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