Question 1

Which of the following countries has not taken steps to privatize its Social Security system?

Accepted Answer

A)  United States 
B)  Mexico 
C)  United Kingdom 
D)  Chile 
A)  United States 
B)  Mexico 
C)  United Kingdom 
D)  Chile

Question 2

Which of the following is true?

Accepted Answer

A)  In 1916, the per person real government expenditures were approximately 60 times greater than in 1800. 
B)  Prior to 1929, government expenditures at the state and local levels were substantially smaller than federal expenditures. 
C)  Real federal spending per person was approximately 80 times greater in 2010 than in 1916. 
D)  All of the above are true. 
A)  In 1916, the per person real government expenditures were approximately 60 times greater than in 1800. 
B)  Prior to 1929, government expenditures at the state and local levels were substantially smaller than federal expenditures. 
C)  Real federal spending per person was approximately 80 times greater in 2010 than in 1916. 
D)  All of the above are true.

Question 3

Which of the following was an underlying cause of the economic crisis of 2008?

Accepted Answer

A)  a failure of government to impose regulations on Fannie Mae, Freddie Mac, and other mortgage lenders 
B)  the imposition of government regulations on Fannie Mae, Freddie Mac, and other lending institutions that eroded the conventional lending standards in place prior to the mid-1990s 
C)  greedy mortgage lenders who extended risky loans to sub-prime borrowers even though the regulators were trying to limit these loans 
D)  federal housing regulations that made it difficult for Fannie Mae, Freddie Mac, and other lending institutions to obtain sufficient loanable funds for the finance of housing construction 
A)  a failure of government to impose regulations on Fannie Mae, Freddie Mac, and other mortgage lenders 
B)  the imposition of government regulations on Fannie Mae, Freddie Mac, and other lending institutions that eroded the conventional lending standards in place prior to the mid-1990s 
C)  greedy mortgage lenders who extended risky loans to sub-prime borrowers even though the regulators were trying to limit these loans 
D)  federal housing regulations that made it difficult for Fannie Mae, Freddie Mac, and other lending institutions to obtain sufficient loanable funds for the finance of housing construction

Question 4

Under the progressive income tax system in the United States, as real incomes rise,

Accepted Answer

A)  a smaller share of income is taxed at higher rates. 
B)  there is no change in the share of income taxed at higher rates. 
C)  a larger share of income is taxed at higher rates. 
D)  none of the above are true. 
A)  a smaller share of income is taxed at higher rates. 
B)  there is no change in the share of income taxed at higher rates. 
C)  a larger share of income is taxed at higher rates. 
D)  none of the above are true.

Question 5

Will a large quantity of bonds held in the Social Security Trust Fund make it easier to deal with the retirement of the baby boomers?

Accepted Answer

A)  Yes; the federal government will be able to redeem these bonds in the future without raising taxes or increasing its borrowing. 
B)  Yes; the interest on these bonds will provide the federal government with a stream of net revenue in the future. 
C)  Yes, but only if the federal government holds these bonds until they mature. 
D)  No; the federal government cannot redeem the bonds without raising revenues for their redemption from other sources. 
A)  Yes; the federal government will be able to redeem these bonds in the future without raising taxes or increasing its borrowing. 
B)  Yes; the interest on these bonds will provide the federal government with a stream of net revenue in the future. 
C)  Yes, but only if the federal government holds these bonds until they mature. 
D)  No; the federal government cannot redeem the bonds without raising revenues for their redemption from other sources.

Question 6

"Since the wind and the flowing rivers can take away industrial waste without charge, polluting is a profitable activity even when people are seriously harmed downwind or downstream, unless environmental regulators stop it." This statement is

Accepted Answer

A)  false if the property rights of downwind or downstream individuals are protected. 
B)  true if the property rights of industrialists are enforced. 
C)  never true. 
D)  always true. 
A)  false if the property rights of downwind or downstream individuals are protected. 
B)  true if the property rights of industrialists are enforced. 
C)  never true. 
D)  always true.

Question 7

In contrast to schools in a voucher system, charter schools are

Accepted Answer

A)  not allowed to be religious schools. 
B)  not allowed to charge tuition. 
C)  not exempt from a variety of standards including financial, safety, and educational outcomes. 
D)  All of the above apply to charter schools. 
A)  not allowed to be religious schools. 
B)  not allowed to charge tuition. 
C)  not exempt from a variety of standards including financial, safety, and educational outcomes. 
D)  All of the above apply to charter schools.

Question 8

Analysis of the Great Depression indicates that

Accepted Answer

A)  even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic downturn. 
B)  even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 
C)  a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D)  the depth of the economic plunge, if not its onset, was the result of monetary, fiscal, and regulatory policies. 
A)  even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic downturn. 
B)  even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 
C)  a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D)  the depth of the economic plunge, if not its onset, was the result of monetary, fiscal, and regulatory policies.

Question 9

The growth of third-party payments has resulted in higher prices for health-care services because

Accepted Answer

A)  the lower out-of-pocket cost for consumers has increased the demand for health-care services. 
B)  consumers have less of an incentive to economize and shop for low-cost services when they pay a lower share of their bill. 
C)  producers have less of an incentive to provide health-care services at a low price when consumers are not as cost conscious. 
D)  All of the above are true. 
A)  the lower out-of-pocket cost for consumers has increased the demand for health-care services. 
B)  consumers have less of an incentive to economize and shop for low-cost services when they pay a lower share of their bill. 
C)  producers have less of an incentive to provide health-care services at a low price when consumers are not as cost conscious. 
D)  All of the above are true.

Question 10

During 2006-2008, the housing foreclosure rate rose sharply

Accepted Answer

A)  for fixed interest rate loans, but it was virtually unchanged for adjustable rate loans. 
B)  for adjustable rate loans to both sub-prime and prime borrowers, but there was little change in the foreclosure rate on fixed interest rate loans. 
C)  for adjustable rate loans to sub-prime borrowers, but the foreclosure rate on these loans to prime borrowers was virtually unchanged. 
D)  for adjustable rate loans to prime borrowers, but the foreclosure rate on these loans to sub-prime borrowers was virtually unchanged. 
A)  for fixed interest rate loans, but it was virtually unchanged for adjustable rate loans. 
B)  for adjustable rate loans to both sub-prime and prime borrowers, but there was little change in the foreclosure rate on fixed interest rate loans. 
C)  for adjustable rate loans to sub-prime borrowers, but the foreclosure rate on these loans to prime borrowers was virtually unchanged. 
D)  for adjustable rate loans to prime borrowers, but the foreclosure rate on these loans to sub-prime borrowers was virtually unchanged.

Question 11

Which of the following is an implication of the random walk theory?

Accepted Answer

A)  Experts will be able to make money by picking and choosing the best stocks. 
B)  There is a systematic pattern to the movement of prices in the stock market. 
C)  Stock market investors can expect to earn a fairly steady real rate of return of about 7 percent annually. 
D)  Even experts will be unable to predict the future movement of stock prices with any degree of accuracy. 
A)  Experts will be able to make money by picking and choosing the best stocks. 
B)  There is a systematic pattern to the movement of prices in the stock market. 
C)  Stock market investors can expect to earn a fairly steady real rate of return of about 7 percent annually. 
D)  Even experts will be unable to predict the future movement of stock prices with any degree of accuracy.

Question 12

A school voucher program targeted towards low- and middle-income families would cause

Accepted Answer

A)  racial and economic segregation among schools to fall. 
B)  per-pupil funding in the public schools to fall. 
C)  salaries for outstanding teachers to fall. 
D)  competition among schools to fall. 
A)  racial and economic segregation among schools to fall. 
B)  per-pupil funding in the public schools to fall. 
C)  salaries for outstanding teachers to fall. 
D)  competition among schools to fall.

Question 13

The only two options to control the growth of healthcare spending are

Accepted Answer

A)  price controls and political rationing or competition and market prices. 
B)  taxation or political mandates. 
C)  subsidizing of healthcare insurance or government provision of healthcare. 
D)  free healthcare or subsidized healthcare. 
A)  price controls and political rationing or competition and market prices. 
B)  taxation or political mandates. 
C)  subsidizing of healthcare insurance or government provision of healthcare. 
D)  free healthcare or subsidized healthcare.

Question 14

(I) Sales taxes, income taxes, property taxes, and grants from higher levels of government are the major sources of state and local revenue in the United States. (II) Including both the excess burden and administration, enforcement, and compliance costs of taxes in the United States, $1 in taxes to the government imposes a cost of somewhere between $1.20 and $1.30 on the economy.

Accepted Answer

A)  Both I and II are true. 
B)  I is true; II is false. 
C)  I is false; II is true. 
D)  Both I and II are false. 
A)  Both I and II are true. 
B)  I is true; II is false. 
C)  I is false; II is true. 
D)  Both I and II are false.

Question 15

Fannie Mae and Freddie Mac's rapid increase in the percentage of all mortgages held encouraged mortgage lenders to

Accepted Answer

A)  tighten credit standards and decrease the number of sub-prime loans extended to borrowers. 
B)  offer lower rates than what Fannie Mae and Freddie Mac could offer. 
C)  lower credit standards and offer terms acceptable to Fannie Mae and Freddie Mac. 
D)  scrutinize the credit-worthiness of borrowers and require higher down payments on mortgages. 
A)  tighten credit standards and decrease the number of sub-prime loans extended to borrowers. 
B)  offer lower rates than what Fannie Mae and Freddie Mac could offer. 
C)  lower credit standards and offer terms acceptable to Fannie Mae and Freddie Mac. 
D)  scrutinize the credit-worthiness of borrowers and require higher down payments on mortgages.

Question 16

Forests in the United States, starting from the time the colonists arrived,

Accepted Answer

A)  have always expanded. 
B)  have only shrunk in size. 
C)  have changed little. 
D)  shrank as they were logged and cleared for farms, then rebounded, especially in the twentieth century. 
A)  have always expanded. 
B)  have only shrunk in size. 
C)  have changed little. 
D)  shrank as they were logged and cleared for farms, then rebounded, especially in the twentieth century.

Question 17

What did Keynes and Hayek believe about government central planning?

Accepted Answer

A)  Both believed that central planning could be used to allocate resources efficiently. 
B)  Both believed that perverse political incentives would undermine the ability of central planners to allocate resources efficiently. 
C)  Keynes believed that government central planning could improve on market outcomes; Hayek disagreed, arguing that both political incentives and insufficient information would undermine their ability to do so. 
D)  Keynes believe that central planning would fail because the policy-makers did not have sufficient information to plan efficiently; Hayek believed that efficient central planning was possible if political decisions were made democratically. 
A)  Both believed that central planning could be used to allocate resources efficiently. 
B)  Both believed that perverse political incentives would undermine the ability of central planners to allocate resources efficiently. 
C)  Keynes believed that government central planning could improve on market outcomes; Hayek disagreed, arguing that both political incentives and insufficient information would undermine their ability to do so. 
D)  Keynes believe that central planning would fail because the policy-makers did not have sufficient information to plan efficiently; Hayek believed that efficient central planning was possible if political decisions were made democratically.

Question 18

Which of the following is true?

Accepted Answer

A)  Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity). 
B)  On average, the number of hours worked per year by women in the labor force is greater than the hours worked by men in the labor force. 
C)  The female/male earnings ratio is substantially higher for never married persons than for those married with a spouse present. 
D)  As the proportion of women preparing for careers as professionals has increased in recent decades, the earnings of women have declined relative to those for men. 
A)  Employers who discriminate against women will have lower costs than rival firms that hire employees strictly on the basis of merit (productivity). 
B)  On average, the number of hours worked per year by women in the labor force is greater than the hours worked by men in the labor force. 
C)  The female/male earnings ratio is substantially higher for never married persons than for those married with a spouse present. 
D)  As the proportion of women preparing for careers as professionals has increased in recent decades, the earnings of women have declined relative to those for men.

Question 19

Based on the rising housing prices of 2000-2005, many buyers opted for interest-only loans and variable rate mortgages with little or no down payment because

Accepted Answer

A)  they expected short-term interest rates to fall substantially in the future and this would reduce their monthly mortgage payment in the years ahead. 
B)  variable rate mortgages are a good way to reduce the risk accompanying your investment when you plan to stay in the house for a long time. 
C)  they thought housing prices would continue to rise and therefore they would be able to sell the house for a profit within a couple of years. 
D)  they could easily recoup their investment, even if there was a downturn in housing prices in the future. 
A)  they expected short-term interest rates to fall substantially in the future and this would reduce their monthly mortgage payment in the years ahead. 
B)  variable rate mortgages are a good way to reduce the risk accompanying your investment when you plan to stay in the house for a long time. 
C)  they thought housing prices would continue to rise and therefore they would be able to sell the house for a profit within a couple of years. 
D)  they could easily recoup their investment, even if there was a downturn in housing prices in the future.

Question 20

John Maynard Keynes and Friedrich Hayek

Accepted Answer

A)  had similar views with regard to the cause of the Great Depression and what might be done to prevent it from happening again. 
B)  both believed that perverse monetary policy was the primary cause of the ups and downs of the business cycle. 
C)  both believed that budget deficits and surpluses could be used to smooth the ups and downs of the business cycle. 
D)  had polar opposite views with regard to the underlying causes of economic booms and bust, but nonetheless their scholarly work commanded widespread respect among economists. 
A)  had similar views with regard to the cause of the Great Depression and what might be done to prevent it from happening again. 
B)  both believed that perverse monetary policy was the primary cause of the ups and downs of the business cycle. 
C)  both believed that budget deficits and surpluses could be used to smooth the ups and downs of the business cycle. 
D)  had polar opposite views with regard to the underlying causes of economic booms and bust, but nonetheless their scholarly work commanded widespread respect among economists.

Which of the following countries has not taken steps to privatize its Social Security system?

Which of the following is true?

Which of the following was an underlying cause of the economic crisis of 2008?

Under the progressive income tax system in the United States, as real incomes rise,

Will a large quantity of bonds held in the Social Security Trust Fund make it easier to deal with the retirement of the baby boomers?

"Since the wind and the flowing rivers can take away industrial waste without charge, polluting is a profitable activity even when people are seriously harmed downwind or downstream, unless environmental regulators stop it." This statement is

In contrast to schools in a voucher system, charter schools are

Analysis of the Great Depression indicates that

The growth of third-party payments has resulted in higher prices for health-care services because

During 2006-2008, the housing foreclosure rate rose sharply

Which of the following is an implication of the random walk theory?

A school voucher program targeted towards low- and middle-income families would cause

The only two options to control the growth of healthcare spending are

Fannie Mae and Freddie Mac's rapid increase in the percentage of all mortgages held encouraged mortgage lenders to

Forests in the United States, starting from the time the colonists arrived,

What did Keynes and Hayek believe about government central planning?

Which of the following is true?

Based on the rising housing prices of 2000-2005, many buyers opted for interest-only loans and variable rate mortgages with little or no down payment because

John Maynard Keynes and Friedrich Hayek

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Filters

Exam 16: Applying the Basics: Special Topics in Economics

Which of the following countries has not taken steps to privatize its Social Security system?

Which of the following is true?

Which of the following was an underlying cause of the economic crisis of 2008?

Under the progressive income tax system in the United States, as real incomes rise,

Will a large quantity of bonds held in the Social Security Trust Fund make it easier to deal with the retirement of the baby boomers?

"Since the wind and the flowing rivers can take away industrial waste without charge, polluting is a profitable activity even when people are seriously harmed downwind or downstream, unless environmental regulators stop it." This statement is

In contrast to schools in a voucher system, charter schools are

Analysis of the Great Depression indicates that

The growth of third-party payments has resulted in higher prices for health-care services because

During 2006-2008, the housing foreclosure rate rose sharply

Which of the following is an implication of the random walk theory?

A school voucher program targeted towards low- and middle-income families would cause

The only two options to control the growth of healthcare spending are

Fannie Mae and Freddie Mac's rapid increase in the percentage of all mortgages held encouraged mortgage lenders to

Forests in the United States, starting from the time the colonists arrived,

What did Keynes and Hayek believe about government central planning?

Which of the following is true?

Based on the rising housing prices of 2000-2005, many buyers opted for interest-only loans and variable rate mortgages with little or no down payment because

John Maynard Keynes and Friedrich Hayek

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Filters