3. After passing through a trough, the business cycle enters a period of Expansion

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1 Economics Review 1st Semester Exam 1. The amount of money the consumer sector of the economy has available for spending after personal income taxes have been deducted is Disposable personal income 2. Since 1790, when the United States' center of population was near Baltimore, the population has moved steadily west 3. After passing through a trough, the business cycle enters a period of Expansion 4. In a market economy, a high price is a signal for producers to offer more and consumers to buy less 5. The unemployment rate is not a completely accurate measure of how many people are out of work because it doesn't count dropouts 6. The Fed uses all of the following to conduct monetary policy EXCEPT price controls 7. The total receipts test is a method for estimating demand elasticity 8. Supply-side economics attempts to stimulate output and lower unemployment by reducing taxes to stimulate investment and consumer spending 9. A long-range effect of the baby boom will be an increase in transfer payments 10. Collective bargaining refers to labor-management negotiations. 11. Absolute advantage and comparative advantage are terms related to nations engaged in trade 12. Trade barriers are enacted to protect domestic industry 13. Perfect competition is characterized by all of the following EXCEPT product differentiation 14. One effect of NAFTA was to reduce tariffs among the United States, Canada, and Mexico 15. In the final years of the Soviet Union, Mikhail Gorbachev instituted a policy of perestroika, which called for restructuring the economy and converting to a market economy. 16. The Japanese economy is characterized by capital-intensive industries 17. The most popular and widely publicized measure of stock market performance on the New York Stock Exchange is the DJIA 18. Multinational corporations have operations in several different countries 19. The borrowing power of a developing nation is weakened if it has a history of Expropriation. 20. A modified free enterprise economy has all of the following advantages EXCEPT the guarantee of a job for anyone willing and able to work

2 21. The fundamental problem that economics tries to solve is how to satisfy unlimited wants with limited resources 22. Individuals earn their incomes in factor markets 23. The free enterprise economy thrives on all of the following EXCEPT central government planning 24. The chief disadvantage of a sole proprietorship is that the owner has unlimited liability 25. A multinational corporation has manufacturing or service facilities in several countries 26. The study of the economic behavior of individuals and firms is called Microeconomics 27. A demand curve shows all of the following EXCEPT the supply produced at every price 28. A modest price increase for local cable television service has had little or no effect on the demand, indicating that demand for the product is Inelastic 29. In a market economy, a low price is a signal for producers to supply less and consumers to buy more 30. At a given price, a surplus occurs when the quantity supplied is greater than the quantity demanded 31. The concept of laissez-faire means keep government out of business 32. A market structure characterized by identical products and a large number of reasonably wellinformed buyers and sellers who act independently describes perfect competition 33. When labor and management decide to go to arbitration, both parties are willing to accept the decision of a third party as binding 34. The theory that states that the supply and demand for workers' skills determines their wages is the traditional theory of wages 35. The single most important source of revenue for the national government is the individual income tax. 36. If one individual earns $10,000 and pays $2000 in taxes and a second individual earns $100,000 and pays $20,000 in taxes, the government is using a proportional tax 37. The steps in initiating and approving a federal budget occur in this order: president, House of Representatives, Senate, president 38. The federal deficit has all of the following effects EXCEPT lower interest rates 39. The Federal Reserve notes used as currency today are inconvertible fiat money 40. The most recognized measure of stock performance is the Dow-Jones Industrial Average, which measures 30 representative stocks on the NYSE

3 41. Which of the following is NOT an important characteristic of the free enterprise economy? Government intervention 42. Economics may best be defined as a (n) study of efforts to satisfy seemingly unlimited wants with scarce resources. 43. When two corporations that produce the same kind of product merge, it is known as a (n) horizontal merger 44. A risk-taker in search of profits is known as a (n) Entrepreneur 45. A popular model used to illustrate the concept of opportunity cost is the production possibilities frontier 46. Increased competition, higher profits, more and better-paying jobs, and healthy tax revenues are all benefits of successful labor unions 47. Which of the following is NOT a characteristic of the market economy? Does not provide for everyone's basic needs 48. Land, labor, capital, and entrepreneurs are the results of supply and demand 49. When corporations involved in different steps of manufacturing or marketing merge, it is known as a (n) vertical merger 50. Public utilities are businesses that are unregulated 51. Which term best describes the consumer act of replacing one item with another less costly item? Demand elasticity 52. In a healthy market, all of the following conditions exist EXCEPT adequate competition exists in all markets 53. The profit-maximizing quantity of output is found where total cost equals total revenue 54. If supply and demand are inelastic, a large change in price has only a small affect on supply 55. A negative externality resulting from building a commuter rail system might be an opportunity cost 56. All of the following are examples of market failure EXCEPT inferior fabrics used in manufactured costumes 57. Costs for electricity, natural gas, and labor are examples of variable costs 58. An example of resource immobility is a dam located at the mouth of a river that's run dry

4 59. Market failure can occur when resources do not move from industry to industry 60. The Robinson-Patman Act increased consumer protection from price discrimination 61. The theory that wages are based on the supply and demand for a worker's skills is the traditional theory of wages 62. The flat tax closes or minimizes most tax loopholes 63. Which of the following is not an impact of a large federal debt? Lower interest rates 64. In 1980, before the S&L crisis got under way, the United States had 4,600 S&Ls. By the early 1990s, there were fewer than 2, The Efficient Market Hypothesis states that stocks are priced about right and bargains are hard to find 66. Laborers who work primarily with their hands because they lack training and skills are called unskilled labor 67. The long-range goal of the Omnibus Act of 1993 was to balance the federal budget 68. The annual budget of the federal government is initiated by the President 69. Federal deposit insurance was not available during the early years of the Great Depression. 70. An advantage of a mutual fund for a small investor is the ability to diversify an investment 71. The foreign sector of the economy represents the difference between the dollar value of exports and imports 72. A condition of acute shortages, high unemployment, and excess capacity at manufacturing facilities is a(n) Depression 73. The committee that advises the Fed on the growth of the money supply and the level of interest rates is the Federal Open Market Committee 74. The hypothetical relationship between federal tax rates and tax revenues is demonstrated by the Laffer curve 75. Examples of automatic stabilizers are unemployment insurance and entitlement programs 76. The market basket is a method of tracking prices of consumer items 77. The degree of income inequality among families is demonstrated by the Lorenz curve 78. The wealthiest 20 percent of the population controls about 75 percent of the nation's wealth

5 79. Tools that the Fed can use to conduct monetary policy include all of the following EXCEPT Regulation Z 80. Fiscal policy is defined as a. the use of command economy quotas in a free enterprise system. b. a policy of limited government involvement in the economy. c. a commitment to deregulation and low taxes. d. the use of government spending and taxing to influence economic activity. 81. Protectionists cite all of the following reasons to justify high tariffs EXCEPT helping the balance of payments 82. Efforts to bring privatization to the Soviet Union began with Mikhail Gorbache 83. The nation once known as the socialist state that works is Sweden 84. When a developing country is in the stage of semi development, its income is growing faster than its population 85. Today, the American economy is an example of modified free enterprise 86. The most favored nation clause is important to foreign countries because favored nations can benefit from U.S. trade negotiations with other countries 87. All of the following are characteristics of communism EXCEPT high consumer satisfaction 88. One of the keys to Japan's economic success has been Keiretsu 89. When a developing country is in the stage of primitive equilibrium, it has no formal economic organization 90. Countries that try to change from a command economy to a market economy face all of the following problems of transition EXCEPT the need to unionize workers 91. Five-Year Plan economic plan used by some communist nations to set economic goals 92. trade deficit when more goods are imported than are exported 93. developing country country that lacks significant industrial development and whose people have very low per capita in-comes 94. protective tariff tax designed to protect domestic industry from imported goods 95. Pollution poisonous and noxious substances in the air, water, or soil 96. Infrastructure public goods, such as highways, airports, and sewer systems, that are needed by society

6 97. customs union international economic situation in which member nations have eliminated all trade barriers 98. population density number of people who live on a square mile of land 99. Subsistence condition in which people produce only enough to survive 100. Exports products one country sells to another country