Deck 1: Finance and Economic Concepts

Question 1

First National Bank is the central bank of the United States.

Answer 1

False

Question 2

Which of the following can be used to finance a small business?

A) using one's own savings
B) borrowing from other individuals
C) borrowing money from financial institutions
D) using cash generated from current sales
E) all of the above

Answer 2

all of the above

Question 3

A person making less than the cutoff rate for Social Security pays 6.2% of his income in Social Security taxes.

Answer 3

True

Question 4

In order to increase the money supply, the Fed will sell government securities.

Question 5

Wheat, soybeans, oil, and gold are commodities.

Question 6

The United States operates with a free enterprise system.

Question 7

The stocks and bonds issued by a corporation are the financial capital resources of the corporation.

Question 8

Social Security tax is regressive to the person making less than the cutoff rate.

Question 9

A dividend is an after tax payment that must be made by all stock companies to the stockholders each year.

Question 10

Finance is any transaction where money is exchanged for goods and services.

Question 11

A person making $90,000 or less pays 6.2% of his salary in Social Security taxes.

Question 12

The stocks and bonds issued by a corporation are the economic capital resources of the corporation.

Question 13

Finance is any transaction where money is exchanged for money or a money -like instrument.

Question 14

As the price of an item increases, the quantity of the item provided to the marketplace will increase, ceteris paribus.

Question 15

The mental and physical talents of human beings are entrepreneurial resources.

Question 16

A market economy is one where all goods and services are exchanged freely.

Question 17

An athlete making $7,000,000 pays 6.2% on the full $7,000,000 in Social Security taxes.

Question 18

In market transactions, when one party wins, the other usually feels as though he or she lost.

Question 19

The Federal Reserve is the central bank of the United States.

Question 20

The law of demand states that as the price of an item falls, the quantity demanded will decrease, ceteris paribus.

Question 21

Which of the following is NOT a primary participant in the financial marketplace?

A) businesses
B) military units
C) governments
D) individual households

Question 22

Human beings have wants and desires for goods and services. They also have financial means with which to pay for them.

A) unlimited; limited
B) limited; unlimited
C) limited; limited
D) unlimited; unlimited

Question 23

There are several markets in the United States. The market where television sets are exchanged is the

A) retail market.
B) real estate market.
C) financial market
D) commodity market.
E) none of the above.

Question 24

Which of the following is an example of financial capital?

A) a desk in a classroom
B) a share of stock issued by IBM
C) a delivery truck used by Federal Express
D) an electric plant used by a local utility to generate electricity
E) all of the above

Question 25

The primary savers of funds in the United States are

A) governments.
B) households.
C) businesses.
D) all of the above.
E) none of the above.

Question 26

There are several markets in the United States. The market where final goods and services are exchanged is the

A) retail market.
B) commodity market.
C) financial market.
D) real estate market.
E) none of the above.

Question 27

The classroom on a college campus is an example of a(n)

A) human resource.
B) capital resource.
C) entrepreneurial resource.
D) natural resource.

Question 28

Which of the following is NOT an example of economic capital?

A) an electric plant used by a local utility to generate electricity
B) a desk in a classroom
C) a share of stock issued by IBM
D) a delivery truck used by Federal Express
E) all of the above

Question 29

Which of the following is NOT a viable source of financing for the small business?

A) borrowing from other individuals
B) using one's own savings
C) using cash generated from current sales
D) borrowing money from financial institutions
E) issuing bonds to the general public

Question 30

A local computer manufacturer hires an additional worker and pays $10.00 per hour for an 8 -hour day. The worker is capable of assembling 3 computers an hour. The firm sells each computer for $1,500. What is the marginal physical product of this worker?

A) $10.00 per hour
B) 3 computers per hour
C) $1,500 per unit produced
D) $80.00 per day

Question 31

The highest value surrendered when a decision is made is

A) economic cost.
B) marginal cost.
C) opportunity cost.
D) absolute cost.
E) capital cost.

Question 32

When Bill Gates developed MS -DOS and founded Microsoft to market this product, he was using a(n)

A) human resource.
B) natural resource.
C) capital resource.
D) entrepreneurial resource.

Question 33

There are several markets in the United States. The market where corn, wheat, soybeans, and oil are exchanged is the

A) real estate market.
B) retail market.
C) financial market.
D) commodity market.
E) none of the above.

Question 34

There are several markets in the United States. The market where property is exchanged is the

A) financial market.
B) retail market.
C) commodity market.
D) real estate market.
E) none of the above.

Question 35

An organized effort where goods and services are freely exchanged is known as a

A) government.
B) market.
C) religion.
D) business.

Question 36

Which of the following is NOT an example of economic capital?

A) a desk in a classroom
B) a delivery truck used by Federal Express
C) an electric plant used by a local utility to generate electricity
D) a bond issued by IBM
E) all of the above

Question 37

The users of funds in the United States are

A) governments.
B) households.
C) businesses.
D) all of the above.
E) none of the above.

Question 38

There are several markets in the United States. The market where stocks, bonds, and money are exchanged is the

A) financial market.
B) retail market.
C) commodity market.
D) real estate market.
E) none of the above.

Question 39

A tree in a forest is an example of a(n)

A) natural resource.
B) human resource.
C) entrepreneurial resource.
D) capital resource.

Question 40

When a college hires a professor, they are employing a(n)

A) natural resource.
B) entrepreneurial resource.
C) human resource.
D) capital resource.

Question 41

Table 1 -1. Supply and Demand for Personal Computers

Refer to Table 1 -1. At a market price of $1,600, there will be

A) a shortage of 2,000 computers.
B) neither a surplus nor a shortage of computers as the market is in equilibrium at this price.
C) a surplus or a shortage of 2,000 computers.
D) a surplus of 2,000 computers.

Question 42

Which of the following is included in Gross Income?

A) profit made by an entrepreneur
B) interest earned on savings accounts
C) wages and tips
D) rental income on property
E) all of the above

Question 43

John Gates made $25,000 last year and paid $2,500 in taxes. What percentage of his income did John pay in taxes?

A) 1%
B) 9%
C) 10%
D) 90%
E) impossible to calculate with the information provided

Question 44

John Gates made $25,000 last year and paid $2,500 in taxes on this income. Jane Smith made $30,000 last year and paid $2,700 in taxes on this income. What type of tax is the government using?

A) proportional taxes
B) progressive taxes
C) proposed taxes
D) regressive taxes
E) impossible to calculate with the information provided

Question 45

Jane just graduated from college with a Bachelor of Science Degree in Computer Information systems. She received the following job offers. Jones and Associates at a starting salary of $30,000. Smith Brothers at a starting salary of $33,000. Joan Cannery Consulting at a starting salary of $35,000. Consultants -R -We at a starting salary of $32,000. Andrews Computer Vendors at a starting salary of $36,000. If she takes the job with Jones and Associates, her opportunity cost is

A) $30,000.
B) $32,000.
C) $33,000.
D) $35,000.
E) $36,000.

Question 46

Table 1 -1. Supply and Demand for Personal Computers

Refer to Table 1 -1. At a market price of $1,800, there will be

A) a surplus or a shortage of 2,000 computers.
B) neither a surplus nor a shortage of computers as the market is in equilibrium at this price.
C) a shortage of 2,000 computers.
D) a surplus of 2,000 computers.

Question 47

Table 1 -1. Supply and Demand for Personal Computers

Refer to Table 1 -1. At a market price of $1,700, there will be

A) a surplus or a shortage of 2,000 computers.
B) a shortage of 2,000 computers.
C) a surplus of 2,000 computers.
D) neither a surplus nor a shortage of computers as the market is in equilibrium at this price.

Question 48

Which of the following is an example of a regressive tax?

A) income tax
B) property tax
C) sales tax
D) flat tax
E) All taxes are regressive taxes.

Question 49

John Gates made $25,000 last year and paid $2,500 in taxes on this income. Jane Smith made $30,000 last year and paid $3,000 in taxes on this income. What type of tax is the government using?

A) proportional taxes
B) proposed taxes
C) regressive taxes
D) progressive taxes
E) impossible to calculate with the information provided

Question 50

When the supply of money saved exceeds the demand for money, then banks will

A) increase interest rates to attract more savers.
B) lower interest rates to discourage savers.
C) put money on sale by making loans more attractive.
D) both A and B above.
E) both B and C above.

Question 51

Jane just graduated from college with a Bachelor of Science Degree in Computer Information Systems. She received the following job offers. Jones and Associates at a starting salary of $30,000. Smith Brothers at a starting salary of $33,000. Joan Cannery Consulting at a starting salary of $35,000. Consultants -R -We at a starting salary of $32,000. Andrews Computer Vendors at a starting salary of $36,000. If she takes the job with Andrews Computer Vendors, her opportunity cost is

A) $30,000.
B) $32,000.
C) $33,000.
D) $35,000.
E) nothing because she took the job with the highest salary.

Question 52

The supply of money saved includes all of the following EXCEPT

A) demand deposits in banks.
B) savings accounts in banks.
C) money market mutual funds in brokerage houses.
D) stocks held for investors by brokerage houses.
E) all of the above.

Question 53

Jane Smith made $30,000 last year and paid $8,400 in taxes. What percentage of her income did Jane pay in taxes?

A) 2.8%
B) 3.57%
C) 7.2%
D) 28%
E) 72%

Question 54

Which of the following is NOT a form of taxes that governments use?

A) regressive taxes
B) proposed taxes
C) progressive taxes
D) proportional taxes
E) all of the above

Question 55

A union has negotiated a contract that states the following: work up to 40 hours per week will be paid at a base rate of $10 per hour. All work in excess of 40 hours, but less than 48 hours will be paid at a rate equal to 1 1 times the base rate. Any work in excess of 48 hours will be paid at double 2
Time. This pay scale agrees with

A) the law of supply.
B) ceteris paribus.
C) the law of demand.
D) the law of supply and demand.
E) can't tell with the information provided.

Question 56

The cost associated with hiring one more unit of labor is

A) absolute cost.
B) economic cost.
C) opportunity cost.
D) capital cost.
E) marginal cost.

Question 57

The price paid for money is

A) the principal and interest rate charged by the lender.
B) the amount borrowed from the lender.
C) the interest rate charged by the lender.
D) the actual payment made by the borrower to the lender.
E) There is no price paid for money as it is not for sale.

Question 58

John's friend just gave him a pair of concert tickets to see his favorite rock group perform this weekend. Each ticket sells for $25. John's boss asked him to work overtime the same weekend and at the same time as the concert. John currently makes $10.00 an hour and his overtime pay for the four hours his boss asked him to work is double the hourly rate. If John decides to go to the concert, his opportunity cost is

A) $80.00 in lost pay.
B) $40.00 in lost pay.
C) $50.00 because that is what his friend paid for the tickets.
D) $50.00 for the two tickets.
E) nothing because the concert tickets were free for John.

Question 59

John Gates made $25,000 last year and paid $1,500 in taxes on this income. Jane Smith made $30,000 last year and paid $3,000 in taxes on this income. What type of tax is the government using?

A) proposed taxes
B) regressive taxes
C) proportional taxes
D) progressive taxes
E) impossible to calculate with the information provided

Question 60

Albert Jones went to his local department store to purchase a pair of Levi's. He thought that the style of Levi's that he wanted would sell for about $30 a pair. When he got to the store, he saw a sign which said, Levi's, all styles, $18 a pair. Albert bought three pairs of Levi's. The behavior of Albert is consistent with

A) the law of supply.
B) the law of demand.
C) ceteris paribus.
D) the law of supply and demand.
E) can't tell with the information provided.

Question 61

If the Fed sells $10,000 in government securities, it will have the effect of

A) decreasing the money supply.
B) changing the money supply, but the direction is not clear.
C) having no effect on the money supply.
D) increasing the money supply.
E) unable to tell with the information provided.

Question 62

Jerry Jones has a Visa card with the Very Big Interstate Bank. He notices that the interest rate charged on this card is 19.5% per annum. Jerry has been employed by the same company for 15 years and has excellent credit. The company has a credit union that will issue Jerry a Visa card with an interest rate of 14.6%. The credit union offered Jerry this reduced rate because

A) the systematic risk is lower for credit union members than it is for the general population.
B) the unsystematic risk is lower for credit union members than it is for the general population.
C) the credit union manager likes Jerry.
D) all Visa credit cards charge the same rate.

Question 63

You read an article in the paper that stated the Federal Reserve Bank sold $500 million of government securities on Tuesday of last week. When the Fed did this they were controlling the money supply by using which of the following tools?

A) open market operations
B) risk
C) reserve requirements ratio
D) discount rate
E) unable to tell with the information provided

Question 64

When the Federal Reserve notifies banks that they must hold fifteen cents for every dollar that is deposited, it is controlling the money supply by using which of the following tools?

A) reserve requirements ratio
B) risk
C) discount rate
D) open market operations
E) unable to tell with the information provided

Question 65

The probability that the desired return on an investment will be different from the desired return is defined as

A) risk.
B) discount rate.
C) reserve requirements ratio.
D) open market operations.
E) unable to tell with the information provided.

Question 66

If the Fed purchases $10,000 in government securities it will have the effect of

A) having no effect on the money supply.
B) decreasing the money supply.
C) changing the money supply, but the direction is not clear.
D) increasing the money supply.
E) unable to tell with the information provided.