Deck 2: Economics

Question 1

Euroequity is a stock that is:

A)traded in Europe
B)issued in Europe
C)traded outside its country of origin
D)never denominated in U.S. dollars

Answer 1

traded outside its country of origin

Question 2

The Franklin/Templeton mutual funds company recently introduced a new mutual fund that invests in companies in four rapidly developing countries. The fund, called the BRIC fund, refers to which set of countries?

A)Belarus, Rwanda, Ireland, Czech Republic
B)Belgium, Romania, Indonesia, Chile
C)Bolivia, Romania, Italy, Colombia
D)Brazil, Russia, India, China

Answer 2

Brazil, Russia, India, China

Question 3

Assume that the federal required reserve ratio is 20 percent and the discount rate is 5 percent. If 1000 is deposited into a bank, what will be the total increase to the money supply?

A)4000
B)5000
C)6667
D)20,000

Answer 3

5000

Question 4

The government of Country ABC has decided to decrease the money supply after initially achieving equilibrium in the real and financial sectors. How will this decision affect the IS-LM model?

A)The IS curve will shift to the left
B)The IS curve will shift to the right
C)The LM curve will shift to the left
D)The LM curve will shift to the right

Question 5

If an official of a host government visited an American embassy and requested assistance from the U.S. in setting up an environmental monitoring and measuring system, the embassy officer would

A)contact the Department of State to transmit the request to the United Nations Environment Programme for assistance
B)contact the U.S. Environmental Protection Agency and request a mission to aid the country in establishing an environmental monitoring and measuring system
C)explain the foreign policy role of the Department of State and suggest that the country send its ambassador to the U.S. to the U.S. Environmental Protection Agenc
D)contact the Department of State, the U.S. Environmental Protection Agency, the U.S. Agency for International Development, and the Trade Development Agency to determine what assistance might be provided

Question 6

Which of the following international or regional certification and eco-labeling schemes have the highest level of participation by environmental nongovernmental organizations (NGOs) in creating and enforcing standards?

A)Forest Stewardship Council (FSC)
B)International Organization for Standardization (ISO) 14001
C)Program for the Endorsement of Forest Certification (PEFC)
D)Sustainable Forestry Initiative (SFI)

Question 7

Total tax revenues have historically made up what percent of the U.S. economy?

A)10
B)14
C)18
D)22

Question 8

Transferable discharge permits allow polluters to buy and sell the right to pollute. For which type of environmental pollution are these permits most often used?

A)Air pollution from automobiles
B)Air pollution from power-generating companies
C)Water pollution from leaking oil tankers
D)Water pollution from agricultural fertilizer runoff

Question 9

Foreign Service Officers gather information and report on anti-dumping cases in support of which of the following U.S. government agencies that has primary responsibility for the determination of such cases?

A)The International Trade Commission
B)The Treasury Department
C)The Department of Commerce
D)The U.S. Trade Representative

Question 10

An inventory philosophy developed in Japan that employs a trigger that signals when products are needed and should then be ordered is called

A)enterprise resource planning (ERP)
B)material requirements planning (MRP)
C)just-in-time (JIT)
D)economic order quantity (EOQ)

Question 11

Which of the following special provisions are contained in all World Trade Organization (WTO) agreements for developing or least-developed member countries?

A)Measures to limit their trading opportunities
B)Provisions requiring all WTO members to safeguard their trade interests
C)Shorter time periods to implement agreements and commitments
D)Support to help them opt out of technical standards

Question 12

A host country manufacturer seeks trade preference status with the U.S.; however, the Foreign Service Officer (FSO) is aware that the country is a known exploiter of child labor. The FSO should explain that pursuant to the Trade and Development Act:

A)under no circumstances will the U.S. do business with the country
B)the Generalized System of Preference now links beneficiary countries' commitment to eliminate the worst forms of child labor to receipt of trade benefits
C)the country cannot obtain preference status until it proves that child labor has been eliminated by its political jurisdiction
D)only certain types of child labor are acceptable in the countries to which the U.S. grants trade preference status

Question 13

The European Union (EU) promotes free trade among its member states. Over the years, EU membership has grown to 25 countries with more European countries seeking membership. Which of the following statements would be most appropriate for a U.S. official to make at a trade summit organized between the U.S and the EU in 2006?

A)"The U.S. and the EU share a longstanding commitment to free and open markets, and the U.S. is looking forward to continuing to work with the EU in further promoting free trade and economic integration across the Atlantic region."
B)"Both the U.S. and the EU have supported free trade expansions in the past and it is important that a larger EU not jeopardize free trade talks under the World Trade Organization."
C)"The EU must recognize that the U.S. has many vital economic interests in Europe and that the U.S. will always act to protect those interests."
D)"The U.S. believes that an expanding EU poses an economic danger to non-EU countries and the U.S. therefore wishes to see no further expansion of the common market within the EU."

Question 14

Which of the following characteristics would LEAST apply to investment recovery inventory?

A)Unpredictable generation
B)Unpredictable demand
C)Unknown condition
D)Simplified pricing

Question 15

When negotiating an inventory resupply arrangement for gasoline, which of the following issues would typically be addressed last?

A)Price
B)Consequences of running out
C)Stability of Supply
D)Potential fluctuation of consumption rates

Question 16

Which of the following reasons for holding any inventory is most important?

A)To deal with uncertainty in supply and demand
B)To improve the organization's balance sheet
C)To use up excess budget funds at the close of a fiscal year
D)To better your position with suppliers by buying more from them

Question 17

The most commonly included factor used to calculate the cost of carrying inventory is

A)personnel costs
B)cost of the product
C)order processing cost
D)interest rate of money

Question 18

The Byrd Amendment was found in violation of international trade law by a World Trade Organization (WTO) dispute settlement panel because the amendment provided that:

A)safeguards to protect U.S. steel from imports could be extended beyond the WTO limit if certain countries granted extraordinary subsidies to their steel industries
B)he U.S. could grant subsidies to its steel industry in excess of WTO limits to meet the competition from state-owned foreign steel industries that were not run for profit
C)dumping margins would be calculated by the U.S. Department of Commerce and would not be subject to WTO review
D)dumping duties collected on U.S. imports would be distributed to the injured companies

Question 19

Which of the following costs is included in the carrying cost of supplies inventory?

A)Purchase price
B)Cost of money
C)Labor costs
D)Transportation costs

Question 20

A system in which goods are replaced as they are used by means of a card (or other signaling device) that travels with the goods and is sent back to the supplier when the goods are consumed as automatic authorization to replace what was used is known as

A)Kanban
B)Supplier-Managed Inventory
C)A Purchasing Card
D)Material Requirements Planning

Question 21

The Cuban Liberty and Democratic Solidarity (Libertad) Act (Helms-Burton) provides for sanctions against foreign companies involved in what sorts of transactions in Cuba?

A)Any commercial trade
B)Trade involving food and medicine
C)Any direct investment
D)Investment in nationalized property

Question 22

The Foreign Corrupt Practices Act prohibits corrupt payments by

A)U)S. companies overseas
B)foreign lobbyists in the U.S.
C)foreign companies operating in the U.S.
D)U)S. companies operating in Western Hemisphere countries

Question 23

Trade Promotion Authority granted to the President by Congress gives the executive branch the authority to negotiate:

A)free trade agreements provided that Congress approves individual provisions of each agreement
B)a new trade round with World Trade Organization members provided that Congress approves the list of countries that benefit from U.S. concessions
C)trade agreements provided that Congress approves each agreement as a whole
D)agreements that promote U.S. exports, facilitate U.S. foreign investment, and protect U.S. intellectual property rights overseas

Question 24

Under the Generalized System of Preferences of the U.S., the U.S. establishes an exception to the Most Favored Nation principle of international trade law by giving special access to the U.S. market to:

A)countries with which the U.S. has signed bilateral trade agreements
B)developing countries for certain categories of products
C)countries in the Western Hemisphere that respect human rights
D)a list of countries that produce low-cost textiles and apparel

Question 25

From the point of view of international trade law, the Helms-Burton law for dealing with Cuba is legally questionable because it:

A)calls for secondary boycotts
B)ties trade sanctions to subjective evaluation of human rights
C)targets only certain sectors of the Cuban economy
D)requires Cuba to recognize international agreed-upon labor rights in order to remove the boycott

Question 26

In regard to the Most Favored Nation (MFN) principle that is a key provision of the General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO) trade law, what do GATT and the WTO say regarding the North American Free Trade Agreement (NAFTA), a regional trading agreement?

A)NAFTA's terms are fully consistent with MFN
B)NAFTA is permitted as part of a deal among certain countries allowing other free trade agreements
C)NAFTA is allowed as an exception since it does not raise barriers against non-members
D)NAFTA provides MFN to non-member countries

Question 27

The U.S. law that extended the longtime U.S. embargo against Cuba is the

A)Helms-Burton Act
B)McCarran Act
C)National Security Act
D)Voorhis Act

Question 28

Economist and philosopher Adam Smith's expression, "the invisible hand" refers to a theory or belief that:

A)the greed of capitalists seeking wealth actually helps the poor in society
B)the world economy is governed by a series of natural laws
C)outside forces beyond human control influence the economy
D)governments should not impose economic regulation

Question 29

The Leahy Amendment prohibits foreign assistance to which recipients?

A)Foreign governments that provide aid to Cuba
B)Governments that nationalize U.S. property without compensation
C)Security forces guilty of gross human rights violations
D)Governments that refuse to exempt U.S. personnel from the International Criminal Court

Question 30

Under the World Trade Organization and the laws of the U.S. and other countries, countervailing duties may be applied as a trade remedy when foreign:

A)industries are subsidized by their governments to increase their productivity and competitiveness
B)governments artificially change their exchange rate so that their goods become cheaper in other countries
C)unions receive subsidies from their governments to lower labor costs
D)exporting companies receive subsidies from their governments

Question 31

The Massachusetts state legislature banned any Massachusetts company or individual from trading with Burma. In terms of legality, this action is

A)legal, if approved by the U.S. Secretary of State
B)illegal under the U.S. Constitution
C)legal if approved by the President's National Economic Council
D)illegal under the Foreign Trade (Development and Regulation) Act, 1992

Question 32

Economic globalization, or the increased geographic dispersion of production across borders, has had which of the following impacts?

A)Enabled the world's 20 poorest countries to catch up economically with middle- and high-income countries
B)Increased global transportation and communication costs
C)Diminished the ability of states to ""go it alone"" in defense production
D)Increased the economic benefits of military conquest among the most economically advanced countries

Question 33

Which best defines laissez-faire capitalism?

A)Business activity and natural resource usage and distribution are not regulated by the government
B)Government controlled distribution of natural resources with little involvement in other sectors of the economy
C)Ownership of the means of productions is split between public and private entities
D)Existence of extensive legislation governing internal trade

Question 34

A statement from Exxon-Mobile that their third quarter profits were down 15% from last year is an example of:

A)Normative economics
B)Positive economics
C)Macroeconomics
D)Differentiated economics

Question 35

Which of the following defines the opportunity cost of production?

A)Using a resource in one capacity in production eliminates the ability to use it in another
B)Loss of potential profit in order to capture a larger market share
C)Streamlining production costs to maximize profit
D)Increasing overhead costs in order to expand production

Question 36

Which best describes the economy of the United Kingdom of Great Britain?

A)Traditional economy
B)Command economy
C)Market economy
D)Mixed economy

Question 37

Which best describes the calculation of GNP or Gross National Product?

A)The total value of goods and services produced domestically, plus income earned by citizens outside the country, less foreigner's income from domestic production
B)The total value of goods and services produced domestically by all workers
C)The total value of goods and services produced domestically less production costs except wages paid
D)The total value of goods and services produced domestically, less income from foreign workers producing domestically, less the total value of goods consumed domestically

Question 38

In the United States changes in the money supply are controlled by:

A)the U.S. Treasury Department
B)the Federal Reserve Bank
C)the House Committee on Financial Services
D)the Bureau of Engraving and Printing

Question 39

If you purchase a 10 year, $15000.00 bond with an annual coupon rate of 6%, what is your total return at maturity?

A)$900.00
B)$9,000.00
C)$15,900.00
D)$24,000.00

Question 40

In graphing supply and demand, at what point is market equilibrium achieved?

A)When supply is slightly above demand
B)When supply is slightly below demand
C)When supply and demand intersect
D)When demand is significantly above supply

Question 41

In the United States which industry could best be defined as an oligopoly?

A)Shoe manufacturing
B)Automobile manufacturing
C)Publishing
D)Home construction

Question 42

What do most economists view as the main economic problem facing the world, the reason for the study of economics?

A)Scarcity
B)Currency inflation
C)Trade imbalance
D)Recession

Question 43

According to the law of demand, the relationship between price and quantity of goods demanded is:

A)inverse
B)reciprocal
C)converse
D)equal

Question 44

If productivity is the amount of output that is generated per unit of input, what would the productivity of labor be if ABC Sprockets produced 2,000,000 sprockets in two weeks, while employing 10 workers each working 40 hours per week?

A)2500 per hour
B)400,000 per worker
C)4,000,000 per week
D)400 per week

Question 45

Which of the following industries in the United States is not an example of monopolistic competition?

A)Electric service providers
B)Fast food restaurants
C)Cosmetics companies
D)Athletic shoe manufacturers

Question 46

Which action would support the principle of supply side economics?

A)A business slashes prices to move excess inventory
B)The government cuts taxes to encourage increased investment
C)The government imposes trade restrictions to increase imports
D)Industry leaders collaborate on pricing strategies

Question 47

In a downward stock market in which stockholders may rush to sell shares,increasing the downward spiral, conditions are known as:

A)a bear market
B)dumping
C)a trade deficit
D)a margin call

Question 48

Which government agency regulates the process for certifying labor unions as representatives of certain groups of workers?

A)FTC
B)AFL
C)NLRB
D)NTSB

Question 49

With which of the following nations did the United States have the largest trade deficit in 2005?

A)Japan
B)Mexico
C)Canada
D)China

Question 50

Which of the following would not be associated with the study of macroeconomics?

A)Inflation
B)National unemployment rates
C)Production factors
D)Individual consumer practices

Question 51

Which of the following is the least likely to contribute to economic growth?

A)Technological advances
B)Labor force education
C)Increased access to resources
D)Tighter government regulation

Question 52

In a capitalist market economy, a primary role of government is to:

A)Regulate all key industries to insure consumer advantage in pricing and availability
B)Protect core services not naturally supplied by market forces
C)Regulate the distribution and use of scarce resources
D)Monitor foreign competition and limit imports to improve domestic production

Question 53

In a free enterprise economy, the market forces of supply and demand that determine the pricing of products and commodities are known as:

A)income effect
B)capitalism
C)price mechanism
D)shortage

Question 54

When the real Gross Domestic Product (GDP) is declining, that period is referred to as a recession. When that trend stops and economic activity begins to rise again it is known as a:

A)peak
B)cycle
C)trough
D)gap

Question 55

The Keynesian theory of economics, practiced in the United States promotes the:

A)importance of both public and private roles in the economy
B)value of laissez-faire policies in building a strong economy
C)ability of natural market forces to self regulate the economy
D)idea that man has very little control in preventing recession or depression

Question 56

Companies such as Moody's and Standard & Poor's provide the service of:

A)regulating public companies for the SEC
B)determining credit ratings for public and private companies
C)conducting stock transactions for traders
D)calculating the DOW Jones average daily

Question 57

The process of paying off a debt over a fixed period of time with specified payments and interest rates is known as:

A)fiscal policy
B)appreciation
C)amortization.
D)revolving credit

Question 58

Demand pull inflation refers to a situation in which:

A)Output greatly exceeds the aggregate demand
B)Market supply and demand are very close to equilibrium
C)Output can not keep up with aggregate demand
D)Supply exceeds market demand

Question 59

If utility is the measure of satisfaction gained by consuming a good or service,then according to the principle of diminishing marginal utility:

A)Five doughnuts makes you happier than four, but the fifth doughnut does not make you as happy as the first
B)Five doughnuts makes you happier than four and the third doughnut makes you happier than the first
C)Five doughnuts does not make you as happy as four because utility has been maximized
D)Five doughnuts make you happier than one and each additional doughnut makes you happier than the last

Question 60

Consumer or investor behavior in which bargains are accepted that are low risk and low potential payoff and bargains are avoided which are higher risk, but potentially higher payoff is known as:

A)Risk tolerance
B)Risk aversion
C)Risk neutral
D)Risk premium

Question 61

Which country has the strongest GDP per capita:
W= GDP of $152 billion and a total population of 54,553,000
X = GDP of $400 billion and a total population of 21,900,000
Y= GDP of $595 billion and a total population of 38,500,000
Z = GDP of $ 628 billion and a total population of 43,655,000

A)Country W
B)Country X
C)Country Z
D)Country X and Y are equal

Question 62

When the Fed enacts an expansionary monetary policy in order to increase output,a goal is to increase the monetary supply which is usually accomplished through all of the following Fed actions except:

A)printing additional currency
B)lowering interest rates
C)reducing bank reserve requirements
D)purchasing government bonds

Question 63

The difference between a nominal interest rate and a real interest rate is that:

A)the nominal interest rate is for a fixed period of time
B)the real interest rate is legally binding
C)the nominal interest rate includes additional costs financed in a loan
D)the real interest rate factors in inflation

Question 64

If a firm desires to improve productivity and expand economic growth over time,the best action to take is:

A)increase capital expenditure
B)acquire new technology
C)avoid any new debt
D)A and B are equally important

Question 65

Supply and demand are two important factors that influence the market. Supply means the amount of a specific product or service available. Demand refers to the amount of that product or service consumers want to purchase. Both of these factors influence the price of goods. For example, if there is a large supply of a product which few people want to buy, the price of that product will go down. As the price goes down, demand usually increases. Eventually, a balance between the two factors is reached and the optimal price for that product or service is determined. At that point, the supply and demand have reached equilibrium.
Why does demand only "usually" go up when the price is lowered?

A)Demand always increases on its own
B)The supply is often decreased instead
C)Price may not be the only factor causing low demand
D)People want to pay more for products, not less
E)The system is only based on speculation so nothing is certain

Question 66

A new dog toy is introduced in pet stores in April for $19.99, but by December the toy is being sold for $4.99. According to the law of supply and demand which is most likely to be true about the dog toy?

A)Supply for the toy was low but demand was high
B)Supply for the toy was high but the demand was low
C)Both the supply and the demand for the toy were low
D)Both the supply and the demand for the toy were high
E)Answer cannot be determined

Question 67

If a drought severely reduces the amount of corn available to consumers, what would you expect to happen?

A)The supply of corn would go up
B)The demand for corn would go down
C)The price of corn would stay the same
D)The price of corn would go down
E)The price of corn would go up

Question 68

If 200 jobs are available and only 100 people are unemployed, what will have to happen according to the laws of supply and demand?

A)Companies needing employees will need to increase pay
B)Companies needing employees will need to decrease pay
C)Companies needing employees will need to reduce benefits
D)Companies needing employees will need to fire workers
E)The laws of supply and demand do not apply to this situation

Question 69

Which of the following government regulatory agencies was created in response to wide spread bank failures during the 1930's?

A)SEC
B)FDIC
C)FTC
D)Federal Reserve Board