Deck 2: Economics and Banking

Question 1

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
E) capitalist economy

Answer 1

B

Question 2

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
E) privately owned, profit-seeking enterprises are converted to government-owned production and services

Answer 2

D

Question 3

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 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
E) an exchange of currency without an exchange of goods, in which the price of something is determined by what sellers demand

Answer 3

C

Question 4

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
E) there is no government intervention whatsoever in industry

Question 5

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
E) the production and pricing of goods and services is determined through the operation of a market

Question 6

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
E) the government does not intervene in industry

Question 7

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
E) sustainability

Question 8

________ 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
E) Equilibrium

Question 9

Taken together,iPod and iTunes are ________.

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

Question 10

________ is one of the countries closest to having a planned economy,and ________ is one of the countries closest to having a market economy.

A) Russia; Singapore
B) India; Norway
C) Russia; Norway
D) Cuba; Singapore
E) Canada; China

Question 11

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
E) because the demand is lower than the supply

Question 12

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
E) supply is affected by changes in technology

Question 13

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
E) shortage

Question 14

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
E) surplus

Question 15

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
E) the effects on population changes on demand

Question 16

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
E) the effects of changes in resource prices on supply

Question 17

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
E) The economy is defined by a freedom of choice for both buyers and sellers.

Question 18

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
E) Fortune 500 companies

Question 19

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
E) the number of substitute goods available

Question 20

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
E) the exchange of ideas about motivation and behavior in the workplace

Question 21

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
E) goods that experience seasonal changes in demand

Question 22

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

A) Monopolistic competition
B) A monopoly
C) An oligopoly
D) Perfect competition
E) A duopoly

Question 23

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
E) magazines and newspapers

Question 24

What best determines the level of competition?

A) the degree of population change
B) the number of substitutes for a certain good or service
C) the degree of change in income levels
D) the number of complementary products or service
E) the existence of complementary goods

Question 25

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.There she is told 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
E) changes in income levels

Question 26

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.
E) Prices will be low.

Question 27

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

A) A duopoly
B) A monopoly
C) An oligopoly
D) Perfect competition
E) Monopolistic competition

Question 28

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

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

Question 29

The ________ and the Department of Justice must review 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 Appeals Court
E) Securities and Exchange Commission

Question 30

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
E) an action taken by the government to influence swings in the business cycle

Question 31

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.
E) A large number of sellers of virtually identical products means that no single seller can set the price for these products.

Question 32

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
E) to ensure that companies have equal access to natural resources like water and natural gas

Question 33

________ 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) A monopoly
C) An oligopoly
D) Perfect competition
E) A duopoly

Question 34

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
E) unemployment rate

Question 35

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) They will be split between the United States and Mexico.
E) They will be split among all three countries.

Question 36

The government allows ________ companies to operate as regulated monopolies.

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

Question 37

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
E) a country's overall increase in profitability from one year to the next

Question 38

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

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

Question 39

________ 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) A monopoly
C) An oligopoly
D) A duopoly
E) Perfect competition

Question 40

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 expenditures in a given year
E) a country's overall increase in profitability from one year to the next

Question 41

The term "business cycle" refers to ________.

A) the periodic increases and decreases of the economy
B) the periodic purchases of goods and services by the government
C) the increases and decreases in the rate of inflation
D) the periodic growth of the Federal Reserve system
E) the periodic increases and decreases in the GDP due to seasonal factors

Question 42

The government determines the appropriate level of taxes and spending through its ________.

A) monetary policy
B) domestic policy
C) foreign policy
D) fiscal policy
E) currency policy

Question 43

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
E) to ensure that it reflects current wholesale resource costs

Question 44

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
E) the changes in prices of the resources used to create consumer goods

Question 45

________ unemployment measures unemployment caused by lack of demand for those who want to work; it generally follows the economy.

A) Seasonal
B) Frictional
C) Structural
D) Cyclical
E) Temporary

Question 46

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
E) marketer's

Question 47

What is the money supply?

A) the total amount of money held in the Federal Reserve Bank
B) the combined amount of money available in privately owned accounts
C) the combined amount of money available within the economy
D) the amount of money the government is allowed to spend to stimulate economic growth
E) all the coins and bills held by people, businesses, and banks

Question 48

________ unemployment refers to a temporary state of unemployment in which workers move between jobs,careers,and locations.

A) Seasonal
B) Frictional
C) Structural
D) Cyclical
E) Circumstantial

Question 49

All of the following statements about open market operations are true EXCEPT:

A) They are used by the Federal Reserve to change the Federal Funds Rate
B) They are used by the Federal Reserve to change the discount rate
C) They are used by the Federal Reserve to buy and sell mutual funds
D) They are used by the Federal Reserve to transact with securities dealers
E) They are probably the most influential tool the Federal Reserve has to alter money supply

Question 50

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

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

Question 51

________ is a decrease in the rate of inflation.

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

Question 52

Mae's oven bakes 50 cinnamon rolls an hour.She bakes 200 cinnamon rolls a day.The cost of power for running her oven each day is $30.Mae has decided that she would like to bake the same amount of cinnamon rolls in less time in order to save on energy costs.What should she do?

A) Increase productivity by baking more cinnamon rolls per hour.
B) Increase efficiency by beginning her baking operations earlier in the day.
C) Increase profitability by charging more money per cinnamon roll.
D) Manage competition by baking muffins as well as cinnamon rolls.
E) Increase her customer base by advertising on popular local food blogs.

Question 53

The Federal Reserve System (the Fed)manages the country's money supply through its monetary policy to control inflation by doing all of the following EXCEPT ________.

A) buying and selling government securities
B) trading in foreign exchange markets
C) changing certain interest rates
D) increasing taxes
E) manipulating reserve requirements

Question 54

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
E) quality of life

Question 55

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

A) Seasonal
B) Frictional
C) Structural
D) Cyclical
E) Temporary

Question 56

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
E) the difference between the prices of the raw materials used to create goods and the prices the consumer actually pays for these finished goods

Question 57

Decreasing taxes can stimulate the economy by ________.

A) allowing consumers more money to spend
B) decreasing the amount of money the government is able to spend
C) directly influencing the consumer price index
D) controlling the money supply
E) helping to contain an economy that is growing too quickly

Question 58

________ unemployment measures permanent unemployment associated with massive industry-wide changes that lead to complete elimination of the positions formerly held.

A) Seasonal
B) Frictional
C) Structural
D) Cyclical
E) Circumstantial

Question 59

The government manages the supply of money through its ________.

A) monetary policy
B) domestic policy
C) foreign policy
D) fiscal policy
E) stimulus policy

Question 60

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
E) energy prices; prices for services

Question 61

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

Question 62

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 63

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

Question 64

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

Question 65

The value of currency is based on an underlying commodity.

Question 66

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

Question 67

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

Question 68

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

Question 69

In which part of the business cycle is the Federal Reserve most likely to increase the discount rate to discourage banks from borrowing?

A) trough
B) expansion
C) peak
D) recession
E) depression

Question 70

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

Question 71

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

Question 72

The reserve requirement is defined as ________.

A) the maximum amount of money banks can borrow from the Federal Reserve
B) the maximum amount of money banks can borrow from one another
C) the minimum amount of money banks hold in reserve to cover deposits
D) the minimum amount of money that can be deposited by banks in the Federal Reserve
E) the maximum amount of money that is insured by the Federal Deposit Insurance Corporation

Question 73

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

Question 74

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

Question 75

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 76

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

Question 77

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

Question 78

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

Question 79

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 80

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