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Economics - Unit 2 - Test Review Flashcards | StudBud
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Economics - Unit 2 - Test Review
Economics - Unit 2 - Test Review
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Review of GDP, monetary policy, and fiscal policy for on level Economics in high school
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Questions
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Answers
1
What is an example of a positive external shock to aggregate supply?
Good weather leads to unusually productive harvest.
Popular new diet encourages consumers to buy more cornflakes
Demand for new suburban houses increases farmland value.
China announces it will import 50% more from USA.
2
What is the cost of money?
the bank’s use of money creation
the smoothing out of fluctuations in the market
the price of the interest rate
the economy’s use of open market operations
3
What is the difference between a recession & a depression?
Depression is deep recession w/high unemployment.
Recession is more severe than depression & lasts longer
Recession is period of growth; depression is contraction
Unlike recession, depression includes high inflation.
4
As you move from left to right, the aggregate demand curve
may slope upward or downward.
slopes upward.
is horizontal.
slopes downward.
5
What is one possible short-term effect of an easy money policy?
increased investment spending
a contracting money supply
decreasing inflation
higher interest rates
6
What are royalties?
fees paid to celebrities for using their names
percentage of a franchise’s earnings paid to parent company
a percentage of profits paid to the government
fees paid to law firms and accountants
7
When the price level falls, consumers & firms buy more goods & services.This is:
aggregate demand curve.
aggregate supply curve.
equilibrium GDP.
business cycle.
8
As commercial banks keep more excess reserves, money creation
remains the same.
could either increase or decrease.
increases.
decreases.
9
In a typical business cycle, what stage immediately follows a peak?
contraction (recession)
growth
trough
expansion (recovery)
10
Which of the following is an advantage of a sole proprietorship?
No one is responsible if it fails.
It is easy to get financing to start one.
It is an easy way to make a lot of money.
It is the least-regulated form of business organization.
11
What is one example of an automatic stabilizer?
a balanced budget amendment
food stamps
a new highway project
the national debt
12
If a firm enjoys economies of scale,
average total cost will increase as production increases.
its total costs will decrease as production increases.
its marginal revenue will increase as production increases.
its average total cost will decrease as production increases
13
What do Social Security taxes pay for?
benefits to those who are unemployed
benefits to federal workers & military personnel
transportation & living expenses for low income people
benefits to older people/surviving family/some disabilities
14
Products that would be used in calculating an increase or decrease in GDP include:
plastic made in KY & sold to toy makers around the world.
cotton cloth made in India & sold to French clothes makers.
toys made in China at a U.S. factory.
cars made in TN by a Japanese auto company.
15
Which of the following instruments is NOT used by the Federal Reserve to change money supply?
the federal tax code
the required reserve ratio
open market operations
the discount rate
16
GDP expressed in constant, or unchanging, prices is called:
nominal GDP.
net national product.
price level.
real GDP.
17
Which of the following is one way the Federal Reserve Bank serves the government?
making loans to the government
minting coins for the government
financing state government projects
selling government securities
18
The main source of funding for your school probably comes from:
payroll taxes.
federal income taxes.
local property taxes.
state sales taxes.
19
The main economic variables that affect business cycles include all of the following EXCEPT:
business investment levels.
external events.
personal savings levels.
interest rates.
20
Which of these tools in an example of monetary policy?
increasing government spending
changing reserve requirements
reducing income taxes
borrowing money through deficit spending
21
When revenues exceed expenditures,
the government is forced to issue more bonds to raise money.
there is a budget deficit.
there is a budget surplus.
the government must create more money.
22
The Office of Management and Budget is
part of the legislative branch of government.
private agency responsible for overseeing prep of budget.
office w/power approve/disapprove of Cong budget proposal
responsible for deciding how much $ each agency gets.
23
The most-used instrument for controlling week-to-week changes in the money supply is
the money multiplier.
the required reserve ratio.
the discount rate.
open market operations.
24
Your receipt says you paid 5% sales tax on sports equipment. This sales tax is example of a
income tax.
regressive tax.
proportional tax.
progressive tax.
25
What are organizations in business of benefiting society who operate like a business called?
limited partnerships
nonprofit organizations
trade associations
producer cooperatives
26
Which of the following is a disadvantage of a sole proprietorship?
legal constraints
difficult to start up
lack of permanence
high taxes
27
The federal government’s Fiscal Year 2007 began on
December 31, 2006.
January 1, 2007.
January 1, 2006.
October 1, 2006.
28
“Market basket” used by Bureau of Labor Statistics to calculate prices is made of:
typical goods & services for urban household.
nonfood items only.
food & necessary services for any family.
food items only.
29
An example of contractionary fiscal policy would be
decreasing government spending.
increasing production of consumer goods.
expanding government's role in regulating private industry.
cutting taxes.
30
The purpose of expansionary fiscal policy is to
increase output.
increase separation between government and private industry.
slow the growth of the GDP.
prevent hyperinflation.
31
When you buy a United States Savings Bond, you
borrow money from a savings and loan association.
loan money to the government.
pay for your child’s college education.
donate money for special government projects.
32
An example of an automatic stabilizer is:
taxes.
inflation.
US savings bonds.
interest rates.
33
When you drive away from the gas pump, you have just paid a(n):
import fee.
corporate income tax.
estate tax.
excise tax.
34
If a general partnership fails, who is responsible for the debts?
anyone who works for the partnership
only the most senior general partner
no one
all of the partners
35
Bob loses his job at GM plant because manufacturing is slow due to downturn in economy, he is
frictionally unemployed.
structurally unemployed.
cyclically unemployed.
seasonally unemployed.
