LESSON 16

1.Businesses and consumers can use checking accounts to buy and sell easily due to ___________________.

A. the amount of currency in circulation

B. the ability of the Federal District Banks to clear checks

C. the truth in lending legislation passed by Congress

D. the intervention of the FDIC in protecting deposits

2.How do open-market operations affect the money supply?

A. Swings in the stock market can cause panics and runs on banks.

B. Free, open markets keep supply and demand in equilibrium.

C. Buying or selling government securities changes the amount of money in circulation.

D. Change in market conditions will prompt a change in reserve requirements.

3.The seven-member group that administers the Federal Reserve System is called the ___________________.

A. Federal Advisory Council

B. Federal Open Market Committee

C. Federal Commerce Board

D. Board of Governors

4.If the reserve requirement for a bank is 20%, how much can a bank loan out of a $1,500 deposit?

A. $300

B. $1500

C. $1200

D. $1300

5.How many Federal Reserve districts are there in the United States?

A. 8

B. 10

C. 12

D. 14

6.The system in which a portion of a bank's deposits are held in reserve while the remainder is free to lend is known as _____________.

A. loose money banking

B. tight money banking

C. fractional reserve banking

D. reserve requirement banking

7.A loose money policy affects the economy by _______________.

A. decreasing the percentage of reserves each bank must maintain

B. increasing the percentage of reserves each bank must maintain

C. increasing interest rates, making more funds available for borrowing

D. decreasing interest rates, making more funds less expensive when borrowing

8.What hampers the Fed's ability to quickly react in setting its monetary policy?

A. Gathering data about the entire current money supply is difficult.

B. The Fed officers often must bend to political pressures, or they risk being fired.

C. Decisions enacted by the Fed often take years before they take effect.

D. District banks are actually in competition with each other, so they do not communicate openly.

9.What is the importance of the year 1913 to the Federal Reserve System?

A. It was the year the Fed was created.

B. It was the year the Fed reached its highest revenues.

C. It was the year the Fed helped end the Panic of 1912.

D. It was the year the Alan Greenspan took over as Chairman of the Fed and became the greatest chairman in Fed history as he led the United States out of a panic.

LESSON 17

1.How does the federal government raise money to cover budget deficits?

A. By borrowing from the Federal Reserve Bank

B. By mandating new taxes to the state governments

C. By cutting all federal social programs

D. By issuing new securities such as Treasury bills and bonds

2.What are public goods and services?

A. The goods and services that are provided by the government and can be used by many people at the same time without reducing the benefit to each individual

B. The goods and services that are provided to the government by people paying taxes for highways and roads

C. The goods and services that are provided by the government to individuals and households to even out income

D. The goods and services that are provided to the government by people voting for elected officials in non-presidential year elections

3.Which of the following is an example of government regulation of externalities?

A. Legislation that fines companies for dumping by-product waste in rivers

B. Legislation that prohibits the sale of certain drugs

C. Legislation that promotes competition within industries

D. Legislation that sets a minimum wage

4.What is one reason why government spending alone may not reflect the true size of government?

A. The government does not adjust its spending figures for inflation.

B. The government nets its total spending with total tax revenue.

C. Some private-sector spending is mandated by law.

D. The term "government spending" does not include federal employees' salaries.

5.A negative externality is_______________.

A. the value of one additional unit produced

B. pollution produced by a manufacturing facility

C. a higher tax rate for luxury products

D. the payments made to individuals for old age benefits

6.What is the 12 month period that makes up the fiscal year of the United States?

A. January-December

B. April-March

C. July-June

D. October-September

7.How do governments borrow money?

A. By issuing bonds and other securities

B. By applying to banks just like corporations do

C. By establishing lines of credit with other nations

D. By increasing the individual tax rate during hard times

8.Which of the following would most likely occur as a result of a public work project?

A. The restoration of an old bridge

B. The creation of a new playground for a private school

C. The creation of a new playground for a public school

D. The purchase of a new police car by a city government

9.Why are cigarettes more heavily taxed than some other goods? Choose the best answer.

A. It is a demerit good.

B. It is a merit good.

C. It is a harmful good.

D. It is a drug.

LESSON 18

1.What fiscal policy might the government enact to help curb increasing unemployment?

A. Increase business taxes to stave off stagflation

B. Lower rates on savings accounts to discourage leakage

C. Give tax credits to businesses investing in new plants

D. Enact legislation that extends unemployment benefits

2.The New Deal "3 Rs" refers to ____________________.

A. reading, writing and arithmetic

B. relief, recovery and reform

C. red, white and blue

D.relish, mustard and ketchup

3.John Maynard Keynes is closely related to which of the following?

A. Stabilization policy

B. Keynes policy

C. Fiscal policy

D. Monetary policy

4.According to monetarists, how should budget deficits be handled?

A. Deficits are acceptable, because they are offset by growth in the GDP.

B. Deficits should never exceed 20% of the entire fiscal year budget.

C. The government should borrow twice as much as needed to cover a deficit to stimulate demand.

D. The government should not run a budget deficit; the budget should always be balanced.

5.What role should the Fed play according to monetarist theory?

A. The Fed should implement fiscal policies to control leakages and injections.

B. The Fed should change rates weekly to compensate for time lags.

C. The Fed should be disbanded, as it only interferes with the free market.

D. The Fed should allow the money supply to grow smoothly and consistently.

6.Demand-pull inflation is caused by____________________.

A. the money supply being too small

B. the money supply growing too quickly

C. lack of government spending

D. growth of private investments

LESSON 20

1.Karl Marx proposed an economic system called Communism or authoritative socialism that is characterized by ____________.

A. a desire to overthrow the economic system of capitalism to protect the working class

B. a desire to establish a national constitution restricting private ownership.

C. using the supply of currency to control inflation

D. using government purchases of securities to control inflation

2.Which statement is true with respect to pure capitalism?

A. Price is determined strictly by the forces of supply and demand.

B. Price is determined by factors of production including taxes.

C. Resources are restricted to geographic areas.

D. Price is determined by government.

3.Which of the following is another name for communism?

A. Authoritative socialism

B. Egalitarian socialism

C. Aristocratic socialism

D. Marxist socialism

4.How would you classify an economy in which there is communal ownership of property and the state determines how all factors of production should be utilized?

A. Pure Capitalism

B. Market capitalism

C. Socialism

D. Capitalistic socialism

5.Which of the following countries is least likely to institute a market capitalism economy?

A. The United States

B. Cuba

C. Japan

D. India

6.Property rights are crucial in which of the following economies?

A. Market capitalism

B. Market capitalism and pure capitalism

C. Market capitalism, pure capitalism, and command economy

D. Market capitalism and command economy

7.What is the body of law which determines the rights individuals have when making legal agreements for business and personal reasons?

A. Consumer law

B. Corporate law

C. Contract law

D. Civil law

8.The Organization for Economic Development's mission is _____________.

A. to support the World Bank, economic loans for undeveloped nations and raise living standards in undeveloped countries

B. to provide funds for the World Bank, economic loans, and financial guidance to increase the standard of living for all people of the world

C. to support sustainable economic growth, boost employment, raise living standards and assist the economic development of other countries

D. to support high economic growth, decrease population, raise living standards and provide economic support for all third world countries

9.Which of the following is an economic system which allows a government to have some control of the economy?

A. Democratic Socialism

B. Pure Capitalism

C. Market Capitalism

D. Market Socialism

10.Socialism is based on ________.

A. communal ownership of property

B. communal ownership of labor

C. the laws of supply and demand

D. the laws of marginal return

LESSON 21

1.Undeveloped nations are often characterized as primarily agricultural economies because ____________________.

A. these nations are engaged in subsistence farming

B. these nations refuse to adapt their culture to large farming ventures

C. these nations are populated by people that will not adapt to the modern world

D. these nations have a lower GDP and cannot use machines to change the living standards

2.In addition to providing immediate relief to developing nations, foreign aid is used for __________.

A. capital flight

B. comparative advantage

C. investment

D. subsistence farming

3.Nationalization of industry refers to ____________.

A. a government taking over property and/or facilities without payment to the owners

B. socialism as an economic system protecting the rights of the working class

C. exploitation of the indigenous worker by foreign corporation causing widespread pollution

D. an economic system featuring private and government ownership of the factors of production

4.How do personal savings create capital?

A. Banks use the money saved to borrow against deposits to pay interest on the funds held.

B. Funds are used to pay down debt owed by the financial institution on bad loans, which helps create capital.

C. Funds accumulated in financial institutions are matched by the Federal Reserve, which increases the amount of capital available.

D. Funds deposited by individuals into financial institutions are used to make loans for large or long term purchases.

5.Undeveloped nations generally have ______.

A. low literacy rates, moderate industry and small, healthy populations

B. low literacy rates, little industry and large populations

C. high populations, industry and moderate literacy rates

D. small populations, high tech industry and high literacy rates

6.Why is illiteracy considered a major problem in economic development?

A. A poorly trained labor force cannot assist in building a better economy.

B. A poorly trained labor force cannot adapt to new technology.

C. A poorly trained labor force cannot provide innovation for new products.

D. All of the choices

7. Real income per person

Access to and quality of health care

Access to and quality of education

The list shows things which are taken into consideration when calculating which of the following?

A. The Gross National Product of a country

B. The Consumer Price Index of a country

C. The standard of living in a country

D. The development level of a country

LESSON 22

1.A foreign affiliate is ________.

A. a newscaster located outside of the United States

B. a branch of the multinational corporation in another country

C. a telecommunications office located outside of the United States

D. an imported medallion used on office buildings

2. Corporations that build military craft

Corporations that build military munitions

Corporations that build nuclear reactors

The examples in the list are companies owned by which of the following in the United States?

A. Foreign investment groups

B. Domestic investment groups

C. The US Government

D. US citizens

3.The foreign ownership of the U.S. government securities amounts to ______________.

A. 60%

B. 75%

C. 40%

D. 10%

4.What is the benefit of global competition?

A. Global competition promotes participation in world sporting events such as the Olympics which is an economic bonus for the host country.

B. Global competition does not offer benefits to most people because foreign goods and services are purchased by the wealthy.

C. Global competition benefits the governments of countries by encouraging different tax brackets for goods and services produced by other countries.

D. Global competition encourages innovation: more products are offered for sale at lower prices.

5.The foreign ownership of the U.S. government securities amounts to ______________.

A. 60%

B. 75%

C. 40%

D. 10%

LESSON 23

1.Businesses must be...

...flexible

...able to deal with large influxes of orders

...efficient in inventory control.

The guidelines in the list are all guidelines of which of the following? Choose the BEST answer.

A. All modern companies

B. All internet based companies

C. E-commerce

D. Becoming more competitive

2.What is the relationship between standardization and the growth of the telecommunications industry?

A. The growth of the telecommunications industry was based on the invention of the fiber optic cable which allowed for trans-ocean communication. Standardization had no part in the growth of the telecommunications industry.

B. Standardization refers to the growth of assembly line production rather than craftsmanship in the Industrial Revolution. It has no bearing on the telecommunications industry.

C. Once all telecommunication protocols were standardized, the cost of manufacturing telecommunication components and the methodology of its use allowed for widespread use.

D. The telecommunications industry used small component parts to transform the communication devices into very small machines. Standardization refers to the size and manufacturer of each component.

3.[Bill Jones at Bill's Used Car Sales published the following advertisement on the company website.

At Bill's Used Car Sales, we pride ourselves on having the number one customer loyalty in town. We keep our customers coming back because of the great deals we offer on our quality used cars. Please come see us today for a no-obligation test drive, and you will see why people keep coming back to Bill's Used Car Sales for their next automobile.]

Which of the following types of marketing is Bill Jones using in his advertisement?

A. Loyalty marketing

B. Low-price marketing

C. Frequency marketing

D. Repeat-buyer marketing

4.Based on Schumpeter's Wave Theory of economic growth, which statement is true?

A. The normal economy is in equilibrium and adjusts seasonally based on labor and capital needs.

B. The normal economy is never in equilibrium because social and political unrest by the working class keeps economic conflict in motion.

C. The normal economy is in equilibrium because of the law of diminishing returns as inputs are added to the factor of production.

D. The normal economy is never in equilibrium because it is continually disrupted by entrepreneurial innovation.

5.How has the Internet changed marketing?

A. Companies can advertise by mailing advertisements directly to consumers.

B. Company computers track and store information on buying habits, allowing for a company to provide the exact product desired.

C. Company computers can send merchandise to individuals on a regular schedule and bill regardless of the consumer's use of the product.

D. Market research demonstrates that there has been no change due to the use of the Internet for consumers.

6.What role does innovation play in economics?

A. The development of new products and systems generally affect only one industry which may experience some additional growth.

B. The development of new products, systems, or processes with wide effects helps stimulate economic growth.

C. Innovation does not affect the overall economic system. It only affects immediate supply and demand for a particular product.

D. Innovation does not affect the overall economic system. It affects long term investment opportunities.