Deck 12: Economics

Question 1

What do Keynesians think the government should do during a recession?

A)Increase spending.
B)Cut spending.
C)Decrease taxes.
D)Keep inflation high.

Answer 1

Increase spending.

Question 2

Which famous economist is not correctly paired with his seminal work?

A)Capital - Karl Marx
B)The Return of Depression Era Economics - Milton Friedman
C)The Wealth of Nations - Adam Smith
D)The General Theory of Employment, Interest and Money - John Maynard Keynes

Answer 2

The Return of Depression Era Economics - Milton Friedman

Question 3

Which of the following is true of countries that have high Gini indices?

A)Most of the wealth is concentrated in a small segment of society.
B)They have achieved a high degree of gender equality.
C)They are on track to meet the UN Millennium Development Goals.
D)They exhibit a high standard of living.

Answer 3

Most of the wealth is concentrated in a small segment of society.

Question 4

Which of the following would not be included in the USA GDP?

A)Government spending
B)The salary of a non-US citizen working in the US
C)Profit from a factory owned by a US citizen but operated in Brazil
D)Money spent by an Italian company in the US

Question 5

At an all-you-can-eat buffet, a person devours his first plate of food, enjoys the second and can't eat the third. How might an economist explain this?

A)The food's marginal utility was decreasing.
B)The supply curve was increasing.
C)The food's marginal cost was increasing.
D)The food's total utility was decreasing.

Question 6

What is a liquidity trap?

A)When a company grows slowly because it focuses too much on liquidity
B)When apparent assets actually are a drain on the company, creating a cash flow problem
C)When there is not enough liquidity in a system, creating instability
D)When people with cash won't invest because they expect prices to fall

Question 7

Which is the best explanation of stagflation?

A)A stagnant economy with high inflation
B)Prices that aren't changing; neither inflation nor deflation
C)A combination of low job growth and low inflation
D)Extremely high deflation, the opposite of hyperinflation

Question 8

How does the government measure inflation?

A)It polls prominent economists.
B)It measures changes in the value of the US dollar and Treasury bonds.
C)It measures the change in value of a long list of values.
D)It measures the change in value of a long list of wages and salaries.

Question 9

Is it possible for per capita income to go up while median income is going down?

A)Yes, this is a sign of growing unemployment.
B)Yes, this is a sign of growing inequality.
C)No, when per capita income goes up median income must as well.
D)Yes, these two measures are not related to each other.

Question 10

A plant that produces 1000 units of some item decides to make 1001 units instead. What is the cost of this additional unit called?

A)Cost of growth
B)Overhead cost
C)Marginal cost
D)Per unit expenditure

Question 11

Which of the following conditions is not necessary for a perfect market?

A)No barrier to entry or exit
B)All actors have total information about the market.
C)Equal access to technology
D)The absence of regulation

Question 12

Which of the following is an example of insider trading?

A)A person inside the company uses secret information to make trades.
B)A person at a partner company uses secret information to make trades.
C)A person with tips from a friend inside the company uses that information to make trades.
D)All of the above

Question 13

What is arbitrage?

A)Making a profit by manipulating discrepancies between multiple markets
B)A system for arbitrating trade disputes
C)Buying and selling stocks through an intermediary
D)A system that determines the legality of major trades

Question 14

What is it called when a company controls every portion of a product's lifecycle, from raw materials to retail sale?

A)Vertical integration
B)Horizontal integration
C)Monopolistic activity
D)Economy of scale

Question 15

All of the following market activities are legal except:

A)Vertical integration
B)Horizontal integration
C)Monopolistic activities
D)Economies of scale

Question 16

Which economic system is based on the assumption that the wealth of a nation depended on its total available capital?

A)Capitalism
B)Mercantilism
C)Bullionism
D)Feudalism

Question 17

What is an elastic good?

A)A good that can be produced at many different costs
B)A good that is valued by many different market segments
C)A good that can be sold at any price
D)A good whose demand changes in proportion with the price

Question 18

What is the gold standard?

A)The highest quality version of a product
B)A monetary system that links currency to the value of gold
C)The standard price of gold on the commodities market
D)The standard purity of gold sold on the commodities market

Question 19

If the demand for a product X goes down, what happens to the demand for complementary product Y?

A)The demand for product Y goes up.
B)The demand for product Y goes down.
C)The demand for product Y is unaffected.
D)There is not enough information to answer.

Question 20

If the demand for product X goes up, will the demand for the substitution product Y go up or down?

A)The demand for product Y will go up.
B)The demand for product Y will go down.
C)The demand for product Y is unaffected.
D)There is not enough information to answer.

Question 21

How do economists quantify the possibility that invested money could have been used for another purpose later on?

A)Risk
B)Cost of money
C)Inflation
D)Opportunity cost

Question 22

What is the difference between capital goods and consumer goods?

A)Capital goods create value, while consumer goods do not.
B)Capital goods cost more than consumer goods.
C)Capital goods are purchased by manufacturers; consumer goods are bought by individuals.
D)Capital goods are bought and then resold as consumer goods

Question 23

How is efficiency defined in macroeconomics?

A)Reducing cost as much as possible
B)Allocating resources to maximize total utility
C)Matching supply and demand as closely as possible
D)Matching marginal cost and marginal utility as nearly as possible

Question 24

What is a market failure?

A)A trader who fails to make money on the market
B)A product that has zero demand
C)A situation in which the market does not allocate resources efficiently
D)A market in which goods cannot be bought or sold

Question 25

What is the most common effect when a government prints a great deal of money?

A)Prices in that currency go up.
B)That nation becomes wealthier because it has more money.
C)The nation's overall liquidity increases.
D)The currency becomes more popular for savings.

Question 26

If company A is better than company B at both producing T-shirts and at selling them retail, why might company A contract the first job to company B?

A)Company B has an absolute advantage at producing T-shirts.
B)Company A believes it will benefit from future competition.
C)There is no reason for company to contract out the work.
D)Company B has a comparative advantage at producing T-shirts.

Question 27

What is a product's equilibrium price?

A)Its production cost
B)The per unit cost, excluding overhead
C)The price that is equal to its inherent value
D)The price at which supply and demand are equal

Question 28

As production volume increases, the marginal cost a manufactured good usually decreases. What is the reason for this?

A)The fixed cost is spread over more units.
B)The factory becomes more efficient.
C)New workers will accept lower wages.
D)To account for reduced marginal utility

Question 29

If government regulations impose price controls on wheat, and if the production cost of wheat then exceeds that price, what is the most likely result?

A)There will be a wheat shortage.
B)Wheat sellers will lose money.
C)Wheat sellers will sell to retailers below market value.
D)Wheat sellers will see their profits grow.

Question 30

Why is there a discrepancy between long-term and short-term effects of a change in demand?

A)The market is slow to understand most changes.
B)The market waits to see if the change is permanent.
C)Equilibrium situations always take time to settle down.
D)There is a cost associated with adapting to the market.

Question 31

Why is a CPU's cache important?

A)The cache size determines the number of threads the CPU can handle.
B)The cache size determines how many programs the CPU can interact with.
C)Without a cache, the CPU can only hold one number at a time.
D)Without a cache, the CPU will miss lots of clock cycles.