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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 companies? 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 goods 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 product? d. more; increase The aggregate demand curve could shift because of changes to any of the following factors EXCEPT for which one? 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 banks 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 pursue? c. increased substantially d. remained unchanged Please refer to the graph below to answer the following question. 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 question. a. Seasonal unemployment b. Structural unemployment c. Frictional unemployment d. Inflational unemployment Please refer to the graph below to answer the following question. 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 20%? 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 telecommunications 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 services b. people decide how to use their property, within the limits of the law c. buyers and sellers make voluntary exchanges 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 same 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 shortages 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 supplied 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 externality d. negative externality, positive externality a. public education, which decreases crime b. highways that allow efficient trade and travel 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 market. 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 externality 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 services. 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 Reserve 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 secret Market Structure – Natural Monopoly (characteristics - Electricity service water service pipelines railway system) natural gas Market Structure – Oligopoly (characteristics - cell phone industry airline travel car rental industry courier parcel service) True/False 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. -T 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