Deck 3: Economics

Question 1

Given the strength of the economy and a particularly strong performance of banks, the Canadian dollar's value has risen from $0.90 to $0.98 US dollars. What is the Canadian dollar appreciation value?

A)9)88%
B)8)89%
C)1)89%
D)1)98%

Answer 1

8)89%

Question 2

The following factors affect the value of currency EXCEPT:

A)demand flow
B)normal inflation
C)current supply
D)current events

Answer 2

normal inflation

Question 3

Although capital/labor ratios are higher in poor countries than in richer and more developed countries, it is less likely that capital investment flocks to these poor countries. The main reason behind the poor investment is:

A)low mechanisms of operations export
B)language barriers that threaten productivity
C)world interest rates that are likely to increase
D)geopolitical instability and less secure property rights

Answer 3

geopolitical instability and less secure property rights

Question 4

During the 1990s, many European countries joined forces by forming an economic and monetary union to compete against the large economy of the United States as well as the emerging economies of China and India. The following are advantages to the European Union EXCEPT:

A)removing conversion costs and exchange rate uncertainty
B)lower inflation and interest rates
C)political arguments and disharmony amongst member states
D)increased competition and efficiency of the market

Question 5

Governments provide Foreign Direct Investment (FDI) incentives to encourage the movement of capital into their countries. The following are examples of incentives EXCEPT:

A)lowered income and corporate taxes
B)special economic zones of trade
C)land and expatriation subsidies
D)higher and more restrictive tariffs

Question 6

The International Monetary Fund (IMF) has come under strong criticism in recent years because of its ____________ which is(are) accused of delaying the economic growth of poorer countries.

A)structural adjustment programs
B)bretton woods system
C)millennium development goals
D)microloan programs

Question 7

After the Second World War, many countries have instituted measures that would prevent the entry and exit of large capital into the country. What are these measures referred to?

A)adjustment programs
B)foreign investment limits
C)capital subsidies
D)capital controls

Question 8

To calculate the depreciation, the following equation is used. The resulting figure is always: Currency depreciation = old currency value - new currency value
New currency va

A)negative
B)positive
C)multiple of old value
D)dependent on interest rates

Question 9

Greece has a high rate of inflation compared to the United States. This means that the American dollar will buy:

A)less of Greek currency in the short term
B)more of Greek currency in the short term
C)same of Greek currency in the short term
D)less of the Greek currency as dictated by the real exchange rate

Question 10

During the 1990s and due to a civil war, Nigeria experienced capital flight especially by foreign investors. Capital flight is a significant and sudden reduction in the _____________ within a country.

A)insurance against fraud
B)loanable funds
C)supply assets
D)demand for assets

Question 11

Multinational Companies (MNCs) that have opened establishments and stores in smaller regions in the United States have led to individual-owned companies to struggle for business. The advantages of MNCs include the following EXCEPT:

A)greater R&D funding and capacity
B)possession of better technology
C)better access to local markets
D)accumulated global managerial experience

Question 12

The Netherlands is considered to have an open economy. In an open economy, government budget deficit results in the following EXCEPT:

A)increase in domestic investment
B)reduction of loanable funds supply
C)increase in interest rate
D)decrease in net foreign investment

Question 13

The United States enforces a strict trade policy on Asian oak imports. Manufacturers are only allowed a certain amount annually according to the size of their operations. What is this referred to:

A)export quota
B)import tariff
C)import quota
D)export tariff

Question 14

The expansion of Multinational Companies (MNCs) such as Wal-Mart in the global market has occurred for the following reasons EXCEPT:

A)secure, unchanging interest rates
B)low cost access to local markets
C)economies of scale
D)international difference in productivity

Question 15

Which countries are included in NAFTA?

A)United States; Canada
B)United States; Canada; Mexico
C)United States; Britain; France
D)All NATO countries except Germany

Question 16

While competitive advantage means that an entity produces a product at a lower opportunity cost, absolute advantage means that an entity:

A)produces less of a product than its competitors
B)produces more of a product than its competitors
C)produces a better quality product than its competitors
D)produces a longer lasting product than its competitors

Question 17

Globalization of business and trade have the following distinct advantages EXCEPT:

A)rapid spread of technological advancement
B)exacerbation of environmental degradation
C)reduction in production cost
D)encouragement of competition between countries

Question 18

Equilibrium exchange rate occurs when quantity supplied equals quantity demanded of:

A)a local currency at a specific local price
B)a local currency at a specific foreign price
C)a foreign currency at a specific local price
D)a foreign currency at a specific foreign price

Question 19

In the Ricardian model of international trade, the following is true:

A)countries engage in manufacturing only
B)countries specialize in raw materials
C)countries specialize in their best productions
D)countries never experience trade deficits

Question 20

Country A has only recently begun exporting Gold. According to the figure below, what has the move from domestic consumption alone to export meant for prices paid by domestic consumers?

A)not enough information is available
B)prices remained the same
C)prices decreased
D)prices increased

Question 21

Benin is an African country with a small open economy. An increase in Benin's trade deficit is more likely due to the following EXCEPT:

A)an increase in government regulations
B)an increase in world interest rates
C)an increase in government spending
D)an increase in exports in comparison to imports

Question 22

Germany exports wheat products to countries all over the world. Germans will wish to purchase German wheat when the domestic price matches the lower ____________.

A)world price
B)interest rate
C)exchange price
D)loanable fund

Question 23

The real exchange rate of currency is a determinant of how much a country exports and imports. According to the equation below, what is the effect of an increase in foreign prices on the real exchange rate? Real Exchange Rate = Nominal Exchange Rate X Domestic Price
Foreign Price

A)decreases it
B)increases it
C)no change
D)dependent on the GDP

Question 24

Economists postulate that there is a relationship between inflation and unemployment within societies. They state that when the real GDP of a country is high, actual unemployment rate falls below its natural level. What effect does this have on inflation?

A)it accelerates inflation
B)it decelerates inflation
C)it has an insignificant effect on inflation
D)it depends on the GDP

Question 25

In an open economy, the factors that affect net exports include the following EXCEPT:

A)consumer tastes for domestic and foreign goods
B)exchange rate to purchase foreign goods
C)domestic and international prices
D)tariffs on imported goods

Question 26

Net Capital Outflow (NCO) is the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners. NCO is affected by the following factors EXCEPT:

A)real interest rates paid on foreign assets
B)real interest rates paid on domestic assets
C)perceived political and security risks from foreign holdings
D)GDP of foreign countries where assets are held

Question 27

The Big Mac Index as measure of price comparison across countries is a type of:

A)purchasing production parity
B)purchasing power parity
C)marginal propensity to consume
D)marginal propensity to produce

Question 28

Governments engage in ___________ to increase aggregate demand during a recession and to invigorate the economy.

A)growth stabilizers
B)automatic stabilizers
C)aggregate stabilizers
D)supply stabilizers

Question 29

The following are negative impacts of rapid economic growth EXCEPT:

A)greater income disparities
B)more environmental degradation
C)higher quality of life
D)resource depletion

Question 30

Which economies are much more likely to encourage free trade despite their imposition of protectionist regulations in some sectors of their economies?

A)large, powerful countries
B)emerging countries with limited development
C)small, struggling economies
D)countries in deep recessions

Question 31

According to the Schumpeterian model, developing countries can be trapped in low levels of GDP because their institutions do not take full advantage of ____________ developed from more advanced countries.

A)tariffs
B)laws
C)machines
D)innovation

Question 32

The Solow-Swan growth model uses a number of equations to calculate economic growth factors in the following EXCEPT:

A)output
B)interest rates
C)labor-time
D)investment

Question 33

According to the Solow-Swan model of economic growth, greater investment in physical capital raises the standards of living temporarily because of:

A)crowding out effects
B)demand pull inflation
C)diminishing returns
D)loanable funds

Question 34

According to the endogenous growth theory, higher investment increases the economic output per worker permanently. One such investment is:

A)longer years of training and education
B)more government building and warehouses
C)greater industry subsidies
D)fewer import quotas

Question 35

The following figure illustrates the investment in Research & Development (R&D) as a percent of GDP over a ten year period. Which country spent the least amount of money?

A)UK
B)Germany
C)USA
D)France

Question 36

Economists state that government purchases have a multiplier effect on aggregate demand. In other words, every dollar spent by the government leads to an increase in aggregate demand for goods and services by a dollar or more. According to the multiplier equation below, what does MPC stand for? Multiplier = 1/(1 - MPC)

A)marginal propensity to consume
B)medium proportion to consumption
C)marginal proportion to consumption
D)medium propensity to consume

Question 37

If the United States' government spends $30 billion, what is the amount of demand for goods and services if the MPC is ¾?

A)$30 billion
B)$90 billion
C)$120 billion
D)$180 billion

Question 38

Among the indicators of educational attainment as a measure of human capital are the following EXCEPT:

A)elementary & secondary school enrollment
B)ratio of scientists/skilled technologists to overall population
C)average years of schooling
D)fluctuating rates of legal immigration

Question 39

Productivity refers to the quantity of goods and services that a worker can produce from each hour of work. The following factors affect productivity EXCEPT:

A)physical capital
B)natural resources
C)manufacturing base
D)technological knowledge

Question 40

The United States has placed an import quota on corn and oats. What are the effects of import quotas on the prices charged by domestic producers of goods?

A)no effects on domestic
B)make price equal to world price
C)lower price below world price
D)raise price above world price

Question 41

Which of the following industries spend the greatest proportion of their costs on Research & Development (R&D) activities?

A)education
B)construction
C)pharmaceutical
D)automobile

Question 42

The aggregate demand curve slopes downward for the following reasons EXCEPT:

A)wealth
B)inflation
C)interest rate
D)exchange rate

Question 43

Developing countries such as Ghana lose nearly a third of their graduating medical doctors to more developed countries such as England and Australia. This loss of human capital is also referred to as:

A)education drain
B)brain drain
C)doctor drain
D)human drain

Question 44

Human capital as an investment is seminal to the economic growth of a country. The following are characteristics of human capital EXCEPT:

A)it is productive and produced
B)it is inversely proportional to education
C)it earns returns on the investment
D)it is subject to depreciation

Question 45

To illustrate an economic model such as the one predicting real GDPs, the following are used EXCEPT:

A)graphs
B)tables
C)equations
D)case studies

Question 46

In a competitive market, the prices of goods and services are determined by _______ from consumers and _______ from producers.

A)demand; supply
B)supply; opportunity
C)supply; demand
D)demand; opportunity

Question 47

A country's national economy has shown an 8% growth over the past 4 years. Before that, the economy moved from recession to stagnation over a period of 10 years. What is this economic fluctuation referred to?

A)business cycle
B)economic forecast
C)growth cycle
D)stagnation cycle

Question 48

In a legislative meeting designed to investigate new standard of living changes, a number of politicians are contemplating whether there should be an increase in minimum wages or a provision of small business tax cuts. This is an example of:

A)trickle down economics
B)positive economics
C)normative economics
D)negative economics

Question 49

In 2007, the nominal Gross Domestic Product (GDP) of a small Asian country was 5% and the real GDP growth was 2%. What was the rate of inflation for this country?

A)-3%
B)10%
C)3%
D)7%

Question 50

What are the two types of return effects of human capital?

A)private; external
B)private; internal
C)public; external
D)public; internal

Question 51

A Production Possibilities Curve is concave to the origin due to:

A)overconsumption by consumers
B)inefficient processes
C)decreased raw materials availability
D)increased opportunity costs

Question 52

A software company manager assigns new roles within an Enterprise Resource Planning project according to recent training and acquired skills. This type of task assignment is referred to as:

A)generalization
B)specialization
C)capitalism
D)opportunity

Question 53

Governments invest in the development of new research and technologies in order to gain scientific, economic, and military advantages globally. The following are investments in research and development EXCEPT:

A)R&D subsidies
B)patent system
C)public provision
D)import quotas

Question 54

Welfare economics is the field of study that examines how:

A)the government develops monetary policies
B)poor people are given money for food and rent
C)banks are offered bailout in the case of mortgage defaults
D)the allocation of resources impacts economic well-being

Question 55

The following are components of Porter's Five Forces model EXCEPT:

A)bargaining power of suppliers
B)bargaining power of buyers
C)bargaining power of banks
D)competitive rivalry

Question 56

The City of Newark, New Jersey has instituted strict rent control since the 1960s in a number of neighborhoods. Rent control is an example of:

A)minimum pricing
B)price ceilings
C)collective bargaining
D)demand inelasticity

Question 57

In Rhode Island, the minimum hourly wage that can be paid to someone above the age of 14 is $6.50. Minimum wage is an example of:

A)government hegemony
B)fiscal responsibility
C)social engineering
D)price floor

Question 58

One of the consequences of unanticipated inflation is:

A)distribution of income from owners to investors
B)distribution of income from employees to employers
C)job losses
D)job gains

Question 59

Over the past 25 years, the manufacturing base in the United States has begun to erode due to outsourcing to countries with cheaper production. Skilled workers in automobile and textile manufacturing have found it difficult to find other work. What type of unemployment is this?

A)manufacturing
B)outsourcing
C)structural
D)dynamic

Question 60

In this current recession, there are many cities with unemployment rates as high as 25% due to the loss of jobs across all sectors and industries. What is this type of unemployment called?

A)sector deficient
B)wage deficient
C)supply deficient
D)demand deficient

Question 61

Since automating their client registration processes, many telecommunication companies have reduced their customer service and management staff by up to 50%. What is the resultant unemployment called?

A)technological
B)automation
C)telecommunication
D)information

Question 62

Rogers Communication has over a dozen products in a various stages of development in any given time. For these products, nearly a half will have patents before the testing stage. These patents are considered:

A)intangible debts
B)tangible debts
C)intangible assets
D)tangible assets

Question 63

Companies conduct assessment methods to estimate their market value. The following are assessment methods EXCEPT:

A)income-based
B)asset-based
C)market-based
D)inflation-based

Question 64

A tariff is a tax on raw materials and manufactured goods that are produced ___________ and sold __________.

A)overseas; overseas
B)domestically; overseas
C)overseas; domestically
D)domestically; domestically

Question 65

What is the effect of tariffs on the import of goods?

A)reduces quantity of imports
B)increases quantity of imports from poor countries
C)increases quantity of imports from rich countries
D)has no effect on the quantity of imports

Question 66

Which of the following is considered physical capital that contributes to the economic growth of a country?

A)transportation infrastructure
B)federal reserve bank
C)currency exchange centers
D)average length of adult population schooling

Question 67

Jason and his graduating college class of 2009 spent, on average, 4.5 months in finding appropriate jobs that match their individual skills and interests. During this average time of searching, what is this type of unemployment referred to:

A)dynamic
B)frictional
C)static
D)natural

Question 68

The theory of efficiency wages states that workers and companies perform more efficiently when wages are ____________.

A)inflation-adjusted
B)above equilibrium
C)government legislated
D)union-supported

Question 69

Which economist expressed a statistical relationship between the rate of growth of money wages and unemployment?

A)J)M. Keynes
B)A) W. Phillips
C)M) Friedman
D)J) A. Hobson

Question 70

At any given time, there is a steady number unemployment figure which will be resistant to economic growth and government interventionist policies. What is this type of unemployment called?

A)natural rate of unemployment
B)consistent rate of unemployment
C)dynamic rate of unemployment
D)static rate of unemployment

Question 71

The luxury clothing market is known to be especially vulnerable to economic recessions as people curtail spending on expensive non-essentials. Some luxury clothing retails resort to selling these same goods at outlet markets in an effort to lure customers who are unwilling or unable to pay. This is an example of:

A)first degree price discrimination
B)price stickiness
C)second degree price discrimination
D)demand-pull inflation

Question 72

The following are conditions necessary for companies to institute price discrimination EXCEPT:

A)ability to set one's prices
B)lack of competition
C)separate markets
D)demand elasticity

Question 73

In Keynesian economics, 'liquidity trap' refers to instances when demand for money becomes inelastic which means that further introduction of money into the economy will not lower interest rates. What is the shape of a demand curve during a liquidity trap?

A)horizontal
B)vertical
C)concave
D)convex

Question 74

The following includes components of the money supply EXCEPT:

A)coin
B)assets
C)currency
D)demand deposits

Question 75

The medium run aggregate supply (MRAS) is affected by labor, capital availability, technological capability, and wage rate.

Question 76

In the circular flow of money through an economy, the following is considered a leakage:

A)consumer expenditure
B)bank interest
C)consumer saving
D)wages paid to workers

Question 77

Prices for goods and services depend largely on the product's lifecycle. Which is the correct stage progression in a product's lifecycle?

A)launch - maturity - decline
B)growth - proliferation - maturity - decline
C)growth - maturity - decline
D)launch - growth - maturity - decline

Question 78

According to economists, goods and services prices reach an equilibrium in reaction to consumer demands and producer supplies. The following are factors that determine price fluctuations EXCEPT:

A)product lifecycle
B)wage stickiness
C)competition
D)cost & demand information

Question 79

Sweden is considered to be a country with a low inflation rate while the Congo has a high inflation rate. According to the quantity theory of money, describe the nature of the positive relationship between inflation and money supply growth for Sweden and the Congo, respectively?

A)strong; strong
B)strong; weak
C)weak; strong
D)weak; weak

Question 80

Johnson & Johnson managers have shifted production from an Aloe Vera based hand cream to an Oat based one. The cost of the shift has increased by 12%. What is this phenomenon referred to:

A)law of increasing costs
B)law of decreasing sales
C)product diversification
D)product integration