Final Exam

Question 1

The skills and knowledge gained by a worker through education and experience are

Answer 1

human capital

Question 2

Shortages occur when

Answer 2

people have trouble supplying the goods and services at current prices

Question 3

All the goods and services we produce are

Answer 3

scarce

Question 4

Economics is the study of how people…

Answer 4

choose from limited resources to meet their needs

Question 5

Giving up one alternative for another is called

Answer 5

a trade-off

Question 6

Scarcity always exists because

Answer 6

our needs and wants are not limited, but our resources are limited

Question 7

Thinking at the margins means deciding about

Answer 7

adding or subtracting one additional unit of some resource

Question 8

Using resources in such a way as to maximize the production of goods and services is called

Answer 8

efficiency

Question 9

The resources used to make goods and services are called

Answer 9

factors of production.

Question 10

Which is a key economic question faced by all countries?

Answer 10

Production possibilities; what to make

Question 11

The government decides which goods and services will be produced in a

Answer 11

central planned economy

Question 12

Markets allow us to

Answer 12

exchange things that we have for things that we have for things that we don’t

Question 13

In return for supplying the factors of production?land, labor, or capital?people receive

Answer 13

money

Question 14

Which of the following countries is the most extreme example of a centrally-planned economy?

Answer 14

North Korea

Question 15

In a traditional economy, economic decisions are based largely on

Answer 15

Custom.

Question 16

The free enterprise system of the United States is best described as a

Answer 16

Mixed Economy

Question 17

What are the three main goals of the government in its attempt to keep the economy running smoothly?

Answer 17

High employment, steady growth, and stable prices.

Question 18

Social Security provides

Answer 18

it is compulsory, provides minimum floor of income. benefits based on adequacy, not individual equity. Benefits are loosely related to earnings. available w/o a “needs/means” test. based on presumed need

Question 19

The value of the goods and services produced by an economy is called

Answer 19

Gross Domestic Product (GDP)

Question 20

Pollution caused by automobiles is an example of

Answer 20

A negative externality

Question 21

Which of the following is an example of a public good?

Answer 21

national defense

Question 22

A measure of how consumers react to a change in price is known as the

Answer 22

Elasticity of Demand

Question 23

Total revenue is defined as the amount of

Answer 23

Total amount of money a company receives by selling goods and services

Question 24

If a firm knows that the demand for its product is inelastic at its current price, it knows that an increase in price will

Answer 24

total revenue.

Question 25

Which of the following describes the substitution effect?

Answer 25

As the price of a good rises, people will substitute other products.

Question 26

The key factor that determines whether the supply of a good will be elastic or inelastic is

Answer 26

he key factor is time. In the short run, a firm cannot easily change its output level, so supply in inelastic. In the long run, firms are more flexible, so supply is more elastic.

Question 27

The supply curve

Answer 27

Is a graphic representation between product price and quantity of a product

Question 28

____________ is a measure of the way suppliers respond to a change in price.

Answer 28

Elasticity of Supply

Question 29

Which of the following is NOT a fixed cost?

Answer 29

gas

Question 30

Marginal cost is

Answer 30

Cost of producing one or more unit of a good

Question 31

Which of the following is an example of a shortage?

Answer 31

Pizza- $2.00 per slice leads to QD 250 slices per day, but QS of 150 slices per day = shortage of 100 slices

Question 32

When there is excess supply,

Answer 32

surplus

Question 33

How are goods and resources distributed in a free market economy?

Answer 33

through prices

Question 34

Whenever the market is in disequilibrium and prices are flexible, market forces will

Answer 34

Market forces push toward equilibrium.

Question 35

The minimum wage is an example of

Answer 35

Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.

Question 36

A market that is a monopoly has

Answer 36

A large supplier which people have to buy from

Question 37

In many industries, deregulation has resulted in

Answer 37

lower prices for consumers.

Question 38

The type of currency used in the United States today is

Answer 38

fiat money

Question 39

Assets that have liquidity are

Answer 39

easy to turn into cash

Question 40

All of the following are examples of a use of money EXCEPT a

Answer 40

these are examples of the use of money: •Medium of exchange •Unit of account • Store of value

Question 41

All of the following are characteristics of money EXCEPT

Answer 41

``` these are the following characteristics of money: •Durability •Portability •Divisibility •Uniformity •Limited supply •Acceptability ```

Question 42

In case of a bank failure, customer deposits up to $250,000 per account are guaranteed by the

Answer 42

FDIC

Question 43

Investment is the act of

Answer 43

Redirecting resources from being consumed today so that they may create benefits in the future

Question 44

Which of the following is a reason for diversification?

Answer 44

to reduce risk

Question 45

Bonds are

Answer 45

A formal contract issued by a corporation or other entity that includes a promise to repay borrowed money with interest at fixed intervals

Question 46

Which of the following bonds are issued by the United States government?

Answer 46

saving bond

Question 47

The purpose of a financial intermediary is to help channel funds from

Answer 47

savers to borrowers

Question 48

Who was given authority to levy taxes by the Framers of the Constitution?

Answer 48

Congress

Question 49

The main source of revenue for local governments is

Answer 49

property taxes

Question 50

Which of the following would be a progressive tax?

Answer 50

People with higher incomes pay a higher percentage than people with smaller incomes

Question 51

What is withholding?

Answer 51

Taking tax payment out of an employee's pay before he or she receives it

Question 52

The federal income tax is a

Answer 52

An example of Progressive Tax

Question 53

What program provides the largest source of funds for health care for America's poorest people?

Answer 53

Medicaid/ medicare

Question 54

The set amounts that you subtract from your gross income for yourself, your spouse, and any dependents are called

Answer 54

personal exemptions

Question 55

What is a person's taxable income?

Answer 55

Taxable income -the earnings on which taxes must be paid; total income minus exemptions and deductions

Question 56

All federal income tax returns must be sent to the Internal Revenue Service by midnight on

Answer 56

April 15th or the working day after

Question 57

All of the following are types of tax structure EXCEPT

Answer 57

these are the three types of tax structures •Proportional (aka flat) Tax •Progressive Tax •Regressive Tax

Question 58

The amount of federal income tax a person owes is determined on a(n)

Answer 58

their income

Question 59

Which of the following might be part of an expansionary policy?

Answer 59

More working people means more total spending in the economy and Tax Cuts

Question 60

If the President vetoes the budget, Congress

Answer 60

Votes to override the veto by a 2/3 majority vote, or they work with the president to find compromise

Question 61

Maynard Keynes believed that to end the Great Depression, government should

Answer 61

Find a way to boost demand; though spender should be the federal government, believed in fiscal policy

Question 62

A budget surplus occurs when

Answer 62

The government spends less than it collects in taxes

Question 63

When government revenues and expenditures are equal, there is

Answer 63

Equilibrium

Question 64

What is the main goal of a government's fiscal policy?

Answer 64

Stimulate economic growth

Question 65

The national debt is

Answer 65

The total amount of money the federal government owes all bondholders (lenders)

Question 66

How many Federal Reserve Districts are there?

Answer 66

12

Question 67

How do banks create money?

Answer 67

* By doing their business | * Required Reserve Ratio -the percentage of deposits banks are require to keep in reserve

Question 68

Too much money in the economy leads to

Answer 68

inflation

Question 69

The Federal Reserve System is overseen by the

Answer 69

By the Federal Reserve Board

Question 70

Which of the following actions would the Fed take to fight inflation?

Answer 70

* Low interest rate * Adjust interest Rate * Balance the money supply

Question 71

Which monetary policy tool is considered an expansionary tool?

Answer 71

Open Marriage ket Operations -the buying and selling of government securities to alter the supply of money

Question 72

The interest rate that banks charge each other for loans is called the

Answer 72

Federal Funds Rate

Question 73

How often must each financial institution that holds deposits for customers report to the Fed about its reserves and activities?

Answer 73

from time to time

Question 74

What is monetary policy?

Answer 74

The actions that the Federal Reserve System takes to influence the level of GDP and rate of inflation in the economy

Question 75

What is the required reserve ratio?

Answer 75

The percentage of deposit banks are require to keep in reserve