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Final Exam Economics: Unit 5 Name: _________________________________ Part One: Multiple Choice 1. This theory states that education increases productivity and results in higher wages. A. Social Darwinism B. Demand-Pull Theory C. Cost-Push Theory D. Theory of Relativity E. The Learning Effect 2. GDP measures all of these produced or provided in a given year. A. New & Used Goods B. Stocks & Bonds C. Goods & Services D. Subsistence Farming & Household Production E. Mutual Funds 3. Which of the following is not measured by the GDP? A. Used goods, such as cars or houses B. Financial assets, such as stocks or bonds C. Anything not produced within the country’s borders D. Household production or subsistence farming E. All the Above 4. The current dollar value for one year’s GDP. A. Real GDP B. Nominal GDP 5. GDP expressed in constant, or unchanging, prices. A. Real GDP B. Nominal GDP 6. A good used in the production of a final good is called A. a Nondurable Good B. a Monetary Cost C. a Final Product D. an Intermediate Good E. a Durable Good 7. This GDP is the most useful because it is corrected for inflation. A. Real GDP B. Nominal GDP 1 Score: ______/100 Final Exam Economics: Unit 5 8. The term for the percentage of people who live in households with income below the official poverty threshold is A. Downward Spiral Effect B. Demand-Pull Theory C. Income Distribution D. Poverty Rate E. Rate of Loss 9. All of the following are factored into the GDP except: A. Consumer Spending B. Business Investment C. Federal Tax Rate D. Government Investment E. E. Net Exports (X-M) 10. Which of the following is not one of the four types of unemployment? A. Temporary B. Cyclical C. Frictional D. Seasonal E. Structural 11. Unemployment that is temporary where a person may be looking for a better job or receiving a higher education. A. Cyclical B. Seasonal C. Temporary D. Structural E. Frictional 12. Printing large amounts of money could cause this type of inflation A. Hyperinflation B. Purchase Power C. Cost-Push Inflation D. Demand-Pull Inflation E. Controlled Inflation 13. The income level below which income is insufficient to support a family or household A. Poverty Rate B. Poverty Threshold C. Social Security D. Inflation E. The Learning Effect 2 Final Exam Economics: Unit 5 14. The direct exchange of one set of goods and services for another. A. Money B. Greenbacks C. Barter D. Currency E. The Benjamins 15. Which of the following is a function of money? A. Medium of Exchange B. Unit of Account C. Store of Value D. Above of the Above E. None of the Above 16. Coins and paper bills used as money are called this. A. Currency B. Greenbacks C. Silversides D. Bonds E. Treasury Notes 17. Which of the following is not a characteristic of money? A. Durable B. Aesthetic C. Portable D. Divisible E. Limited Supply 18. The government agency that insures customer deposits if a bank fails up to $100,000 per account. A. TVA B. SEC C. CCC D. WPA E. FDIC 19. Which of the following is not one of the Five Cs of Lending? A. Capacity B. Capital C. Character D. Collateral E. Choice 3 Final Exam Economics: Unit 5 20. Which of the following is not a way to improve your credit score? A. Pay your bills on time B. Keep credit limits low C. Buy more than you can afford to show your purchasing power D. Keep active accounts active over a long period E. Limit inquiries to your credit 21. The credit scores most lenders use to determine your credit risk. A. FICO Scores B. FICA Scores C. FIFA Scores D. FDIC Scores E. FEMA Scores 22. Which of the following is a credit data source in a credit report? A. Payment History B. Amounts Owed C. Length of Credit History D. New Credit E. All of the Above 23. Credit equals the ability to do this. A. Spend Money B. Borrow Money C. Save Money D. Raise Money E. All of the Above 24. This was the most severe economic downturn in the history of industrial capitalism. A. Panic of 1776 B. Panic of 1837 C. The Great Depression D. Recession of 1979 E. Lend-Lease 25. This is the spreading out of investments to reduce risk. A. Divisibility B. Collateral C. Diversification D. Specification E. Capacity 4 Final Exam Economics: Unit 5 26. This represents individual ownership in the corporation. A. Shares B. Stocks C. Bonds D. Treasury Notes E. Currency 27. This is profit from selling stock. A. Round Lots B. Odd Lots C. Cash Calls D. Dividends E. Capital Gains 28. This is quarterly profit paid to shareholders. A. Round Lots B. Odd Lots C. Cash Calls D. Dividends E. Capital Gains 29. This is a market for buying and selling stock. Examples: Nasdaq & New York Stock Exchange A. Stock Exchange B. Securities and Exchange C. Dow Jones Industrial Average D. S&P 500 E. Bull & Bear Market 30. The purpose of this type of fiscal policy is to increase output. A. Contractionary B. Expansionary 31. Fiscal Policy involves these two things. A. Taxing & Spending B. Taxing & Saving C. Spending & Saving 32. Decreasing government spending is an example of this type of fiscal policy A. Contractionary B. Expansionary 5 Final Exam Economics: Unit 5 33. To create money for the budget the federal government borrows money causing this A. a Free Ride B. a Capital Gain C. a Recession D. a Deficit E. a Depression 34. The study of behavior and decision making of entire economies A. Macroeconomics B. Microeconomics 35. The study of the economic behavior and decision making of small units, such individuals, families, households, and businesses. A. Macroeconomics B. Microeconomics 36. Which of the following is not a Factor of Production? A. Land B. Labor C. Capital D. Limited Supply 37. The phrase used by economists regarding whether a country decides to produce more military goods or more consumer goods. A. Guns or Butter B. Rifles or Toast C. Doughnuts or Tanks 38. Making a decision about how much or less to do. It allows people to evaluate options based on available resources. A. Cost-Demand Theory B. Demand-Pull Theory C. Opportunity Buy D. Think at the Margin E. Opportunity Sale 39. In competitive markets, this is reached when the quantity demanded equals the quantity supplied. A. Equilibrium B. Shift Right C. Shift Left 6 Final Exam Economics: Unit 5 40. This law states that if all things are equal, consumers will demand more of a product as its price decreases, and less of a product as its price increases. A. Law of Supply B. Law of Demand 41. This law states that if all things are equal, producers will supply more of a product as its price increases, and less of a product as its price decreases. A. Law of Supply B. Law of Demand 42. Items that are usually consumed or used together are called A. Salt & Pepper Shakers B. Proportional Services C. Final Products D. Intermediate Goods E. Complementary Goods 43. This is what the Latin term ceteris paribus means. A. Equal and Divisible B. In money we trust C. Save and Spend D. All other things held constant E. Out of Many One 44. Economists call an industry this if three or four firms dominate the market with at least 70-80% of the market share. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly 45. This is the ability of a firm to alter the market price of a good or service. A. Market Power B. Barrier to Entry C. Imperfect Competition D. Start Up Costs 46. When firms sell their products below cost to drive competitors out of the market, they are practicing A. Collusion B. Predatory Pricing C. Price War D. Price Fixing E. Perfect Competition 7 Final Exam Economics: Unit 5 47. This market structure is defined by the following conditions: many firms, few artificial barriers to entry, slight price control over price, and differentiated products. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly 48. This market structure, the simplest market structure, has a large number of firms all producing the same product. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly 49. This market structure has only a single seller in a market—this firm controls the price of the product and is able to produce less and charge more. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly 50. What do Social Security taxes pay for? A. benefits to federal workers and military personnel B. benefits to those who are unemployed C. transportation and training expenses for low-income people D. benefits to older citizens, surviving family members of wage earners, and people with certain disabilities Part Two: Matching Work Bank: Durable Goods, Nondurable Goods, Intermediate Goods, Gross Domestic Product, Fixed Income, Savings Rate, Purchasing Power , Real GDP Per Capita, Consumer Price Index, Poverty Threshold 51. ________________ A measure of all goods and services sold in a given year. 52. ________________ This income does not change from month-to-month or from year-to-year. 53. ________________ A consumers ability to purchase goods and services as it relates to changes in income and changes in inflation rate. 54. ________________ These goods will not last long such as food or paper products. 55. ________________ A nation’s GDP divided by its population. 56. ________________ This is a market basket of goods used to measure inflation. 8 Final Exam Economics: Unit 5 57. ________________ The minimum level of income one can earn to be considered impoverished. 58. ________________ The portion of disposable income put into a savings account. 59. ________________ These goods will last more than 5 years such as automobiles and appliances. 60. ________________ A good used in the production of a final good. Part Three: Matching Word Bank: Cost-Push Theory, Demand-Pull Theory, Food Stamps, Wage-Price Spiral, Hyperinflation, Cyclical Unemployment, Structural Unemployment, Frictional Unemployment, Underemployed 61. ________________ When a person works at a job for which he/she is overqualified, or he/she works parttime when a fulltime job is desired. 62. ________________ This unemployment occurs when workers’ skills do not match available jobs. 63. ________________ This unemployment mirrors the business cycle. 64. ________________ Inflation that is out of control and often leads to a total economic collapse. 65. ________________ This type of unemployment occurs when people take time to find a job. 66. ________________ Entitlement program designed to provide food aid to needy. 67. ________________ The process by which an increase in wages causes higher prices and higher prices cause higher wages. 68. ________________ Theory that inflation occurs when producers raise prices in order to meet increased costs. 69. ________________ The theory that too much money in the economy causes inflation. 70. ________________ Theory that inflation occurs when demands for goods and services exceeds existing supplies. Part Four: True or False 71. ______ Economics is the study of how people seek to satisfy their needs and wants. 72. ______ Scarcity implies unlimited quantities of resources to meet limited wants. 9 Final Exam Economics: Unit 5 73. ______ Economists call the most desirable alternative given up as the result of a decision an opportunity cost. 74. ______ Adam Smith believed that self-interest was the motivating force in the free market and he called for restricting the role of government in the economy. 75. ______ A political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government is a democracy. 76. ______ In a free enterprise, economic decisions are determined in a free market by private decision rather than by state control. 77. ______ In the market equilibrium, prices adjust to make the quantity supplied equal to the quantity demanded. 78. ______ Collusion refers to an agreement among firms to divide the market, set prices, and and/or limit production. Part Five: Match the terms below with the appropriate position on the business cycle. (4points) _____ Contraction B. _____ Expansion _____ Trough C. D. _____ Peak A 10 Final Exam Economics: Unit 5 Part Six: Create a market graph with the title of the market (Market for Snowboards), price range on the vertical axis (YAxis), quantity on the horizontal axis (X-Axis). Plot the data points using the information provided below. (4 Points) Part Seven: Buy a Car (2 Points) Vehicle Make: Honda Simple Interest Formula: Factoring Monthly I = PRT Payments Formula: I = Interest ($) P = Principal ($) MP = P+I R = Rate (%) N T = Time (Years) Loan 1: Find the monthly payment with the car financed at the add-on interest rate of 3% for 5 Years. (Show Work) Price ($) Quantity $20 50 $30 75 $40 100 $50 125 Vehicle Model: Accord Vehicle Price: $15,000.00 MP = monthly payment ($) P = principal ($) I = interest (P x R x T) N = number of months the loan is for Loan2: Find the monthly payment with the car financed at the add-on interest rate of 6% for 3 Years. (Show Work) 11 Final Exam Economics: Unit 5 Part Eight: Buy a House: (10 Points) Things to Remember: Property tax is 1.25 percent of the purchase price divided by 12, not the loan amount. Homeowners Insurance will run approximately $12.00 per month per $100,000 appraised value. To apply the 33% Rule multiply the monthly house payment x 3. 1. 2. 3. 4. 5. 6. Purchase Price: $1,000,000.00 Loan Amount: (Assume a 20% Down Payment) ____________________ Term: 30 Years Interest Rate: 4% Principal & Interest: $3819.00 Tax: ____________________ & Insurance: ____________________ (Show Work Below) 7. HOA: $100.00 8. Monthly Payment: (Show Work Below) 9. Total Mortgage Paid: (Show Work Below) ____________________ ____________________ 10. Monthly income needed to afford the above house using the 33% Rule on a 30-Year Loan. ____________________ (Show Work Below) 12