending to stimulate the economy
adjusting tax rates to stimulate the economy
adjusting government expenditures to stimulate the economy
64
The Federal Deposit Insurance Corporation (FDIC) was created to ________.
prevent working people from being exploited by employers
provide modest bank insurance for depositors
help people provide for their own retirement
regulate new companies that were soliciting funds from investors
65
In the model GDP = C + I + G + (X-M), "I" stands for _______.
investment sector
imports
input
interest rate
66
You can easily carry money in a pocket or purse. This reflects what characteristic of money?
limited supply
durability
portability
legal tender

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