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

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

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 person would not be included in the civilian labor force?

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

The Federal Deposit Insurance Corporation (FDIC) was created to ________.

provide modest bank insurance for depositors

Which of the following is included in the unemployment rate?

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

How does inflation affect the minimum wage?

it decreases the buying power of the wage.

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

A mostly independent agency that supervises & manages the financial system

How do production costs affect aggregate supply?

Aggregate supply increases when production costs decrease.

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 these is a prominent feature of monetary policy?

adjusting interest rates to stimulate the economy

Bond prices are determined by ___________________.

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

What happens at the "equilibrium price"?

the number supplied equals the number demanded

Which statement best explains why money was invented?

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

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

because it has been demonstrated repeatedly

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

to track monthly changes in prices paid by urban consumers

What are the characteristics of demand?

the desire, ability, and willingness to buy a product

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

the cost of choosing one alternative over another

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Economics Final Exam Review

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Questions 66

Answers

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

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