Winter Break Test

Matching

Key Terms and ConceptsDirections: Match the terms with the descriptions. Write the letter of the correct answer in the blank provided. Not all of the choices will be used.

a. productive capacity e. Keynesian economicsb. supply-side economics f. automatic stabilizerc. Laffer Curve g. multiplier effectd. classical economics h. demand-side economics

____ 1. the idea that every dollar change in fiscal policy is reflected in a greater change in the economy

____ 2. based on the idea that markets regulate themselves

____ 3. based on the idea that the economy is driven by demand

____ 4. proposes that the government can and should regulate the economy

CompletionComplete each statement.

1. The most desirable alternative given up as a result of a decision is the ______.

2. People will buy more of a good when its price falls and less when its price rises, according to the _______.

3. The theory that learning increases the efficiency of production is called the ________.

4. Replacing a good with a similar good because of a change in prices is an example of the _____.

5. When elasticity of demand is exactly 1, demand is described as _______.

6. If consumers buy much less of a good after a price increase, demand is _______.

7. To measure how demand for a good will change when its price changes, economists use _______.

8. Temporary and part-time jobs are known as _______.

9. The practice of using an outside supplier to do jobs that used to be done by a company’s own workers is called ______.

10. The theory that a college degree identifies people who may be good employees is called the ______.

11. The unofficial barrier that sometimes prevents some women and minorities from advancing to the top ranks of organizations is called the _______.

12. An organization of workers that tries to improve working conditions for its members is a __________.

Multiple ChoiceIdentify the choice that best completes the statement or answers the question.

Directions: Use the graph to answer questions 1 and 2.

____ 1. The graph shows how many new schools and new roads a city can build using all of its resources. What trend does the graph show?a. As more new schools are built, the number of new roads increases.b. As more new schools are built, the number of new roads decreases.c. As the number of new roads decreases, the number of new schools also decreases.d. The number of new roads has no effect on the number of new schools.

____ 2. The graph shows a shift in the market demand curve for a certain brand of shirt. The market demand curve predictsa. the highest or lowest future prices for these shirts.b. how people will change the number of shirts they buy.c. the long-term popularity of certain shirt brands.d. whether the quantity of shirts demanded will remain constant.

____ 3. To earn the most pay, what is the trade-off? a. There won’t be any trade-off, only benefits.b. You can study for an extra hour.c. You will have a balance of work and study time.d. You will lose five hours of study time.

____ 4. The physical capital used by a woodworker to make furniture would includea. saws and drills.b. trees and oil.c. hard work and time.d. a workshop and money.

____ 5. Which of these terms could you use in place of the phrase “human capital”?a. equipment c. toolsb. buildings d. skills

____ 6. How could the Chinese economy be characterized?a. free marketb. centrally plannedc. mixed, but more centrally plannedd. mixed, but more like a free market

____ 7. A person who believes that wealth should be evenly distributed throughout society is a. a socialist.b. a communist.c. a capitalist.d. an entrepreneur.

____ 8. What is one key feature of public goods?a. The more people use them, the more money they cost to provide.b. It would be difficult to make consumers pay individually to use them.c. Every consumer must be willing to pay for them.d. People who do not pay for them do not get to use them.

____ 9. You read an article in a news magazine that explains how the economy expanded for several years, and then went into a period of contraction. What is the main subject of this article?a. povertyb. microeconomics

c. the business cycled. voluntary exchange

____ 10. Which of the following programs was President Roosevelt establishing when he spoke these words?a. Temporary Assistance for Needy Familiesb. Social Securityc. War on Povertyd. The New Deal

____ 11. What are the government’s three goals as it tries to promote economic strength? a. technological advancement, competition, and productivityb. high employment, growth, and stabilityc. public disclosure, regulation, and the public interestd. legal equality, patriotism, and profits

____ 12. If the elasticity of demand for a good at a certain price is less than one, then the demand isa. elastic. c. unitary elastic.b. inelastic. d. negative elastic.

____ 13. What does technology generally do to production?a. It lowers cost and decreases supply.b. It lowers cost and increases supply.c. It increases cost and decreases supply.d. It has very little effect on production.

____ 14. A corn farmer has a new machine to pick corn. How will the quantity he supplies change? a. It will be reduced by the government.b. It will not change the quantity supplied.c. It will increase as input costs decrease.d. It will decrease as input costs decrease.

____ 15. Consider that the word variable means “to vary.” Which of the following costs of running a company do you think is a variable cost rather than a fixed cost?a. monthly rent for the factory building c. insurance feesb. property taxes d. raw materials for making goods

____ 16. What condition must be present before a product’s price will naturally move toward its equilibrium price? a. price floors c. a free marketb. high taxes d. rationing

____ 17. How is monopolistic competition mainly different from perfect competition?a. The government sets prices.b. There are fewer sellers and more buyers.c. Buyers can buy from any seller.

d. Sellers can profit from slight differences in products.

____ 18. One way that firms in a monopolistic competition engage in nonprice competition is througha. advertising.b. production.c. variable costs.d. fixed costs.

____ 19. A group of customers who can benefit from price discrimination in the travel industry isa. anyone living in rural areas.b. senior citizens.c. users of eBay.d. people in poor health.

____ 20. Which are two qualities of perfect competition?a. The goods are all the same, and there are many buyers and sellers.b. The goods are controlled by the government, and it is easy for sellers to sell.c. The goods are all the same, but they are sold at different prices in different places.d. The goods are all different, and there are few buyers and sellers.

____ 21. What causes imperfect competition? a. free marketsb. barriers to entryc. new commoditiesd. identical products

____ 22. A writer should avoid plagiarism because she may a. be banned from writing any more works.b. be tried as a criminal.c. be sued for fraud.d. have to make a public apology.

____ 23. What major advantage does a partnership have that a sole proprietorship does not?a. Partnerships combine partners’ assets.b. The business is easy to start up.c. Partners are not responsible for business debts.d. The business is easy to sell.

____ 24. Which of the following is an advantage of a sole proprietorship?a. It is easy to expand if it succeeds.b. It faces few government rules.c. It is easy to get financing to start one.d. It has the lowest federal income taxes.

____ 25. Why might a bank be more likely to loan money to a partnership than to a sole proprietorship? a. Partners are personally liable while sole proprietors are not.b. Partnerships are more likely to last a long time.c. Partnerships are more heavily regulated by the government.d. Partners usually have more assets to secure loans.

____ 26. Mr. Martin owns a neighborhood shop that used to be called Martin’s Flowers. Now his shop is called Flowers Galore, just like the shops you have seen in other towns and in the mall. What change did Mr. Martin most likely make?a. from limited to general partnershipb. from sole proprietorship to franchisec. from corporation to general partnershipd. from sole proprietorship to corporation

____ 27. What is one of the most important goals of a labor union?a. to help workers get more educationb. to help workers find better jobsc. to get white-collar workers to joind. to improve wages and benefits

____ 28. How have real wages in the United States changed in the last 20 years?a. Real wages have gone up significantly.b. Real wages have gone down significantly.c. Real wages have gone up slightly.d. Real wages have gone down slightly.

____ 29. Which of the following is the biggest disadvantage of using shells instead of coins as money?a. durabilityb. portabilityc. uniformityd. divisibility

____ 30. You are planning to buy a DVD with a debit card. Where will the money come from?a. your savings accountb. a finance companyc. your checking accountd. an automated clearing house

____ 31. Which of the following is an illustration of how fears of future economic problems affect GDP?a. Businesses will invest more money in the short term to ensure higher profits in the future;

GDP will then be pushed up.b. Consumers will spend more money in the short term to prevent future economic problems;

GDP will be pushed up.c. Government will spend less and save money in anticipation of future economic

contraction; GDP will be reduced.d. Consumers will spend less and save money in case future economic problems affect them;

GDP will be reduced.

____ 32. Which of these is an investment in human capital that could increase economic growth?a. providing free lunches c. setting up a worker training programb. buying safety equipment d. setting up worker savings plans

____ 33. Which of the following tax structures is least like the suggestion made by the IRS agent?a. flat taxb. regressive taxc. progressive taxd. proportional tax

____ 34. What economic theory was the basis of President Ronald Reagan’s policies?a. classical economicsb. Keynesian economicsc. demand-side economicsd. supply-side economics

____ 35. How were the fiscal policies of Democrats John F. Kennedy and Lyndon Johnson similar to those of Republicans Ronald Reagan and George H. W. Bush?a. They all supported supply-side economic theories.b. They all supported tax cuts to boost the economy.c. They all supported Keynesian budget planning.d. They all supported tax increases on wealthier Americans.

____ 36. Robin buys several new Treasury bonds that will mature in 30 years. How does her purchase affect the federal budget?a. It does not affect the budget because the government will not be able to use the money for

30 years.b. It is a loan to the government that can be used to pay for the budget.c. It is causing a budget deficit because the government will have to repay Robin’s loan plus

interest.d. It is helping to create a budget surplus because Robin will have to pay taxes on her

investment in the bonds.

____ 37. In order to have demand for a good, consumers must a. desire the good and have the money to buy it.b. be able to create the good and sell it to others.c. know where the stores are and have a credit card.d. understand how it works and be able to get it.

____ 38. Which of the following is the correct mathematical formula for calculating elasticity of demand? a. percentage change in price demanded / percentage change in quality desiredb. percentage change in overall price / percentage change in market demandedc. percentage change in substitutes / percentage change in value demandedd. percentage change in quantity demanded / percentage change in price

____ 39. If a supplier who has no control over the market price reports that the marginal revenue of a product is $10, that meansa. the supplier makes $10 on every unit sold.b. consumers pay a market price of $10 per unit.c. it costs $10 to make each additional unit of the item.d. the total revenue before deducting costs is $10.

____ 40. In a free market, prices lead to an efficient allocation of resources. In other words,a. consumers can buy unlimited amounts of any good they like at a price of their choice.b. resources are used in the most valuable and productive way according to the desires of

consumers and producers.c. the government decides who controls natural resources.d. people who own resources are unable to bargain with people who wish to buy resources.

____ 41. Building a video store near a grocery store is an example of which type of nonprice competition?a. physical featuresb. service levelc. advertisingd. location

____ 42. How are prices and output of goods in a monopoly different from the prices and output of goods in perfect competition?a. Output is low and prices are high.b. Output is high and prices are low.c. Output is the same, but prices are lower.d. Output is the same, but prices are higher.

____ 43. What is the purpose of government allowing and regulating a natural monopoly?a. to limit waste and maintain reasonable pricesb. to take a percentage of the profits made by the monopolyc. to protect industries critical to national defensed. to encourage monopolies to lower their development costs

____ 44. What is one action a worker can take to earn higher wages?a. Get a job that pays the minimum wage.b. Get more education or training.c. Get a job that pays the equilibrium wage.

d. Get a less dangerous job.

____ 45. Why is portability an important characteristic of money?a. It would be hard to use money if everyone did not accept it.b. It would be confusing if some dollar bills were worth more than others.c. If we could not carry money with us, it would be hard to use.d. If money did not last a long time, we could not use it to store value.

____ 46. Why are funds in checking accounts called demand deposits?a. They go down in value when demand for them decreases.b. They are available whenever the account holder wants them.c. They go up in value as demand for them increases.d. They are kept without interest by the bank.

____ 47. Near money includesa. demand deposits.b. credit and debit cards.c. traveler’s checks.d. savings deposits.

____ 48. You have $100 to invest. You do not need the money for at least six months. Which is the best investment?a. opening a savings accountb. buying a municipal bondc. buying a certificate of depositd. buying a junk bond

____ 49. How are savings bonds different from other bonds?a. Savings bonds provide a higher rate of return.b. Saving bonds are held for a very short time.c. Savings bond holders do not receive regular interest payments.d. Saving bonds are issued in large amounts.

____ 50. How did the U.S. business cycle change in the first few years of the 1930s?a. It contracted quickly.b. It expanded slowly.c. It expanded quickly.d. It reached a peak.

____ 51. A bank is offering 5 percent interest on its savings account. If the inflation rate is 4 percent, how much return would customers actually make on their savings?a. 1 percentb. 4 percentc. 5 percentd. 9 percent

____ 52. Which of the following are two characteristics of a good tax?a. equity and elasticityb. simplicity and equityc. efficiency and complexityd. certainty and inelasticity

____ 53. Based on the data, which of the following is true?a. Federal grants have increased dramatically as a percentage of state and local budgets.b. Federal grants have decreased dramatically as a percentage of state and local budgets.c. Federal grants have steadily decreased as a percentage of state and local budgets.d. Federal grants have remained fairly stable as a percentage of state and local budgets.

____ 54. Why does the government sometimes use an expansionary fiscal policy?a. to encourage economic growth and create jobsb. to expand the government’s control over discretionary spendingc. to control the demand for consumer goods and servicesd. to slow down the economy and lower inflation

____ 55. Which of the following is included in GDPa. Purchasing Colombian coffee at publix c. New tires for your mom’s old carb. Government providing food stamps d. Purchasing your fathers old mustang

____ 56. The best combination of factors of production is...a. Milk, Computers, Steve Jobs, FIU c. Meat, Steve Jobs, FIU, Buildingb. Manure, Steve Jobs, IPhone, Mr. G d. Corn, Mr. G, FIU, Computers

____ 57. In the circular flow model, households are best described asa. Suppliers and demanders in the factor

market.c. Suppliers and demanders in the products

market.b. Demanders in the factor market and

suppliers in the product market.d. Demanders in the product market and

suppliers in the factors market.

____ 58. An inefficient point on the PPC is founda. past the frontier c. on the frontier but closer to the y-axisb. on the frontier but closer to the x-axis d. below the frontier