Question 1

Which of the following observations is true of the federal budget between 1960 and 2010?

Accepted Answer

A) The federal budget was in deficit in the early 1960s. 
B) Between 1960 and 1970 the federal budget deficit reflected a sharp increase. 
C) The federal budget was in surplus between 1970 and 1980. 
D) The federal budget deficit was the highest in the late 1990s. 
E) The federal budget deficit was lower than 600 billion dollars in 2010. 
A) The federal budget was in deficit in the early 1960s. 
B) Between 1960 and 1970 the federal budget deficit reflected a sharp increase. 
C) The federal budget was in surplus between 1970 and 1980. 
D) The federal budget deficit was the highest in the late 1990s. 
E) The federal budget deficit was lower than 600 billion dollars in 2010. E

Question 2

In a market economy,_____ own(s) all the basic resources or factors of production.

Accepted Answer

A) households 
B) the federal government 
C) the Federal Reserve bank 
D) the local government 
E) business firms 
A) households 
B) the federal government 
C) the Federal Reserve bank 
D) the local government 
E) business firms A

Question 3

An enterprise that has only one shareholder does not constitute a corporation.

Accepted Answer

A) True 
 B)False  False

Question 4

The idea that in a market system the consumer determines what is to be produced is called:

Accepted Answer

A) consumer monopoly. 
B) habeas corpus. 
C) consumer sovereignty. 
D) business sovereignty. 
E) caveat emptor. 
A) consumer monopoly. 
B) habeas corpus. 
C) consumer sovereignty. 
D) business sovereignty. 
E) caveat emptor.

Question 5

The figure given below represents the equilibrium price and output in the market for restaurant meals and delivery meals. Figure 4.1  
- Refer to Figure 4.1.If the price in the Delivery Meals market remains at $10 but demand shifts to D2 which of the following situations will be observed?

Accepted Answer

A) People would be willing and able to purchase 75 units while only 60 units would be available. 
B) People would be willing and able to purchase only 60 units while 75 units would be available. 
C) People would be willing and able to purchase 75 units while only 50 units would be available. 
D) People would be willing and able to purchase 75 units while only 25 units would be available. 
E) People would be willing and able to purchase 50 units and producers would supply exactly 50 units. 
A) People would be willing and able to purchase 75 units while only 60 units would be available. 
B) People would be willing and able to purchase only 60 units while 75 units would be available. 
C) People would be willing and able to purchase 75 units while only 50 units would be available. 
D) People would be willing and able to purchase 75 units while only 25 units would be available. 
E) People would be willing and able to purchase 50 units and producers would supply exactly 50 units.

Question 6

Households and firms pay taxes to the government to:

Accepted Answer

A) increase their consumption spending. 
B) finance the country's import bill. 
C) increase their savings. 
D) improve their standard of living. 
E) finance government expenditures. 
A) increase their consumption spending. 
B) finance the country's import bill. 
C) increase their savings. 
D) improve their standard of living. 
E) finance government expenditures.

Question 7

The figure given below represents the circular flow of income between households,firms,financial intermediaries,and foreign countries. Figure 4.2  
- Refer to Figure 4.2.Assume investment spending decreases by $4,000.Everything else being the same,what must be the new value of net trade flows in order to maintain total expenditures on business firms' output at $35,000?

Accepted Answer

A) -$2,500 
B) -$1,500 
C) $3,500 
D) $6,500 
E) $7,500 
A) -$2,500 
B) -$1,500 
C) $3,500 
D) $6,500 
E) $7,500

Question 8

Consider the circular flow of income model with households and firms as the two sectors.If business spending (investment) were suddenly decreased due to expectations of a dismal economy in the near future,then because total purchases would suddenly be reduced:

Accepted Answer

A) the income created would be reduced,and the value of output and the value of income would decline. 
B) the income created would be reduced,and the value of output and the value of income would no longer be equal. 
C) the income created would be reduced,and the value of output and the value of income would increase. 
D) the income created would be reduced,and the value of output and the value of income would decline until the foreign sector was introduced. 
E) the household sector would try to save more. 
A) the income created would be reduced,and the value of output and the value of income would decline. 
B) the income created would be reduced,and the value of output and the value of income would no longer be equal. 
C) the income created would be reduced,and the value of output and the value of income would increase. 
D) the income created would be reduced,and the value of output and the value of income would decline until the foreign sector was introduced. 
E) the household sector would try to save more.

Question 9

The process of new products and new firms replacing existing products and firms is called:

Accepted Answer

A) transformational innovation. 
B) technological development. 
C) price skimming. 
D) consumer sovereignty. 
E) creative destruction. 
A) transformational innovation. 
B) technological development. 
C) price skimming. 
D) consumer sovereignty. 
E) creative destruction.

Question 10

In economics parlance,the term investment refers to:

Accepted Answer

A) the cost of employing human capital. 
B) expenditure on expense accounts of employees. 
C) the expenditure incurred on salaries and rent. 
D) business spending for acquiring capital goods. 
E) the expenses on the purchase of stocks of a corporation. 
A) the cost of employing human capital. 
B) expenditure on expense accounts of employees. 
C) the expenditure incurred on salaries and rent. 
D) business spending for acquiring capital goods. 
E) the expenses on the purchase of stocks of a corporation.

Question 11

Which of the following is a valid difference between sole proprietorship and partnership?

Accepted Answer

A) Partnerships require a written agreement while sole proprietorships do not. 
B) Partnerships require a state charter while sole proprietorships do not. 
C) Partnerships generate lower profits than sole proprietorships. 
D) Partnerships are characterized by unlimited liability,while sole proprietorships are not. 
E) Partnerships consist of two or more partners sharing the responsibility of the firm,while sole proprietorship consist of a single individual. 
A) Partnerships require a written agreement while sole proprietorships do not. 
B) Partnerships require a state charter while sole proprietorships do not. 
C) Partnerships generate lower profits than sole proprietorships. 
D) Partnerships are characterized by unlimited liability,while sole proprietorships are not. 
E) Partnerships consist of two or more partners sharing the responsibility of the firm,while sole proprietorship consist of a single individual.

Question 12

According to the circular flow diagram,with households and firms as the only two sectors,money saved by the households reenters the economy in the form of:

Accepted Answer

A) human capital. 
B) investment spending. 
C) fiscal spending. 
D) consumption spending. 
E) deposits. 
A) human capital. 
B) investment spending. 
C) fiscal spending. 
D) consumption spending. 
E) deposits.

Question 13

In a market system,the distribution of income is determined by the ownership of resources.

Accepted Answer

A) True 
 B)False

Question 14

Total government spending in the U.S.economy was around _____ of GDP in the financial year 2010.

Accepted Answer

A) 5 percent 
B) 36 percent 
C) 25 percent 
D) 44 percent 
E) 16 percent 
A) 5 percent 
B) 36 percent 
C) 25 percent 
D) 44 percent 
E) 16 percent

Question 15

The figure given below represents the circular flow of income between households,firms,financial intermediaries,and foreign countries. Figure 4.2  
- Refer to Figure 4.2.Calculate the total amount of consumption expenditure.

Accepted Answer

A) $7,500 
B) $25,000 
C) $10,000 
D) $42,500 
E) $35,000 
A) $7,500 
B) $25,000 
C) $10,000 
D) $42,500 
E) $35,000

Question 16

Which of the following statements is a defining feature of a corporation?

Accepted Answer

A) The owners of a corporation face unlimited liability on debts. 
B) A corporation owns and operates units in foreign countries. 
C) A corporation is created by a verbal agreement. 
D) A corporation that is based on a verbal agreement is also recognized by State law. 
E) A corporation has a legal identity that is separate from that of its owners. 
A) The owners of a corporation face unlimited liability on debts. 
B) A corporation owns and operates units in foreign countries. 
C) A corporation is created by a verbal agreement. 
D) A corporation that is based on a verbal agreement is also recognized by State law. 
E) A corporation has a legal identity that is separate from that of its owners.

Question 17

The market process by which new products and new firms replace existing products and firms is called:

Accepted Answer

A) technology transfer. 
B) marginal rate of substitution. 
C) capital replacement. 
D) creative destruction. 
E) market saturation. 
A) technology transfer. 
B) marginal rate of substitution. 
C) capital replacement. 
D) creative destruction. 
E) market saturation.

Question 18

A surplus in a country's trade balance means that:

Accepted Answer

A) net exports exceed transfer payments. 
B) the country's currency is over-valued. 
C) the value of net exports is positive. 
D) imports into the country exceed exports. 
E) domestic savings exceeds domestic investment. 
A) net exports exceed transfer payments. 
B) the country's currency is over-valued. 
C) the value of net exports is positive. 
D) imports into the country exceed exports. 
E) domestic savings exceeds domestic investment.

Question 19

When the government's spending is less than tax revenue,it implies that:

Accepted Answer

A) the government budget is balanced. 
B) the government is running a deficit. 
C) there is a budget surplus. 
D) there is a higher chance of default by the government. 
E) the government needs to borrow from the central bank. 
A) the government budget is balanced. 
B) the government is running a deficit. 
C) there is a budget surplus. 
D) there is a higher chance of default by the government. 
E) the government needs to borrow from the central bank.

Question 20

In 2009,combined government spending in the U.S.economy was about:

Accepted Answer

A) $50 billion. 
B) $500 billion. 
C) $12,163 billion. 
D) $5,000 billion. 
E) $2,012 billion. 
A) $50 billion. 
B) $500 billion. 
C) $12,163 billion. 
D) $5,000 billion. 
E) $2,012 billion.

Exam 4: The Market System and the Private and Public Sector

Which of the following observations is true of the federal budget between 1960 and 2010?

In a market economy,_____ own(s) all the basic resources or factors of production.

An enterprise that has only one shareholder does not constitute a corporation.

The idea that in a market system the consumer determines what is to be produced is called:

The figure given below represents the equilibrium price and output in the market for restaurant meals and delivery meals. Figure 4.1 - Refer to Figure 4.1.If the price in the Delivery Meals market remains at $10 but demand shifts to D2 which of the following situations will be observed?

Households and firms pay taxes to the government to:

Consider the circular flow of income model with households and firms as the two sectors.If business spending (investment) were suddenly decreased due to expectations of a dismal economy in the near future,then because total purchases would suddenly be reduced:

The process of new products and new firms replacing existing products and firms is called:

In economics parlance,the term investment refers to:

Which of the following is a valid difference between sole proprietorship and partnership?

According to the circular flow diagram,with households and firms as the only two sectors,money saved by the households reenters the economy in the form of:

In a market system,the distribution of income is determined by the ownership of resources.

Total government spending in the U.S.economy was around _____ of GDP in the financial year 2010.

The figure given below represents the circular flow of income between households,firms,financial intermediaries,and foreign countries. Figure 4.2 - Refer to Figure 4.2.Calculate the total amount of consumption expenditure.

Which of the following statements is a defining feature of a corporation?

The market process by which new products and new firms replace existing products and firms is called:

A surplus in a country's trade balance means that:

When the government's spending is less than tax revenue,it implies that:

In 2009,combined government spending in the U.S.economy was about:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The figure given below represents the equilibrium price and output in the market for restaurant meals and delivery meals. Figure 4.1 - Refer to Figure 4.1.If the price in the Delivery Meals market remains at $10 but demand shifts to D₂ which of the following situations will be observed?