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Economics Semester Exam Review
Economics Semester Exam Review
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Review to prepare for the Multiple Choice Questions on the Semester Exam in Economics.
Flashcards
70 cards
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Questions
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Answers
1
When supply ______, prices fall, and quantity demanded ______ to reach a new equilibrium.
reverses
levels
decreases
increases
2
A
leading
indicator could be best described as an indicator that
follows or trails a change in economic activity.
functions to distort price levels.
tells how to buy stocks.
shows an upcoming increase or decrease in economic activity.
3
The most important decisions in a corporation are made by
the board of directors.
the founders of the company.
the stockholders.
the investors.
4
Which of the following best compares stocks to bonds?
Bonds are low risk, while stocks are high risk.
Bonds provide ownership in a company, stocks do not.
Bonds always pay a high rate; stocks always go up slower.
Bonds are a high risk investments, stocks are low risk.
5
Which of the following is
NOT
an example of complimentary goods?
Electric shaver and charging cord
Skis and ski boots
Calculator and cell phone
Row boat and oars
6
For most goods, a rise in people’s income means that there will be
an increase in demand.
a decrease in demand.
a lowering of prices.
a substitution effect.
7
Which type of business organization has the greatest individual liability?
sole proprietorship
franchise
partnership
corporation
8
Which of the following explains the relationship between income effect and consumption?
As incomes ↓, consumption stays same, but we get less for $.
As prices ↑, people get less for $ and consumption goes ↓.
As prices ↑, people buy more, but consumption goods ↑.
As income rises, consumption of lower priced goods falls.
9
The term macroeconomics could be BEST defined as the
increase in the price of all goods in the economy.
study of behavior & decision making of the entire economy.
study of how individuals & businesses make economic choices.
value of all final goods & services produced in an economy.
10
What group of people are considered in the unemployment rate?
All people 16 years & older who are working or want to work
All people 16 years and older
All people who have given up finding a job
All 16 & older not working, but actively seeking employment
11
Shoes went on sale: almost every pair sold in < 1 day. Re-stocked: sale over & few purchased.
This illustrates the substitution effect.
This illustrates the Law of Demand.
This illustrates the income effect.
This illustrates the Law of Discounts.
12
Why does a government place ceilings on some residential goods?
to keep business people from making large profits
to keep goods from becoming too expensive
to reduce demand for these goods
to prevent inflation during boom times
13
Competition is important to market systems because
small companies cannot be forced out of business.
it promotes efficiency among producers.
it prevents development of larger corporations.
it allows all businesses to make equal profits.
14
A demand curve illustrates the
products which are most in demand.
differences in price charged by different stores.
quantities demanded at each price by consumers.
differences in demand for different products.
15
Fiscal policy can be best described as
the use of taxation & govt. spending to manipulate economy.
the manipulation of stock market to speed up the economy.
the manipulation of required reserves for banks.
the idea that govt. should stay out of business activity.
16
Due to a scarcity of resources,
every society must choose among competing uses of resources.
some members of society must live in poverty.
the govt. must decide how to allocate valuable resources.
every society needs central planning.
17
Which is
NOT
an example of capital at an oil refinery?
men and women that supervise the refining process
generator used to produce electricity for light in lab
tanks in which the oil is stored
office building that organizes shipping of the oil
18
When deciding which of two items to purchase, you should always
choose after comparing costs and benefits of both items.
choose the item that you want.
choose the item that costs the most.
choose the item that costs less.
19
Which of these is a key economic question faced by countries?
How much money should be raised in taxes?
What goods and services should be produced?
How many schools should be built?
How big should the army be?
20
If you lived on a fixed income, how would you be affected by inflation?
Little effect: because income is not tied to inflation.
Hit hard: rising inflation would lower your rate of pay.
Benefit: because you would have more purchasing power.
Financially stressed: income doesn't go up when prices do.
21
What is a recession?
A period when the economy falls for at least 6 months
A very mild and short expansion
A period when the econ. is neither expanding nor contracting
A long and severe depression
22
The law of demand says
the lower the price, the more consumers will substitute.
the lower the price, the more consumers will buy.
the lower the price, the less consumers will buy.
the higher the price, the more consumers will buy.
23
The
BEST
example of a corporation located in Fremont would be
Spanky's Pizza.
Hendon and Slate Accounting.
Nestle/Gerber.
Vredeveld's Shoes.
24
Which describes the
best advantage
of a corporation as a business organization?
a guarantee of greater profits
increase in liability and production costs
personal service to its customers via word of mouth
greater access to productive resources and capital
25
Which local business is
most likely
to face the greatest amount of government regulation?
The Lunch Pail
Bill’s Shop and Save
Nestle/Gerber
Season’s
26
A market is at equilibrium when
quantity supplied is greater than quantity demanded.
quantity demanded is greater than quantity supplied.
quantity supplied and quantity demanded are equal.
the government takes action to bring it into equilibrium.
27
The most basic way to measure inflation/deflation in the economy is using
the Consumer Price Index.
the NASDAQ.
the Dow Jones Industrial Average.
the S&P 500.
28
The most common form of business organization is
the corporation.
the sole proprietorship.
the partnership
the franchise.
29
How does a society answer 3 econ. questions about production & consumption of goods & services?
Based solely on current environmental regulation.
Based on recent technological advances.
Based on the importance it attaches to the stock market.
Based on importance attached to econ. goals & soc. values.
30
A general increase in prices is called
a price index.
the CPI.
purchasing power.
inflation.
31
What is monetary policy?
actions Fed. Reserve takes to influence stability of prices
amount of money the federal government spends
amount of $ the Federal Reserve banks print up & distribute
the decision to have federal and state banks
32
Scarcity can best be defined as
a prolonged economic contraction.
the limited amounts of goods and services in the world.
alternatives people sacrifice when making a decision.
government aid to the poor.
33
The inflation rate is
the ability to buy goods and services.
the percentage change in prices over time.
not an important measure to economists.
measured in fixed dollars.
34
A surplus exists when (or whenever)
new products are brought to the market for sale.
there is greater supply of goods than people who want them.
there are too few items for the people who want to buy them.
prices drop.
35
Which of the following is
NOT
a goal of the American economic system?
Stable prices
Low unemployment
Economic growth
No inflation
36
Shortages occur when
many people are unemployed.
the United States imports more than it exports.
people have trouble supplying goods at current prices.
interest rates go up.
37
Which of the following is an example of a good with inelastic demand?
A particular brand of chewing gum
Life-saving medicine
Television sets
Computers
38
If sellers expect the price of a good to rise in the future, they will
store goods now and sell more in the future.
set prices according to the law of demand.
put more goods on the market immediately.
raise their prices now.
39
Entrepreneurs are people who
help settle labor disputes.
work on the floor of the stock exchange.
put together land, labor, & capital to create new business.
produce all of a country's guns and butter.
40
Marginal Analysis can best be described as
purchasing an item you need.
weighing the pros and cons of a decision.
impulse buying.
purchasing an item you want.
41
Demand is elastic when
a large change in price causes an equal change in demand.
the number of consumers who are willing to buy increases.
price changes have little effect of demand.
a small change in price causes a large change in demand.
42
The study of economics involves studying how and/or why
governments decide what is best for their country.
you chose to not study for this test.
businesses work to create monopolies.
people & companies make decisions on using scarce resources.
43
In the State of Michigan we have a 6% sales tax. This is what type of tax?
An excise tax
A progressive tax
A regressive tax
A proportional tax
44
What would happen if there was a change in one of the determinants of demand?
A shift of the supply curve to the right or left
A shift of the demand curve to the right or left
No change
A movement along the demand curve
45
A tax where a larger percentage of the income is taken from high income earners is called
a proportional tax.
a progressive tax.
a regressive tax.
an excise tax.
46
According to the
law of supply
,
the lower the price the larger the quantity produced.
if the price of a good falls new firms may enter the market.
the higher the price the larger quantity produced.
if the price of a good rises some firms will produce less.
47
Which of the following is included in the calculation of GDP?
Consumer Spending
Government Spending and Consumer Spending
Net Imports
Government Spending
48
Which is true of the government in a centrally planned (command) economy?
It places emphasis on the production of consumer goods.
It builds every house in every village.
It encourages workers to innovate.
It makes all important economic decisions.
49
Most large businesses are
general partnerships.
corporations.
sole proprietorships.
cooperatives.
50
In a traditional economy, economic decisions are based largely on
custom or tradition.
science.
socialism.
technology.
51
Which of the following is an example of a shortage?
Manufacturers make too many units of a popular new toy
Consumers cannot afford to buy a new popular toy
Stores cannot sell all new popular toys they have on hand
Consumers cannot find enough of a new popular new toy
52
A partnership is a business organization owned by
one general partner and many stockholders.
two or more individuals.
individuals and stockholders.
one or more individuals.
53
A
lagging
indicator could be best described as an indicator that
functions to distort price levels.
follows or trails a change in economic activity.
shows an upcoming increase or decrease in economic activity.
tells how to buy stocks.
54
Which of the following leads to an increase in supply?
A decrease in the cost of raw materials (inputs, resources)
A change in the law of supply
An increase in the cost of raw materials (inputs, resources)
Diminishing marginal returns
55
The economic system of the United States is best described as a
mixed econ. w/equal amounts of freedom & govt. intervention.
free market economy.
mixed econ. w/limited govt. intervention & deal of freedom.
traditional economy.
56
Johnny chooses to stay home & study instead of going to the big game. The choice to skip it is
Jodi’s trade-off.
Johnny’s opportunity cost.
Johnny thinking at the margin.
a really good time for Johnny.
57
Which of the following businesses would it be
more likely
for you to own a share of?
the local McDonalds
Spanky’s Pizza
Walmart
Sandy’s Harley Davidson
58
A major advantage of owning your own business is
you makes all of the business decisions.
you make your own hours.
you get to keep the entire profit.
All of the above.
59
Using resources in such a way as to maximize the production of goods and services is called
efficiency.
underutilization.
thinking at the margins.
growth.
60
If you keep buying a product despite a price increase, your demand could be described as
strong.
elastic.
inelastic.
normal.
61
Economics is the study of how people
gain knowledge and skill from study and experience.
choose from limited resources to meet their needs.
respond to war and drought.
calculate their income tax.
62
Which of the following statements about money is true?
It holds its value during times of inflation.
It makes buying and selling easier.
It makes saving more difficult.
It doesn’t hold its value
63
Inflation reduces people’s purchasing power because
there is not enough money in the economy.
the market basket has to be changed every year.
the same amount of money buys fewer goods.
the same amount of money buys more goods.
64
A tax where a constant percentage is taken is called
a proportional tax.
a regressive tax.
a progressive tax.
an excise tax.
65
What is a Business Cycle?
Amount of time it takes a business to produce its products
A period of increased economic growth
A period of economic growth followed by economic contraction
A dangerous time for all businesses
66
A price ceiling can best be described as a/an
decrease in the cost of raw materials.
govt. imposed maximum price that can be charged.
increase in the cost of raw materials.
govt. imposed minimum price that can be charged.
67
GDP can be BEST described as the
increase in the price of all goods in the economy.
value of all final goods & services produced in an economy.
study of how individuals & businesses make econ. choices.
study of behavior & decision making of the entire economy.
68
Which of the following will
NOT
affect demand?
expectations of the future
the number of sellers in the market
the price of related goods
the number of people living particular place
69
All of the following are uses of money
except
Consumer Price Index
Store of value
Measure of value
Medium of exchange
70
Which of the following is included in GDP?
An intermediate good
A fish you buy in the store
A non-USA service or product used in another country
A fish that you catch and eat yourself
