Assignment on economic problems

Question

Assignment:

Question 1
 
Which of the following economic systems abolishes all private property?

1. communism
2. socialism
3. fascism
4. all of the above 

Question 2
 
The profit motive is one characteristic of a command economy.

1. True
2. False              

Question 3
 
In a market system, the government enforces laws ensuring that private enterprises and conditions of competition will prevail.

1. True
2. False

 Question 4
 
The most common type of business in the United States is the corporation

1. True
2. False          

Question 5
 
Laissez-faire is a policy of no government intervention in the economic activities of individuals and businesses.

1. True
2. False             

Question 6

In a partnership, each partner’s liability is limited to his or her contribution to the partnership.

1. True
2. False            

Question 7

There are no government-regulated markets in the U.S. economy.

1. True
2. False

Question 8
 
Which of the following is not among the United States’ economic goals?

1. full employment
2. stable price 
3. healthy economic growth
4. equal distribution of income

Question 9

Under the U.S. market system, land and capital goods are owned mainly by

1. federal government
2. individuals and firms   
3. local governments    
4. state governments             

Question 10
 
The biggest disadvantage of a sole proprietorship is the lack of distinction between the business and the owner.

1. True
2.  False

Question 11
 
In the United States, marketing cooperatives are most commonly found in the agriculture industry.

1. True
2. False      

Question 12
 
Self-interest is a major tenet of economic liberalism.

1. True
2. False   

Question 13

Which of the following is considered a command economy?

1. communism    
2. socialism    
3. fascism   
4. all of the above

Question 14
 
Economics is considered a physical science

1. True
2. False    

Question 15
 
The difference between a capital good and a consumer good depends on

1. the purpose for which it is used   
2. how it was produce    
3. what it is   
4. how quickly it is used up

Question 16

Positive economics deals with “what is” as opposed to “what ought to be.”

1. True
2. False

Question 17
 
Production is the creation or addition of utility.

1. True
2. False               

Question 18
Consumption is the ultimate end of economic activity.

1. True
2. False       

Question 19

The relationship between the price of a book and the number of volumes purchased would be an example of microeconomics

1. True
2. False               

Question 20
 
An example of a macroeconomic model is

1. the price of chicken influences the quantity of chicken bought  
2. the size of the total national output depends on the size of total spending   
3. the output of a product is influenced by the cost of production for the product
4. all of the above             

Question 21
The largest share of the total income of the United States is currently being distributed in the form of

1. interest
2. rent
3. wages
4. profits              

Question 22
 
Which of the following areas of study is included in the field of macroeconomics?

1. electricians’ wage rates
2. monopolistic pricing
3. price of automobiles
4. general price level               

Question 23
 
The total value of the goods and services produced over a period of time represents an economy’s

1. planned saving
2. total income  
3. total wealth
4. capital               

Question 24
Stocks and bonds are counted as part of total wealth.

1. True
2. False             

Question 25
 
The stock of labor talents and skills is known as

1. a public good
2. the functional distribution
3. human capital
4. enterprise               

Question 26
One cause for the uneven standard of living throughout the world is the uneven distribution of resources.

1. True
2. False               

Question 27
In exercising the principle of comparative advantage, a nation with no absolute advantage should produce a commodity in which it faces a lower opportunity cost than its trading partners face.

1. True
2. False               

Question 28
Government regulations which affect entrepreneurial activities within a nation also affect total output and the standard of living.

1. True
2. False              

Question 29

A need to make choices exists because of

1. scarcity of resources
2. the abundance of goods
3. unlimited human needs and wants
4. both (a) and (c)               

Question 30
The principle of comparative advantage applies to

1. individuals only
2. business firms only
3. nations only
4. individuals, businesses, and nations               

Question 31
 
Economics can be defined as the study of choices.

1. True
2. False              

Question 32
 
Suppose that Country A has an absolute advantage over country B in the production of both wheat and cloth. The opportunity cost of 1 unit of wheat is 2 units of cloth in Country A and 3 units of cloth in Country B. If each country specializes in producing the good in which it is relatively more efficient and then trades for the other good, it follows that

1. all the resulting gains in consumption will go to Country A   
2. all the resulting gains in consumption will go to Country B
3. each country will experience half the resulting gains in consumption
4. the allocation of the resulting consumption gains will be determined by bargaining between the two countries.

               
Question 33
 
Exercising the principle of comparative advantage between nations primarily involves

1. specialization
2. transportation costs
3. currency exchange rates
4. domestic income tax rates

               
Question 34
 
An example of technological development is to increase output through

1. raising pay
2. working longer hours
3. hiring more workers
4. using better machines               

Question 35
 
An economy’s production possibilities curve could shift outward as a result of a(n)

1. increased level of technology
2. reduction in the quantity of capital goods
3. decrease in the production of goods
4. decrease in the amount of available resources               

Question 36
 
A nation needs an abundance of all productive resources in order to attain a high standard of living

1. True
2. False              

Question 37
To solve their basic long-term economic problems, developing countries primarily need

1. food
2. clothing
3. technical assistance
4. shelter              

Question 38
A surplus quantity will occur when

1. quantity demanded is greater than quantity supplied
2. price is above equilibrium
3. demand is elastic
4. price is below equilibrium

Question 39

A change in demand would be illustrated by

1. a drop in price, which causes people to buy more
2. an increase in price, which causes people to buy less
3. a change in people’s preferences that causes them to buy either more or less than before
4. all of the above

Question 40
If 12 units of a good are sold when the price is $1 per unit, and 8 units are sold at a price of $1.50 per unit, then demand is

1. elastic
2. inelastic
3. of indeterminate elasticity
4. unit elastic

Question 41
 
The more substitutes for a good, the more elastic its demand tends to be.

1. True
2. False

Question 42
 
A demand curve generally

1. is a straight horizontal line
2. is a straight vertical line
3. slopes downward to the right
4. slopes downward to the left

Question 43
The quantity supplied and price tend to vary

1. inversely
2. independently
3. in an unrelated fashion
4. directly

Question 44
 
Price elasticity of demand tends to be greater for substitute items than for complementary goods

1. True
2. False

Question 45
To maintain a price below the equilibrium price,

1. demand must increase
2.  supply must increase
3. the government must set a ceiling price
4. supply must decrease

Question 46
An increase in demand will cause the demand curve to

1. move to the right
2. move to the left
3. become more vertical
4. become more horizontal

Question 47
 
Price ceilings usually create surpluses since supply is increased.

1. True
2. False

Question 48
 
Price floors can create shortages if price floors are above market prices.

1. True
2. False

Question 49
 
When the supply of a product increases but the demand for the product remains unchanged, the equilibrium price of the product will

1. fall, and equilibrium quantity will decrease
2. be unaffected
3. first rise and then return to the original price level
4. fall, and equilibrium quantity will increase

Question 50
 
On a price/quantity graph, a straight horizontal demand curv

1.  has zero price elasticity
2.  is perfectly elastic
3.  is perfectly inelastic
4.  is perfectly unit elastic

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE ASSESSMENT: EXAM 2
Question 1
 
A firm is making a profit under conditions of monopolistic competition if, at the equilibrium output,

1. AR is above MR
2. MR is above AR
3. AR is above AVC
4.  AR is above ATC

Question 2
 
Firms in monopolistic competition sell a similar but differentiated product.

1. True
2. False

Question 3
A major characteristic of a monopoly is the ability of the monopolist to influence price.

1. True
2. False

Question 4
The Federal Trade Commission

1. prevents mergers that substantially lessen competition
2. rules on the antitrust activities of labor unions
3.  issues patents
4. polices deceptive advertising

Question 5
If a monopolist lowers its price from $45 to $42 in order to increase its sales volume, marginal revenue

1. equals $45
2.  equals $42
3.  is less than $42
4.  is between $45 and $42

Question 6
 
The first act to declare monopolies illegal in the United States was the

1. Sherman Antitrust Act
2.  Clayton Act
3.   Federal Trade Commission Act
4.  Robinson-Patman Act

Question 7 
One company that retained its monopoly position for years through control of raw materials was

1. Aluminum Company of America (ALCOA)
2.  Proctor & Gamble
3.  Ford Motor Company
4.  U.S. Steel

Question 8
 
Monopsony is a market condition in which there is only one seller.

1. True
2. False

Question 9
 
If firms in monopolistic competition are earning short-run profits,

1. barriers to entry will allow the profits to continue in the long run
2.  total supply in the market will decrease in the long run as firms reduce output to keep prices high
3.   the entry of new firms will eliminate the profits in the long run
4.  each existing firm will experience an increase in its average revenues in the long run

Question 10
 
Oligopoly is a market structure in which

1. there are only two sellers
2.  there are relatively few producers
3.  no firm can influence price
4.  there are many producers

Question 11
All firms in monopolistic competition must sell at the same price.

1. True
2. False

Question 12 
The major characteristic of a monopoly is

1. the degree of control over price it can exercise
2.  its ability to produce numerous products
3.  its price elasticity of demand
4.  its source of revenue

Question 13
 
Under which type of market structure is the firm’s pricing decision the most difficult?

1. perfect competition
2.  monopoly
3. monopolistic competition
4. oligopoly

Question 14
 
Under perfect competition, if a firm is suffering a loss,

1. MR exceeds ATC
2. AR equals AVC
3.  AR equals ATC
4.  AR is less than ATC

Question 15
The difference between the price firms would be willing to accept for their goods and the price they actually receive is called

1. consumer surplus
2.  consumer efficiency
3.  allocative efficiency
4.  producer surplus             

Question 16
 
In the long run, under conditions of perfect competition, market forces come into play to

1. enhance profits
2.  increase demand
3.  eliminate profits
4.  separate MR and AR               

Question 17
 
Under conditions of perfect competition, an individual producer

1. always maximizes output
2.  operates where MR equals MC
3.  ever suffers a loss
4.  operates where MR is greater than MC               

Question 18
 
If all firms adhere to the conditions of perfect competition, short-run losses are avoided.

1. True
2. False

               
Question 19
 
If a firm in a perfectly competitive industry is producing at a point where TR equals TC and the market demand increases, then the firm will be making

1. economic profits; it will expand output
2.  economic profits; output will not change
3.  normal profits; output will expand
4.  normal profits; output will not change               

Question 20
 
In perfect competition, if the market price is at the same level as the minimum point of the firm’s average total cost curve, the best the firm can hope for is to break even.

1. True
2. False             

Question 21
 
In a perfectly competitive industry, if TR exceeds TC, then in the long ru

1. firms will exit the industry
2.  new firms will enter the industry
3.  there will be no change in the number of firms
4.  the market supply will shift to the left               

Question 22
 
A prime example of perfect competition is the U.S. auto industry.

1. True
2. False               

Question 23
 
Elaine’s firm is in a perfectly competitive industry. Why doesn’t Elaine try to sell more of her product by lowering its price below the market price

1. her demand curve is not elastic
2.  doing so would be considered unethical price chiseling
3.   her competitors would not allow it
4.   she can sell all she wants at the market price               

Question 24
 
Which of the following is correct when the perfectly competitive firm is producing its long-run equilibrium output level?

1. MR equals MC
2.  AR equals ATC
3.   P equals MC
4.   all of the above              

Question 25
 
Under conditions of perfect competition, short-run equilibrium does not necessarily exist where

1. profit is maximized or loss minimized
2.  MR = AR
3.  MR = MC
4.  MR = ATC               

Question 26
 
According to the simple circular flow concept, whenever planned investment is less than planned saving

1. inventories accumulate
2. output increases
3.  prices rise
4.  employment increases              

Question 27
 
In the circular flow, investment refers to spending on

1. government bonds
2.  certificates of deposit
3.   capital goods
4.   consumer goods               

Question 28
 
Inventory accumulation occurs whenever

1. output is less than spending
2.   output exceeds spending
3.   investment exceeds saving
4.   a deficit budget occurs               

Question 29
 
A decrease in investment can cause a decrease in the price level without affecting total output.

1. True
2. False              

Question 30
 
In the circular flow, nonprofit institutions are

1. counted as businesses
2.  excluded
3.  treated separately
4.  counted as households               

Question 31
 
During a period of unemployment, a deficit budget will most likely have which of the following effects on business activity?

1. increase total output
2.  cause prices to rise
3.  have a neutral effect
4.  cause prices and total output to fall               

Question 32
 
An increase in planned savings always results in an increase in planned investment.

1. True
2. False              

Question 33
 
If the federal government spends less than it receives from taxes,

1. it has a surplus budget with injections exceeding leakages
2.  it has a deficit budget with injections exceeding leakages
3. it has a deficit budget with leakages exceeding injections
4.  it has a surplus budget with leakages exceeding injections               

Question 34
 
In the simple circular flow model, if planned I exceeds planned S, then

1. the economy is not at equilibrium
2.  the size of the circular flow is increasing
3.  if the economy is at full employment, then prices will rise
4.  all of the above              

Question 35
 
If inventories are accumulating, income must be greater than spending.

1. True
2. False              

Question 36
 
Whenever exports exceed imports (and other planned injections equal other planned leakages), the economy

1. remains stable
2. expands
3. contracts
4. deflates              

Question 37
 
Which of the following statements concerning the circular flow model is (are) correct?

1. an increase in planned savings always generates an increase in planned investment spending
2.  planned investment spending is an injection into the circular flow
3.   increased investment always results in decreased savings
4.  all of the above               

Question 38
 
It is true that a stable economy occurs when

1. total injections into the circular flow are large enough to make up for government tax leakages
2.  total leakages from the circular flow are great enough to offset the effects of government spending
3.  total planned leakages from the circular flow are exactly equal to total planned injections into the circular flow
4.  actual saving is equal to planned investment               

Question 39
 
In a mature industry, all firms operate with constant returns to scale.

1. True
2. False              

Question 40
 
If the accounting profit equals $200,000 and implicit costs equal $40,000, the economic profit equals

1. $240,000
2.  $200,000
3.  $160,000
4.  $40,000               

Question 41
 
If the firm produces one more unit of output and total cost rises from $1,000 to $1,050, marginal cost is

1. $1,050
2.  $1,000
3.  $2,050
4.  $50              

Question 42
 
The major factor accounting for diseconomies of scale is management inefficiency.

1. True
2. False               

Question 43
 
Average revenue (AR) is equal to

1. total revenue/output
2. total revenue minus total cost
3.  price per unit
4.  both (a) and (c)

Question 43
 
The average fixed cost remains constant even in the long run.

1. True
2. False               

Question 45
 
A production function is

1. a technique for determining the most profitable rate of output
2.  the relationship between a combination of inputs and a quantity of output
3.  an important factor in determining the shape of the long-run supply curve
4.  all of the above              

Question 46
 
If the selling price of a product is $10, the average total cost is $8, and total sales are 5,000 units, the total profit will be

1. $5,000
2.  $8,000
3.   $10,000
4.   $20,000              

Question 47

The production function relates outputs to inputs.

1. True
2. False             

Question 48
 
As units of input are added to the productive process, the marginal product

1. increases
2. decreases
3. remains the same
4. declines then rises              

Question 49
 
The average product decreases any time the marginal product is decreased.

1. True
2. False             

Question 50
 
If output changes in fixed proportion to a change in all of a firm’s productive resources, the firm has

1. constant marginal returns
2. constant returns to scale
3. decreasing marginal returns
4. decreasing returns to scale                

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE ASSESSMENT: EXAM 3
Question 1
 
If planned investment decreases, the multiplier will decrease the equilibrium income.

1. True
2. False               

Question 2
 
The change in the level of planned spending that results from a change in the price level is indicated by the movement of the economy along a given

1. aggregate expenditure curve
2.  aggregate demand curve
3.  aggregate supply curve
4.  both (a) and (b)              

Question 3
 
In the Keynesian model, whenever unplanned inventory increases occur in the economy, production is likely to

1. speed up slowly
2.  slow down
3.   remain unchanged
4.  speed up immediately               

Question 4
 
If planned construction investment increases by $30 billion and the MPC is two-thirds, total output will increase by

1. $30 billion
2.  $20 billion
3.   $45 billion
4.   $90 billion               

Question 5
 
Keynes recommended the use of government deficit spending to overcome widespread unemployment.

1. True
2. False               

Question 6
According to the Keynesian analysis, as income increases, the marginal propensity to consume will rise.

1. True
2. False               

Question 7
 
Say’s Law states that

1. supply is greater than demand
2.  supply is less than demand
3.  demand generates supply
4.  supply generates demand               

Question 8
 
The time lags lead monetarists to contend that monetary policy is counterproductive.

1. True
2. False               

Question 9
 
The classical doctrine assumed that the normal equilibrium position for the economy was at full employment.

1. True
2. False             

Question 10
 
According to the Keynesian analysis, equilibrium occurs at the point where total aggregate expenditure equals total output.

1. True
2. False               

Question 11
 
In the Keynesian model, the most important influence on planned consumption is

1. the interest rate
2. expectations
3.  disposable income
4.  the price level              

Question 12
 
The multiplier is the reciprocal of the marginal propensity to consume.

1. True
2. False               

Question 13
 
Aggregate expenditure in the U.S. economy includes spending for U.S. output by

1. households and businesses, but not governments
2.  households, businesses, and the federal government, but not state and local governments
3.  households, businesses, and all governments except foreign ones
4.  households, businesses, and governments, both domestic and foreign              

Question 14
 
The bulk of the M1 money supply is made up of

1. silver dollars and gold bars
2.  checkable deposits
3.  travelers checks
4.  money market funds              

Question 15
 
If a new cash deposit creates excess reserves of $5,000 and the required reserve ratio is 10 percent, the banking system can increase the money supply by a maximum of

1. $50,000
2.  $500
3.  $5,000
4. $4,500             

Question 16
 
An increase in the velocity of money can have an effect similar to that of an increase in the money supply.

1. True
2. False               

Question 17
 
If a bank has $60,000 in legal reserves and is subject to a 10 percent reserve requirement, it could have outstanding checkable deposits to the extent of

1. $60 million
2.  $600,000
3.  $6 million
4.  $60,000              

Question 18
 
If a worker’s money wage increases at a faster pace than the CPI, his or her real wage will rise.

1. True
2. False              

Question 19
 
The Treasury issues all paper currency today.

1. True
2. False              

Question 20
 
Funds that earn a fixed rate of interest and must be held for a stipulated period of time are known a

1. checkable deposits
2.  time deposits
3.   savings deposits
4.   money market funds               

Question 21
 
Included in the official U.S. money supply are

1. U.S. government bonds
2.  corporate stocks
3.  checkable deposits
4.  all of the above               

Question 22
 
The U.S. money supply measure that consists of currency plus travelers checks and checkable deposits is referred to a

1. M1
2. M2
3. M3
4. M1 + M2               

Question 23
 
The quantity theory of money assumes that

1. the national economy tends to operate at less than full
2.  the velocity of money is unstable
3.   the national economy tends to operate at full employment
4.   the velocity of money varies with changes in interest rates               

Question 24
 
If the CPI in City A is 150 and the CPI in City B is 135,

1. the dollar has greater purchasing power in City B
2.  prices are higher in City A than they are in City B
3.  City B must be using a different base year
4.  none of the above               

Question 25 
 
The value or purchasing power of the dollar can be obtained by dividing $1 by the CPI.

1. True
2. False               

Question 26
 
Stored value and smart cards are forms of electronic banking.

1. True
2. False              

Question 27
 
Each Federal Reserve Bank has its own board of directors.

1. True
2. False             

Question 28
 
The First Bank of the United States was chartered be

1. the federal government
2.  the state of New York
3.   the city of New York
4.   Suffolk County               

Question 29
 
All members of the Board of Governors are members of the Fed’s Open Market Committee.

1. True
2. False             

Question 30
 
The Federal Reserve System was established in

1. 1980
2.  1913
3. 1864
4.  1791               

Question 31
 
Members of the Board of Governors are

1. appointed by Congress
2.   selected by the U.S. President
3.  selected by member banks
4. selected by the U.S. Treasury Department               

Question 32
 
By buying government securities, the Federal Open Market Committee adds to member banks’ reserves.

1. True
2. False               

Question 33
 
The Board of Governors of the Federal Reserve System is

1. under the jurisdiction of the U.S. President
2.  responsible to the Secretary of the U.S. Treasury
3.  independent within the U.S. government
4.  responsible to the Council of Economic Advisors               

Question 34
 
The members of the Board of Governors of the Federal Reserve System are appointed by the U. S. President.

1. True
2. False               

Question 35
 
Various studies have recommended changes in the Federal Reserve structure and policy that include

1. having Congress set the discount rate
2.  placing monetary policy in the control of Congress
3.  dissolving the Board of Governors
4.  making each appointment to the Board of Governors a lifetime appointment               

Question 36
 
If the Federal Open Market Committee desired to tighten credit, it would

1. buy securities in the open market
2.   sell securities in the open market
3.  lower the discount rate
4.  raise the discount rate               

Question 37
 
Competition in U.S. banking has been increased by

1. the expansion of interstate banking
2.  the expansion of foreign bank branches into the United States
3.  the movement of brokerage houses and large corporations into traditional banking activities
4.  all of the above               

Question 38
 
If a Federal Reserve Bank wanted to tighten the money supply, it would

1. lower the reserve requirement
2.  buy securities in the open market
3.  raise the discount rate
4.  lower the discount rate               

Question 39
 
The existence of undistributed corporate profits tends to cause

1. NNP to be smaller than GDP
2.  national income to be larger than personal income
3.  national income to be smaller than NNP
4.  personal income to be larger than disposable personal income               

Question 40
 
National income is equivalent to total earnings in the form of wages, rent, interest, and profits.

1. True
2. False               

Question 41
 
The GDP counts durable goods only during their year of production.

1. True
2. False               

Question 42
 
Imports constitute a minus figure in national income accounting.

1. True
2. False               

Question 43
 
GDP overstates national income because it does not make any adjustment for national debt.

1. True
2. False             

Question 44
 
The national income accounts for the United States are prepared by the

1. Bureau of Labor Statistics
2.  U.S. Department of Commerce
3.  Federal Reserve Board
4.  President Council of Economic Advisors               

Question 45
 
Excluded from the GDP are

1. military services
2. postal services
3.  medical services
4.  nonmonetary transactions               

Question 46
 
The difference between GDP and final sales equals

1. depreciation
2.  exports
3. imports
4. net inventory change              

Question 47
 
In dollar value, the nominal GDP in the United States is in the vicinity of

1. between 3 and 4 billion
2.  between 4 and 5 billion
3.  between 4 and 5 trillion
4.  between 10 and 12 trillion               

Question 48
 
The GDP and NI figures are not equal because

1.   business profits are included in GDP but not in NI
2.   depreciation and indirect taxes are included in GDP but not in NI
3.   all taxes must be deducted from GDP to arrive at NI
4.   none of the above               

Question 49
 
Current disposable income can be adjusted for price changes and population changes to yield real per capita disposable income

1. True
2. False               

Question 50
 
Personal consumption expenditures account for approximately two-thirds of the GDP in the United States.

1. True
2. False                

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE ASSESSMENT: EXAM 4

Question 1
 
U.S. workers have

1. neither substantial geographic nor occupational mobility
2.  both substantial geographic and occupational mobility
3.   substantial geographic mobility but not occupational mobility
4.  substantial occupational mobility but not geographic mobility               

Question 2
 
Many economists believe that increases in the minimum wage tend to create a labor surplus.

1. True
2. False               

Question 3
 
The rate of unemployment that can be expected from normal frictional unemployment in an otherwise fully employed labor force is known as the

1. natural rate of unemployment
2.  full-employment unemployment rate
3.  structural unemployment rate
4.  Humphrey-Hawkins unemployment rate              

Question 4
 
If workers are changing jobs voluntarily and it takes a while for them to find new jobs, they are an example of

1. structural unemployment
2.  frictional unemployment
3.  technological unemployment
4.  none of the above               

Question 5
 
Underemployment includes employed workers not performing at full capacity.

1. True
2. False               

Question 6
 
The Humphrey-Hawkins Act’s target rates for unemployment and inflation were reached by their target date of 1983.

1. True
2. False               

Question 7
 
Which type of unemployment is the most difficult to cure?

1. functional
2.  seasonal
3.  cyclical
4.  structural               

Question 8
 
The idea of the natural rate of unemployment is that

1. frictional and structural causes prevent employment in the economy from ever becoming 100 percent of the labor force
2.   each industry has its average turnover rate, and this rate determines its natural rate of unemployment
3.   the market system requires that a pool of unemployed people be available to limit the power of workers
4.   none of the above               

Question 9
 
The total U.S. labor force excludes members of the armed services stationed outside the United States.

1. True
2. False               

Question 10
 
The Full Employment and Balanced Growth Act set a 1983 U.S. inflation rate target of

1. 1 percent
2.   2 percent
3.   3 percent
4.   4 percent               

Question 11
 
The total labor force includes all persons in the noninstitutional population who are either working or seeking work.

1. True
2. False               

Question 12
 
The natural rate of unemployment is usually

1. equal to the full-employment rate of unemployment
2.  higher than the full-employment rate of unemployment
3.  lower than the full-employment rate of unemployment
4.  double the full-employment rate of unemployment               

Question 13
 
If the percentage of the population that is below the poverty line has decreased, then the number of

1. poor must have increased
2.   poor must have decreased
3.   poor may have increased
4.   people above the poverty line must have increased              

Question 14
 
If a Lorenz curve were constructed for the distribution of wealth, the curve would

1. indicate greater inequality for wealth than income
2.  indicate less inequality for wealth than income
3.  be identical to the Lorenz curve for income
4.  be a straight line from the origin               

Question 15
 
The total number of people in poverty has changed little since the late 1960s.

1. True
2. False

               
Question 16
The poverty rate for blacks is almost three times that for whites.

1. True
2. False               

Question 17
 
If everyone had the same income, the Lorenz curve would become the line of income equality.

1. True
2. False              

Question 18
 
The official poverty threshold line is adjusted annually for

1. income taxes
2.  inflation
3.  average household size
4.  average family size               

Question 19
 
In 2004, households with incomes less than $22,629 received

1. 3.4 percent of aggregate income
2.   5.7 percent of aggregate income
3.   8.2 percent of aggregate income
4.   10 percent of aggregate income               

Question 20
 
Nonfamily households earn less than 50 percent of the income earned by family households.

1. True
2. False               

Question 21
 
The Lorenz curve shows the

1. percent of families on the vertical axis and percent of income on the horizontal axis
2.   percent of families on the horizontal axis and the cumulative percent of income on the vertical axis
3.  cumulative percent of income on the vertical axis and the cumulative percent of families on the horizontal axis
4.  cumulative percent of families on the vertical axis and the cumulative percent of income on the horizontal axis               

Question 22
A minimum wage rate job raises a family out of poverty.

1. True
2. False               

Question 23
 
In discussing the distribution of income among families, the term “lowest fifth” indicates

1. the poorest five percent of families
2.   the poorest twenty percent of families
3.   the smallest twenty percent of families
4.  the percentage of families receiving one-fifth of the income               

Question 24
 
If income were distributed solely according to productivity, some individuals would not receive any income.

1. True
2. False               

Question 25
 
Cost-push inflation is characterized by

1. the wage-price spiral
2.  administered pricing
3.  stagflation
4. the multiplier               

Question 26
Inflation and unemployment can never exist at the same time.

1. True
2. False              

Question 27
 
To most effectively combat inflation by raising taxes, the government should

1. target funds that would otherwise be held idle
2.  also increase government spending
3.   target households with low marginal propensities to consume
4.  target funds that would otherwise be spent on consumption or investment               

Question 28
 
During an inflationary period, the Fed is inclined to purchase government securities to combat inflation.

1. True
2. False               

Question 29
 
In the 1970s, the war in Vietnam caused a fiscal drag on the economy.

1. True
2. False               

Question 30
 
Government policies designed to lower aggregate demand in order to combat inflation are known as

1. expansionary policies
2.  contractionary policies
3.  anti-growth policies
4.  recession policies               

Question 31
 
During the 1990–1991 recession, the U.S. government’s large budget deficits and budget reduction commitments limited its ability to use fiscal policy to stimulate the economy.

1. True
2. False               

Question 32
 
When the U.S. Treasury sells bonds to the public to finance government spending and then the Fed buys the bonds through open-market purchases, the Fed is

1. monetizing the debt
2.  decreasing the money supply
3.  decreasing bank reserves
4.  increasing the difficulty of raising funds for government spending               

Question 33
 
Fiscal policy deals with

1. interest rates
2.   the money supply
3.   the government budget
4.  bank credit               

Question 34
 
In the late 1960s, a 10 percent surcharge on U.S. personal and corporate income taxes was imposed as an expansionary measure.

1. True
2. False

               
Question 35
If the government finances increased spending strictly through higher taxes, this action

1. increases the multiplier effect
2.  has no impact on the multiplier effect
3.  decreases the multiplier to a value greater than one
4.  decreases the multiplier to one             

Question 36
 
The Economic Recovery Tax Act of 1981 reduced personal income taxes by 25 percent over a three-year period.

1. True
2. False               

Question 37
 
Jawboning by the Carter Administration proved to be an unsuccessful contractionary policy.

1. True
2. False              

Question 38
The U.S. economy has experienced no minor cycles since World War II.

1. True
2. False               

Question 39
 
Agricultural explanations of the business cycle are not as important today as they were 50 to 75 years ago, because today

1. agricultural production is more mechanized
2.  agricultural production is a smaller portion of the total economy
3.   agricultural production is greater
4.   we eat less               

Question 40
 
The underconsumption theory is classified as a real or physical cause of the business cycle.

1. True
2. False               

Question 41
 
During the expansion phase of the business cycle, profit margins increase due to a widening cost-price relationship.

1. True
2. False               

Question 42
 
Which of the following is the most valid expression of a theory of underconsumption as a cause of business cycles?

1. capital goods production encroaches on consumer goods production
2.  income equals production, but not all income is used for current purchasing power
3.   people want more goods than the economy is capable of producing; therefore, they must cut their consumption expectations
4.  the economy provides insufficient purchasing power to buy back the goods it produces               

Question 43
 
A recession occurs whenever there’s a decline in real GDP for two or more successive quarters.

1. True
2. False               

Question 44
 
Involuntary inventory accumulation may occur during the contracting phase of the business cycle.

1. True
2. False              

Question 45
 
A hurricane is considered an external force in business cycle analysis.

1. True
2. False              

Question 46
 
During the contraction phase of the business cycle,

1. prices fall relative to costs, reducing profit margins
2.   costs fall relative to prices, reducing profit margins
3.   prices fall relative to costs, increasing profit margins
4.  costs fall relative to prices, increasing profit margins               

Question 47
 
An example of an external force in business fluctuations is

1. falling interest rates due to lagging demand in a contraction
2.   a devaluation in the nation’s currency
3.   variations in inventories
4.   the lag between price changes and cost changes    

Question 48
 
Economists use the phrase “business cycle” when discussing

1. movements in interest rates
2.   changes in economic productivity
3.   fluctuations in employment
4.  fluctuations in total output around the trend               

Question 49
 
The underinvestment theory is classified as a monetary cause of the business cycle.

1. True
2. False               

Question 50
 
As the economy moves into the trough of the business cycle, there is a sizable reduction in the output of capital goods.

1. True
2. False               

 
Skip navigation linksECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE ASSESSMENT:
Question 1
 
Overseas investments by U.S. citizens are recorded as credit items in the capital account of the U.S. balance of payments.

1. True
2. False              

Question 2
 
Under a fixed or controlled exchange rate system, if the United States wanted to increase the value of the dollar, it could buy foreign currencies with dollars.

1. True
2. False               

Question 3
 
Since World War II, international exchange rates have been

1. fixed all the time
2.   floating all the time
3.  fixed most of the time until the early 1970s, and floating most of the time since then
4.  determined by the use of exchange controls             

Question 4
 
Under a system of fixed exchange rates, excess demand for foreign currency at the official exchange rate would cause

1. the exchange rate to rise
2.  the exchange rate to fall
3.  the government to buy foreign currency from the country’s importers
4.  the government to sell foreign currency to the country’s importers               

Question 5
 
The course of international monetary policy is directed primarily by the

1. Federal Reserve
2.  World Bank
3.  International Monetary Fund
4.  leaders of the Group of Seven nations               

Question 6
 
Overseas investments by U.S. citizens show up in the U.S. balance of payments as

1. credit items
2.  debit items
3.  current account items
4.  investment income               

Question 7
 
A debit item on the U.S. balance of payments is any transaction that

1. results in a loss by U.S. sellers
2.  results in a loss by U.S. buyers
3.  makes foreigners use up their holdings of U.S. dollars
4.   makes U.S. dollars available to foreigners               

Question 8
 
Under the gold standard, a country that is experiencing a gold outflow

1. has a balance of payments deficit
2.  has a shrinking money supply
3.  is experiencing a fall in output
4.  all of the above              

Question 9
 
When a U.S. citizen invests in foreign assets, the transaction is recorded in the balance of payments as a

1. credit in capital account
2.  debit in the capital account
3.  credit in the current account
4.  debit in the current account               

Question 10
 
Since World War II, the importance of gold in international exchange has increased.

1. True
2. False               

Question 11
A freely floating exchange rate exists when

1. governments set pegs for the exchange rate but occasionally adjust them
2.  offshore banks determine the exchange rate
3.  supply and demand forces are allowed to determine the rate at which currencies are exchanged for each other
4.  governments use international reserves only to influence exchange rates               

Question 12
 
An appreciation of the U.S. dollar would

1. encourage foreigners to invest in the United States
2.  discourage foreigners from buying U.S. goods
3.  discourage the travel abroad of U. S. citizens
4.  encourage foreign travel in the United States               

Question 13
 
Under the gold standard, a country experiencing a gold outflow

1. has a balance of payments surplus
2.  had an increasing money supply
3.  experienced a decline in output
4.  experienced an increase in output              

Question 14
Under a system of floating exchange rates, increased demand of U.S. citizens for Japanese goods will cause

1. the Japanese yen to depreciate against the U.S. dollar
2.  the U.S. dollar to appreciate against the Japanese yen
3.  the Japanese yen to appreciate against the U.S. dollar
4.  the exchange rate between the Japanese yen and the U.S. dollar to remain unchanged               

Question 15
 
Under the gold standard, a nation experiencing chronic trade deficits had to increase its money supply while reducing its holdings of gold.

1. True
2. False               

Question 16
 
Appreciation of the U.S. dollar encourages travel abroad by U.S. citizens.

1. True
2. False               

Question 17
 
If trade between the United States and Canada were totally free of restrictions, the incomes of most Canadian workers would decrease.

1. True
2. False               

Question 18
 
The revenue and protective purposes of a tariff are largely incompatible.             

1. True
2. False               

Question 19
 
Using tariffs to support diversification of a nation’s industrial structure

1. has little application to developing countries
2.  is based on the need to protect high domestic wages
3.  is based on the need to make the economy less vulnerable to demand fluctuations for its products
4. is designed to encourage specialization by the nation’s producers in just one or a few goods               

Question 20
In comparing a revenue tariff versus a protective tariff on the same good, a revenue tariff would tend to be

1. less than a protective tariff
2.  greater than a protective tariff
3.  equal to a protective tariff
4.  greater than or equal to a protective tariff              

Question 21
 
The General Agreement on Tariffs and Trade (GATT) was replaced by the World Trade Organization (WTO).

1. True
2. False               

Question 22
The rule of origin defines the maximum percentage of a country’s exported product that can be sold in the United States.

1. True
2. False              

Question 23
 
Tariff protection

1. encourages the optimum use of scarce resources
2.  has no impact on use of scarce resources
3.  prevents the optimum use of scarce resources
4.  eliminates the scarcity of resources               

Question 24
 
A provision that permits raising tariffs if domestic producers are suffering under an existing tariff is known as            

1. a trading bloc
2. exchange control
3.  antidumping
4. an escape clause               

Question 25
 
Beginning in 2002, Economic Monetary Union members no longer print their own money.

1. True
2. False               

Question 26
Chile has been invited to join the European Union.

1. True
2. False               

Question 27
 
The principle of comparative advantage is associated with

1. restricting consumer choices
2. greater production at higher prices
3.  specialization and exchange
4.  comparing the efficiency of alternative tariffs               

Question 28
 
The primary function of the Export-Import Bank is to assist in

1. guaranteeing markets for U.S. importers
2. financing exports from the United States
3.  providing foreign currency to U.S. banking institutions
4.  reducing tariff rates between trading nations               

Question 29
 
Exports from China into the U.S. have most seriously impacted the

1. automobile industry
2.  furniture industry
3.  travel industry
4.  cosmetics industry              

Question 30
 
Although political arguments strongly favor free trade, most decisions affecting international trade are made in the economic arena

1. True
2. False              

Question 31
 
Who does not gain when a tariff is imposed?

1. domestic producers of the good
2.  domestic workers in the protected industry
3.  domestic consumers of the good
4.  domestic suppliers in the protected industry             

Question 32
 
The Export-Import Bank is owned by 150 nations, including the United States.

1. True
2. False               

Question 33
 
Consider a tariff levied on the importer of a consumer good. The tariff is ultimately paid by

1. the importer
2. the consumer
3.  competing foreign firms
4.  competing domestic firms             

Question 34
 
The size of the national debt relative to GDP will not be reduced by

1. paying off some of the debt
2.  lowering the federal deficit
3.  having the GDP grow faster than the debt
4. having creditors forgive part of the debt               

Question 35
 
In the United States, income is taxed only by the federal government.

1. true
2. False             

Question 36
 
Whether a tax is shifted forward or backward depends on the price elasticities of demand and supply.

1. True
2. False               

Question 37
Which of the following taxes is not collected from the consumer on the final sale of goods and services?

1. consumption tax
2.  national sales tax
3.  value-added tax
4.  flat tax             

Question 38
 
The full-employment balanced budget always shows a surplus.

1. True
2. False               

Question 39
The government’s ability to repay the national debt is governed only by the total assets of the economy.

1. True
2. False               

Question 40
 
When the federal budget is used as a tool for economic stabilization, the ideal goal is to

1. balance the budget over the entire business cycle
2.  balance the budget each year
3.  balance the budget during expansions
4.  run a surplus during contractions               

Question 41
 
As a percentage of GDP, the U.S. national debt held by the public is larger than in any major European country.

1. True
2. False               

Question 42
 
A consumption tax is usually collected on

1. wages and salaries
2.  interest income
3.  dividend income
4.  none of the above               

Question 43
 
When the government uses tax revenue to pay off portions of the national debt, total purchasing power in the economy

1. increases
2. decreases
3.  is not affected at any level
4.  remains the same but changes individually              

Question 44
 
As interest rates rise,

1. the temptation to borrow increases
2.  the cost of carrying the national debt rises
3.  the likelihood of a surplus budget increases
4.  the need for deficit spending to reinvigorate the economy grows            

Question 45
 
A balanced federal budget

1. cannot have an expansionary effect on the economy
2.  can have an expansionary effect on the economy if the government finances spending with taxes on idle funds
3.  can have an expansionary effect on the economy if the government finances spending with taxes on funds that would have been used for private consumption
4.  can have an expansionary effect on the economy if the government finances spending with taxes on funds that would have been used for private investment             

Question 46
 
The U.S. income tax is based on the principle of

1. cost of service
2.  benefit received
3.   ability to pay
4.   quality of sacrifice               

Question 47
The U.S. national debt has declined continuously as a percentage of GDP since World War II.

1. True
2. False               

Question 48
 
Which of the following is not a necessary characteristic for a tax to qualify as a good tax?

1. justifiability
2.   convenience
3.  being economical
4.  equality               

Question 49
 
The equality-of-sacrifice doctrine would require larger taxes from higher-income groups.

1. True
2. False               

Question 50
 
The sales tax is proportional with respect to the tax base of the amount of purchases.

1. True
2. False