Deck 2: Economics and Banking

Question 1

Holding all other factors constant, prices are set slightly above the point where supply equals demand.

Answer 1

False

Question 2

The value of currency is based on an underlying commodity.

Answer 2

True

Question 3

The price at which supply of an item or service equals the demand for that item is known as the market price.

Answer 3

True

Question 4

Mae's Restaurant is the only establishment in town that sells cinnamon rolls. Mae therefore has a monopoly on the cinnamon roll business in town.

Question 5

Macroeconomics is the study of how certain occurrences affect the economy as a whole.

Question 6

In a planned economy, an individual's personal income dictates this or her spending choices.

Question 7

Population changes are a key determinant of demand for goods and services.

Question 8

Competition affects demand by changing the number of substitute goods in a given market.

Question 9

Business managers do not need to be aware of the decisions of collective businesses outside their own industry.

Question 10

Competition in an oligopoly is centered more on making one product stand out from another than it is on price.

Question 11

Microeconomics is the study of the behavior of the overall economies of small countries.

Question 12

Mae bakes 100 cinnamon rolls each day to sell at her café, and each day she sells out before breakfast is over. Many of her customers ask for, but don't get one. Her customers ask that she bake more cinnamon rolls each day. This is an example of a shortage.

Question 13

Although the United States comes close to being a capitalist economy, it is considered a mixed economy because there is some government intervention.

Question 14

Traditional economies are the most common economies found in the world today.

Question 15

The supply of services is not part of the study of economies because it does not involve the exchange of goods.

Question 16

Supply refers to how much of a product or service is available for purchase at a given time.

Question 17

The law of demand states that as the price for an item or service increases, so will the supply and that if the price is lower, the supply will also be less.

Question 18

Economics is the study of how goods and services are exchanged between individuals, businesses, and governments.

Question 19

Changes in the price of resources do not help determine supply because those resources can be replaced by substitute goods.

Question 20

The price of a product or service is based entirely on its actual value.

Question 21

Higher productivity results in higher costs and higher prices, resulting in lower income and lower profitability.

Question 22

John is an employee at a car manufacturer. Today he has come into work to find that production has stopped because the government has determined that the steel used in the cars will be better used in the manufacture of a new railway line. John doesn't mind, because although his wages are low, he gets paid whether there is any work for him to do or not. John MOST likely lives in a ________.

A)traditional economy
B)planned economy
C)market economy
D)mixed economy

Question 23

A recession is a decline in the gross national product (GNP)over two or more consecutive quarters of the year.

Question 24

________ is the country closest to having a planned economy, and ________ is the country closest to having a market economy.

A)Russia; United States
B)India; Japan
C)Russia; Japan
D)Cuba; United States

Question 25

A mixed economy is one in which ________.

A)both resources and means of production are extremely limited and generally confined to agricultural produce
B)the government or other centralized group determines and controls all resources and means of production
C)both individuals and government control resources and determine production methods
D)either individuals or private firms control resources and determine production methods

Question 26

The consumer price index (CPI)tracks changes in price at the wholesale level.

Question 27

The government can influence the economy through its fiscal policy by making changes in the money supply.

Question 28

A planned economy is one in which ________.

A)the government or other centralized group determines wages, sets prices, and distributes resources and products to the common group
B)individuals produce enough for personal survival with few resources or goods left over to trade or barter
C)individual income ultimately controls purchasing decisions
D)government distributes some goods and services through selected social programs, and individual income determines purchasing decisions for other goods and services

Question 29

Joseph took a class in macroeconomics, which means that he was studying the behavior of ________.

A)individual businesses
B)people with limited resources
C)the overall economy
D)corporate executives

Question 30

Cyclical unemployment measures those out of work during the off-season, such as those employed in agriculture and snow-, beach-, or holiday-related industries.

Question 31

Which of the following statements is NOT true of a market economy?

A)The pricing of goods is determined by what sellers wish to charge and buyers wish to pay.
B)The system encourages private ownership of resources.
C)The individual makes his or her own economic decisions.
D)The government may supply some goods or services

Question 32

A free market economy is one in which ________.

A)the government or other centralized group determines what to produce
B)individuals determine what to produce with some level of government involvement
C)a tightly knit social network barters and trades for goods at a market
D)individuals and private firms make decisions based on consumer needs and wants

Question 33

The Fed relies primarily on changes in the reserve requirement (the minimum amount of money banks must hold in reserve to cover deposits)to ease or tighten the money supply.

Question 34

The main function of economics is to study ________.

A)the exchange of goods and services between individuals, businesses, and nations
B)the exchange of cultural information in a diverse society
C)the stock exchange
D)the exchange of diplomatic relations between nations

Question 35

When the Federal Reserve Bank buys or sells U.S. securities, it changes the level of reserves in the banking system, which has an effect on interest rates.

Question 36

Change in prices is an important economic indicator because it is a measurement of consumer's purchasing power.

Question 37

Celeste is interested in studying the effects that natural disasters have on the value of goods and services in the affected areas. Her area of study should be ________.

A)marketing
B)microeconomics
C)macroeconomics
D)sociology

Question 38

The discount rate is the interest rate banks are charged when they borrow money from the Fed.

Question 39

Products manufactured in foreign countries by U.S. companies are included in the U.S.'s gross domestic product (GDP).

Question 40

Socialism is similar to communism in that ________.

A)the government provides all of the social services
B)the governments fail under economic stress
C)the government distributes goods and services
D)the government experiences shortages of goods and services

Question 41

The amount of a product or service that is available for purchase at any given time is called ________.

A)commodity
B)surplus
C)supply
D)demand

Question 42

The government allows ________ companies to operate as regulated monopolies.

A)airline
B)mining
C)utility
D)timber

Question 43

When the supply curve and the demand curve for a single product or service are shown on the same graph, the point at which the curves intersect identifies the ________.

A)total profit earned by the producers
B)market price of the good
C)quality of the good or service being purchased
D)amount of the surplus to be anticipated

Question 44

________ refers to how much of a product or service people want to buy at any given time.

A)Commodity
B)Surplus
C)Supply
D)Demand

Question 45

One example of complementary goods is ________.

A)cheese and crackers
B)cable television and Internet service
C)dog food and a dog bowl
D)a cell phone and wireless phone service

Question 46

What is the MOST likely scenario in a monopoly, where only one seller supplies a product or service?

A)Demand may be low.
B)Demand may vary.
C)Supply may be abundant.
D)Supply may be limited.

Question 47

Mae's Country Kitchen sells out of her cinnamon rolls every morning before 8:30 a.m., and her later customers ask her to make more. The next day, Mae makes an additional two dozen cinnamon rolls and raises the price of an individual cinnamon roll by 50¢. She sells all but one of them. Mae has found the ________ price of her cinnamon rolls.

A)market
B)supply
C)demand
D)determinant

Question 48

A demand curve illustrates ________.

A)the effects of price on quantity demanded
B)that as price increases, demand stays the same
C)the effects of supply on quantity demanded
D)that as demand decreases, the price increases

Question 49

What are substitute goods?

A)goods that can be used in place of others
B)goods that can be modified to replace others
C)goods that complement others
D)goods that can be used to repair others

Question 50

Pilar's daughter wants a Betty the Builder doll for Christmas. When Pilar gets to the toy store, they are sold out, so she goes to another store, where they tell her that they have a limited quantity, which will go on special sale at 6 a.m. the next morning and that she'd better get in line early. This is an example of which of the following determinants of demand?

A)complementary goods
B)population changes
C)substitute goods
D)consumer preference

Question 51

Prices become higher when a unique and highly desirable item is auctioned ________.

A)because the supply and demand are equal
B)because the demand is higher than the supply
C)because the supply is higher than the demand
D)because the supply and demand are kept unknown

Question 52

Which of the examples given below illustrates how changes in resource prices help determine supply?

A)An increase in the cost of oil reduces the numbers of trucks carrying goods to certain locations.
B)An increase in the number of trucks carrying goods to certain locations increases the number of goods available in those areas.
C)An anticipated decrease in the costs of truck maintenance may indicate a future decrease in the number of trucks carrying goods.
D)The establishment of high-speed railways with energy-efficient freight trains may render trucks obsolete.

Question 53

Taken together, iPod and iTunes are ________.

A)substitute goods
B)complementary goods
C)competitive goods
D)monopolistic goods

Question 54

According to the law of supply, the amount of a good or service supplied will increase as the price increases, and decrease as the price decreases. This direct relationship exists because ________.

A)supply is not dependent on the resources required to produce the product
B)supply is derived from a producer's desire to maximize profit
C)supply is affected by the number of suppliers
D)supply is not affected by the quantity of similar or substitute products

Question 55

A supply curve illustrates ________.

A)that as supply decreases, demand decreases
B)the effects of price on quantity supplied
C)the effects of price on quantity demanded
D)that as supply increases, the price stays the same

Question 56

Which transaction best describes bartering?

A)an exchange of goods for currency, in which the price of something is determined by establishing its value against an underlying commodity
B)a transfer of goods without an exchange of currency, in which the price of something is determined by the seller, and the buyer agrees to pay him at a later time
C)an exchange of goods without an exchange of currency, in which the price of something is determined by the needs and resources of each person involved in the exchange
D)an exchange of goods for currency, in which the price of something is determined by what buyers are willing to pay

Question 57

The ________ reviews mergers between large competitors to determine whether the combined firm would be a monopolistic corporation.

A)Federal Trade Commission
B)Internal Revenue Service
C)Federal Reserve Bank
D)Federal Court system

Question 58

What best determines the level of competition?

A)the amount of population change
B)the amount of substitutes for a certain product or service
C)the amount of change in the level of income
D)the amount of complementary products or service

Question 59

A(n)________ occurs when there is only one provider of a service or product and no substitutes for the service or product exist.

A)duopoly
B)monopoly
C)oligopoly
D)perfect competition

Question 60

The following is NOT an example of a factor that would determine supply of a product:

A)an increase in the construction of apartment buildings
B)A new robotic system for assembling automobiles has been adopted by a car manufacturer.
C)The price of lumber has decreased, making it more affordable for a developer to build new homes.
D)Higher unemployment would ultimate increase the price of home entertainment systems.

Question 61

A continuous decrease in the level of prices over time is called ________.

A)deflation
B)inflation
C)disinflation
D)deflection

Question 62

The average total of goods and services required to maintain a particular standard of living is called ________.

A)the cost of living
B)total household expenditure
C)the cost of fundamental human needs
D)the cost/price index

Question 63

ArmiLiza, a popular United States-based brand of handbags, has built a second factory in Mexico. The majority of the new factory's employees are Mexican citizens or Honduran immigrants. On which country's gross domestic product will the second factory's goods be counted?

A)the United States
B)Mexico
C)Honduras
D)All of the above

Question 64

In what way does monopolistic competition favor consumers?

A)A limited number of sellers differentiate their products or services by offering better quality items and/or greater incentives to purchase them.
B)A large number of sellers providing virtually identical products means that no single seller can set the price.
C)A large number of sellers and products increases supply of similar, but not identical, products and services, so to increase demand sellers are likely to reduce prices.
D)A single seller or provider ensures consistency of product quality and regulated pricing.

Question 65

Which of the following industries is LEAST likely to form an oligopoly?

A)airline
B)automobile
C)tobacco
D)consulting

Question 66

A rise in the general level of prices over time is called ________.

A)deflation
B)inflation
C)disinflation
D)deflection

Question 67

The gross national product (GNP)measures ________.

A)the overall market value of final goods and services produced in a country in a year
B)the overall gross profit a country earns in a year
C)a country's overall income resulting from production in a year
D)a country's overall amount a country is able to spend in a year

Question 68

The gross domestic product (GDP)measures ________.

A)the overall market value of final goods and services produced in a country in a given year
B)the overall gross profit a country earns in a given year
C)a country's overall income resulting from production in a year
D)a country's overall expenditures in a given year

Question 69

The producer price index tracks the average change in prices from the ________ perspective.

A)government's
B)buyer's
C)seller's
D)economist's

Question 70

What does the monthly consumer price index (CPI)measure?

A)the changes in prices of goods and services as determined by the sellers
B)the amount of products and services manufactured domestically
C)the number of new products purchased by consumers
D)the changes in prices of goods and services purchased by households

Question 71

A(n)________ occurs when there are many buyers and sellers of products that are virtually identical and any seller can easily enter and exit the market.

A)monopolistic competition
B)monopoly
C)oligopoly
D)perfect competition

Question 72

What is the purpose of the U.S. government's regulation of monopolies?

A)to ensure that there are as many opportunities for perfect competition as possible
B)to ensure that no single seller can drastically increase the price of a given product or service
C)to ensure that no one industry has control of the entire national economy
D)to ensure that local businesses are always the preferred provider of products consumers want

Question 73

What is an economic indicator?

A)a business expert who understands the economy and can advise managers how best to handle their companies
B)a formula used by accountants to determine their company's net profit
C)an aspect of the economy that can be measured in order to determine a country's overall economic health
D)a way of identifying whether a given market is an oligopoly or monopolistic competition

Question 74

Why does the U.S. Bureau of Labor Statistics evaluate the CPI's "market basket"?

A)to ensure that it reflects current trends in the production of goods and services
B)to ensure that it reflects current consumer spending habits
C)to ensure that it reflects current wholesale spending habits
D)to ensure that it reflects current consumer demand

Question 75

A(n)________ occurs when there are a few sellers in a given market and each seller has a fairly large share of that market.

A)monopolistic competition
B)monopoly
C)oligopoly
D)perfect competition

Question 76

________ is a decrease in the rate of inflation.

A)Deflation
B)Inflation
C)Disinflation
D)Deflection

Question 77

A(n)________ occurs when there are many buyers and sellers and little differentiation between products, but perceived differences between products among consumers.

A)monopolistic competition
B)monopoly
C)oligopoly
D)perfect competition

Question 78

The ________ is the most widely used indicator of economic growth in the world today.

A)gross national product
B)consumer price index
C)producer price index
D)gross domestic product

Question 79

The value of the CPI's "market basket" is determined by ________.

A)the combined prices of a specified set of goods and services, including taxes
B)the net profit earned by businesses selling a specified set of goods and services
C)the price of all goods and services, including taxes, purchased in a particular period
D)the cost of production for a specified set of goods and services in a given market

Question 80

Goods tracked by the PPI include ________ and ________.

A)education; medical care
B)recreation; apparel
C)transportation; communication
D)raw materials; finished goods sold to retailers