1) Which statement best describes a capitalist economy?

a. Society determines production and the allocation of goods and services only through markets.

b. Government policies determine the production and the allocation of goods and services.

c. Government policies determine the production, but not the allocation, of goods and services.

d. The role of individual self interest is relatively unimportant because the government makes most of the economic decisions.

2) Which of the following would cause the unemployment rate to increase?

1 a man who quits his job to spend more time with his children.

2 a woman who has not looked for a job and two years and begins looking again.

3 a woman who quits her job and begins looking for a new job in another city.

a. One only.

b. Two only.

c. Three only.

d. One and two only.

e. Two and three only.

3) The largest item in the expenditure or flow of the product approach to GDP is:

a. consumer spending.

b. Gross domestic investment.

c. Net exports of goods and services.

d. Government purchases of goods and services.

e. Rental payments.

4) Which of the following would be counted as investment when calculating GDP?

1 the purchase of a computer by an auto man manufacturer.

2 the purchase of a share of IBM stock.

3 the construction of a new house.

a. One only.

b. Two only.

c. One and two only.

d. One and three only.

e. Two and three only.

5) Which of the following would be an example of an intermediate good or service?

a. Sugar purchased by a bakery as a flavor enhancer for its cookies.

b. Tuition paid by a student at State University.

c. A house purchased by a family with four children.

d. A calculator purchased by a college student for taking exams.

e. A car purchase by your students parents and given to the student.

6) Which of the following is an example of structural unemployment?

a. A computer programmer who quits her job to move to a warmer climate.

b. A construction worker who loses his job in the winter.

c. An auto worker who loses her job during a recession.

d. A steel worker who is replaced by a robot.

e. A toy maker who worked for a company that closed because consumers did not buy its toys.

7) Explain the effects of an increase in the aggregate demand. Include all facets of the economy affected. Provide as complete of an answer as possible to obtain full credit.

8) A headline reads, "the federal reserve bank (not the federal government) expresses its fear of recession". Explain what actions the Fed could take to prevent or correct for the recession and what their intended goal will be for the economy. Be sure to explain all facets in the economy that may be affected by this action and why it is important.

9) Most economists would argue that efficiency is a very important term and economics. Using related terms such as scarcity, allocation, etc ., Explain the importance of efficiency. Additionally, explain how the benefit of efficiency is not always supportiveof equity.