Economics Flashcards
1
Q
Economists consider time to be a scarce resource.
A
true
2
Q
Emerson County has two large lakes. The county runs a fish hatchery that raises three kinds of fish that are used to keep the lakes stocked. Anyone can go boating or canoeing on the lakes, but only people who buy a license are allowed to fish in them. Which of the following economics questions is Emerson County focusing on by requiring a license to fish?
i. What should be produced?
ii. How should it be produced?
iii. Who will use what is produced?
A.
i only
B.
ii only
C.
iii only
D.
i and iii only
A
C.
iii only
3
Q
Which of the following would solve the problem of scarcity in the world and eliminate the need for economics? A. an unlimited supply of resources B. unlimited want and demand from consumers C. a scarcity of resources D. a shortage of demand
A
A.
an unlimited supply of resources
4
Q
Two name brand electronic companies have decided join the cellular phone production market. To save money on how much they pay their employees, they have decided to have their new phones manufactured overseas. Which of the basic economics questions have these companies answered? i. What should be produced? ii. How should it be produced? iii. Who will use what is produced? A. i only B. iii only C. i and ii only D. i, ii, and iii
A
C.
i and ii only
5
Q
It is possible for a resource to be scarce in one part of the world and plentiful in another.
A
true
6
Q
Scarcity is an ongoing part of the human condition.
A
true
7
Q
Economists believe it is important to make \_\_\_\_\_\_\_\_\_\_ decisions about \_\_\_\_\_\_\_\_\_\_ resources. A. wise . . . scarce B. quick . . . plentiful C. popular . . . scarce D. popular . . . plentiful
A
A.
wise . . . scarce
8
Q
Crude oil, which is found only in certain regions of the world, is used for using the gasoline Americans use every day. Oil can also be refined into diesel and jet fuel. Additionally, it is used to make plastic and man-made fibers such as nylon. Which of the following characteristics of scarcity does oil exemplify?
i. limited in quantity
ii. desirable
iii. has more than one use
A.
i only
B.
ii only
C.
ii and iii only
D.
i, ii, and iii
A
D.
i, ii, and iii
9
Q
A shortage can be either short-term or long-term, but it is not an ongoing condition.
A
true
10
Q
A higher demand for a good or service than what is currently available in the market is the definition of \_\_\_\_\_\_\_\_\_\_. A. surplus B. scarcity C. shortage D. supply
A
C.
shortage
11
Q
Which best describes how consequences are different from costs when making a decision?
A
D. Consequences require accepting an outcome.
12
Q
The cost of something is what a person ______ as a result of choice.
A
relinquishes
13
Q
In economics, money always represents \_\_\_\_\_\_\_\_\_\_ because it could always be spent on something else. A. opportunities B. negative consequences C. positive consequences D. margins
A
A.
opportunities
14
Q
Which of the following is an accurate paraphrase of the statement below?
Each time we select one alternative, we give up another.
A.
Each time we make a choice, we give up a benefit.
B.
Each time we make a choice, we give up a different choice.
C.
Each time we select a consequence, we are given a cost.
D.
Each time we select a marginal benefit, we are given a cost.
A
B.
Each time we make a choice, we give up a different choice.
15
Q
Robotics Inc., a company that sells robotics, wants to economize. Which of the following strategies illustrates how Robotics Inc. could successfully economize?
A.
reducing the cost of producing robots and increasing the price
B.
reducing the price of the robots while increasing costs to produce them
C.
reducing the opportunity cost of building robots while increasing the monetary cost
D.
increasing the marginal benefits while reducing the number of low cost decisions
A
D.
increasing the marginal benefits while reducing the number of low cost decisions
16
Q
Monetary cost is also known as \_\_\_\_\_\_\_\_\_\_ to economists. A. revenue B. profit C. price D. tax
A
C.
price
17
Q
Positive consequences are also known as \_\_\_\_\_\_\_\_\_\_. A. monetary costs B. opportunity costs C. benefits D. resources
A
C.
benefits
18
Q
Jackie has always wanted a diamond engagement ring and tells her boyfriend, Tom, that she will not accept anything other than a diamond ring. Tom goes to the jewelry store and can only find a $5,000 ring, which is far more than he can responsibly afford. Which of the following choices pairs a monetary cost with a positive consequence? A. buying the ring, the loss of Jackie B. buying the ring, engagement to Jackie C. not buying the ring, the loss of Jackie D. not buying the ring, engagement to Jackie
A
B.
buying the ring, engagement to Jackie
19
Q
Which of the following are examples of scarce resources?
i. money
ii. time
iii. energy
A.
i and ii only
B.
i and iii only
C.
ii and iii only
D.
i, ii, and iii
A
D.
i, ii, and iii
20
Q
Julie has three free hours on her Saturday afternoon and two things she wants to do. First, she wants to complete the math assignment that is due on Monday for school because she has no time to do it on Sunday. Secondly, she wants to go get coffee with her best friend, Carol. Julie decides to spend two hours completing her math assignment.
If she decided to increase her current marginal benefit by one unit (one unit equals one hour), what would be the marginal cost of that decision?
A.
She would have no time to spend with Carol.
B.
She would be able to spend one hour with Carol.
C.
She would be able to spend two hours with Carol.
D.
She would be able to spend all three hours with Carol.
A
A.
She would have no time to spend with Carol.
21
Q
Entrepreneurs bring new \_\_\_\_\_\_\_\_\_\_ and \_\_\_\_\_\_\_\_\_\_ to the market. A. products . . . ideas B. services . . . training C. training . . . experience D. production . . . diversity
A
A.
products . . . ideas
22
Q
Each of the following investments contributes to a higher quality labor force EXCEPT: A. health care B. retaining experienced workers C. additional vacation and sick leave D. additional education and training
A
C.
additional vacation and sick leave
23
Q
Societies make choices about goods and services based on the availability of \_\_\_\_\_\_\_\_\_\_. A. land B. workers C. resources D. new technology
A
C.
resources
24
Q
Entrepreneurs are different from the rest of the labor force because they are \_\_\_\_\_\_\_\_\_\_ and \_\_\_\_\_\_\_\_\_\_. A. innovators . . . risk takers B. imaginative . . . creative C. accountable . . . specialized D. determined . . . profit seekers
A
A.
innovators . . . risk takers
25
```
Domestic resources are usually __________ than imported resources.
A.
cheaper
B.
lower quality
C.
higher quality
D.
more expensive
```
A.
| cheaper
26
```
Infrastructure can consist of all of the following EXCEPT:
A.
roads
B.
airports
C.
forests
D.
canals
```
C.
| forests
27
```
Improved technology allows workers to be more __________ and productive.
A.
skilled
B.
efficient
C.
capable
D.
economical
```
B.
| efficient
28
```
When businesses invest in domestic resources they __________.
A.
reduce capital
B.
require a larger workforce
C.
increase imports
D.
make higher profits
```
B.
| require a larger workforce
29
How do entrepreneurs differ from labor, or members of the workforce?
A. Entrepreneurs earn money for their work.
B. Entrepreneurs are considered human capital.
C. Entrepreneurs innovate and take risks.
D. Entrepreneurs help produce goods and services.
C. Entrepreneurs innovate and take risks.
30
```
Which one of the following professionals provides goods for society’s consumers?
A.
dentist
B.
butcher
C.
lawyer
D.
accountant
```
B.
| butcher
31
Define capitalism. What factor determines whether a country's economy is more or less capitalist?
Capitalism is the use of private resources to make a profit. The factors that determine whether a country's economy is more or less capitalist is if it's closer to a pure market economy or a total command economy.
32
```
According to the diagram, which country is closest to a pure market economy?
A.
China
B.
Sweden
C.
Hong Kong
D.
United States
```
C.
| Hong Kong
33
Explain the difference between government subsidies and transfer payments. Give an example of a transfer payment.
Transfer payments is when the government takes money from one group of people and gives it to another group of people. For example, social security and Medicare and Medicaid. Government subsidies is government financial aid meant to stimulate the economy or promote certain goods. For example, corn production because corn can be turned into ethanol.
34
```
According to the circular flow diagram, the government purchases products from __________.
A.
firms
B.
households
C.
foreign governments
D.
government agencies
```
A.
| firms
35
Explain how governments send tax money back to households and firms.
The tax money that the government collects is used to build roads and pay for services that households and firms may find useful. The government also gives the money back through transfer payments.
36
Explain why the US economy is referred to as a mixed market.
The US economy is referred to as a mixed economy because it has a mix of a market forces and central planning, but mostly market forces.
37
```
According to the diagram, which country is closest to a total command economy?
A.
China
B.
Cuba
C.
Hong Kong
D.
Sweden
```
B.
| Cuba
38
```
According to the circular flow diagram, the government buys factors of production from __________.
A.
firms
B.
households
C.
business owners
D.
government agencies
```
B.
| households
39
Explain the difference between market forces and central planning. In what type of economic system are they both present?
Market forces is private business dealings based on supply and demand. Central planning is national government decision making about the economy. In a mixed market economy, such as the US, both market forces and central planning are present.
40
Describe the three roles of the government within the economic flow.
The three roles of the government within the economic flow are to give payment subsidies to firms, regulate wages and interest, and transfer payments.
41
```
In a mixed market economy, money goes to the government in the form of __________.
A.
rent
B.
taxes
C.
loans
D.
interest
```
B.
| taxes
42
```
The US government’s assistance to people who have lost their jobs is to offer them __________.
A.
a government loan
B.
unemployment counseling
C.
a new employment opportunity
D.
unemployment compensation
```
D.
| unemployment compensation
43
```
A pure market economy is based on the interaction of __________ and __________.
A.
buyers . . . sellers
B.
buyers . . . consumers
C.
sellers . . . producers
D.
producers . . . distributors
```
A.
| buyers . . . sellers
44
```
All modern economies use some combination of __________ and __________.
A.
capitalism . . . socialism
B.
market forces . . . capitalism
C.
central planning . . . government
D.
market forces . . . central planning
```
D.
| market forces . . . central planning
45
```
A country that is close to a pure market economy is referred to as a __________ nation.
A.
nationalist
B.
capitalist
C.
socialist
D.
communist
```
B.
| capitalist
46
```
Private business dealings based on supply and demand define __________.
A.
mixed markets
B.
market forces
C.
central planning
D.
command economics
```
B.
| market forces
47
```
There is usually a large black market presence in which economy?
A.
socialist
B.
pure market
C.
total command
D.
mixed market
```
C.
| total command
48
```
According to the diagram, who is provided goods from firms?
A.
only households
B.
only governments
C.
both households and governments
D.
neither households nor governments
```
C.
| both households and governments
49
```
Market forces and government interaction blend to form a __________ economy.
A.
mixed
B.
blended
C.
central
D.
merged
```
A.
| mixed
50
```
Which economic system is defined as the use of private resources to make a profit?
A.
socialism
B.
capitalism
C.
communism
D.
total command
```
B.
| capitalism
51
Define the term laissez-faire. What is the role of the government in a laissez-faire economy?
Laissezfaire literally means "let them act," and refers to an economy based on capitalism and limited government involvement in the economy. Laissezfaire promotes economic freedom, economic growth, and a higher standard of living in society.
52
The invisible hand of the marketplace refers to the idea that self-interest and competition work together to ensure that the market __________.
A.
is not threatened by foreign competition
B.
never needs any type of government regulation
C.
creates enough jobs to keep citizens throughout the nation fully employed
D.
provides the goods and services consumers want at reasonable prices
D.
| provides the goods and services consumers want at reasonable prices
53
Describe the four elements that markets need for success.
The four elements that markets need for success are specialization, selfinterest, competition, and economic freedom. Specialization will result in a variety of goods/services and quality goods/services, all in a short time frame and with little waste. Selfinterest promotes competition and that regulates prices.
54
```
Adam Smith is regarded as the father of __________.
A.
Marxism
B.
modern economics
C.
mixed market economics
D.
the socialist movement
```
B.
| modern economics
55
Explain how self-interest and competition work together to regulate prices.
Selfinterest refers to when consumers seek certain goods/services at the cheapest prices possible, which means that producers aim to meet those needs better than their fellow competitors. This results in competition between the companies to try to make better products or lower their prices.
56
Explain Adam Smith’s ideas about what the government’s role should be.
Adam Smith believed that there should be as little government involvement in the economy as possible. He believed that the government should only try to protect domestic businesses from foreign competitors and have a strong national defense system.
57
Describe how Adam Smith’s ideas are seen in the United States economy.
Adam Smith's ideas are seen in the United States economy because we have a mixed economy where there is more market forces than central planning. This means that the government has little involvement in the economy. The United States has a capitalistic economy.
58
```
Which type of economic system did Adam Smith believe could provide for society's needs?
A.
mixed
B.
market
C.
command
D.
traditional
```
B.
| market
59
```
Adam Smith wrote his economic theories in a book titled __________.
A.
The Future of Capitalism
B.
The Wealth of Nations
C.
The History of Market Economics
D.
The Wealth of the New World
```
B.
| The Wealth of Nations
60
Explain how the invisible hand regulates the economy.
The invisible hand refers to selfinterest and competition in the economy. Consumers seek out goods/services with the best price, so they are acting on their selfinterest. So the producers will try outdo their competitors by lowering their prices or upgrading their products/services. As this continues, this regulates prices and advances the products/services for better performance.
61
In a market economy, specialization enables the creation of
high-quality goods and services.
62
```
When consumers seek to buy goods at the best possible price they are exercising self-__________.
A.
interest
B.
control
C.
confidence
D.
promotion
```
A.
| interest
63
```
The invisible hand is created when __________ and __________ work together.
A.
specialization . . . self-interest
B.
self-interest . . . competition
C.
specialization . . . competition
D.
confidence . . . economic freedom
```
B.
| self-interest . . . competition
64
```
Self-interest motivates producers to offer __________ products.
A.
less expensive
B.
more expensive
C.
consumer demanded
D.
environmentally safe
```
A.
| less expensive
65
```
Specialization makes each of the following possible EXCEPT:
A.
surplus of goods and services
B.
goods available in a short time frame
C.
variety of goods and services
D.
high-quality goods and services
```
A.
| surplus of goods and services
66
```
Specialization occurs when a corporation concentrates on producing __________.
A.
low-quality items
B.
limited supplies of a good
C.
one particular good or service
D.
rare and authentic items
```
C.
| one particular good or service
67
```
A competitor will often lower prices in an effort to __________.
A.
increase trade
B.
attract business
C.
create monopolies
D.
decrease production
```
B.
| attract business
68
```
A laissez-faire government approach to the economy is based on the ideas of __________.
A.
socialism
B.
communism
C.
traditionalism
D.
capitalism
```
D.
| capitalism
69
```
A __________ is an agreement between two or more people or parties.
A.
contract
B.
security
C.
dialogue
D.
monopoly
```
A.
| contract
70
_______ have the economic freedom to save, spend, and invest money as they see fit.
?
71
```
Government programs in which money is taken from one group and given to another are called __________.
A.
political capital
B.
transfer payments
C.
market economies
D.
factors of production
```
B.
| transfer payments
72
```
According to the diagram, in a mixed market economy taxes are paid by all of the following EXCEPT:
A.
firms
B.
labor
C.
government
D.
households
```
C.
| government
73
```
Adam Smith believed that the role of the government should include all of the following EXCEPT:
A.
ensuring a stable and peaceful nation
B.
providing a stable and secure economy
C.
guaranteeing an honest judicial system
D.
granting patents and copyrights
```
B.
| providing a stable and secure economy
74
Each of the following is a sign of economic freedom EXCEPT:
A.
producers produce what is profitable
B.
wages and prices are controlled by the government
C.
people save, spend, and invest money as they wish
D.
consumers use private property for their own benefit
B.
| wages and prices are controlled by the government
75
The invisible hand of the marketplace refers to the idea that self-interest and competition work together to ensure that the market __________.
A.
is not threatened by foreign competition
B.
never needs any type of government regulation
C.
creates enough jobs to keep citizens throughout the nation fully employed
D.
provides the goods and services consumers want at reasonable prices
D.
| provides the goods and services consumers want at reasonable prices
76
```
According to Figure 5.4, how many slices of pizza will one pizzeria be willing to supply at a market price of $1.50 a slice?
a.
100
c.
300
b.
200
d.
1,000
```
b.
| 200
77
Consider this scenario:
In response to an increase in the product’s price, producers of MP3 players have increased the quantity supplied.
```
This is an example of ____________________.
a.
elastic supply
b.
elastic demand
c.
inelastic supply
d.
inelastic demand
```
a.
| elastic supply
78
the amount a supplier is willing and able to supply at a certain price
quantity supplied
79
```
The market price of a slice of pizza has risen from $1.50 to $2.00. Based on the Market Supply Curve in Figure 5.4,the average pizzeria would respond by _________.
a.
making 50 fewer slices a day.
c.
making 500 fewer slices a day.
b.
making 50 more slices a day.
d.
making 500 more slices a day.
```
d.
| making 500 more slices a day.
80
a chart that lists how much of a good all suppliers will offer at different prices
market supply schedule
81
Which of the following is the best example of the law of supply?
a.
A sandwich shop increases the number of sandwiches they supply every day when the price is increased.
b.
A food producer increases the number of acres of wheat he grows to supply a milling company.
c.
A catering company buys a new dishwasher to make their work easier.
d.
A milling company builds a new factory to process flour to export.
A sandwich shop increases the number of sandwiches they supply every day when the price is increased.
82
Which of these events would indicate a movement along a supply curve for batteries?
a.
Workers at a major battery factory go on strike and stop production.
b.
A new law requires battery manufacturers to spend more money on environmentally-sound trash disposal.
c.
Battery manufacturers raise the price of eight AA batteries from $3.50 to $3.95 a set.
d.
A new trade agreement enables stores to import foreign batteries.
c.
| Battery manufacturers raise the price of eight AA batteries from $3.50 to $3.95 a set.
83
```
Which product’s supply could be elastic in the short run?
a.
large handmade pizzas
c.
large diamonds
b.
large handmade rugs
d.
large jet airplanes
```
a.
| large handmade pizzas
84
Elasticity of supply is a measure of the way suppliers respond to a change in price.
true
85
```
According to the law of supply, the higher the price,
a.
the more consumers are willing to pay.
b.
the larger the quantity produced.
c.
the smaller the quantity produced.
d.
the more the availability of a good is reduced.
```
b.
| the larger the quantity produced.
86
```
A baker calculates that by spending $16 on labor and materials, she can bake 10 cakes a day. $24 will allow her to bake 12 cakes, while $36 spent on labor and materials produces 14 cakes. In terms of capital and labor, the baker has
a.
increasing marginal returns.
c.
decreasing marginal returns.
b.
constant marginal returns.
d.
negative marginal returns.
```
c.
| decreasing marginal returns.
87
```
Which of the following is a fixed cost for a store?
a.
short-term workers
c.
advertising
b.
rent
d.
inventory
```
b.
| rent
88
```
A firm will produce a level of output at which marginal revenue is equal to:
a.
average revenue.
c.
marginal cost.
b.
fixed costs plus variable costs.
d.
average cost.
```
c.
| marginal cost.
89
```
A cost that stays constant is a:
a.
variable cost
c.
marginal cost
b.
fixed cost
d.
total cost
```
b.
| fixed cost
90
```
Profits are maximized when marginal revenue and marginal costs are ________.
a.
set
c.
equal
b.
less than market price
d.
greater than market price
```
c.
| equal
91
```
The cost of producing one more unit of a good is the:
a.
fixed cost
c.
marginal cost
b.
total cost
d.
variable cost
```
c.
| marginal cost
92
```
A firm’s total cost of production is:
a.
marginal cost plus average cost.
c.
marginal cost plus variable cost.
b.
variable cost plus fixed cost.
d.
none of the above.
```
b.
| variable cost plus fixed cost.
93
the cost of producing one more unit of a good
marginal cost
94
```
An entrepreneur knits sweaters for sale. The entrepreneur has fixed costs of $100. When he makes 10 sweaters in one month, he must spend $15 on wool. To make eleven sweaters in one month, he must spend $17 on wool. If he has no other costs, what is the marginal cost of the eleventh sweater?
a.
$1
c.
$17
b.
$2
d.
$117
```
b.
| $2
95
the additional income from selling one more unit of a good
marginal revenue
96
Which of the following is an example of lower production costs brought about by the use of technology?
a.
the delivery costs of gasoline to the consumer by diesel trucks
b.
the use of e-mail to replace slower surface mail
c.
the making of breads and pastries in local shops rather than large bakeries
d.
the importing of fresh vegetables from South America rather than using canned vegetables
b.
| the use of e-mail to replace slower surface mail
97
What is the effect of import restrictions on prices?
a.
They cause prices to drop.
b.
They cause prices to rise.
c.
They often cause prices to rise steeply and then drop.
d.
They usually do not have any lasting effect on price.
b.
| They cause prices to rise.
98
What do sellers do if they expect the price of goods they have for sale to increase dramatically in the near future?
a.
sell the goods now and try to invest the money instead of resupplying
b.
sell the goods now but try to get the higher price for them
c.
store the goods until the price rises
d.
store the goods indefinitely regardless of when the price rises
c.
| store the goods until the price rises
99
The United States government is currently requiring all car companies to produce more gas efficent automobiles. All car companies must produce cars that get more than 25 miles per gallon by 2012. This is known as a subsidy.
false
100
```
Which of the following is an example of government influence on supply?
a.
law of supply
c.
marginal costs
b.
subsidies
d.
market supply curve
```
b.
| subsidies
101
A reduction in the number of sellers will shift the supply curve to the right.
false
102
Which example best demonstrates the practice of the U.S. government providing subsidies to American industry?
a.
Offering a decrease in the excise tax for automakers who produce environmentally friendly cars.
b.
Deregulating the utilities and power companies.
c.
Encouraging farmers to switch to organic methods by supplying financial support.
d.
Allowing the telephone and communications companies to become privatized.
c.
| Encouraging farmers to switch to organic methods by supplying financial support.
103
```
If a factor input is increased and all other factor inputs remain the same, what happens to the quantity supplied of this good at each and every price?
a.
it remains the same
c.
it increases
b.
it decreases
d.
none of the above
```
b.
| it decreases
104
Items that are harmful to the public good such as alcohol, cigars and high-pollutant gasoline are sometimes regulated by government with through excise taxes.
true
105
Technology can cause a drop in input costs.
true
106
What happens to the individual demand curve as the price of an item increases?
a.
An individual demand for an item will increase causing an upward slope.
b.
An individual demand for an item will decrease causing a downward slope.
c.
An individual demand will increase, causing the price to increase further.
d.
An individual demand curve will remain unchanged and price is never a factor.
b.
| An individual demand for an item will decrease causing a downward slope.
107
```
The change from the old demand curve to the new demand curve shown in the table represents a
a.
movement upward along the demand curve.
b.
movement downward along the demand curve.
c.
shift of the demand curve to the left.
d.
shift of the demand curve to the right.
```
d.
| shift of the demand curve to the right.
108
```
For most products and services, increased price results in
a.
demand for fewer products.
c.
reduced demand for substitutes.
b.
demand for more products.
d.
increased demand for complements.
```
a.
| demand for fewer products.
109
When the price of an item decreases, the quantity demanded increases. When the price of an item increases, the quantity demanded decreases.
true
110
```
All of the following must exist for there to be demand EXCEPT
a.
a necessity to buy a product.
c.
an ability to buy a product.
b.
producers to sell a product.
d.
a willingness to buy a product.
```
not b
A?
111
A demand schedule shows
a.
an upward-sloping curve that illustrates the positive relationship between price and quantity demanded.
b.
a listing of the various quantities demanded of a particular product at all prices that might prevail in the market.
c.
the fluctuations in demand that occurred over a specified period of time.
d.
the fluctuations in demand scheduled to occur over the following year.
b.
| a listing of the various quantities demanded of a particular product at all prices that might prevail in the market.
112
A demand curve illustrates the quantity demanded at every possible price at a given time.
true
113
Marginal utility is the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product.
true
114
```
Find the price of $15 on the demand schedule. What point does this price and quantity correspond to in the graph?
a.
v
c.
x
b.
w
d.
y
```
c.
| x
115
diminishing marginal utility
the decrease in satisfaction or usefulness received from each additional unit of a product
116
What does the movement shown on this graph represent?
a.
a change in demand
b.
the inverse relationship between price and quantity demanded
c.
the inverse relationship between price and marginal utility
d.
diminishing marginal utility
b.
| the inverse relationship between price and quantity demanded
117
Joe goes to the grocery store to buy steak. He expects that he will be spending $5.99 per pound for his steak as there is only one brand to choose from and their price has remained the same for about a year. However, to Joe’s surprise, the grocery store has begun selling a generic store brand of the same cut of steak for $3.99 per pound. Joe decides that to save the $2.00 per pound he will try to store brand steak.
Based on the information provided above, which of following terms bests describes the scenario that occurred?
a. Income effect
b. Substitution effect
c. Change in quantity demanded
d. Change in quantity supplied
b. Substitution effect
118
```
Which of the following choices could cause the movement shown in this graph?
a.
a decrease in income.
b.
an increase in population
c.
an increase in the price of a substitute
d.
a decrease in the price of a complement
```
a.
| a decrease in income.
119
Ceteris paribus means “all other things held constant”.
true
120
substitutes
products that can be used in place of other products
121
Ceteris paribus means “put your two cents in”.
false
122
```
An increase in the price of milk causes a decrease in the demand for cereal. The two products are
a.
substitutes.
c.
unrelated.
b.
complements.
d.
demand elastic.
```
b.
| complements.
123
```
If the demand for beef decreased because a society focused more on vegetarianism the cause for the change would be _______.
a.
population.
c.
preferences.
b.
prices of other goods and services.
d.
incomes.
```
c.
| preferences.
124
```
Based on this graph, how many Beanie Babies™ were demanded at a price of $6 before they became a fad?
a.
100
c.
300
b.
200
d.
400
```
b.
| 200
125
```
In the early 2000’s, MP3 players replaced CD players as the preferred portable music player. This shift in demand was likely the result of the
a.
increased cost of CD players.
c.
decreased cost of CD players.
b.
effect of Ceteris Paribus.
d.
improved technology of MP3 players.
```
d.
| improved technology of MP3 players.
126
```
When a customer's need for a product is not urgent, demand tends to be
a.
inelastic.
c.
complementary.
b.
elastic.
d.
unit elastic.
```
b.
| elastic.
127
All of the following are determinants of demand elasticity EXCEPT
a.
whether the purchase of the product can be delayed
b.
whether there are adequate substitutes for the product.
c.
whether the purchase of the product requires a large portion of income.
d.
whether the product has utility.
d.
| whether the product has utility.
128
Which of the following best describes demand elasticity?
a.
Measures if a change in price will cause a larger, smaller, or proportional change in the quantity demanded.
c.
A change in price will cause a small change in the quantity demanded
b.
Measures how consumers will react to a change in quantity supplied.
d.
A change in price will not cause a change in the quantity demanded.
not c
A?
129
```
A product that has few substitutes tends to be:
a.
elastic
c.
unit elastic
b.
inelastic
d.
a complimentary good
```
b.
| inelastic
130
```
If the price of a product goes down by 10% and the quantity demanded goes up by 20% the product is:
a.
elastic
c.
cheap
b.
inelastic
d.
is an inferior good
```
a.
| elastic
131
```
Because a price increase has little or no effect, the demand for the product is
a.
complementary.
c.
elastic.
b.
inelastic.
d.
unit elastic.
```
b.
| inelastic.
132
All of the following statements are true EXCEPT:
a.
Unit elastic demand is described as a change in price causing a proportional change in quantity demanded.
b.
Raising the prices of the products that you sell will guarantee that you will make better profits.
c.
Inelastic demand describes those items that you cannot live without despite how much the price may rise.
d.
When the elastic demand curve is inverse means that when the price goes down total expenditures go up.
b.
| Raising the prices of the products that you sell will guarantee that you will make better profits.
133
Which of the following best describes the concept of elastic demand?
a. Elastic demand describes demand when a given change in price causes a relatively larger change in the quantity demanded.
b. Elastic demand describes demand when a given change in price causes a relatively smaller change in the quantity demanded.
c. Elastic demand describes demand when a given change in price causes no change in the quantity demanded.
d. Elastic demand describes demand when a given change is price causes no change in the quantity supplied.
a. Elastic demand describes demand when a given change in price causes a relatively larger change in the quantity demanded.
134
A business decreases the price of their product by 10%, as a result, consumer demand for the product has also increased by 10%. Which term does the scenario best describe?
a.
demand elasticity
c.
inelastic demand
b.
elastic demand
d.
unit elastic demand
not a
135
If the price of a product goes up by 10% and the quantity demanded goes up by 20% the product is an inferior good.
false
136
```
The initial signal that demand for a good exceeds production in an economy is that the __________.
A.
price rises
B.
supply increases
C.
price declines
D.
quality improves
```
A.
| price rises
137
```
According to the above graph, the demand shift in the market would cause the new equilibrium price to be __________.
A.
$5.00
B.
$12.50
C.
$10.00
D.
$15.00
```
B.
| $12.50
138
```
In order to satisfy an increased demand for a good or service, more __________ often appear in the market.
A.
taxes
B.
producers
C.
restrictions
D.
consumers
```
B.
| producers
139
```
When the quantity supplied is the same as the quantity demanded, the market is __________.
A.
falling
B.
saturated
C.
balanced
D.
unstable
```
C.
| balanced
140
```
A shift in demand moves in the same direction as __________.
A.
supply
B.
price
C.
quantity
D.
quality
```
B.
| price
141
```
The above graph is an example of a __________ shift in the market.
A.
price
B.
supply
C.
demand
D.
equilibrium
```
C.
| demand
142
```
In the example above, what is the equilibrium price for Perfect Pepperoni Pizza?
A.
$5.00
B.
$10.00
C.
$15.00
D.
$17.50
```
B.
| $10.00
143
```
Prices provide __________ to both consumers and producers.
A.
incentives
B.
security
C.
assurance
D.
quantities
```
A.
| incentives
144
```
Changes in supply and demand cause a market’s __________ to change.
A.
quality
B.
technology
C.
freedom
D.
equilibrium
```
D.
| equilibrium
145
```
Producers are able to produce more of a good and to make more profit from __________.
A.
high prices
B.
limited demands
C.
high production costs
D.
government involvement
```
A.
| high prices
146
Profit is best described as
a.
a gain in material items or money after any type of transaction.
c.
a monetary loss after a transaction.
b.
a monetary gain that occurs as the result of a transaction.
d.
the term used to describe an equal trade in goods or services.
b.
| a monetary gain that occurs as the result of a transaction.
147
Brian is starting his own business producing chairs designed to be used while playing video games. This is an example of _________.
```
a.
creating a monopoly
b.
specialization
c.
the factor market
d.
self-interest
```
b.
| specialization
148
```
A ___________ is an economy in which private enterprise exists with considerable government regulation.
a.
market economy
c.
centrally planned economy
b.
mixed economy
d.
traditional economy
```
b.
| mixed economy
149
What is the product market?
a.
the market in which payments are received for selling products to consumers
b.
the market in which income is received for supplying land, labor, or capital
c.
the market in which firms purchase the factors of production from households
d.
the market in which households purchase the goods and services that firms produce
not a
150
An example of laissez-faire, is the government deciding what to produce and how to produce it.
false
151
Which best describes how producers benefit from consumer sovereignty?
c.
| Producers receive guidance on what to produce.
152
Which of the following statements regarding the circular flow model is not accurate?
a.
Firms supply households with goods and services.
c.
Firms pay households for land, labor, and capital.
b.
Households pay firms for goods and services.
d.
Households supply firms with goods and services.
d.
| Households supply firms with goods and services.
153
What is an important advantage of a free market?
a.
It does not change unless the government directs it.
b.
It offers a wide variety of goods and services.
c.
It is easy to regulate.
d.
It protects the less fortunate.
b.
| It offers a wide variety of goods and services.
154
```
A market is any place that brings together buyers and sellers with a view to agreeing a price for _______.
a.
delivery.
c.
collateral.
b.
exchange.
d.
a quote.
```
b.
| exchange.
155
Why is consumer sovereignty considered an advantage?
d.
| because consumers help determine what is produced
156
The eminent domain clause of the Constitution states that the government can not take away an individual’s property without providing just compensation.
true
157
```
In which system is private property found?
a.
centrally planned
c.
free enterprise
b.
command
d.
communism
```
c.
| free enterprise
158
Why does the government use its powers to make sure that businesses disclose information to the public?
a.
to make buyers more knowledgeable and safer
b.
to make it hard for businesses to make an excess profit
c.
to make it easier for consumers to save money
d.
to make it easy for businesses to have good information
a.
| to make buyers more knowledgeable and safer
159
A large telephone company has hired lobbyists to try to persuade lawmakers to reduce governmental regulation over the telecommunications industry. Why might the company do this?
a.
Some regulations are costly to implement and cut into profits.
b.
Many regulations promote too much competition, driving down prices.
c.
Certain regulations result in rapid business growth, which some companies find difficult to handle.
d.
All of the above
a.
| Some regulations are costly to implement and cut into profits.
160
In which way does a public disclosure law help consumers?
a.
by allowing consumers to file grievances about products and businesses with the government
b.
by requiring companies to give consumers important information about their products
c.
by forcing companies to pay taxes based on the amount of goods and services they sell or buy
d.
by requiring businesses to report business relationships that could constitute a monopoly on the marketplace
b.
| by requiring companies to give consumers important information about their products
161
What are some of the basic principles of free enterprise?
a.
research institutions, government restriction, and stock qualifications
b.
profit motive, legal equality, private property rights, free contract, and competition
c.
interest groups, disclosure laws, public interest, and negative regulation
d.
absolute organizations, low prices, and quality control indexes
b.
| profit motive, legal equality, private property rights, free contract, and competition
162
requirements for companies to provide full information about their products
public disclosure laws
163
Due process and eminent domain are found in the 7th Amendment of the Constitution.
false
164
The principle that everyone can compete in the marketplace is called
open opportunity
165
What best describes the role of government in a free enterprise system?
a.
Control business activities.
b.
Decide what companies will be formed and then allow the managers to run them.
c.
Allow individuals to operate their businesses in ways they think will maximize their profits.
d.
Require companies to disclose information to consumers.
c.
| Allow individuals to operate their businesses in ways they think will maximize their profits.
166
```
Which of the following was NOT part of the 1962 Consumer Bill of Rights?
A.
the right to safety
B.
the right to return
C.
the right to choose
D.
the right to be heard
```
B.
| the right to return
167
```
Which US president established the Consumer Bill of Rights in 1962?
A.
Dwight D. Eisenhower
B.
Lyndon B. Johnson
C.
Harry S Truman
D.
John F. Kennedy
```
D.
| John F. Kennedy
168
```
Patents and copyrights are two forms of protection for
A.
physical property
B.
intellectual property
C.
imaginary property
D.
potential property
```
B.
| intellectual property
169
```
The consumer’s right to be heard means that consumers should expect positive action from government and businesses when they __________.
A.
organize mass protests
B.
speak up about problems
C.
praise the quality of their purchases
D.
make contributions to top officials
```
B.
| speak up about problems
170
Having property rights refers to the legal authority to do all of the following EXCEPT:
A.
own property
B.
take property that others have abandoned
C.
use the property as one sees fit, within the law
D.
receive any income the property generates
B.
| take property that others have abandoned
171
Which of the following is NOT a way that the Federal Trade Commission protects consumers?
A.
making complaints about fraud and identity theft available to law enforcement
B.
suing companies and people who violate consumer protections laws
C.
educating consumers and businesses about rights and responsibilities
D.
ensuring that factory safety standards are in line with current laws
D.
| ensuring that factory safety standards are in line with current laws
172
```
Original works of authorship are protected by __________.
A.
patents
B.
insignias
C.
trademarks
D.
copyrights
```
D.
| copyrights
173
```
Which of the following is NOT intellectual property?
A.
a new office building
B.
the design for the building
C.
a painting of the building
D.
software used inside the building
```
A.
| a new office building
174
Property owners have a strong incentive to improve their property because they can __________.
A.
increase the value of their neighbor’s property, even if it does not increase the value of their own
B.
be confident that they will receive the financial benefits of improving their property if they choose to sell
C.
be sure that improvements on property will intimidate new buyers, keeping the population of the neighborhood low
D.
increase the amount of their annual property tax
B.
| be confident that they will receive the financial benefits of improving their property if they choose to sell
175
```
The consumer’s right to safety means that goods and services will not be hazardous __________.
A.
if used by any responsible adult
B.
under any circumstances whatever
C.
if used for their intended purposes
D.
when purchased in their original packaging
```
C.
| if used for their intended purposes
176
```
The rise and fall of economic activity through periods of expansion and recession is known as the __________.
A.
business cycle
B.
percentage change
C.
unemployment rate
D.
consumer price index
```
A.
| business cycle
177
```
All of the following categories are part of the CPI market basket EXCEPT:
A.
education and communication
B.
food and beverages
C.
career promotion
D.
medical care
```
C.
| career promotion
178
Inflation is a decrease in the average price level in the economy.
false
179
```
People who want to work and have jobs are said to be __________.
A.
employers
B.
employed
C.
retirees
D.
military
```
B.
| employed
180
```
The percentage increase in the average price of the economy’s goods and services is known as __________.
A.
market basket
B.
price index
C.
deflation rate
D.
inflation rate
```
D.
| inflation rate
181
```
People age 16 years or older who are working in a job for which they are overqualified for are said to be __________.
A.
underemployed
B.
full-time student
C.
nonlabor force
D.
retired
```
A.
| underemployed
182
```
Each month, government employees interview about 60,000 persons in sample households to determine what percentage is unemployed. This is used to determine the __________ rate.
A.
price index
B.
unemployment
C.
market basket
D.
business cycle
```
B.
| unemployment
183
```
The percentage of decrease in the average price of the economy’s goods and services is known as the __________.
A.
nonlabor force
B.
deflation rate
C.
unemployment rate
D.
consumer price index
```
B.
| deflation rate
184
```
The total US noninstitutionalized population 16 years and older is known as the __________.
A.
discouraged workers
B.
underemployed
C.
labor force
D.
households
```
C.
| labor force
185
```
A __________ contains thousands of specific items that represent what average urban households purchase month after month.
A.
price index
B.
dollar value
C.
business cycle
D.
market basket
```
D.
| market basket
186
```
The benefits of long-term economic growth include all of the following EXCEPT
a.
an increase in the standard of living.
b.
an increase in employment.
c.
a boost in economic growth of other nations.
d.
an increase in the availability of land.
```
d.
| an increase in the availability of land.
187
A table that shows annual compound rates of growth between selected periods of time is the standard of living.
false
188
capital-to-labor ratio
total capital stock divided by the number of workers in the labor force
189
```
The numbers in this table were calculated by
a.
adding the dollar value of all final goods and services produced in the nation.
b.
subtracting net exports from GDP.
c.
multiplying GDP by total population.
d.
dividing GDP by total population.
```
d.
| dividing GDP by total population.
190
_______ is a factor that influences economic growth.
labor
191
```
A table that shows annual compound rates of growth between selected periods of time.
a.
quality of life
c.
growth triangle
b.
real GDP
d.
standard of living
```
c.
| growth triangle
192
labor productivity
ratio of output produced per unit of labor input
193
```
Increasing productivity results in
a.
increasing economic growth.
c.
stabilization of economic growth.
b.
decreasing economic growth.
d.
sporadic economic growth.
```
a.
| increasing economic growth.
194
```
Which of the following is not a factor that could lead to economic growth?
a.
labor
c.
land
b.
capital
d.
opportunity cost
```
d.
| opportunity cost
195
The capital-to-labor ratio influences
a.
| economic growth
196
```
In a sole proprietorship, __________ receive all of the profits.
A.
banks
B.
owners
C.
partners
D.
investors
```
B.
| owners
197
```
Sole proprietorships are often owned by __________.
A.
financial institutions
B.
a small group of investors
C.
one person or a married couple
D.
people with a common interests
```
C.
| one person or a married couple
198
What is one reason why a business owner might choose a for-profit business over a nonprofit business?
to avoid facing stricter business regulations
199
```
When corporations and shareholders each pay taxes on the same money it is called __________ taxation.
A.
dual
B.
repeat
C.
double
D.
shadow
```
C.
| double
200
```
Profit motive and a sense of __________ act as powerful incentives for many entrepreneurs.
A.
power
B.
uncertainty
C.
independence
D.
impulsiveness
```
C.
| independence
201
```
Ownership of a corporation is __________ to transfer.
A.
easy
B.
difficult
C.
impossible
D.
impractical
```
A.
| easy
202
What is one feature of a nonprofit business that is different from a for-profit business?
Nonprofits are exempt from taxes.
203
```
Shareholders have __________ liability because they are not responsible for the debts or actions of the corporation.
A.
limited
B.
personal
C.
unlimited
D.
corporate
```
A.
| limited
204
```
Each of the following is a risk of entrepreneurship EXCEPT:
A.
loss of savings
B.
being your own boss
C.
damage to relationships
D.
possibility of unemployment
```
B.
| being your own boss
205
When a business’s purpose is to benefit the general public, the business is called a ________ business.
nonprofit
206
In a perfectly competitive market, prices and production costs are kept
low
207
```
All of the following are examples of a commodity, except
a.
strawberries
c.
milk
b.
a designer handbag
d.
petroleum
```
b.
| a designer handbag
208
Some examples of barriers to entry are technology and start-up costs.
true
209
In a perfectly competitive market, competition drives prices to the point where they
not a
| prob "just cover costs"
210
product that is considered the same no matter who makes or sells it.
commodity
211
As competition drives prices down in a perfectly competitive market, ________
will reach a point that allows suppliers to just cover costs.
?
| not "prices"
212
```
Which of the following is a condition of a perfectly competitive market?
a.
a few buyers
c.
a market in which there is only one barrier to entry
b.
identical products
d.
uninformed buyers and sellers
```
b.
| identical products
213
the expenses a firm must pay before it can begin to produce and sell goods
start-up costs
214
One of the four conditions for perfect competition is few sellers and buyers.
false
215
If an individual seller tries to increase the price of their product in a perfectly competitive system then:
a.
other sellers will increase their prices.
c.
the seller will increase their profit.
b.
the individual will not be able to sell any of their product.
d.
none of the above
b.
| the individual will not be able to sell any of their product.
216
```
Which of the following is a characteristic of a monopoly?
a.
no barriers to entry
c.
it is always government owned
b.
a single buyer
d.
a single seller
```
d.
| a single seller
217
```
Which of the following can destroy a monopoly?
a.
technology
c.
a reduction in the price of factor inputs
b.
increased barriers to entry
d.
a law which outlaws price discrimination
```
a.
| technology
218
Why do companies practice price discrimination?
a.
Price discrimination enables companies to charge all consumers the same price for a good or service.
b.
Price discrimination allows companies to defend an illegal monopoly against free market competition.
c.
Price discrimination provides individual producers with an advantage in perfectly competitive markets.
d.
Price discrimination recognizes that groups of consumers are willing and able to pay different amounts and maximizes profits by charging each group a different price.
d.
Price discrimination recognizes that groups of consumers are willing and able to pay different amounts and maximizes profits by charging each group a different price.
219
A natural monopoly is a market that runs most efficiently when one large firm supplies all the output.
true
220
```
A monopolist will set its production at a level where marginal cost is equal to
a.
marginal revenue.
c.
total revenue.
b.
the equilibrium market price.
d.
quantity supplied.
```
a.
| marginal revenue.
221
Which of these is an example of economies of scale?
a.
A shoe store finds it can increase profits by hiring high school students who are willing to work for minimum wage.
b.
A ranch increases its profits by expanding from 400 to 800 cattle without buying or renting additional land.
c.
A restaurant charges customers $1 a glass for water that was once provided for free.
d.
An Internet access company charges customers different rates for using the Internet at different times of day.
b.
| A ranch increases its profits by expanding from 400 to 800 cattle without buying or renting additional land.
222
A market dominated by one seller is called a monopoly.
true
223
Factors that cause a producer’s average cost per unit to fall while output rises are known as _____.
a. franchise scale
b. price discrimination
c. economics of scale
d. market power scale
c. economics of scale
224
Why can an industry that enjoys economies of scale easily become a natural monopoly?
a.
because average costs drop as production rises
b.
because the market taxes less as production rises
c.
because consumers tend to appreciate monopolies
d.
because our government traditionally supports monopolies
a.
| because average costs drop as production rises
225
a government-issued right to operate a business
license
226
```
Which of the following is not a characteristic of monopolistic competition?
a.
few artificial barriers to entry
c.
homogenous products
b.
large number of firms
d.
slight control over price
```
not b
| prob a
227
Which of the following is an example of an oligopoly?
a.
A weekly farmers’ market offering buyers diverse choices of vegetables, fruits, and baked goods from area farms.
b.
AT&T’s control of the long distance land-line phone market in the 1980s.
c.
The nationalization of the airline QANTAS by the Australian government.
d.
The domination of the music industry by four major companies; Sony, EMI, Universal, and Warner.
d.
| The domination of the music industry by four major companies; Sony, EMI, Universal, and Warner.
228
```
Sunshine Island has three large supermarkets that supply most of the groceries for the island’s population. How would you describe the market for groceries on Sunshine Island?
a.
perfect competition
b.
cartel
c.
oligopoly
d.
monopoly
```
c.
| oligopoly
229
Price fixing can be best described as
a. an agreement between two companies to sell the same good or service at the same price.
b. a government order that the price of an item should not rise for a set number of years.
c. one companies guarantee to keep a product at a specific price to compete against their competition.
d. a government order to keep prices the same to combat inflation.
a. an agreement between two companies to sell the same good or service at the same price.
230
```
Which of the following products is an example of monopolistic competition?
a.
tap water
c.
books
b.
oranges
d.
bus tickets
```
c.
| books
231
What is the definition of an oligopoly?
a.
one firm producing 95 percent of the output
b.
four firms produce 40 percent or more of the output
c.
eight to ten firms producing 40 or less of the output
d.
two firms producing 95 percent of the output
b.
| four firms produce 40 percent or more of the output
232
An oligopoly is a market structure in which a large number of firms dominate the market.
false
233
a series of competitive price cuts that lowers the market price below the cost of production
price war
234
Which of the following is one market trend that results when a monopolistically competitive firm starts earning profits well above its costs?
a.
The firm would become an oligopolistic firm because it has effectively eliminated the competition and now dominates the market alone.
b.
The firm would try to lure 100 percent of customers by flooding the market with defective products.
c.
Fierce competition would encourage rivals to create new ways to differentiate their products and lure customers to them.
d.
The firm would eventually go out of business because demand would decrease.
c.
| Fierce competition would encourage rivals to create new ways to differentiate their products and lure customers to them.
235
```
What happens to a monopolistically competitive firm that begins to charge an excessive price for its product?
a.
The firm will go out of business.
b.
Consumers will substitute a rival’s product.
c.
Consumers will boycott the product.
d.
The government will regulate the price.
```
b.
| Consumers will substitute a rival’s product.
236
Which of the following is an example of resource mobility?
a.
an engineer asking for a higher wage
b.
an aircraft factory laying off engineers
c.
an engineer taking a job at a different factory
d.
an aircraft factory selling its products overseas
c.
| an engineer taking a job at a different factory
237
public goods
products that are collectively consumed by everyone
238
Inadequate competition can occur when there is not efficient allocation of resources because entrepreneurs, labor, and capital have not been free to move to areas where returns are
c. the highest
239
Market failure can occur when resources do not move freely from one industry to another.
true
240
Economists describe an unintended side effect of a business activity as an externality.
true
241
market failure
occurs when any one of the four conditions necessary for a competitive free enterprise economy is significant
242
externality
an unintended side effect that either benefits or harms an uninvolved third party
243
An externality is an unintended side effect that benefits or harms a third party not involved in the activity.
true
244
```
An unintended side effect that benefits or harms a third party not involved in the activity is:
a.
a condition of oligopoly.
c.
a problem caused by inadequate competition.
b.
an externality.
d.
price discrimination.
```
b.
| an externality.
245
Noise pollution from a racetrack is an example of a positive externality.
false
246
If the government deregulates the airline industry then:
a.
less competition will be expected
c.
a perfectly competitive market will exist
b.
producers will have more control over the price charged for their product
d.
none of the above
b.
| producers will have more control over the price charged for their product
247
like a cartel, an illegal grouping of companies that discourages competition
trust
248
Deregulation occurs when the government no longer determines what role each company can play in the market and how much the company can charge for their products.
true
249
When the government deregulated the airline industry it was expected that competition would increase.
true
250
To encourage competition, the government would want to preserve incentives so companies would
a. resist the urge to merge.
251
Deregulation always leads to lower prices for the consumer.
false
252
The government has no power over companies joining together into larger companies.
false
253
Which of the following is true about a merger?
a.
It is an example of deregulation.
c.
It is a combination of two or more companies into a single firm.
b.
It violates the Sherman Anti-Trust Act of 1890.
d.
It always leads to economic growth.
c.
| It is a combination of two or more companies into a single firm.
254
```
Which of the following industries have been deregulated in recent years?
a.
low-cost housing
c.
airlines
b.
pharmaceuticals
d.
steel
```
c.
| airlines
255
laws that encourage competition in the marketplace
antitrust laws
256
```
Anything accepted for payment of goods and services or repayments of debts can be considered __________.
A.
cash
B.
money
C.
creditable
D.
transferable
```
B.
| money
257
```
Inflation causes the price of goods and services to __________ over time.
A.
fall
B.
rise
C.
vary
D.
freeze
```
B.
| rise
258
```
When money provides a standard way to compare the value of goods and services, it acts as a __________.
A.
store of value
B.
unit of account
C.
currency converter
D.
economic regulator
```
B.
| unit of account
259
```
Trade is evaluated by weighing __________ and __________.
A.
need . . . want
B.
costs . . . benefits
C.
value . . . currency
D.
competition . . . price
```
B.
| costs . . . benefits
260
```
The gold standard has not been used in any major economy since __________.
A.
1900
B.
1933
C.
1946
D.
1971
```
D.
| 1971
261
```
When money is legally accepted and has a recognized value it is a __________.
A.
legal tender
B.
universal good
C.
granted property
D.
reimbursed currency
```
A.
| legal tender
262
```
The type of e-cards that have an antenna built into them are __________ cards.
A.
zip
B.
contact
C.
convenient
D.
contactless
```
D.
| contactless
263
```
Each of the following is an example of commodity currency EXCEPT:
A.
cattle
B.
cacao beans
C.
precious coins
D.
savings bonds
```
D.
| savings bonds
264
```
The Bretton Woods system allowed governments to sell __________ to the United States Treasury at a fixed price.
A.
gold
B.
bonds
C.
silver
D.
currency
```
A.
| gold
265
```
If a prepaid smart card or gift card is lost, then the money that was on that card is __________.
A.
no longer available
B.
reimbursed by the bank
C.
donated to charity
D.
transferred to a new card
```
A.
| no longer available
266
```
The institution responsible for managing a nation’s money supply is the __________.
A.
central bank
B.
trade commission
C.
national security
D.
government regulator
```
A.
| central bank
267
```
The guiding philosophy behind the formation of the Federal Reserve System was a __________ decentralized bank run by the federal government.
A.
stable
B.
unified
C.
dominating
D.
unicameral
```
A.
| stable
268
```
The Federal Reserve regulates the money supply by controlling how much banks can __________.
A.
lend
B.
invest
C.
spend
D.
borrow
```
A.
| lend
269
```
The Federal Reserve directly affects the ability of banks to __________.
A.
create accounts
B.
certify checks
C.
approve loans
D.
attract customers
```
C.
| approve loans
270
```
To counter inflation the Federal Reserve makes __________ available.
A.
less money
B.
more money
C.
lower interest rates
D.
more government loans
```
A.
| less money
271
```
The Federal Reserve System monitors and regulates the US __________ and __________ system.
A.
tax . . . spending
B.
trade . . . commerce
C.
monetary . . . banking
D.
regulation . . . investment
```
C.
| monetary . . . banking
272
```
The Federal Reserve System is an independent government agency that was established by __________.
A.
the Cabinet
B.
Congress
C.
the president
D.
the Supreme Court
```
B.
| Congress
273
```
The Federal Reserve institution of district 12 is called__________.
A.
The Federal Reserve of Board of Governors
B.
The Federal Reserve of San Francisco
C.
The Federal Reserve of Philadelphia
D.
The Federal Reserve of Santa Barbara
```
B.
| The Federal Reserve of San Francisco
274
```
Within the structure of the Federal Reserve System, each of the following is a depository institution EXCEPT:
A.
banks
B.
credit unions
C.
money markets
D.
savings and loans
```
C.
| money markets
275
```
Which former US president signed the Federal Reserve Act in 1913?
A.
Calvin Coolidge
B.
Herbert Hoover
C.
Woodrow Wilson
D.
Theodore Roosevelt
```
C.
| Woodrow Wilson
276
The balance sheet discloses all the assets and liabilities of a bank on one form.
true
277
The Federal Reserve Bank is responsible for replacing torn and worn money with new bills.
true
278
```
What is the cost of money?
a.
the smoothing out of fluctuations in the market
b.
the economy’s use of open market operations
c.
the price of the interest rate
d.
the bank’s use of money creation
```
c.
| the price of the interest rate
279
```
According to the passage, what was the federal-funds rate before the rate increase?
a.
5.0%
c.
4.8%
b.
4.75%
d.
5.25%
```
b.
| 4.75%
280
```
If the Federal Reserve increases the reserve requirement, what effect will this have on the nation’s money supply?
a.
Increase the money supply.
c.
Have no effect on the money supply.
b.
Decrease the money supply.
d.
It will double the nation’s money supply.
```
b.
| Decrease the money supply.
281
```
All of the following actions by the Fed would promote an easy money policy EXCEPT
a.
increasing the reserve requirement.
b.
buying government securities.
c.
lowering the discount rate.
d.
announcing that it anticipates adopting an easy money policy.
```
a.
| increasing the reserve requirement.
282
The Fed restricts the growth of the money supply in the case of a tight money policy which
drives interest rates up.
283
```
All of the following are tools of monetary supply EXCEPT
a.
selective credit controls.
c.
liability and assets.
b.
moral persuasion.
d.
open market operations.
```
c.
| liability and assets.
284
The Federal Reserve Bank is responsible for minting new coins.
false
285
```
Assets are
a.
properties, possessions, and claims on others.
b.
cash a bank owes to depositors.
c.
the same as net worth.
d.
legal reserves.
```
a.
| properties, possessions, and claims on others.
286
The real rate of interest is the interest rate minus the rate of inflation.
true
287
```
When a bank keeps $12 from a $100 deposit as legal reserves, it is using
a.
the Federal Reserve System.
c.
a legal reserve system.
b.
a fractional reserve system.
d.
a fractional deposit system.
```
b.
| a fractional reserve system.
288
```
Liabilities are
a.
reserves a bank must set aside.
c.
cash a bank can use for making loans.
b.
debts and obligations.
d.
the same as net worth.
```
b.
| debts and obligations.
289
real rate of interest
the market rate of interest minus the rate of inflation
290
If the Fed increases the interest rate, it will increase the supply of money.
false
291
```
Coins, currency, demand deposits and travelers checks fit what definition of the money supply?
a.
M1
c.
M3
b.
M2
d.
M4
```
a.
| M1
292
```
An example of expansionary fiscal policy would be
a.
cutting taxes.
b.
cutting government spending.
c.
cutting production of consumer goods.
d.
cutting prices of consumer goods.
```
a.
| cutting taxes.
293
```
A fiscal year _____________________.
a.
is a nine month period of time that begins August 1st.
c.
begins on any date and lasts 12 months.
b.
coincides with the regular calendar year.
d.
starts on the first of the month.
```
c.
| begins on any date and lasts 12 months.
294
The Federal Reserve is responsible for managing the federal budget.
false
295
If the government wanted the economy to grow, it would
d. increase government spending and cut taxes.
296
```
The purpose of expansionary fiscal policy is to
a.
increase output.
b.
prevent hyperinflation.
c.
slow the growth of the GDP.
d.
increase the separation between government and private industry.
```
a.
| increase output.
297
```
An example of contractionary fiscal policy would be
a.
cutting taxes.
b.
decreasing government spending.
c.
increasing production of consumer goods.
d.
expanding the government’s role in regulating private industry.
```
b.
| decreasing government spending.
298
a written document indicating the amount of money the government expects to receive for a certain year and authorizing the amount of money the government can spend that year
federal budget
299
```
Which of the following fiscal tools would the government use to get the economy out of a recession?
a.
increase the money supply
c.
increase taxes
b.
increase federal expenditures
d.
reduce the interest rate
```
not c
300
According to the graph, how do expansionary fiscal policies affect the economy?
a.
The government decreases spending to save more money.
b.
The government increases spending to raise output of goods and services and create jobs in the short term.
c.
The government decreases demand to reduce the growth of economic output.
d.
The government increases supplies to increase inflation and raise prices.
b.
| The government increases spending to raise output of goods and services and create jobs in the short term.
301
12-month financial planning period that may not coincide with the calendar year; October 1 to September 30 for the federal government.
fiscal year
302
```
According to Figure 15.9, what was true about revenues and expenditures in 1950?
a.
they favored a surplus
c.
they were about equal
b.
they favored a deficit
d.
not enough information given to determine
```
c.
| they were about equal
303
```
A _________ is sometimes referred to as a government debt, and occurs when the government spends more money than it is bringing in.
a.
budget surplus
c.
budget deficit
b.
hyperinflation
d.
stagflation
```
c.
| budget deficit
304
```
What does a budget deficit do to the national debt?
a.
decreases
c.
has no effect
b.
increases
d.
depends on how large the deficit is
```
b.
| increases
305
```
When the government runs a deficit, it must sell bonds through this department?
a.
Department of Commerce
c.
Department of Defense
b.
Department of the Treasury
d.
Department of the Interior
```
b.
| Department of the Treasury
306
total amount of money the federal government owes
national debt
307
When you buy a United States Savings Bond, you
a.
loan money to the government.
b.
borrow money from a savings and loan association.
c.
donate money for special government projects.
d.
pay for your child’s college education.
a.
| loan money to the government.
308
```
When revenues exceed expenditures,
a.
there is a budget surplus.
b.
there is a budget deficit.
c.
the government must create more money.
d.
the government is forced to issue more bonds to raise money.
```
a.
| there is a budget surplus.
309
```
What is a government bond that is repaid within 3 months to a year?
a.
Mortgage
c.
Treasury Bill
b.
Certificate of Deposit
d.
Federal Reserve Note
```
c.
| Treasury Bill
310
```
According to Figure 15.9, what was true about revenues and expenditures in 1950?
a.
they favored a surplus
c.
they were about equal
b.
they favored a deficit
d.
not enough information given to determine
```
c.
| they were about equal
311
```
According to Figure 15.9, what was the general trend of government revenues and expenditures during the early 1950s?
a.
they favored a deficit
c.
they favored a surplus
b.
they were about evenly split
d.
not enough information
```
b.
| they were about evenly split
312
```
A tax that imposes a higher percentage rate of taxation on low incomes rather than high incomes is known as a:
a.
proportional tax
c.
excise tax
b.
progressive tax
d.
regressive tax
```
d.
| regressive tax
313
```
The “incidence of a tax”
a.
is a benefit tax.
b.
refers to those who bear the final burden of taxation.
c.
is a special tax on individuals with high income.
d.
is a tax paid by self-employed workers.
```
b.
| refers to those who bear the final burden of taxation.
314
progressive tax
tax that imposes a higher percentage rate of taxation on persons with high incomes than those with low incomes
315
The two principles of taxation are the benefit principle and the ability-to-pay principle.
true
316
sales tax
simple tax levied on most consumer purchases
317
Tax incidence is concerned with tax loopholes.
false
318
```
Tax incidence is concerned with:
a.
tax loopholes
c.
who has the final burden of a tax
b.
tax credits
d.
the efficiency of the tax system
```
c.
| who has the final burden of a tax
319
sin tax
high tax designed to raise revenue and reduce consumption of a socially undesirable product
320
The three criteria for effective taxes are
a.
efficiency, simplicity, and regressiveness.
b.
efficiency, simplicity, and progressiveness.
c.
equity, progressiveness, and efficiency.
d.
equity, simplicity, and efficiency.
d.
| equity, simplicity, and efficiency.
321
The belief that taxes should be paid based on benefits received, despite total income, is known as the benefit principle of taxation.
true
322
```
Which of the following is a major source of federal revenue?
a.
demand deposits of the federal reserve
c.
sale of copper on the open market
b.
corporate income tax
d.
state banking fees
```
b.
| corporate income tax
323
```
The government uses indexing to revise tax brackets so that workers do not pay higher taxes just because
a.
of individual income taxes.
c.
they are married.
b.
they are unemployed.
d.
of inflation.
```
d.
| of inflation.
324
gift tax
tax on donations of money or wealth to individuals
325
FICA
federal tax used to pay for Social Security and medicare
326
```
A tax levied on both employers and employees to pay for Social Security and Medicare is:
a.
FICA
c.
customs duty
b.
an excise tax
d.
a progressive tax
```
a.
| FICA
327
```
The State places a ten cent tax on every gallon of gasoline used by consumers. What type of tax is this an example of:
a.
sales tax
c.
income tax
b.
excise tax
d.
customs duty
```
b.
| excise tax
328
What is a progressive income tax?
a.
Tax rate remains the same regardless of income.
c.
the average tax rate goes up when income goes up.
b.
The average tax rate goes down when income goes up.
d.
A tax that is measured at the margin.
c.
| the average tax rate goes up when income goes up.
329
```
The individual income tax is a(n)
a.
proportional tax.
c.
regressive tax.
b.
progressive tax.
d.
excise tax.
```
b.
| progressive tax.
330
estate tax
tax on the transfer of property when a person dies
331
```
FICA includes taxes to pay for
a.
Social Security and medicare.
c.
unemployment and medicare.
b.
Social Security and unemployment.
d.
medicare and worker's compensation.
```
a.
| Social Security and medicare.
332
```
A person who assigns value to property for tax purposes is called a
a.
revenue agent.
c.
IRS agent.
b.
tax collector.
d.
tax assessor.
```
d.
| tax assessor.
333
Taxes on most personal property are seldom collected because of the problem of valuation.
true
334
```
Intergovernmental revenues are generally intended for
a.
education and public welfare.
c.
environmental cleanup.
b.
public transportation.
d.
parks and recreation.
```
a.
| education and public welfare.
335
tax assessor
person who assigns value to property for tax purposes
336
property tax
a tax on tangible and intangible possessions
337
```
New Hampshire is one example of a state that did not have ________, so they needed to make up the difference in income by enacted ________ to ensure income for the state.
a.
sales tax; other taxes
b.
income tax; sales tax
c.
funding for education; property tax
d.
property tax; university tax
```
a.
| sales tax; other taxes
338
Summarize the main idea of the cartoon.
a.
The government is not interested in the growth of e-commerce.
b.
The government is charging a sales tax on all technological improvements.
c.
The government does not interfere with the conduct of e-commerce.
d.
The government is losing revenue by not collecting sales tax on e-commerce.
d.
| The government is losing revenue by not collecting sales tax on e-commerce.
339
```
What is a payroll withholding statement?
a.
A bank statement summarizing the activity of an individual’s bank account.
c.
The summary statement attached to a paycheck that summarizes income, tax withholdings, and other deductions.
b.
The net pay that an individual receives.
d.
None of the above.
```
c.
| The summary statement attached to a paycheck that summarizes income, tax withholdings, and other deductions.
340
```
All of the following tax deductions can appear on a payroll withholding statement EXCEPT
a.
federal excise taxes.
c.
federal income taxes.
b.
FICA taxes.
d.
state income taxes.
```
a.
| federal excise taxes.
341
```
If a state provides money to a local municipality for education, it is an example of:
a.
a welfare payment
c.
intergovernmental transfer
b.
a state surplus
d.
a reduction in property taxes
```
c.
| intergovernmental transfer
342
```
What are the two types of government spending?
a.
Consumption plus investment.
c.
Capital goods and labor.
b.
Goods and services and transfer payments.
d.
Transfer payments and capital goods.
```
b.
| Goods and services and transfer payments.
343
```
A grant-in-aid is a:
a.
transfer payment
c.
tax incidence
b.
business investment program
d.
consumer program
```
a.
| transfer payment
344
Two types of government spending include spending on goods and services and transfer payments.
true
345
The public sector is that part of the economy that is made up of individuals and privately-owned businesses.
false
346
```
Per capita means:
a.
the amount of capital per person
c.
the amount of dollars per person
b.
the amount of labor per person
d.
per person
```
d.
| per person
347
```
Based on what you know about historical events, why did government spending per capita increase sharply in the early to mid 1940s, as shown in the graph?
a.
spending on services during the Great Depression
b.
spending on World War II
c.
spending on World War I
d.
spending on the Korean War
```
b.
| spending on World War II
348
```
All of the following are examples of transfer payments EXCEPT
a.
the purchase of fighter jets.
c.
unemployment compensation.
b.
Social Security.
d.
funds to build interstate highways.
```
a.
| the purchase of fighter jets.
349
Government spending can directly affect both the allocation of resources and the distribution of income.
true
350
When the government produces goods and services, it always competes with producers in the private sector.
false
351
Distribution of income explains the way in which income is allocated to individuals, families, or other designated groups.
true
352
```
Based on the circle graph, about how many dollars does the federal government expect to spend on health that year?
a.
$8.3 billion
c.
$230 billion
b.
$141 billion
d.
$13.5 billion
```
b.
| $141 billion
353
One result of the current Social Security debate has been to concentrate the public’s mind on the true economic condition of the elderly.... While the top 20% of seniors are relatively affluent,...almost all of the rest are highly dependent on Social Security.... [T]he program provided at least half of the total income of more than 55% of senior citizens and at least 75% of the total income of more than a third.... [Social Security] lifted 11.4 million seniors—or nearly half of the 65-and-older population—out of poverty, cutting the elderly’s poverty rate from 47.6% to 11.9%.
Source: Adapted from “Social Security is Aptly Named,” reprinted from May 10, 1999 issue of Business Week by special permission, copyright © 1999 by The McGraw-Hill Companies, Inc.
```
According to the passage, about what percentage of the elderly would be living in poverty if the Social Security system did not exist?
a.
47.6%
c.
55%
b.
11.9%
d.
59.5%
```
a.
| 47.6%
354
fiscal year
a 12-month financial planning period that may or may not coincide with the calendar year
355
discretionary spending
programs that must receive annual authorization
356
mandatory spending
spending authorized by law that continues without the need for annual approvals of Congress
357
The Federal Budget is:
a.
the total of local, state and federal expenditures.
c.
the annual plan for expenditures for the coming year.
b.
the annual plan for proposed revenue for the coming year.
d.
the annual plan outlining proposed revenues and spending for the coming years.
d.
| the annual plan outlining proposed revenues and spending for the coming years.
358
federal budget
annual plan outlining proposed revenues expenditures for the coming year
359
```
An example of mandatory spending is financing for
a.
interest payments on the federal debt.
b.
national defense.
c.
medical research programs.
d.
elementary and secondary education programs.
```
a.
| interest payments on the federal debt.
360
```
Who creates the Federal Budget?
a.
Federal Reserve
c.
Council of Economic Advisors
b.
House of Representatives
d.
President
```
d.
| President
361
```
The sequence for the approval of the federal budget is
a.
president to Congress to Supreme Court.
b.
president to Congress back to president.
c.
House Appropriations Committee to Congress to president.
d.
Congress to House Speaker to president.
```
b.
| president to Congress back to president.
362
Mutual funds are financial institutions that lend the funds that savers provide to borrowers.
false
363
```
Financial institutions that lend the funds that savers provide to borrowers.
a.
mutual funds
c.
pensions
b.
premiums
d.
financial intermediaries
```
d.
| financial intermediaries
364
```
All of the following are examples of nonbank financial institutions EXCEPT
a.
credit unions.
c.
life insurance companies.
b.
finance companies.
d.
real estate investment trusts.
```
a.
| credit unions.
365
```
The financial institutions that bring together funds that savers provide and then lend those funds to others are called
a.
mutual funds.
c.
financial assets.
b.
financial systems.
d.
financial intermediaries.
```
d.
| financial intermediaries.
366
```
Saving is necessary for
a.
a traditional economy.
c.
financial assets.
b.
a command economy.
d.
capital formation.
```
d.
| capital formation.
367
savings
the dollars that become available in the absence of consumption
368
When consumers build up a lot of debt, they may choose to apply for a bill consolidation loan that they can use to pay off their other bills.
true
369
financial system
network of savers, investors, and financial institutions that work together to transfer savings to investors
370
```
Which two countries have the highest saving rates among the countries shown on the chart?
a.
Germany and Japan
c.
France and Germany
b.
France and Italy
d.
Japan and Italy
```
d.
| Japan and Italy
371
Money is burning a hole in consumers’ pockets. Again last month, U.S. wage earners spent nearly as much as they made, contributing to record low savings. But consumers have good reason to be out there spending. They’ve got jobs, their incomes are rising, confidence is high, and the stock market is booming. This trend dragged down the savings rate—savings as a percentage of after-tax income—to a record low.
```
Source: The Columbus Dispatch, May 29, 1999.
This passage suggests that the low savings rate is due to
a.
high unemployment.
c.
low prices.
b.
the booming economy.
d.
falling incomes.
```
b.
| the booming economy.
372
A tax-deferred investment and savings plan that acts as a personal pension fund for employees.
401(k)
373
A 302K Plan is a tax deferred investment and savings plan that acts as a personal pension fund for employees.
false
374
```
What two companies rate and publish bonds?
a.
Poor Richard’s and Moody’s
c.
Sampson’s and Monroe’s
b.
Standard and Poor’s and Moody’s
d.
none of the above
```
b.
| Standard and Poor’s and Moody’s
375
Bond ratings can be used as a measure of the bond's risk.
true
376
Munis are bonds issued by state and local governments.
true
377
A 401(k) plan is a tax-deferred investment and savings plan that serves as a personal pension plan for employees.
true
378
```
Suppose you deposited $10 into your savings account each month, as indicated in the table. Your account pays 4%, compounded monthly. How much will you have in your account at the end of 15 years?
a.
$2,908
c.
$3,668
b.
$2,461
d.
$1,800
```
b.
| $2,461
379
```
The principal or total amount initially borrowed that must be repaid to the lender at maturity.
a.
value
c.
total value
b.
par value
d.
none of the above
```
b.
| par value
380
A coupon is the stated interest on a corporate, municipal, or government bond.
true
381
Bonds
a.
pay a fixed interest rate over a specified period of time.
b.
are insured by the federal government.
c.
are a consistently low-risk investment choice.
d.
are rated according to risk from A through G.
a.
| pay a fixed interest rate over a specified period of time.
382
```
Financial planning begins with
a.
the first floor.
c.
a solid foundation.
b.
the attic.
d.
the second floor.
```
c.
| a solid foundation.
383
Goals to be reached within two to five years.
mid-term
384
The earning potential on your savings.
rate of return
385
The availability of your funds on short notice.
liquidity
386
Goals to be reached within a period of six months but can be up to two years.
short-term
387
Additional income one can earn over a long period of time from placing their money in a savings account.
interest
388
The security of funds in one's savings account.
safety
389
The amount of insurance needed does not vary from person to person.
false
390
The rate of interest on money held in a savings account, _______ the amount of money saved.
```
a.
decreases
c.
has no effect
b.
increases
d.
none of the above
```
b.
| increases
391
```
Rate of return on savings refers to
a.
availability of your funds on short notice.
b.
tax-free accumulation of savings.
c.
earning potential of savings.
d.
security or safety of funds on deposit.
```
c.
| earning potential of savings.
392
Stephen used a reconciliation worksheet, but his checkbook balance does not match the final worksheet balance. Evaluate the following list of possible errors that he has made. Decide which items could potentially correct this problem if found and corrected.
Choose the option below that correctly describes the items that could have caused this problem with Stephen’s reconciliation.
a.
I, III, IV, and V could cause the problem, but not II.
b.
I, II, III, and V could cause the problem, but not IV.
c.
All five of the potential errors could cause this sort of problem.
d.
I and II could cause the problem since there are no math errors.
c.
| All five of the potential errors could cause this sort of problem.
393
George tallies up the transactions in his check register and comes up with a total balance of $221.57, but his bank statement says that his balance is $203.73. Which of the following are still outstanding?
```
I. A $20.25 check to the florist
II. A $14.29 check to the dry cleaners
III. A $38.09 check deposit
IV. A $19.05 money order deposit
a.
I and III
b.
I and IV
c.
II and III
d.
II and IV
```
a.
| I and III
394
Which of the following items are elements of a monthly checking account statement?
I. A period (beginning date and ending date)
II. A beginning balance and ending balance.
III. A detailed list of debits and credits during the period.
a.
I and II
b.
I and III
c.
II and III
d.
I, II and III
d.
| I, II and III
395
```
Consider the following incomplete deposit slip:
How much cash did the person who filled out this deposit slip receive?
a.
$381.23
b.
$451.02
c.
$88.79
d.
$436.02
```
c.
| $88.79
396
```
Richard’s checkbook register as of 02/19:
Enter the following transactions into Richard’s checkbook register and state his ending balance:
a.
$715.79
b.
$1,009.81
c.
$780.72
d.
$880.24
```
b.
| $1,009.81
397
Which of the following must be present for a check to be legitimate?
```
I. Your signature
II. A memo or note
III. The payee
a.
I and II
b.
III only
c.
I and III
d.
I, II, and II
```
c.
| I and III
398
Liam uses checks and a debit card, but does not always write all the transactions in his checkbook register. He has lost track of his checkbook balance. Liam looks up the “available balance” using online banking, and writes it on the next line as his new checkbook balance available to spend. What is wrong with Liam’s method?
a.
Liam’s method fails to consider whether he has written any outstanding checks.
b.
The reconciliation worksheet will not work properly using Liam’s adjusted checkbook balance.
c.
Liam could have unexpected non-sufficient funds fees due on any checks that have not yet cleared the bank.
d.
All of the above.
d.
| All of the above.
399
What are you primarily doing when you reconcile your checking account?
a.
Making sure the bank spelled your name properly.
b.
Making sure that your records match your bank’s records.
c.
Writing down the transactions that your bank automatically records so you don’t have to.
d.
Calling the bank to check the dates on each transaction.
b.
| Making sure that your records match your bank’s records.
400
When must you sign a deposit slip?
a.
You must always sign a deposit slip.
b.
You only need to sign a deposit slip when receiving cash.
c.
You only need to sign a deposit slip when using an ATM, rather than depositing at the bank.
d.
You never need to sign a deposit slip. Your account information is enough.
b.
| You only need to sign a deposit slip when receiving cash.
401
```
Nick is making a deposit with a check and wants cash back. His deposit slip has his name, his account number, the date, the amount of the check, his signature, the total deposit amount, and what else?
a.
A record of his last deposit
b.
The check number
c.
His account balance
d.
The amount of cash he wants
```
d.
| The amount of cash he wants
402
```
Bonds issued by the government are safer investments because ____.
a.
amount they pay at maturity
b.
credit rating of the issuer
c.
interest rate paid
d.
current yield
```
b.
| credit rating of the issuer
403
the annual interest the issuer promises to pay on the face value of a bond.
coupon rate
404
```
Municipal bonds are issued by ____.
a.
the federal government
b.
major corporations
c.
state, county, and city governments
d.
small start-up companies
```
c.
| state, county, and city governments
405
a share in the ownership of a corporation.
stock
406
used to evaluate how well a company has increased in earnings and value over time.
P/E Ratio
407
```
Bonds that have an investment range of 3-12 months are ____.
a.
Treasury bills (T-bills)
b.
Treasury bonds
c.
Treasury notes
d.
U.S. savings bonds
```
```
a.
Treasury bills (T-bills)
```
408
```
The face value of a bond is the ____.
a.
amount for which it sells
b.
amount it is worth when it is issued
c.
amount it pays at maturity
d.
purchase price plus its yield
```
b.
| amount it is worth when it is issued
409
the percentage of return on an investment.
yield
410
```
Corporate stocks and bonds can range from safe to risky depending on the ____.
a.
amount of dividends or interest they pay
b.
size of the corporation
c.
products or services the company sells
d.
financial strength of the company
```
d.
| financial strength of the company
411
The computer network used for trading securities is the NYSE.
false
412
Money market funds invest primarily in foreign currency.
false
413
Which of the following is NOT a guideline for investing in real estate?
a.
consider purchase and management costs and estimate the income the property will provide.
b.
find reliable professionals to represent your interests.
c.
learn about property values and management.
d.
wait for an opportunity free of risks.
d.
| wait for an opportunity free of risks.
414
```
Full-service brokerage firms
a.
have lower commissions.
c.
provide no investment advice.
b.
offer portfolio management.
d.
teach you how to do market research.
```
b.
| offer portfolio management.
415
A form that instructs your broker to buy or sell a stock as you request, but ultimately at the best price available.
market order
416
```
Which of the following should you NOT research when investing in mutual funds?
a.
Qualifications of fund managers.
b.
The primary goals of the fund.
c.
The performance of the fund over time.
d.
Finding reliable professionals to represent your interests.
```
d.
| Finding reliable professionals to represent your interests.
417
```
A balanced fund offers
a.
low risk and moderate growth.
c.
high risk and minimal growth.
b.
high risk and moderate growth.
d.
low risk and minimal growth.
```
a.
| low risk and moderate growth.
418
A form that instructs your broker to buy or sell when and if a stock reaches a specified price.
stop order
419
Securities that are expected to increase in value, emphasizing growth over income.
growth fund
420
A form that instructs your broker to buy or sell a certain stock at a set price or better.
limit order
421
```
A closed-end fund
a.
is only available online.
c.
has a floating number of shares.
b.
has a fixed number of shares.
d.
is sold directly by the company.
```
b.
| has a fixed number of shares.
422
IRAs and Keogh Plans offer consumers the opportunity to make tax deferred contributions to a retirement fund.
true
423
The point where a person stops employment completely.
retirement
424
```
A(n) _?_ is a plan that enables workers and their spouses to set aside money for retirement.
a.
annuity investment plan (AIP)
c.
individual retirement account (IRA)
b.
individual profit option (IPO)
d.
office retirement plan (ORP)
```
c.
| individual retirement account (IRA)
425
Generally, money deposited in an IRA or Keogh account can be withdrawn without penalty ____.
a.
as needed
b.
only at retirement age of 59 1/2 or older
c.
only for emergencies
d.
only if authorized by the account manager
b.
| only at retirement age of 59 1/2 or older
426
```
Like IRA’s, the interest earned on Keogh accounts
a.
is not taxed until retirement.
c.
is taxed annually as regular income.
b.
is not taxed at all.
d.
can be withdrawn without penalty.
```
a.
| is not taxed until retirement.
427
Taxpayers earning less than a certain amount may be able to make a tax deductible contribution to this type of account.
Individual Retirement Account (IRA)
428
```
Contributions are made into IRA accounts
a.
quarterly.
c.
monthly.
b.
annually.
d.
weekly.
```
b.
| annually.
429
```
The allowable amount a person can contribute to a Keogh plan
a.
is set by the U.S. Treasury.
c.
is $10,000 a year.
b.
is 59 1/2 percent.
d.
changes periodically.
```
d.
| changes periodically.
430
```
Withdrawing funds early from a retirement account can result in
a.
tax penalties.
c.
a federal fine.
b.
loss of interest.
d.
both a & b.
```
not a
| most likely not c
431
In this account, self-employed persons may make contributions up to a certain amount each year to a retirement account and claim them as a tax deduction.
Keogh Plan
432
```
Say you take out a loan with a principal of $44,500. The interest rate is 13.11%, compounded monthly. If you make consistent monthly payments and pay off the loan over the course of six and a half years, how much interest will you have paid in total? Round dollar amounts to the nearest cent.
a.
$21,849.92
b.
$3,018.03
c.
$20,003.60
d.
$24,321.18
```
a.
| $21,849.92
433
Jocelyn is considering taking out one of the two following loans. Loan H is a three-year loan with a principal of $5,650 and an interest rate of 12.24%, compounded monthly. Loan I is a four-year loan with a principal of $6,830 and an interest rate of 10.97%, compounded monthly. Which loan will have the smaller monthly payment, and how much smaller will it be? Round all dollar values to the nearest cent.
a.
Loan H's monthly payment will be $42.46 smaller than Loan I's.
b.
Loan H's monthly payment will be $140.79 smaller than Loan I's.
c.
Loan I's monthly payment will be $11.88 smaller than Loan H's.
d.
Loan I's monthly payment will be $26.98 smaller than Loan H's.
c.
| Loan I's monthly payment will be $11.88 smaller than Loan H's.
434
```
Dana just finished paying off the $15,400 loan she took out four years ago. The loan had 6.68% interest, compounded monthly. If Dana paid a total of $18,321.60, how much did she pay in service charges?
a.
$730.08
b.
$366.49
c.
$1,028.72
d.
$266.76
```
a.
| $730.08
435
Yvette is considering taking out a loan with a principal of $16,200 from one of two banks. Bank F charges an interest rate of 5.7%, compounded monthly, and requires that the loan be paid off in eight years. Bank G charges an interest rate of 6.2%, compounded monthly, and requires that the loan be paid off in seven years. How would you recommend that Yvette choose her loan?
a.
Bank F offers a better loan in every regard, so Yvette should choose it over Bank G’s.
b.
Yvette should choose Bank F’s loan if she cares more about lower monthly payments, and she should choose Bank G’s loan if she cares more about the lowest lifetime cost.
c.
Yvette should choose Bank G’s loan if she cares more about lower monthly payments, and she should choose Bank F’s loan if she cares more about the lowest lifetime cost.
d.
Bank G offers a better loan in every regard, so Yvette should choose it over Bank F’s.
b.
Yvette should choose Bank F’s loan if she cares more about lower monthly payments, and she should choose Bank G’s loan if she cares more about the lowest lifetime cost.
436
Dahlia is trying to decide which bank she should use for a loan she wants to take out. In either case, the principal of the loan will be $19,450, and Dahlia will make monthly payments. Bank P offers a nine-year loan with an interest rate of 5.8%, compounded monthly, and assesses a service charge of $925.00. Bank Q offers a ten-year loan with an interest rate of 5.5%, compounded monthly, and assesses a service charge of $690.85. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.
a.
Loan Q’s finance charge will be $83.73 greater than Loan P’s.
b.
Loan Q’s finance charge will be $317.88 greater than Loan P’s.
c.
Loan P’s finance charge will be $20.51 greater than Loan Q’s.
d.
Loan P’s finance charge will be $234.15 greater than Loan Q’s.
a.
| Loan Q’s finance charge will be $83.73 greater than Loan P’s.
437
Why is the interest rate of a loan one of the most important things to consider when shopping around for loans?
a.
The interest rate should be ignored, because there’s nothing a consumer can do to change it.
b.
The interest rate is essentially how long you have to pay off your loan, and the shorter the better.
c.
The interest rate can drastically change the total amount paid to the lender, in the case of mortgages, up to thousands of dollars.
d.
The interest rate does not change, even between banks, so choosing the right time to borrow is essential.
c.
The interest rate can drastically change the total amount paid to the lender, in the case of mortgages, up to thousands of dollars.
438
What is the difference between a service charge and a finance charge?
a.
A service charge is a fee which must be paid every month, while a finance charge is a one-time fee assessed at the beginning or end of a loan period.
b.
A service charge is a flat fee charged to a borrower, while a finance charge is a fee charged to a borrower based on the amount borrowed.
c.
A service charge is a fee assessed by a lender, while a finance charge is a fee charged by a financial institution, such as a bank.
d.
A service charge is a fee assessed by a lender other than interest, and a finance charge is the total of the interest paid on a loan and the service charge.
d.
A service charge is a fee assessed by a lender other than interest, and a finance charge is the total of the interest paid on a loan and the service charge.
439
```
Megan took out a loan of $85,600 at an interest rate of 11.5%, compounded monthly. She paid off the loan in full over the course of exactly twelve years. Assuming that Megan made the same payment every month for twelve years, what was her monthly payment?
a.
$1,125.03
b.
$629.52
c.
$1,098.52
d.
$820.33
```
c.
| $1,098.52
440
Which of these best fits the definition of interest, as it applies to finance?
a.
Interest is the money earned by investing.
b.
Interest is the cost of borrowing money.
c.
Interest is the cost of investing poorly.
d.
Interest is the portion of a loan which must be repaid every year.
b.
| Interest is the cost of borrowing money.
441
You are considering taking out one of two loans. Loan R has a principal of $17,550, an interest rate of 5.32% (compounded monthly), and a duration of seven years. Loan S has a principal of $15,925, an interest rate of 6.07% (compounded monthly), and a duration of nine years. Assuming that you pay back each in monthly intervals, which loan will have a greater lifetime total, and how much greater will it be? Round all dollar values to the nearest cent.
a.
Loan S’s lifetime total will be $1,274.12 greater than Loan R’s.
b.
Loan S’s lifetime total will be $32.99 greater than Loan R’s.
c.
Loan R’s lifetime total will be $350.88 greater than Loan S’s.
d.
Loan R’s lifetime total will be $58.96 greater than Loan S’s.
c.
| Loan R’s lifetime total will be $350.88 greater than Loan S’s.
442
```
Olivia has taken out a $13,100 unsubsidized Stafford loan to pay for her college education. She plans to graduate in four years. The loan has a duration of ten years and an interest rate of 7.6%, compounded monthly. By the time Olivia graduates, how much greater will the amount of interest capitalized be than the minimum amount that Olivia could pay to prevent interest capitalization? Round all dollar values to the nearest cent.
a.
$654.45
b.
$477.27
c.
$995.60
d.
$354.22
```
a.
| $654.45
443
```
Gertrude takes out a $5,500 subsidized Stafford loan, which must be paid back in ten years. Gertrude will graduate four years after taking out the loan. If the loan has an interest rate of 6.8%, compounded monthly, and Gertrude makes monthly payments, how much interest will she pay by the time the loan is repaid? Round all dollar values to the nearest cent.
a.
$4,462.40
b.
$1,213.28
c.
$1,713.69
d.
$2,094.80
```
d.
| $2,094.80
444
Which loan or loans listed below are awarded based on the financial need of the student?
```
I. Perkins loan
II. subsidized Stafford loan
III. unsubsidized Stafford loan
a.
I only
b.
I and II
c.
II and III
d.
I, II, and III
```
b.
| I and II
445
```
At the beginning of each of her four years in college, Miranda took out a new Stafford loan. Each loan had a principal of $5,500, an interest rate of 7.5% compounded monthly, and a duration of ten years. Miranda paid off each loan by making constant monthly payments, starting with when she graduated. All of the loans were subsidized. What is the total lifetime cost for Miranda to pay off her 4 loans? Round each loan's calculation to the nearest cent.
a.
$23,650.00
b.
$29,481.08
c.
$7,834.32
d.
$31,337.27
```
d.
| $31,337.27
446
Why is deferment an important aspect of student loans?
a.
Most students are unable to make monthly payments while studying, so deferment allows them to focus on studying.
b.
Even if students are able to pay for their loan, they don't need to take on the responsibilities of paying back the loan.
c.
Deferment allows students to miss payments every so often, because being a college student is tough.
d.
Deferment is only beneficial to a student if they are a full-time student.
a.
| Most students are unable to make monthly payments while studying, so deferment allows them to focus on studying.
447
Which statement or statements accurately describe characteristics of subsidized Stafford loan?
I. grace period during which payments are not due
II. based on student need
III. student is responsible for all interest for the lifetime of the loan.
```
a.
I only
b.
II only
c.
I and II
d.
I and III
```
c.
| I and II
448
```
Henry wants to avoid interest capitalization on his $7,800 unsubsidized Stafford loan. Henry will graduate in four years, and the loan has a duration of ten years. The loan has an interest rate of 5.6%, compounded monthly. How much must Henry pay every month to avoid interest capitalization?
a.
$14.56
b.
$43.68
c.
$36.40
d.
$31.20
```
c.
| $36.40
449
```
Oliver is looking to go to college. His family does not have very much money, so he qualifies for need-based financial aid. Oliver needs to spend most of his time working at his full-time job, so he will only be able to take a few classes per semester. Oliver’s parents have poor credit scores and cannot afford to take on any more debt. Based on Oliver’s situation, recommend a federal loan which would be appropriate for him.
a.
subsidized Stafford loan
b.
unsubsidized Stafford loan
c.
private student loan
d.
PLUS loan
```
a.
| subsidized Stafford loan
450
```
Hal has just graduated from four years of college. For the last two years, he took out a Stafford loan to pay for his tuition. Each loan had a duration of ten years and interest compounded monthly, and Hal will pay each of them back by making monthly payments, starting as he graduates. Hal’s loans are detailed in the table below.
Once all of his loans are paid off, what will Hal’s total lifetime cost be? Round all dollar values to the nearest cent.
a.
$9,023.28
b.
$8,467.20
c.
$11,498.40
d.
$13,615.20
```
d.
| $13,615.20
451
```
Kate took out a subsidized Stafford loan worth $9,710 to pay for college. The interest rate on the loan was 5.9%, compounded monthly. It took Kate 5 years to pay off the loan after graduation. What portion of the total amount she paid represented the interest?
a.
$11,236.22
b.
$9,710.00
c.
$1,526.22
d.
$2,942.37
```
c.
| $1,526.22
452
Finance contracts must include a full description of the car.
true
453
```
The length of the repayment period is a factor in determining ___.
a.
the total amount borrowed
c.
the annual percentage rate
b.
the interest rate
d.
the total cost of financing
```
d.
| the total cost of financing
454
The higher your annual percentage rate, the higher interest rate you are paying for your loan.
true
455
Collateral is something of value pledged as security for a loan.
true
456
```
To obtain a ___, the borrower pledges the car as security or collateral.
a.
premium
c.
good interest rate
b.
loan
d.
all of the above
```
b.
| loan
457
```
The finance contract will state the ___.
a.
total amount borrowed
c.
the due date for payments
b.
the annual percentage rate
d.
all of the above
```
d.
| all of the above
458
```
Auto dealers, banks, credit unions, and loan associations ___.
a.
are good places to look for used cars
b.
are all common sources of financing
c.
a good sources of information on new cars
d.
all provide similar loan services
```
b.
| are all common sources of financing
459
```
Collateral means the creditor will hold the ___ to the car until the loan is paid in full.
a.
title
c.
loan
b.
deed
d.
bill of sale
```
a.
| title
460
Financing a car costs more than paying cash for a car, because you must repay the amount borrowed and the interest.
true
461
```
When financing a car, you must pay ___ on the amount borrowed.
a.
interest
c.
down payments
b.
capital
d.
collateral
```
a.
| interest
462
What does a market do?
Markets make it possible for companies to specialize in a niche. By specializing, it makes the production process more efficient and the products/services more high quality.
463
What does laissez-faire mean?
Laissesfaire is the idea that the government should not have any involvement with the economy. Instead, they should leave it up to the people to run the markets.
464
Define firm.
Firm is an organization that buys resources to product a needed product. It then sells that product for a profit.
465
```
The circular flow diagram divides the economy into two sectors: one concerned with producing goods and services and the other with consuming them. Frank Knight first illustrated this, calling it _______.
a.
The Wheel of Wealth
c.
The Wheel of Fortune
b.
The Wealth of Nations
d.
The Wealth Wheel
```
a.
| The Wheel of Wealth
466
What is the biggest advantage of a free market?
In a free market, the business can product and sell whatever product they want. They can also decide on the price of the product. It will keep the prices low through the competition with other businesses.
467
What is a factor market?
A factor market is a market where resources that are used to make products are bought and sold, especially to firms.
468
```
Your individual decision is but one that sends a message to the suppliers (in the marketplace) about the product they _______.
a.
are offering for sale.
c.
created.
b.
invented.
d.
produced.
```
a.
| are offering for sale.
469
Define household.
A household is including all the people who live in a house, apartment, or other living quarters and are consumers.
470
What is meant by the phrase; “Invisible Hand.”
The "Invisible Hand" is referring to how the market is selfregulating and does not need someone, like the government, to get involved. It is used to describe a free market.
471
What is specialization?
Specialization is used to describe when companies focus on limited products or services. This makes their production time efficient and their products or services better quality.
472
What does eminent domain mean?
Eminent domain means that the government can take private property without the owner's permission. However, the government will pay a compensation.
473
Describe the concept of free contract.
The concept of a free contract is that everyone has the right to choose what agreements or "contracts" they want to agree to.
474
What are interest groups?
Interest groups are organizations that tries to persuade the public to either act or vote according to the organization's interests.
475
What are five basic principles found in a free enterprise system?
The five basic principles found in a free enterprise system are profit motive, open opportunity, legal equality, private property rights, free contract, voluntary exchange, and competition.
476
What does open opportunity mean?
Open opportunity is the ability for everyone to participate in the economy.
477
What do public disclosure laws do?
It is the requirement that companies must give their consumers crucial information about their products or services.
478
Where is taxation found in the Constitution?
Taxation is found in Article 1 on the Constitution.
479
Where are property rights found in the Constitution?
Property rights are found in the fifth amendment of the Constitution.
480
What is profit motive?
Profit motive is the idea that everyone does things to benefit themselves. This drives individuals and businesses to make decisions that improve themselves.
481
```
All of the following are forms of intellectual property EXCEPT:
A.
a movie about aliens
B.
a movie poster
C.
a movie theater
D.
a movie review
```
C.
| a movie theater
482
Explain how secure property rights make it possible for people to own a home without having to pay cash for it. How does this benefit society?
A person can own a house without actually having to pay cash for it because the system allows people to use mortgage loans. In this way, people can pay back the bank the amount and with interest. This benefits society because it allows people to buy the house now instead of having to wait to gather up all of the money.
483
```
Inventions and designs are protected by __________.
A.
patents
B.
insignias
C.
trademarks
D.
copyrights
```
A.
| patents
484
```
Company logos are protected by __________.
A.
patents
B.
insignias
C.
trademarks
D.
copyrights
```
C.
| trademarks
485
It is very hard to protect people’s property rights unless we can define exactly who owns what. For example, the ownerhip of a car is defined by who owns the title to the car. Provide four other examples of defining ownership. Your examples may include both physical and intellectual property.
When you buy a house, you will have to get a mortgage. Mortgage is a type of loan for home ownership. For intellectual property such as songs and inventions, the ownership is defined by copyrights, trademarks, and patents.
Cattle have brands and are kept within fences Property has deeds Computers have serial numbers Inventions have patents Logos have trademarks Works of authorship have copyrights
486
If property is divestible it means the __________.
A.
government can lay claim to it at any time
B.
ownership cannot be transferred
C.
owner is legally able to sell it or give it away
D.
government cannot make an offer to buy it
C.
| owner is legally able to sell it or give it away
487
What are four ways the Federal Trade Commission protects consumers?
The Federal Trade Commission's responsibility is to sue companies and individuals who violates the law and creates rules to protect consumers. They also educate the public about their rights and responsibilities. They also file consumer fraud and identity theft to law enforcement agencies.
488
Explain the following: if the government did not protect property rights under the rule of law, only the property of the wealthy would be secure.
Wealthy people can afford services that will protect their property rights like security cameras, locks, or gates. However, the rest of the people need the protection of the government to protect their property rights because they can not afford such services.
489
The Constitution gives Congress the power to promote the progress of science by giving authors and inventors the exclusive rights to their own work for a limited time. In a paragraph of five sentences or more, explain how scientific progress is promoted by having patent and copyright protection.
When authors and inventors are given a patent to their works, then other people can not profit off of those works. Therefore, those creators and their inventions are protected for a period of time. With copyright protection, the works of the authors and inventors are protected of authorship. These laws gives creators incentive to create things that will be useful of enjoyable to the public. It makes it to where only the creator can profit it off of their own works and makes it illegal for others to use those works to their own advantage.
490
```
The consumer’s right to choose means that the goods and services offered should be __________ and prices should be __________.
A.
quality . . . rock bottom
B.
exceptional . . . rock bottom
C.
quality . . . competitive
D.
acceptable . . . competitive
```
C.
| quality . . . competitive
491
```
The __________ reflects the ups and downs of the nation’s real GDP.
A.
business cycle
B.
inflation rate
C.
consumer price index
D.
unemployment rate
```
A.
| business cycle
492
```
A person who is working part-time when full-time work is desired is known as __________.
A.
an employee
B.
unemployed
C.
the nonlabor force
D.
underemployed
```
D.
| underemployed
493
```
The percentage of the US labor force that is unemployed is known as the __________.
A.
consumer price index
B.
gross domestic product
C.
national unemployment rate
D.
annual percentage change
```
C.
| national unemployment rate
494
Using four or more sentences, explain the purpose of the consumer price index (CPI).
The consumer price index or CPI is the most commonly reported price index. It is used to measure the change in prices that an average household must pay. These expenses include things from food to clothing to doctor appointments. The BLS collects data by visiting or calling thousands of retail stores, rental units, service establishments, and doctor offices from all over the United States.
495
```
At any given time, the group of people age 16 years and older who are willing and able to work is known as the __________.
A.
discouraged workers
B.
unemployed
C.
population
D.
labor force
```
D.
| labor force
496
```
Expansion, peak, recession, and trough are all periods of the __________.
A.
business cycle
B.
consumer price index
C.
gross domestic product
D.
annual percentage change
```
A.
| business cycle
497
Identify and explain the different groups in the US labor force.
The US labor force includes everyone over the age of 16 who is willing and able to work. The nonlabor force are people who are fulltime students, stayathome parents, retired people, and discourage workers. Discouraged workers are people who have unsuccessful in seeking a job and have chosen to not continue seeking a job. Then, there are those who are employed and those who are unemployed. Unemployed people are different from discouraged workers because they are still seeking a job.
498
In four or more sentences, explain how the US unemployment rate is determined.
The unemployment rate is the percentage of the US labor force that is unemployed. To determine the unemployment rate is determined by selecting 60,000 households to represent the entire nation. Every month, these 60,000 households are interviewed about their unemployment rates. They determine the number of people that are a part of the labor force and see how many are still unemployed.
499
```
The final dollar value of all the goods and services produced within a country's borders in a given year is the _________.
A.
national inflation rate
B.
gross domestic product
C.
nation's unemployment rate
D.
market basket of consumer goods
```
B.
| gross domestic product
500
Using four or more sentences, explain the concept of inflation and describe how it is measured.
Inflation is the increase in the average price level in the economy. When inflation occurs, money loses its value. Inflation is often reported as a part of the price index. The inflation rate is the percentage that the average price value has increased. It is measured by the changes in the overall prices of the CPI market basket.
501
What does the concept of standard living mean?
The standard of living is referring to the quality of life. In economic terms, it is based on possessions of necessities and the luxury that individuals possess.
502
What happens to government revenues, when the government tax base is increased?
Tax base refers to the incomes and properties that are taxable. If there is bigger tax base, the government revenues increases. If government revenues are increased, the government will be able to provide more services to the public.
503
As economic growth increases, what happens to the demand for foreign made products?
As the economic growth increases, the demand for foreign made products also increases. When there is a higher demand for foreign made products, we are increasing the job opportunities and incomes in other countries.
504
```
The first factor influencing economic growth is one of the greatest resources in the United States. This commodity is __________.
a.
land
c.
labor
b.
capital
d.
entrepreneurs
```
a.
| land
505
Define real GDP per capita.
GDP stands for Gross Domestic Product. GDP per capita refers to the dollar amount of real GDP produced per person.
506
What is the capital to labor ratio?
The capital to labor ratio is the total capital stock divided by the quantity of workers in the labor force.
507
What is standard of living based on?
In economic terms, the standard of living is based on the possessions of necessities and luxuries that an individual has.
508
What is a growth triangle?
A growth triangle is a table that displays the annual compound rates of growth between certain periods of time.
509
What are renewable resources?
Renewable resources are resources that can be replenished and will not run out.
510
What factors influence economic growth?
Factors that influence economic growth are land, capital, labor, entrepreneurs, and productivity and growth.
511
The capital-to-labor ratio shows the average cost of workers to businesses.
false
512
Laissez-faire means government needs to keep their hands off the economy.
true
513
```
Consumers, the government, net exports, and business all make up the total selling price known as the __________.
A.
business cycle
B.
inflation rate
C.
dollar value
D.
unemployed
```
C.
| dollar value
514
```
Discouraged workers, full-time students, and retirees are all considered part of the __________.
A.
underemployed
B.
institutionalized
C.
nonlabor force
D.
unemployed
```
C.
| nonlabor force
515
Why do markets exist?
a.
Markets ensure that government does not intervene in the production of goods and services.
b.
Markets provide self-sufficient people with public places for the exchange of ideas.
c.
Markets ensure economic equity for all people.
d.
Markets allow people to buy what they need to consume and sell the specialized goods and services they produce.
d.
| Markets allow people to buy what they need to consume and sell the specialized goods and services they produce.
516
The U.S. Constitution guarantees certain rights that allow people to engage in business activities. Which of the following does the U.S. Constitution NOT guarantee?
a.
the protection against monopolies and oligopolies
b.
the recognition and protection of private property rights
c.
a limitation on the kinds of taxes that Congress can impose
d.
the right to make binding contracts
a.
| the protection against monopolies and oligopolies
517
When the goverment creates agencies with the authority to protect consumer rights, it shows that the government __________.
A.
feels guilty about mistreating its citizens
B.
is serious about protecting consumer rights
C.
has extra money to spend, probably due to a tax increase
D.
has given up trying to get businesses to take care of consumers
B.
| is serious about protecting consumer rights
518
```
An example of a loan that tends to have a lower interest rate is a(n) __________ loan.
A.
home
B.
unsecured
C.
credit card
D.
paycheck
```
A.
| home
519
```
The amount owed when credit is used is equal to the __________ plus __________.
A.
balance . . . tax
B.
interest . . . tax
C.
principal . . . balance
D.
principal . . . interest
```
D.
| principal . . . interest
520
```
Each of the following can be a form of collateral when applying for a loan EXCEPT:
A.
car
B.
cash
C.
home
D.
jewelry
```
B.
| cash
521
```
Interest allows creditors to be paid for giving up __________.
A.
credit
B.
securities
C.
ingenuity
D.
opportunities
```
D.
| opportunities
522
```
Visa and MasterCard are examples of credit card __________.
A.
brands
B.
issuers
C.
holders
D.
merchants
```
A.
| brands
523
Which form of credit would most likely have the lowest interest rate?
a mortgage
524
```
Each of the following is included in the amount ultimately paid for borrowing money EXCEPT:
A.
amount of loan
B.
length of loan
C.
annual tax payment
D.
annual percentage rate
```
C.
| annual tax payment
525
```
Each of the following is a disadvantage of using credit cards EXCEPT:
A.
often involves going into debt
B.
places a claim on future income
C.
does not seem like spending real money
D.
interest free loan if balance is paid off monthly
```
D.
| interest free loan if balance is paid off monthly
526
```
The annual percentage rate is the interest on a loan paid in __________.
A.
cash
B.
whole
C.
installments
D.
concentration
```
C.
| installments
527
```
Credit card debt is an example of a loan that is __________.
A.
secured
B.
low interest
C.
unsecured
D.
interest free
```
C.
| unsecured
528
A frequent credit user should check out his or her credit rating periodically to ____.
a.
be sure that the information on file is correct
b.
receive a refund on credit charges
c.
find out the total amount owed to creditors
d.
be sure all monthly statements are accurate
a.
| be sure that the information on file is correct
529
There is one central credit reporting agency that keeps a running record of the financial and credit transactions of credit users.
false
530
```
Which of the following is NOT an advantage of using credit?
a.
A source of cash for emergencies.
b.
Convenience.
c.
Ease of spending money you do not have.
d.
Use of goods and services while paying for them.
```
c.
| Ease of spending money you do not have.
531
Credit is the present use of future income.
true
532
A chief advantage of using a credit card is the opportunity to purchase a merchandise or services and pay for them later.
true
533
Finance charges remain the same regardless of the amount of credit used or the length of time you take to repay.
false
534
```
As the percentage rate of interest on a credit transaction increases, the finance charges ____.
a.
are dropped
b.
decrease
c.
increase
d.
stay the same
```
c.
| increase
535
You can damage a good credit rating by ____.
a.
ignoring bills you cannot pay until the creditors take collection action
b.
limiting your use of credit to amounts you can repay with ease
c.
notifying creditors immediately if you cannot pay as agreed
d.
refusing to pay amounts in dispute because of billing errors
a.
| ignoring bills you cannot pay until the creditors take collection action
536
An organization that keeps on file information on the financial practices of individuals and makes that information available to creditors.
credit reporting agency
537
A form of credit used to obtain goods and services in exchange for a promise to pay in full within 25 days of the billing date.
regular charge account
538
```
A Chapter 7 bankruptcy
a.
allows you to fulfill credit obligations.
b.
becomes a part of your credit record.
c.
allows you to keep property and possessions.
d.
all of the above.
```
b.
| becomes a part of your credit record.
539
```
Filing a Chapter 13 bankruptcy
a.
allows you to be clear of debt.
b.
divides sales of your possessions among creditors.
c.
allows you to maintain a reasonably sound credit rating.
d.
all of the above.
```
c.
| allows you to maintain a reasonably sound credit rating.
540
```
A possible warning signal that you may be headed for financial problems with credit is that you
a.
pay only the minimum required.
c.
you only buy sale items.
b.
only buy what you can afford.
d.
all of the above.
```
a.
| pay only the minimum required.
541
```
Usually, issues which arise from using credit are a result of:
a.
a low credit limit
c.
buying too many items with debit cards.
b.
poor money management.
d.
purchasing too many items with cash.
```
b.
| poor money management.
542
```
Consumer Credit Counseling services can help you
a.
manage your money wisely.
c.
both A & B
b.
handle credit wisely.
d.
none of the above.
```
c.
| both A & B
543
```
Credit, if used unwisely, can
a.
be a tool.
c.
make shopping convenient.
b.
lead to financial problems.
d.
all of the above.
```
b.
| lead to financial problems.
544
Consumer Credit Counseling Services sponsored by the National Foundation for Consumer Credit ____.
a.
provides debt consolidation loans with high interest rates
b.
offers reliable low cost help and advice to debt troubled consumers
c.
teaches consumers to manage their money without using credit
d.
provides helpful counseling for high fees
b.
| offers reliable low cost help and advice to debt troubled consumers
545
A source of help for people with credit problems.
credit counseling
546
The court declares a person unable to meet financial obligations and then takes and sells the person’s property and possessions.
chapter 7
547
```
Many reputable creditors will work with you to
a.
set up a repayment program.
b.
gain your business.
c.
inform you if you get into financial trouble.
d.
none of the above.
```
a.
| set up a repayment program.
548
Cartels are difficult to operate for which of the following reasons?
a.
They work only if members keep to their agreed output.
b.
They are illegal worldwide.
c.
Firms in a cartel are likely to lose money.
d.
The products are perfectly competitive.
a.
| They work only if members keep to their agreed output.
549
```
When the amount of money present in the economy causes prices to rise it is called __________.
A.
panic
B.
deflation
C.
recession
D.
inflation
```
D.
| inflation
550
```
Which of the following is NOT a goal of the Federal Reserve System?
A.
to control inflation
B.
to control unemployment
C.
to maintain the balance of trade
D.
to maintain a healthy economy
```
C.
| to maintain the balance of trade
551
Kay has decided to take out a $23,100 loan, and she wants to pay it back in quarterly installments. She has narrowed her options down to two banks. Bank V offers a six-year loan with an interest rate of 4.6%, compounded quarterly, and has a service charge of $822.45. Bank W offers an eight-year loan with an interest rate of 3.9%, compounded quarterly, and a service charge of $722.25. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.
a.
Loan W's finance charge will be $335.96 greater than Loan V's.
b.
Loan W's finance charge will be $436.16 greater than Loan V's.
c.
Loan V's finance charge will be $263.10 greater than Loan W's.
d.
Loan V's finance charge will be $100.20 greater than Loan W's.
a.
| Loan W's finance charge will be $335.96 greater than Loan V's.
552
```
__________ is a system where the government makes the decisions about the economy.
A.
Capitalism
B.
A pure market
C.
A mixed market
D.
Central planning
```
D.
| Central planning
553
```
The US government sends tax money back to households in the form of all of the following EXCEPT:
A.
wages
B.
interest
C.
goods and services
D.
transfer payments
```
C.
| goods and services
554
```
When comparing credit terms, it is important to consider ____.
a.
annual percentage rate of interest
b.
finance charges as a dollar amount
c.
monthly payments
d.
All of the above.
```
d.
| All of the above.
555
The marginal tax rate is the tax that applies to the next dollar of taxable income.
true
556
Each of the following will take place when a customer makes a purchase with a credit card EXCEPT:
A.
bank pays the store on customer’s behalf
B.
customer’s credit limit will increase
C.
customer receives a bill from credit card issuer
D.
finance charges added to the customer’s account
B.
| customer’s credit limit will increase
557
```
Each of the following is a disadvantage of using cash EXCEPT:
A.
usually involves going into debt
B.
not readily available in emergencies
C.
purchases may have to be delayed
D.
no protection against loss resulting from theft
```
A.
| usually involves going into debt
558
All are characteristic of secure property rights EXCEPT:
A.
The property must be passed down through the family.
B.
Ownership rights must be enforced under the rule of law.
C.
The owner must be able to sell or give the property away.
D.
The property itself must be able to be defined.
A.
| The property must be passed down through the family.
559
```
Which of the following does not decrease the demand for a product?
a.
an increase in price
c.
a decrease in price of a substitute good
b.
a decrease in consumer incomes
d.
improved product technology
```
d.
| improved product technology
560
```
An example of mandatory spending is financing for
a.
interest payments on the federal debt.
b.
national defense.
c.
medical research programs.
d.
elementary and secondary education programs.
```
a.
| interest payments on the federal debt.
