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Capital is A ) tools, equipment, and factories used in the production of goods and services; one of four factors of production. Economics is the use of what to produce and distribute goods and services? Correct D ) resources Want is Correct B ) way of expressing a need that leads to a preference for some goods over others The fundamental economic problem is Correct B ) scarcity. Why do economists need to find the answer to all three of these questions? Correct D ) there are not enough resources to satisfy people’s seemingly unlimited wants Markets where productive resources are bought and sold are ______ markets.

Correct A ) factor The key feature of the circular flow of economic activity is the Correct C ) market. Economics is based on Correct B ) scarcity. includes the tools, equipment, machinery, and factories used in the production of goods and services. Correct B ) Capital Twenty percent of the world’s people in the wealthiest nations consume ____ percent of the world’s goods and services. Correct A ) 86 In this passage, “Too much marketing today focuses on awareness rather than reasons to buy. In the old days, awareness advertising was more effective.

There was less competition. All you had to worry about was whether or not people remembered your product. As technology and more kinds of media have come about, it’s no longer enough to be remembered. The consumer has too many choices. Your marketing has to send the message that you are relevant. You need to be sending reasons to buy. ” Advertisers are advised to focus on the economic concept of Correct C ) utility Manufactured goods needed to produce other goods and services are called Correct B ) capital goods. The dollar value of all final goods and services and the ost comprehensive measure of a country’s total production output is Correct D ) Gross Domestic Product (GDP). The three basic economic questions everyone must answer are Correct C ) WHAT to produce, HOW to produce, FOR WHOM to produce. Human capital is Correct B ) the sum of the skills, abilities, health, and motivation of people. According to Alice Rivlin in this passage: “Economic literacy is like having a working knowledge of a foreign language. If you are with a group of foreigners and don’t speak their language at all, you feel excluded.

If you have a rudimentary working knowledge of the language, you can at least follow the drift of the conversation, ask a few questions and feel that, even if you are not getting the fine points, you are not totally left out and you have a basis for acquiring more knowledge. That, it seems to me, is what economic literacy means-a rudimentary working knowledge of the concepts and language of economic activity. If you have a rudimentary working knowledge of economic concepts, you will be Correct B ) able to ask questions to gain more knowledge. Factors of production is/are Correct

B ) productive resources that make up the four categories of land, capital, labor, and entrepreneurship. “There Is No Such Thing As A Free Lunch” reminds us that Correct A ) resources are scarce and that we must make careful economic decisions regarding WHAT, HOW, and FOR WHOM to produce. In this passage, “To take an example,… One man draws out the wire, another straightens it, a third cuts it, a fourth points it;… and [the making of] a pin is, in this manner, divided into about eighteen distinct operations. ” Adam Smith is describing the basic economic concept of Correct

C ) division of labor. The situation in which some necessities have little value while some non-necessities have a much higher value is known as Correct A ) paradox of value. The money used to buy the tools and equipment needed for production is known as Correct C ) financial capital. In which type of economy do consumers and privately owned businesses make the majority of the WHAT, HOW, and FOR WHOM decisions?. Correct B ) free enterprise Division of labor is a characteristic of Correct B ) assembly line production. The free market economy has developed a strong Correct

B ) system of banks. In modern economies, the medium of exchange is Correct B ) money. Which of the following lists the four factors of production? Correct D ) land, labor, capital, entrepreneurs Actions in one part of the country or world that have an economic impact on what happens elsewhere are examples of Correct D ) economic interdependence. Uneven distribution of oil reserves around the world is an example of scarcity of Correct C ) geography. One advantage of a ___________ economy is that it gradually adjusts to change over time. Correct A ) market A traditional economy is an Correct

B ) economy in which the allocation of resources and nearly all other economic activity from ritual or habit. The high degree of freedom in a market system is illustrated by the fact that Correct A ) producers can make whatever they think will sell. To arrive at an economic decision, a decision-making grid may be used to evaluate Correct C ) alternative choices of action. Who makes economic decisions in a command economy? Correct C ) the government An example of a market economy is Correct C ) the United States Economics is the use of what to produce and distribute goods and services? Correct D ) resources

In the cost-benefit analysis described in this passage: “Research has long demonstrated the educational value of early intervention for America’s at-risk children, but a new study also shows the federal programs are a wise public investment. who are the investors A cost-benefit analysis of the federally funded Chicago Child-Parent Center program, which serves children from low-income families in Chicago’s inner city [shows that] an average annual cost of $6,730 per child generated a total return to society at large of $47,759 per participant. ” Who benefited from the savings? Correct C ) all of society

A popular model used to illustrate the concept of opportunity cost is Correct A ) the production possibilities frontier. Which of the following best describes the relationship between trade-offs and opportunity costs? Correct A ) Opportunity costs are incurred when trade-offs are made. The study of economics is important because it enables us to Correct C ) become better decision makers. The most important function of a distribution system is to link _____. Correct C ) producers and consumers Which term refers to the idea that if you have more of one thing, you must have less of another? Correct

B ) opportunity cost What type of economic system does this passage: “So long as mankind lived by raising crops and herding animals, there was not much need for measuring small units of time. The seasons were all important-to know when to expect the rain, the snow, the sun, the cold. Why bother with hours and minutes? Daylight was the only important time, the only time when men could work. ” describe? Correct A ) traditional economy The purpose of government in a command economy is to Correct C ) make major economic decisions. A market economy Correct A ) does not provide for everyone’s basic needs.

Opportunity cost is the Correct D ) cost of the next best alternative use of money, time, or resources when one choice is made rather than another. An economy at its production possibilities frontier is operating Correct B ) at full potential. The term “standard of living” refers to Correct A ) quality of life in a country. Bar graphs Correct A ) shows relationships between different data series is the bar graph. Here the height of the bar represents the measured value or frequency: The higher or longer the bar, the greater the value. The main drawback of the traditional economy is that it

Correct A ) tends to discourage new ideas and ways of doing things. In the economic system described in this passage: “Diaguita Indians have lived in this region for generations… We grow beans, corn and potatoes on the mountain slopes. To irrigate these crops, we still use the channels built centuries ago by our ancestors. We also breed llamas. In our community, the more llamas you own, the richer you are” . answers to the basic economic questions would be determined by Correct A ) habit and custom. All of the following are characteristics of a command economy EXCEPT

Correct B ) public services are available at little or no cost. In a ____________ economy, a central authority makes most of the WHAT, HOW, and FOR WHOM decisions. Correct B ) command What do we call a way of thinking that compares the cost of an action to its benefits? Correct A ) cost-benefit analysis What is the single largest source of revenue for the federal government? Correct C ) individual income taxes The benefit principle of taxation states that Correct D ) people who benefit from government goods and services should pay taxes according to the benefit they receive

FICA includes taxes to pay for Correct A ) Social Security and Medicare. Personal individual income tax is a _____________ tax. Correct B ) regressive An exception or oversight in the tax law that allows some people and businesses to avoid paying taxes is called a Correct C ) tax loophole The three criteria for effective taxes are Correct D ) equity, simplicity, and efficiency A ________ tax paid by corporations on their income. Correct D ) corporate income tax This passage: “We’ll cut your taxes” is the most repeated campaign promise in the history of American politics.

Yet somehow it is still considered visionary, worth a fight. Worth, indeed, a crusade. Why? It’s in our blood. Historically, Americans have hated taxes, and not merely because we had to pay them. We’ve hated taxes because we’ve perceived them to be an infringement on our liberty-and the source of big, powerful, and mischievous government. This was true from the beginning. It wasn’t just “taxation without representation” that bothered us so much. It was taxation. Period. ” compares the feelings of Americans toward taxation today to those same feelings around the time of the Correct C ) American Revolution.

The incidence of a tax can more effectively be shifted from the supplier to the consumer if Correct A ) the demand curve is inelastic. The ability-to-pay principle of taxation states that Correct C ) people should be taxed according to their ability to pay. Iowa residents can take solace in knowing that they’ll likely help the state with its budget crunch if President Bush cuts federal taxes. Iowa’s softening economy has left state government revenue stagnant, a problem caused by a lack of spending by Iowans. Sales-tax receipts have barely bumped up from last year, and it’s coming back to hit the state budget.

In Iowa, residents get to deduct their federal income taxes from their state income taxes. So if the federal government saves Iowans $1 billion in income a tax, that’s $1 billion that the state will get to tax. According to the passage, how will a cut in federal income taxes help the Iowa state budget crunch? Correct A ) The state can tax more of residents’ income. Intergovernmental revenues are generally intended for Correct A ) education and public welfare. According to the passage: America can celebrate Tax Freedom Day┬« on May 3, 2001, according to the Tax Foundation’s annual calculation.

That means that the nation’s taxpayers have to work from January 1, 2001, to the 123rd day of the year before earning enough money to pay for government-federal, state, and local-and start spending money on themselves. … Individual income taxes represent the largest component of Americans’ tax bills…. what is the meaning of “Tax Freedom Day”? Correct D ) By that day, you have earned enough to pay your income taxes for the year. The authority to levy a federal income tax comes from Correct B ) the Sixteenth Amendment. An excise tax is a Correct B ) tax on the manufacture and sale of selected items. The “incidence of a tax”

Correct B ) refers to those who bear the final burden of taxation. A _____________ tax is tax on tangible and intangible possessions, such as real estate, buildings, furniture, stocks, bonds, and bank accounts. Correct B ) property The three largest sources of revenue for local governments are Correct A ) utility and liquor store income, property tax, and intergovernmental revenues. FICA is Correct D ) tax levied on employers and employees to support Social Security and Medicare According to the passage: “Back in 1940, when the Social Security program was just getting under way, average life expectancy was less than 64 years.

The program’s designers expected that most people would contribute to the program most of their lives and die before collecting a dime in retirement benefits. Today, average life expectancy in the United States is more than 75 years. As life expectancy has soared, birthrates have declined, leaving fewer and fewer workers to support the ballooning number of retirees. In 1950, [the system] was solidly supported with 16 workers paying for each retiree; today, there are just over three workers per beneficiary. ” The increase in average life expectancy has created a problem for the Social Security system because

Correct B ) more people are collecting retirement benefits. The two broad categories of government spending are Correct B ) the purchase of goods and services and payments to disadvantaged groups. Although direct mail and special events are typical fundraising methods, one senator who was challenging an incumbent got the most money from his own personal phone calls to donors. Correct A ) True Transfer payments from the government to individuals or other levels of government might be used for all of the following EXCEPT Correct C ) maintenance of the armed forces. A Value-added tax is Correct

A ) tax placed on the value that manufacturers add at the end of production. Based on this passage: “Every year at this time, Congress discovers, with a great public show of dismay and indignation, the existence of the American tax code and the agency that administers it, the Internal Revenue Service. There are high-minded calls for abolishing the current tax system and replacing it. Around April 15, Congress likes to pretend that the tax code just sort of appeared or just happened. But the Constitution puts the burden of taxes solely, exclusively and entirely on Congress’ shoulders.

The tax code is the way it is because a majority of Congress wants it that way. Members of Congress probably like to pretend that the tax code just “sort of appeared” because they Correct B ) don’t want voters to associate them with taxes. Leisure and creative pursuits are called Correct D ) culture The Taxpayer Relief Act of 1997 Correct D ) did little to benefit people without children or capital gains. Overall, who benefited most from tax reform in 1997? Correct C ) the top 20 percent of wage and income earners __________ is the part of the economy made up of federal, state, and local governments. Correct

B ) Public sector The flat tax Correct D ) simplifies the tax process. A value-added tax (VAT) is Correct B ) tax on the value added at every stage of the production process The alternative minimum tax Correct B ) requires people to pay a minimum tax of 20 percent. The VAT is a ______ tax. Correct D ) federal All of the following are effects of increased government spending EXCEPT Correct D ) a decrease in competition between the public and private sectors. The flat tax Correct C ) departs from ability-to-pay principle of taxation. All levels of government combined consume about Correct B ) one-third of the nation’s output.

All of the following EXCEPT one are advantages to a value-added tax. Correct B ) it is invisible to consumers All of the following are effects of the federal debt EXCEPT Correct D ) interest rates are lowered. An example of mandatory spending is financing for Correct A ) interest payments on the federal debt. The pay-as-you-go provision is Correct D ) requirement that new spending proposals or tax cuts must be offset by reductions elsewhere. Who pays for the maintenance on the state highway linking Tyler, Texas, with Corsicana, Texas? Correct C ) Texas The sequence for the approval of the federal budget is Correct

B ) president to Congress back to president. Based on the facts given in the passage: “One result of the current Social Security debate has been to concentrate the public’s mind on the true economic condition of the elderly. While the top 20% of seniors are relatively affluent? almost all of the rest are highly dependent on Social Security. The program provided at least half of the total income of more than 55% of senior citizens and at least 75% of the total income of more than a third. Social Security lifted 11. 4 million seniors-or nearly half of the 65-and-older population-out of poverty, cutting the elderly’s poverty rate from 47. % to 11. 9%. ,” approximately how many Americans are age 65 or older? Correct C ) slightly under 22. 8 million Of the four categories listed below, which accounts for the largest amount of local expenditures? Correct B ) public utilities Which of the following statements best describes the relationship of the federal deficit to the federal debt? Correct B ) The federal deficit leads to borrowing, which adds to the federal debt. According to the passage: “One result of the current Social Security debate has been to concentrate the public’s mind on the true economic condition of the elderly.

While the top 20% of seniors are relatively affluent? almost all of the rest are highly dependent on Social Security. The program provided at least half of the total income of more than 55% of senior citizens and at least 75% of the total income of more than a third. Social Security lifted 11. 4 million seniors-or nearly half of the 65-and-older population-out of poverty, cutting the elderly’s poverty rate from 47. 6% to 11. 9%. ,” about what percentage of the elderly would be living in poverty if the Social Security system did not exist? Correct A ) 47. 6% The United States government accumulated huge deficits during the 1980’s due to

Correct C ) a doubling of spending on national defense. All of the following are differences between the federal debt and private debt EXCEPT Correct C ) the federal debt is the total amount of money borrowed from investors. Interest on debt is Correct D ) costs incurred by both state and local governments for borrowing money Which of the following is NOT an example of a local government? Correct C ) neighborhood associations The federal debt is Correct D ) amount borrowed to finance deficit spending budget with neither a surplus or deficit Which of the following is an example of an entitlement payment?

Correct B ) federal money given to a senior citizen as a Social Security payment All of the following are local officials with approval power for spending EXCEPT Correct D ) the tax assessor. Which of the following statements best describes the relationship of the federal deficit to the federal debt? Correct B ) The federal deficit leads to borrowing, which adds to the federal debt. From the choices below, identify when the federal government began significant deficit spending. Correct C ) 1980’s Of the four categories listed below, which accounts for the largest amount of state expenditures?

Correct D ) higher education Who formulates the federal budget? Correct C ) the president Of the four categories listed below, which accounts for the largest amount of local expenditures? Correct B ) public utilities Based on the passage: “The Aztec in Central America used cacao beans, from which chocolate is made, as money. Prices varied from a few beans for a piece of fruit to several thousand for an enslaved person. Aztec merchants had to take care when selling expensive items. Payment usually came stored in sacks, and the sacks might contain counterfeit money-bean husks filled with mud. What type of money did the Aztec use? Correct D ) commodity money Which of the following statements about a gold standard is FALSE? Correct C ) It is easier to expand the money supply. The United States government ended the gold standard in Correct B ) 1934. Based on the passage: ” To get its new Sacajawea dollar into circulation, the U. S. Mint has issued more than 500 million of the golden coins since the end of January, not only to banks, but also to Wal-Mart and Sam’s club stores. But in what may be the greatest coin trick ever, the dollars have all but vanished.

People are making them into jewelry, auctioning them off on eBay, and leaving them under pillows on behalf of the tooth fairy-anything but spending them…. The Mint expects Sacajawea to be back in circulation by year-end, when more than a billion of the dollars will have been minted and the novelty, it hopes, will have worn off. ” Sacajawea dollars have disappeared because many people believe they are Correct A ) worth more as a commodity than as currency. According to the passage: “After the collapse of the Soviet Union in 1990, Russian currency was not trusted. Real money played a fairly small part in Russia’s economy.

Most business was conducted by barter or with IOUs. For example, workers rarely received wages in the form of cash. A bicycle factory outside the city of Perm paid its workers in bicycles! To get cash, the workers had to sell their “paychecks” More often than not, they simply traded the bicycles for the products they want. ” most business in Russia, at that time, was conducted without currency because Russian currency was not Correct A ) accepted. Greenbacks and United States notes were issued to Correct A ) raise money to finance the Civil War. The value of fiat money is Correct D ) faith in the government.

These passages in the United States Constitution” “Article 1, Section 8: The Congress shall have the power: To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures; To provide for the punishment of counterfeiting the securities and current coin of the United States; To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof and in Article 1, Section 10: No State shall coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts…. ” made which of the following statements true at that time? Correct C ) The government could not print paper money.

Which of the following statements about a gold standard is FALSE? Correct C ) It is easier to expand the money supply. The problem with Continental dollars was that Correct A ) so much was printed they became nearly worthless. Money that has an alternative use as an economic good is Correct A ) commodity money. Money functions as all of the following EXCEPT Correct D ) a measure of value. One disadvantage of using gold as a standard for money is Correct D ) paper currency holders could exchange it for gold. What is the origin of the American dollar? Correct B ) the Spanish peso and shillings Money by government decree; has no alternative value or use as a commodity is called Correct C ) fiat money

Fiat currency is also known as ________. (hint: look at the paper money in your possession. ) Correct A ) legal tender The part of modern money that we can touch consists of Correct B ) Federal Reserve Notes. Local banks in the 1800’s that printed too much money were called Correct A ) wildcat banks. ________ is/are the monetary standard under which the basic currency unit is equivalent to, and can be exchanged for, a specific amount of gold Correct D ) Gold standard To make a difference with the Spanish peso, Benjamin Franklin and Alexander Hamilton divided the dollar into Correct B ) tenths (10 equal pieces). Most stocks in the United States are traded on the

Correct B ) over-the-counter market. In what city was America’s first stock exchange located? Correct B ) Philadelphia To determine Gross National Product, Correct C ) add to GDP all payments received by Americans outside the U. S. and subtract payments made to foreign-owned resources in the U. S. In 2001, the national debt was $5. 1 trillion dollars. When President Obama was inaugurated in January of 2009, the national debt was $10. 6 trillion. Sixteen months later the national debt is Correct A ) $13. 1 trillion dollars. In the Gross Domestic Product defense spending is in which sector? Correct B ) governmenGross Domestic Product is Correct

D ) dollar amount of all final goods and services produced within a country’s borders in a year. Which is the best measure of the nation’s income? Correct B ) GNP Which stock exchange the largest electronic screen-based equity securities trading market in the United States. Correct D ) NASDAQ A bull market is a Correct C ) period during which stock market prices move up for several months or years in a row. The Efficient Market Hypothesis argues that Correct A ) stocks are always priced about right and bargains are hard to find. A bear market is a Correct A ) period during which stock market prices move down for several months or years in a row.

The great majority of stocks in the United States are traded on Correct C ) the over-the-counter market. The Efficient Market Hypothesis argues that Correct A ) stocks are always priced about right. According to the United States Treasury, the US national debt is the Correct A ) principal amount owed by the US to its lenders, for example, China and Japan A stock transaction that is made immediately at the market price is made in the Correct B ) spot market. The largest sector of the macroeconomy is the Correct D ) consumer sector. The Dow Jones Industrial Average (DJIA) represent what market value of all U. S. stocks on the New York Stock Exchange Correct A ) fifth (20%)

Which of the following is the most important aggregate of how a country is doing economically? Correct C ) gross national produce Investors who sign a contract guaranteeing them the option of selling shares of stock at a specified price in the future have agreed to a Correct D ) put option. In the model GDP = C + I + G + F, the “F” represents the Correct B ) difference between the dollar value of goods sent abroad and goods purchased from abroad. Since colonial times, the average size of a household in the United States has Correct B ) decreased. Which best describes the movement of the center of population of the United States? Correct C ) east to west

By April 2000, the population of the United States stood at about 281. 4 million people. This year’s anticipated census will be _____ million people. Correct D ) 309 The official count of all people in the United States is called Correct D ) the decennial census. A price index is a ______________. Correct C ) a statistical series that can be used to measure changes in prices over time Real GDP is Correct D ) GDP adjusted to remove the distortion of inflation. Life expectancy is the Correct A ) average remaining life span in years for persons who attain a given age. Since colonial times, the rate of growth of the United States population has Correct B ) steadily decreased.

What is the implicit GDP price deflator? Correct A ) a price index that measures price changes in GDP All of the following factors affect population growth EXCEPT Correct A ) demographers. All of the following statements about real GDP are true EXCEPT Correct C ) real GDP is the same as current GDP. Which of the following is the correct way to calculate real GDP? Correct B ) Divide current GDP by the implicit GDP price deflator and then multiply by 100. The United States lost 600,000 soldiers during World War II and another 37,00 in the Korean War. In the years from 1946 until 1964 there were 76 million babies born. This era has been named the Correct B ) baby boom.

The official count of all people in the United States is called Correct D ) the decennial census. Economists know it is important to track inflation because it Correct B ) distorts statistics about overall economic performThe mean center of United States population (using the centroid definition) has been calculated for each U. S. Census since 1790. Currently this point is located in Correct D ) Missouri. All of the following factors affect population growth EXCEPT Correct A ) demographers. To construct a price index, all of the following are needed EXCEPT Correct B ) the current inflation rate. Business cycles are Correct A ) nonsystematic upturns and downturns of real GDP.

Real GDP per capita is the preferred measure of economic growth over the long run because Correct B ) prices and the population change over time. This marked the beginning of the Great Depression in 1929: Correct D ) stock market crash The United States experienced almost no growth in real GDP per capita Correct A ) between 1929 and 1939. Which of the following factors affect economic growth? Correct D ) all of the above Which of the following statements about economic growth is FALSE? Correct C ) Economic growth decreases the tax base. Increasing productivity results in Correct A ) increasing economic growth. An econometric model is a Correct

D ) macroeconomic model that uses algebraic equations to describe how the economy behaves. A number of factors are important to economic growth-especially the quantity and quality of the Correct C ) factors of production (A)(An) ___________ is a monthly statistical series that anticipates changes to the real GDP. Correct D ) index of leading indicators The United States experienced almost no growth in real GDP per capita Correct A ) between 1929 and 1939. A period during which real GDP declines for two quarters in a row, or six consecutive months, is call a(n) ___________. It begins when the economy reaches a peak, and ends when the economy reaches a trough. Correct A ) recession The passage: “A key gauge of future U. S. conomic activity declined 0. 5% last month, as the Sept. 11 terrorist attacks in New York and Washington weakened an already troubled economy. The Conference Board said Monday its index of leading economic indicators fell to 109. 2 in September,… the largest one-month decline since January 1996…. The index indicates where the overall U. S. economy is headed in the next three to six months…. The economy had been struggling for several months before the Sept. 11 attacks. Many economists have said they believe that a recession is unavoidable with the new uncertainties raised by the disaster. ” discusses a business fluctuation influenced by Correct D ) external shock.

The _____ is a composite index of 11 economic series that move up and down in advance of changes in the overall economy; statistical series used to predict business cycle turning points. Correct C ) econometric model Your ________ is the quality of life based on the possession of necessities and luxuries that make life easier. Correct B ) standard of living Increasing productivity results in Correct A ) increasing economic growth. The business cycle since World War II has been characterized by Correct A ) extended expansions alternating with brief recessions. Changes in ____________ expenditures are one cause of business cycles. Correct D ) capital A major feature of a __________ is its ability to increase real per capita output enough to allow people to raise their standard of living.

This system also increases people’s free time, allowing them to devote more attention to families, hobbies, and recreational activities. Correct C ) free enterprise economy When productivity grows, people produce relatively ______ with the same amount of inputs, and the prices of goods and services tend to stay _______. Correct D ) more, low The change in price level is the _______. Correct B ) an increase in the general price level Prices tend to _______ during expansions and then ________ during recessions. Correct A ) rise faster, slow down To measure the price level, economists select a market basket of goods and then construct a price index such as the Correct B ) consumer price index, producer price index, or implicit GDP.

Because there are always some workers who are in the process of changing jobs, there will always be some ____________ unemployment in the economy. Correct D ) frictional According to the passage: “The nation’s unemployment rate rose to 4. 5 percent in June as manufacturers continued to suffer heavy job losses and demand for workers in service industries fell to the lowest level in 10 months. The Labor Department reported Friday that the jobless rate rose 0. 1 percentage point from a 4. 4 percent rate in May. The 4. 5 percent level matched the unemployment rate in April with both months representing the highest level the jobless rate has reached in the year-long economic slowdown. ” what was the highest level that unemployment reached that year? Correct D ) 4. % All of the following are theories regarding the cause of inflation EXCEPT Correct C ) cost-pull. Unemployment that occurs when a fundamental change in the operations of the economy reduces the demand for workers and their skills is called ___________ unemployment. Correct A ) technological The ________ curve is a curve that shows how much the actual distribution of income varies from an equal distribution. Correct B ) Lorenz At the peak of the Great Depression 1 out of ____ were unemployed. Correct A ) 4 A relatively low rate of inflation, usually 1 to 3 percent annually is Correct A ) creeping inflation A booming economy. Record-low unemployment.

A blizzard of pink slips [a note stating that a person has been fired]. What’s wrong with this picture? The fact is, even in the best of times hundreds of thousands of people lose their jobs through no fault of their own…. You might not get any advance warning, so don’t be caught off guard. Have an up-to-date resume and networking system…. You want to be able to launch your job search soon after you get the bad news. What type of unemployment does this passage describe? Correct D ) frictional The unemployment rate understates employment conditions for all of the following reasons EXCEPT Correct A ) some workers are “between jobs” for one reason or another. Galloping inflation is Correct

B ) intense form of inflation that can go as high as 100 to 300 percent The passage: “For all the recent talk of cutting taxes, Congress rarely cuts them when the economy is growing robustly, as it is now, and unemployment is low. The worry among economists is that the extra money in people’s pockets may make an already strong economy too strong, finally stoking inflation after a long period of relatively stable prices. ” describes rising inflation as a possible result of Correct B ) a booming economy. According to the demand-pull theory, inflation is caused by Correct D ) consumers. Full employment is reached when the employment rate drops below _____ percent. Correct B ) 4. 5 Changes in technology and changes in consumer tastes can cause Correct B ) structural unemployment.

According to the demand-pull theory, inflation is caused by Correct D ) all of the above. Unemployment that is directly related to swings in the business cycle is Correct C ) cyclical unemployment According to the passage: “The Bank of Amsterdam was established in Holland in 1609. At that time, Amsterdam was a center of world trade. More than 340 different kinds of silver coins and about 500 types of gold coins circulated throughout the city. Dutch merchants had little idea how much these coins were worth, so the Bank of Amsterdam was set up under a charter from the city to standardize the currency. The Bank of Amsterdam operated as Holland’s central bank for more than 200 years.

After making a series of bad loans, however, it failed and went out of business in 1819-almost 100 years before America’s central bank was founded. ” why did the Bank of Amsterdam stop operating? Correct C ) It made bad loans. actions by the Federal Reserve System to expand or contract the money supply in order to affect the cost and availability of credit Correct D ) monetary policy A portion of the deposits in the form of coins and currency that banks and other depository institutions are required to hold are called ________ reserves. Correct D ) legal The quantity theory of money holds that excessive increases in the monetary supply Correct C ) lead to inflation.

Federal Reserve Chairman Alan Greenspan decided seven years ago to publicize the central bank’s interest-rate moves once they were made. Now, each meeting of the Fed-whether the central bank changes rates or not-triggers a chorus of instant analysis of what it means for the economy and the financial markets. Which function of the Federal Reserve is the subject of this passage? Correct C ) regulating the money supply The Fed remains largely independent from politics for all of the following reasons EXCEPT Correct D ) the president and Congress appoint new members to vacant seats on the Board of Governors. he dilemma faced by the Fed when considering monetary policy is the choice between Correct A ) inflation and interest rates.

Based on this quotation: “Not too many years ago, Federal Reserve officials conducted monetary policy as if they were members of the Politburo plotting behind the thick walls of the Kremlin. ” the author believed that the Federal Reserve had been too Correct D ) secretive. When command economies make the transition to capitalism, they face all of the following challenges except Correct A ) the Gosplan. Correct B ) debts and obligations. The Fed has defined different categories of money, M1 and M2, according to the money’s Correct B ) function. Repeated short-run attempts to keep interest rates low result in a _________ of the money supply, making inflation _________. Correct A ) long-term expansion, worse e FED has defined M2 as Correct A ) represents the components of the money supply that most closely conform to money’s role as a. store of value. Which letter designations mark Fed actions that will expand the money supply? Correct B ) Lower reserve requirement, Buy bonds, Lower discount rate. The ___________ is the interest the Fed charges on loans to financial institutions. Correct D ) discount rate Assets are Correct A ) properties, possessions, and claims on others. n the long run, changes in the supply of money affect the ____________. Correct C ) general level of prices Which letter designations mark Fed actions that will contract the money supply? Correct

C ) Raise reserve requirement, Sell bonds, Raise discount rate For a bank to be profitable, how much of a spread must it maintain between the rate it charges on loans and the rate it pays for borrowed funds? Correct B ) 2-3 percent A balance sheet shows all of the following EXCEPT Correct A ) bank assets on the right of the T account. All of the following are tools of monetary policy EXCEPT Correct C ) tight money controls. The dilemma faced by the Fed when considering monetary policy is the choice between Correct A ) inflation and interest rates. The price of credit is the ______. Correct A ) rate of interest At times the Fed monetizes the debt in order to Correct

B ) keep interest rates from rising. In the short run, monetary policy affects Correct C ) interest rates and available credit. The social costs of economic instability include all of the following EXCEPT Correct A ) stagflation. Those who favor supply-side policies would tend to support the government playing Correct B ) a reduced role in the economy. Monetarism is described as Correct D ) emphasis on the role of money and its growth as a key to controlling inflation and unemployment. Deregulation is most closely associated with Correct D ) supply-side economics. Economic instability wastes all of the following EXCEPT Correct C ) tax revenues.

According to John Maynard Keynes’s theory of the multiplier-accelerator effect, a decline in investment spending will Correct B ) lead to a downward spiral of the economy. ____________ policies are federal policies designed to increase or decrease total demand in the economy by shifting the aggregate demand curve to the right or to the left. Correct D ) Demand-side Aggregate demand will increase Correct D ) if consumers save less and spend more. Unlike demand-side economics, supply-side economics Correct A ) advocates reduced government involvement in business. The unofficial statistic that is the sum of monthly inflation and the unemployment rate; same as discomfort index is Correct B ) misery index

According to Keynesian economics, only the _________ sector is big enough to step in and offset changes in investment sector spending. Correct B ) consumer The ____________ is the sum of the monthly inflation and unemployment rates. Correct A ) misery index Which is an example of the uncertainty caused by economic instability? Correct B ) A consumer delays a purchase. Social costs are Correct D ) price of economic instability in human terms. The _____________ like unemployment insurance and Social Security protect consumers and the economy in general if economic conditions worsen. Correct A ) automatic stabilizers Which of the following statements is FALSE? Correct B ) Economic instability is at the root of all social problems. John Maynard Keynes Correct

D ) introduced his theories in 1936. The social costs of economic instability include all of the following EXCEPT Correct A ) stagflation. Economists measure the cost of economic instability with Correct D ) both a and b Wage price controls are Correct B ) regulations making it illegal for businesses to give workers raises or to raise prices without the explicit permission of the government. Stagflation is ________. Correct B ) period of stagnant growth combined with inflation The use of government spending and taxing to influence economic activity is called _ Correct B ) fiscal A period of stagnant growth combined with inflation is known as ____________. Correct

B ) stagnation The basis for international trade stems from Correct B ) the differences in production costs from one country to another. The Council of Economic Advisers Correct C ) advises the president on economic developments and strategy. The three-member group that reports on economic developments and proposes strategies to the president is called the Correct A ) Council of Economic Advisers. Which is the best description of the role of the Council of Economic Advisers? Correct A ) report economic developments and propose strategies The nation’s monetary policy Correct A ) often comes under attack from politicians. The United States imports Correct

C ) billions of dollars in products each year. Which of the following is proof that international trade is beneficial? Correct C ) the fact that free nations choose to trade vThe three-member group that reports on economic developments to the president is called the Correct B ) Council of Economic Advisers. A country has a(n) ___________ whenever it is able to produce more of a given product than another. Correct A ) absolute advantage ____________ economic policies grew out of the unemployment and other problems that occurred during the Great Depression of the 1930’s. Correct D ) Demand-side All of the following describe economists EXCEPT Correct

B ) economists are sharply divided into competing schools of thought with little overlap of ideas and beliefs. If a country wants to trade a product with another country, it must have a(n) ___________ in the production of that product. Correct D ) comparative advantage Alpha can produce either 10 apples or 3 oranges. Beta can produce either 12 apples or 3 oranges. Correct C ) Beta has an absolute advantage in the production of apples. Imports are Correct B ) goods and services that one country buys from other countries. The ability of a country to produce a product with greater output per unit of input is Correct A ) absolute advantage. . A country has a comparative advantage when it can