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Economics and Personal Finance Mid-Term Exam 2016
Which of the following occurs during inflation?
How can property rights be diminished?
a. the prices of goods decrease
a. if an individual buys the property
b. costs of production decrease
b. if a business buys the property
c. the purchasing power of money decreases
c. when the property rights are not well defined
d. when the property is sold as a foreclosure
If a programmer injures his wrist from using his computer
in an unsafe position, he should contact the
a. Environmental Protection Agency
b. Social Security Administration
c. Securities and Exchange Commission
d. Occupational Safety and Health Administration
In a competitive environment, a consumer has a choice in
___________________________, service, and price.
a. quality
b. market
c. taxes
d. production
Suppose five banana companies agree on a set price for
bananas. What is another name for this band of
d. the incomes of consumers decrease
Which would you use to determine a Producer Price
Index market basket?
a. raw materials, intermediate goods, final goods
b. raw materials, governmental services,
intermediate goods
c. intermediate goods, governmental services, final
d. governmental services, raw materials, final goods
When the actual inflation rate is lower than the expected
inflation rate, this is ___________________________.
a. bad for borrowers and good for lenders
b. good for borrowers and bad for lenders
c. bad for borrowers and lenders
d. good for borrowers and lenders
A decrease in the price level can cause interest rates to
decrease. This leads to ___________________________
investments and a(n) ___________________________ in
the amount that consumers spend.
a. monopoly
a. fewer; decrease
b. cartel
b. fewer; increase
c. substitutes
c. more; decrease
d. monopsony
Which of the following is included in the gross domestic
d. more; increase
The aggregate demand curve could shift because of
changes to any of the following factors EXCEPT for which
a. volunteer work
b. dental visits
a. a decrease in net exports
c. welfare
b. neutral expectations for the economy
d. financial transactions, such as the purchase of
stocks and bonds
c. an increase in worker wages
d. an increase in government funding
The Federal Reserve has responsibility for all of the
following EXCEPT ___________________________.
a. appointing the chairman of the Federal Reserve
b. controlling the U.S. financial market monetary base
to maintain stability
c. regulating U.S. banks to promote reliability
d. supplying paper currency and coins to the country's Generally, the multifactor productivity in the United
States' manufacturing sector
How is the Federal Deposit Insurance Corporation funded? ___________________________ from 1987 to 2007.
a. by the taxes collected from Americans
a. decreased slightly
b. by the surplus in government expenditures
b. roughly doubled
c. by the income received from premium payments of
insured banks and investments in U.S. Treasury Bonds.
d. by the payments made by commercial banks to the
Federal Reserve
Suppose the federal government wants to control high
levels of inflation. What type of fiscal policy should it
c. increased substantially
d. remained unchanged
Please refer to the graph below to answer the following
a. an expansionary monetary policy
b. a contractionary monetary policy
c. an expansionary fiscal policy
d. a contractionary fiscal policy
Historically, when has growth in the national debt been
highest in the United States?
a. during periods of economic expansion
___________________________ likely contributes to
January unemployment peaks.
b. during periods of economic recession
c. during peacetime
d. during wartime
Please refer to the graph below to answer the following
a. Seasonal unemployment
b. Structural unemployment
c. Frictional unemployment
d. Inflational unemployment
Please refer to the graph below to answer the following
origami cranes, while Jessica has one in making flowers.
b. Akiko has a comparative advantage in making
origami flowers, while Jessica has one in making cranes.
c. Jessica has a comparative advantage in making
both origami flowers and cranes.
When did the economy experience inflation of more than
d. Both Jessica and Akiko have a comparative
advantage in making origami cranes.
Typically, it is more expensive for foreigners to buy U.S.
goods when the U.S. dollar
a. deflates
a. about 1920
b. appreciates
b. about 1930
c. depreciates
c. about 1960
d. about 1980
Which of the following is an example of monopsony?
d. remains at a fixed exchange rate
Free trade agreements (FTAs) support free trade,
investment, and which of the following?
a. One company has control over the telephone
market in a local neighborhood.
a. the availability of student scholarships
b. One professional basketball player is renowned for
his athletic abilities and skills.
c. environmental protection
b. the maintenance of border security
c. One company hires unskilled labor, while another
company hires skilled workers.
d. oversight of workers’ wages
City parks are maintained by
d. One wage worker earns more than another wage
worker doing the same job.
All of the following could cause a decrease in the national
debt EXCEPT for which one?
a. the federal government
b. state governments
c. local governments
a. a period of economic expansion
b. a budget surplus
c. an increase in payroll taxes
d. an increase in government borrowing
Jessica and Akiko are making origami figures for a school
fundraiser. Jessica can make three origami flowers or one
origami crane in one hour. Akiko can make two origami
flowers or two origami cranes in one hour. Which of the
following about comparative advantage is correct?
a. Akiko has a comparative advantage in making
d. none of the above
International trade and globalization are
a. recent phenomena
b. possible only because of the Internet
c. notions that have been around for centuries
d. current ideas introduced through
Why might a business choose to ship its goods via
maritime transportation instead of air transportation?
a. It is shipping perishable goods.
b. It is shipping a massive quantity of goods.
c. It is shipping goods that need to move to another
continent very quickly.
d. All of the above.
In the U.S. economy,
a. prices signal the value of goods and
b. people decide how to use their property,
within the limits of the law
c. buyers and sellers make voluntary
d. All of the above
Economics is the study of
Work efforts plus employees' talents and skills
are _______________.
a. how individuals make choices
b. how societies make choices
c. how choices are made under the condition
of scarcity
d. All of the above
John went to the movies on Saturday night. His
next best alternative was staying home. The value
that John gave up by not staying home is called
a. scarcity
b. the opportunity cost
c. the unintended cost
d. the positive consequences
A "Do Not Touch" sign on a wet park bench
actually results in more people touching the bench.
This is an example of a(n)
a. unintended consequence
b. positive consequence
c. intended consequence
d. trade-off
a. natural resources
b. capital resources
c. human resources
d. All of the above
A production function shows output that can be
produced from _______________.
a. government regulations
b. prices and consumer preferences
c. natural, human, and capital resources
d. unlimited inputs
Businesses buy resources from a ____________
market and sell goods and services in a
_________ market. Households buy these goods
and services in a __________ market.
a. product, consumer, factor
b. factor, product, consumer
c. consumer, factor, product
d. factor, demand, supply
Which factor will NOT change the demand for a
product? _______________
Complete control of the business and keeping all
the profits are advantages of a ____________;
raising capital by selling shares and limited
liability are advantages of a _________________.
a. corporation, partnership
b. sole proprietorship, partnership
c. sole proprietorship, corporation
a. change in income
b. change in tastes
c. change in consumer expectations
d. change in price
Suppose that gloves and mittens are substitutes.
If the price of gloves increases, the demand for
mittens ______________.
d. franchise, corporation
In a market economy, ___________________
results in more choices, improved quality, and
lower prices.
a. competition
b. more government regulations
c. fewer producers
a. decreases
b. increases
c. does not change
d. None of the above
Steel is a factor of production for cars. If the
price of steel increases, then the supply of cars
will ______________.
d. less demand
Janet runs a lemonade stand. Her expenses are 10
cents a cup, and she charges $1.00 per cup. If Janet
sells 50 cups of lemonade in one week, $45.00
represents her _______________.
a. increase
b. stay the same
c. decrease
d. None of the above
a. profits
b. revenues
c. marginal benefits
d. costs
A local grocery store is selling milk for $4.00 per
gallon. If the store lowers the price to $2.00 per
gallon, we can expect _________________, all
else being equal.
a. quantity of milk demanded to increase
b. quantity of milk demanded to stay the
c. quantity of milk demanded to decrease
d. None of the above
Please refer to the graph below to answer the
following question.
A price of $50 represents the
Please refer to the graph below to answer the
following question.
a. equilibrium price
b. price where there are no surpluses or
c. price where quantity demanded equals
quantity supplied
d. All of the above
Suppose that the graph below illustrates the effect
of rent control.
At a price of $2.00, ____________________.
a. there is excess supply
b. there is excess demand
c. quantity demanded equals quantity
d. All of the above
Rent control is an example of a
_______________. It sets the price of rent
_______________ the equilibrium price and
results in a _____________ of apartments.
Suppose that the price of rye bread increases by
5%. As a result, the quantity demanded of rye
bread decreases by 10%. Rye bread is a(n)
a. inelastic good
b. luxury good
a. price ceiling, above, surplus
c. elastic good
b. price floor, below, shortage
d. All of the above
c. price ceiling, below, shortage
d. price floor, above, surplus
A _____________ exists when the private sector
does not provide necessary goods and services,
because it is not profitable to supply them.
a. government failure
b. market failure
c. property right
d. consumer surplus
The government provides goods and services when
the benefits to society outweigh the costs. These
goods include ______________.
c. intended consequence, negative
d. negative externality, positive externality
a. public education, which decreases crime
b. highways that allow efficient trade and
c. police protection that provides safety and
enforces property rights
d. All of the above
Pharmaceutical companies know the side effects
of their medications, but potential patients
initially do not. This is an example of
a. perfect information
b. asymmetric information
Property rights ___________________.
a. provide incentives for people to exchange
goods and services
b. are mainly enforced by the private sector
c. discourage ownership
d. allow people to use their goods, regardless
of the law
c. positive externalities
d. public goods
A progressive tax means high-income individuals
pay __________ percentage of their incomes in
taxes as/than low-income individuals.
a. the same
b. a lower
Which of the following is NOT true?
a. The price charged in a perfectly
competitive market is lower than a monopoly
b. The quantity of products sold in a
monopoly market is lower than in a perfectly
competitive market.
c. Monopolies can be created through patents.
d. Consumers are harmed by perfectly
competitive markets (compared to a monopoly),
because they charge higher prices.
When neighbors benefit from your home
improvements, it is an example of a(n)
___________________; but factory pollution that
harms the health of nearby residents is a(n)
a. positive externality, negative externality
b. unintended consequence, positive
c. a higher
d. None of the above
Economic indicators help us to assess the
strength and overall health of our economy. A
measure of a country's economic output
inflation rate is defined as the monetary
value of all final goods and services produced
within a country over a year's time. The
unemployment rate is the percentage of
those who are not working but who are
available to work in the labor force. Another
economic factor is the GDP, which measures
the changes in the prices of goods and
A long period of negative economic growth
and output = Recession
The highest point of economic output before
the economy slows down = peak
A long period of positive economic growth
and output = expansion
The lowest point of economic output before the
economy begins to recover = trough
A period in which unemployment usually
increases and income decreases = contraction
A private group that offers complaint histories
on companies and promotes ethical business
behavior = Better Business Bureau
The United States’ central bank that protects
consumers of financial products = Federal
Maintaining consumer vigilance, contesting
incorrect statements, verifying receipts and
bills = Consumer responsibilities
Choosing between products, being informed,
attending to grievances, purchasing safe
products, being heard = Consumer rights
Property of authorship such as artwork, songs,
books = copyright
The name “Apple” is an example = trademark
A way to register and protect intellectual
property related to innovations = patent
The Coca-Cola recipe is an example = trade
Market Structure – Natural Monopoly (characteristics -
Electricity service
water service
railway system)
natural gas
Market Structure – Oligopoly (characteristics - cell
phone industry airline travel car rental industry
courier parcel service)
1. Suppose a landlord has one tenant who is
visually impaired. The landlord has a strict
no-pet policy and the visually impaired tenant
cannot live with his guide dog. Because the
Fair Housing Act prohibits this action, this
renter can file a complaint. -T
2. One example of a monetary policy that
the government uses to stimulate
economic growth is to change tax levels.
3. A bull market happens when stock
values increase by at least 20% over
time. -T
4. The long-run equilibrium is the
interception of the long-run aggregate
supply curve and aggregate demand
curve. - F
5. An increase in silk prices within China will
not affect the export of Chinese silk. -T
6. It is cheaper for an American to travel to
foreign countries when the U.S. dollar is
strong. -F
7. When the U.S. dollar is strong against the
German euro, importing German cars into
America will be cheaper. - T
8. Generally, the industrialized, developed
countries use the floating exchange rate
system while some growing, developing
countries still use a fixed exchange rate
system. -T
9. When an embargo is set on a product, it
means that imports are not allowed into a
certain country. - F
10. An extended period of negative growth is
known as an expansion.-T