Test 1 (practice)

Question 1

Things that are valuable are things that are ___________________

Answer 1

-

Question 2

Costs that are paid in money are called:

Answer 2

explicit costs

Question 3

Opportunity cost is the cost:

Answer 3

of what we give up when we make a decision

Question 4

Globalization is defined as:

Answer 4

the economic integration of nations

Question 5

5. When globalization has been effective historically, it’s been because it was based on:

Answer 5

technological advances such as steamships or the internet

Question 6

On the __________ is the economist’s word for making

decisions based on the costs or benefits of one more of something.

Answer 6

Margin

Question 7

(True/False) Mercantilism believes that trade is a form of war, no different than fighting with
guns

Answer 7

True

Question 8

_______________ was the name of the person who taught us that competition is required for
markets to work correctly.

Answer 8

Adam smith

Question 9

England made the American colonies and India produce raw materials, sell them only to England, then buy finished products back from England. This means England:

Answer 9

was using Mercantilism to make themselves richer at our expense

Question 10

(True/False) Comparative advantage requires that countries limit trade to targeted
industries only.

Answer 10

False

Question 11

Supply and demand says if there is a shortage of school teachers:

Answer 11

the price of school teachers is too low

Question 12

look at graph in the practice exam

Answer 12

-

Question 13

(True/False) An export requires that money enter your country and flow out of another.

Answer 13

true

Question 14

Foreign ___________ is the economist’s term for money of other countries.

Answer 14

exchange

Question 15

The sale of oranges from the US to Japan would show up in the ___________________ account
of the US Balance of Payments?

Answer 15

current

Question 16

The purchase of AMC Theaters by China would show in the ______________________ account
of the Balance of Payments

Answer 16

financial / capital financial.

Question 17

The ________________ is the name of the bank that was created in Bretton Woods.

Answer 17

International Monetary fund.

Question 18

(True/False) An increase in imports to the US from China should raise the value of the dollar
against the Yuan.

Answer 18

False, lower the value

Question 19

The entire balance of payments (all parts) adds up to

Answer 19

0

Question 20

(True/False) Prior to Bretton Woods, most world trade was paid for in gold.

Answer 20

True

Question 21

Exchange rates set by the market are called ________ exchange rates.

Answer 21

floating

Question 22

(True/False) The Bretton Woods system made the US dollar the key currency in the world.

Answer 22

True

Question 23

If the US has a trade deficit, how will it be corrected if markets are free to work?

Answer 23

the dollar will fall

Question 24

GDP measures:

Answer 24

total production in the economy.

total expenditure as well.

Question 25

_____ GDP is adjusted for inflation

Answer 25

Real

Question 26

_________ GDP is GDP divided by the population

Answer 26

per capita

Question 27

(True/False) China has the second largest total GDP of any country in the world.

Answer 27

True

Question 28

(True/False) China is not in the top 20 countries in GDP per person in the world.

Answer 28

True

Question 29

GDP equals:

Answer 29

C + S + T

Question 30

The first part of an expansion is sometimes called the:

Answer 30

recovery

Question 31

The labor force is the:

Answer 31

employed plus the unemployed

Question 32

A __________ worker is someone who wants a job, but has given up looking for one.

Answer 32

discouraged

Question 33

The unemployment rate is the percentage of the ___ that is unemployed.

Answer 33

labor force

Question 34

___________________ unemployment is composed of people who are voluntarily changing jobs

Answer 34

Frictional

Question 35

The unemployment rate takes into account

a. part time versus full time work
b. people working in jobs for which they are over-qualified
c. retirees who are working just to get out of the house
d. none of the above

Answer 35

none of the above

Question 36

If free trade can benefit everyone, why do some countries still manipulate their trade? How
do they do it?

Answer 36

They do not care about the other one

they just want to become richer

Question 37

List two categories of goods that are not included in GDP. Explain why comparing GDP
between countries is not really a good idea

Answer 37

1. Things that are traded
2. Things that are illegal.
3. The size of the stuff that we do not
   measure is not good
4. It is not measure of people who are
   happy its the measure of stuff
5. Differences in prices, difference in
   population. We are guessing on all
   this stuff