1. What is one of the most important principles of economics?

globalization
distribution
money
scarcity
2. Solar power and wind power are examples of what kind of resources?

capital
nonrenewable
labor
renewable
3. What's it called with the average price of goods goes up sharply?

recession
scarcity
capitalism
inflation
4. What do businesses try to establish to avoid having a surplus or a shortage?

equilibrium
distribution channels
inflation
scarcity
5. What shows the quantity of a product or service a supplier is willing to sell across a
range of prices?
equilibrium point
demand curve
supply curve
equilibrium price
6. What represents how much a business should charge for an item?

supply curve
equilibrium point
equilibrium price
demand curve
7. Removing which of the following barriers helps make nations more open to each
other?
political
social
economic
all of the above
8. ___________ means that there is never enough of everything to satisfy everyone
completely.
scarcity
demand
supply
globalization

9. More international trade is now possible than in the past because of advancements in
what area?
telecommunications
shipping
travel
all of the above
10. Which of the following is not a way of becoming a citizen of the world?

Learn a second language.

Focus your attention on foreign countries and limit participation in your own
community.
Speak out against racism, bias, and intolerance.
Use the Internet to make friendships across national borders.
11. ________ is the study of how people produce, distribute, and use goods and services.

Economics
Business
Transportation
Consumer science
12. ________ use a variety of mathematical tools and equations to measure the health of
the economy.
Entrepreneurs
Economists
Manufacturers
Consumers
13. Supply and demand have a direct impact on the ________ of goods and services.

price
appearance
utility
all of the above
14. The ________ is where the supply curve and the demand curve meet.

equilibrium quantity
equilibrium point
equilibrium price
supply and demand point

15. Which of the following is not one of the main factors of production?

land
labor
wind
capital

16. Which of the following is a benefit of using capital?

extra time
more knowledge
more productivity
all of the above
17. One problem with globalization is ________.

increased cultural exchange

increased interdependence
increased trade
all of the above

18. Companies spend money on ________ to try to figure out what people want and need.

land
market research
technology
all of the above

19. Each society answers the three basic economic questions based on

its unique combination of values and goals.

the number of factor payments.
its degree of economic growth.
the desire to achieve economic freedom.

20. To improve its standard of living, a nation's economy must

remain stable.
grow through innovation.
reach economic equity.
allow the central government to make economic decisions.

21. Traditional economies are usually

small, close communities that welcome change and new technology.

large, widespread communities that welcome change and new technology.
large, widespread communities that are able to deal effectively with environmental
disaster.
small, close communities that avoid change and new technology.

22. The ways in which factors of production are combined determines the answer to
which economic question?
What will be produced?
How will goods be produced?
Who will consume goods?
How can we provide a safety net?
23. How does a society determine who will get what is produced?

by its distribution of income

by factor payment amounts
by its needs and wants
by economic equity

24. What must a nation's economy do in order to improve the standard of living?

remain stable
grow
reach economic equity
allow central planning

25. Where are traditional economies usually found?

in small communities that welcome change

in large communities that welcome change
in large communities that are able to deal with environmental disaster
in small communities that avoid change

26. What do people supply in return for factor payments?

innovation, profit, or goods

land, labor, or capital
services, goods, or traditions
innovation, labor, or trade

27. Why do people need to buy and sell products or services?

People need to buy and sell products to make a profit.

We need to maintain a competitive society.
No one is self-sufficient.
People need to provide the market with goods and services.

28 Who owns the factors of production?

individuals
households
firms
the market
29. How will consumers react to the incentive of a higher price on a good or service?

The negative incentive will cause consumers to purchase less of the good or
service.
The positive incentive will cause consumers to purchase less of the good or service.
The negative incentive will cause consumers to purchase more of the good or service.
The positive incentive will cause consumers to purchase more of the good or service.

30. What "invisible hand" regulates the free market economy?

incentive and efficiency

specialization
competition between firms
competition and self-interest

31. Why are free market economies able to attain economic growth?

Consumers can purchase all the goods they need, which causes firms to produce
more.
Competition encourages innovation, which causes growth.
Everyone is acting in their own self-interest, which motivates market growth.
Firms keep producing incentives to encourage households to purchase more goods.

32. Why do people need to buy and sell goods or services?

People need to make a profit.

People need a competitive society.
No one is completely independent.
People need to provide the market with goods.

33. Who owns the factors of production?

individuals
households
firms
the market

34. What "invisible hand" directs the free market?

incentives and efficiency

specialization
circular flow
competition
35. Why are free market economies able to grow?

Consumers can buy all needed goods.

Competition encourages innovation.
Everyone acts in their own interest.
Firms keep producing incentives.

36. A socialist society has a more flexible command economy than a communist society
because
some free market practices can combine with central economic planning.
the central government has all economic and political power.
an authoritarian government controls the economy.
the centers of economic power are all under private control.

37. How did heavy industry in the Soviet Union avoid the competition that drives a free
market economy?
The government discouraged competition by determining prices, wages, and
products.
The government used profit as an incentive to entrepreneurs.
Farms were not in direct competition with heavy industry.
The government banned the production of consumer goods.

38. Why might the Soviet planners have favored heavy industry over the makers of
consumer goods?
The products of heavy industry brought in more money.
There were more people trained to work in heavy industry.
Consumer goods are not good economic investments.
The products of heavy industry provide material for many other industries.

39. How is the economic system in China today different from the one in Soviet Russia?

The Chinese government owns firms in major industries.

The Chinese government allows far more economic freedom.
The Chinese government is socialist, rather than communist.
The Chinese government is not authoritarian.
40. The United States economy is a mixed economy

based on a traditional economy, but allowing some government intervention.

based on a centrally planned economy, but limiting government intervention.
based on a free market, allowing no government intervention.
based on a free market, but allowing some government intervention.

41. Government intervention in a modern economy is useful because

the needs and wants of a modern society are always met by the marketplace.
the marketplace has many incentives to create public works such as parks.
governments are more able to meet some needs and wants of modern society.
free market principles do not encourage growth.

42. The United States government intervenes in the economy in order to

provide competition for private firms.

impose barriers on foreign trade.
promote the general welfare.
protect laissez-faire.

43. Which of the following is handled by individuals instead of government in a free

market economy?
national defense
public education
investment options
mass transit

44. Which of the following is a summary of the three key economic questions?

Who will buy which goods and services, and how much will they pay?
How, when, and from whom should consumers get what they want?
When, where, and by whom should goods and services be produced?
What goods and services should be produced, how, and for whom?

45. What is one of the most important advantages of a free market?

It distributes goods equally.

It protects the less fortunate.
It is easy to regulate.
It encourages growth.
46. Which of the following is the main incentive for a manufacturer to sell a product?

making profits on sales

putting others out of business
pleasing the consumer
helping the economy grow

47. Which of the following philosophers argued that a free market would regulate itself
with little government involvement?
Karl Marx
Adam Smith
Vladimir Lenin
Friedrich Engels

48. What is the product market?

the market in which income is received for supplying land, labor, or capital
the market in which governments collect taxes from firms and consumers
the market in which firms purchase the factors of production from households
the market in which households purchase the goods and services that firms
produce

49. Why does the Federal Reserve System have a high degree of political independence?

The system has only advisory power.

It is divided into geographic districts.
The governors are appointed for life.
The system is owned by the banks.

50. What banks must join the Federal Reserve System?

all nationally chartered banks

all state-chartered banks
all banks of any kind
No banks; membership is voluntary

51. Congress passed the Federal Reserve Act in order to

effectively respond to the Great Depression.

decentralize the banking system.
strengthen the Second Bank of the United States.
encourage business expansion and give banks a source of emergency cash.
52. Why did Congress pass the Federal Reserve Act of 1913?

to decentralize the banking system

to respond to the Great Depression
to prevent a President from appointing all Fed Governors
to respond to banking problems caused by the Panic of 1907

53. Which banks are required to become members of the Federal Reserve System?

all national banks

all state banks
every bank in the United States
all twelve district banks

54. Which is a service the Fed provides to all banks?

voting for the Fed's Board of Governors

borrowing money from the Fed
receiving stock in the Fed
serving on the Federal Open Market Committee

55. Which is NOT a function of the Federal Reserve?

process checks for the federal government

loan money to individuals and small businesses
regulate the money supply
clear checks

56. Who issues U.S. paper currency?

the Treasury Department

the U.S. Mint
the district Federal Reserve Banks
the U.S. bank examiners

57. Why does a high interest rate discourage people from holding their money in cash?

They cannot be sure that cash will hold its value.

They are more concerned that it will be stolen.
They are fearful of inflation.
They can get interest for it when it is invested.
58. Which is the Federal Reserve's biggest customer?

its member banks

individuals and small businesses
the federal government
its twelve district banks

59. What is one important reason the Fed controls the money supply?

Otherwise, people would be afraid to deposit their money in banks.

Too little money in the economy would prevent banks from borrowing
Otherwise, there would not be enough new money in circulation.
Too much money in the economy would lead to inflation.

60. Why does the Fed rarely change the reserve requirements?

It is too complicated as a way to make minor adjustments.

It is not an effective way to manipulate the money supply.
It can be disruptive to the whole banking system.
It might not have a significant effect on the money available.

61. Which of the following activities creates money?

printing new currency to replace worn-out money

depositing money into a checking account
saving money in a piggy bank at home
withdrawing money from a checking account

62. Why might the Fed decide to lower reserve requirements?

if consumers are borrowing too much

if the prime rate is too high
if the economy is slowing down
if prices are rising too quickly

63. What is likely to be the best approach to a recession that is expected to turn into an
expansion in a short time?
Use monetary policy to lower interest.
Do nothing and let the economy fix itself.
Use fiscal policy to lower interest.
Use monetary policy to raise interest.
64. Low interest rates encourage business investment by

making it easier to borrow money.

preventing inflation.
decreasing the money supply.
making it easier to predict business cycles.

65. Why is the Federal Reserve called a "lender of last resort?"

The Fed makes loans that allow banks to maintain required reserves.
The Fed decides to whom a bank can lend money.
The Fed will make loans to businesses and individuals when other banks will not.
The Fed can decide how much money a bank can loan out.

66. What is the relationship between interest rates and demand for money?

As interest rates increase, demand for cash decreases.

As interest rates decrease, demand for cash decreases.
Interest rates are determined by demand for cash.
As interest rates increase, the money supply increases.

67. Banks create money by

printing and issuing paper currency.

making interest rates on loans higher than those on savings accounts.
exchanging gold for paper currency.
lending money they are not required to hold in reserve.

68. Prior to the passage of the Federal Reserve Act of 1913, reserve requirements were
excessively high, which discouraged banks from making loans.
difficult to enforce and difficult for banks to maintain on their own.
observed by national banks, but ignored by local banks.
too low to prevent bank runs from occurring.

69. What are Federal Reserve Districts?

the committee that makes the key monetary policy decisions about interest rates and
money supply
the geographic areas into which the Federal Reserve Act divided the United States
the twelve regional banks that monitor and report on banking conditions in specific
geographic areas
the cities with the largest financial institutions across the United States
70. Which of the following best summarizes the relationship between the Federal Reserve
System and the federal government?
The Federal Reserve mainly raises funds for the federal government.
The Federal Reserve is the federal government's banker.
The Federal Reserve serves as Congress's economic advisor.
The President has authority over the operations of the Federal Reserve.

71. The Federal Reserve regulates the required reserve ratio in order to

control the amount of money in circulation.

reduce lags in monetary policy.
discourage banks from making risky loans.
change the discount rate more easily.

72. Which is one way the Fed serves the government?

It makes loans to government officials.

It serves as the Treasury Department's checking account.
It allows money to change hands without charging a fee.
It finances projects for state governments.

73. Suppose the economy is slowing. In response, the Federal Reserve increases the
money supply. What could happen if the economy comes out of recession by itself just
as this monetary policy takes effect?
The economy could slow again.
Businesses could no longer borrow.
Inflation could rise.
Individuals could lose their homes.

74. Who controls the Federal Reserve System?

the President
seven people appointed by the President
Congress
Federal Reserve member banks
75. Why does an economist create a market demand schedule?

to learn what demands the market will make under unusual conditions
to have an idea of how a market would change if conditions in an area changed
to predict how people will change their buying habits when prices change
to show how various conditions can change the demand for a good
76. Which is an example of the law of demand at work?

The price of pizza goes up when the price of cheese goes up.
Demand for pizza goes down when tacos become more popular.
The price of pizza falls when demand for pizza falls.
Demand for pizza rises when the price of pizza falls.

77. If prices rise and income stays the same, what is the effect on demand?

More is bought of some goods and less of others.

Fewer goods are bought.
More goods are bought.
Demand stays the same.

78. How does the substitution effect work when the price of an item drops?

The item becomes less and less popular as price drops.

The substitutes for the item also suffer a drop in prices.
Consumers buy the item as a substitute for other things.
Consumers buy the item even if they do not particularly want it.

79. Why does an economist create a market demand schedule?

to learn what demands the market will make under unusual conditions
to have an idea of how a market would change if conditions in an area changed
to predict how all people will change their buying habits when prices change
to show how various conditions can change an individual's demand for a good

80. What does it mean when you have demand for a good or service?

You can afford the good but may be unwilling to buy it.
You want the good but may not have the money for it.
You are able to buy the good but not at the given price.
You are willing and able to buy the good at the given price.

81. If prices rise but income stays the same, what is the effect on the quantity demanded?

Quantity demanded increases.

Fewer goods are bought.
More goods are bought.
Demand stays the same.
82. How can expectations about the future change consumer behavior?

Immediate demand for a good will drop if the price is expected to stay the same.
Immediate demand for a good will rise if the good is expected to be plentiful.
Immediate demand for a good will rise if its price is expected to rise.
Immediate demand for a good will drop if there are no substitutes available.

83. How can the demand for one good be affected by increased demand for another one?

When goods are bought together, increased demand for one will increase demand for
the other.
If goods are used together, increased demand for one will increase demand for
the other.
If goods are substitutes, increased demand for one will increase demand for the other.
A drop in the price for a good will increase demand for it and its substitute.

84. How does an increase in population affect the demand curve?

A point on the curve moves down.

A point on the curve moves up.
The entire curve shifts to the left.
The entire curve shifts to the right.

85. What causes a shift in the demand curve?

a decrease in price
an increase in price
a change in an area other than price
a change in price and availability

86. What does elasticity of demand measure?

an increase in the quantity available

how buyers will cut back or increase their demand when price rises or falls
a decrease in the quantity demanded
the amount of time consumers need to change their demand for a good

87. How does a person's perception of a good as a necessity or a luxury affect his or her
purchase of it?
If a good is perceived as a luxury, demand becomes elastic.
People who have a lot of money will buy goods even if they think they are a luxury.
A good that is perceived as expensive will no longer be considered a necessity.
A good that is perceived as a necessity will be purchased even if the price rises.
88. Why is demand for milk inelastic?

There are many substitutes for milk.

Buying milk takes a large portion of income.
It is considered a necessity, not a luxury.
It is considered a luxury, not a necessity.

89. Which of the following products has inelastic demand?

a particular soft drink

candy bars
steak
medicine

90. Economists say that a demand curve is accurate only as long as the ceteris paribus
assumption is true. This means that
goods are used in place of one another.
all things other than price hold constant.
consumer desire for goods remains elastic.
anticipated supply can keep up with prices.

91. If you create a demand schedule for an individual and for a market for the same
product, what will remain the same in both schedules?
prices of the good or service
demand curve
percent difference at each price
quantity demanded

92. John gets a raise and decides to start buying enriched pasta instead of cheaper instant
noodles. For John, instant noodles are examples of
inelasticity.
complements.
market demand.
inferior goods.
93. How is profit determined?

total revenue plus total cost

marginal revenue minus marginal cost
total revenue minus total cost
marginal revenue plus marginal cost
 94. In what situation would a factory that is losing money keep operating?

if marginal revenue equals marginal cost

if total cost is greater than operating cost
if total revenue is greater than operating cost
if marginal product of labor becomes negative
95. How does new technology generally affect production?

It lowers cost and decreases supply.

It lowers cost and increases supply.
It increases cost and decreases supply.
It has very little effect on production.

96. What is one reason European governments protect the growing of food with subsidies?

to have food in case imports are ever restricted

to allow the food producers to pay their debts
to reduce the price of farm-grown food
to help the population forget the food shortages after World War II

97. What is the government's goal in buying excess crops or other agricultural products?

to raise minimum wage

to keep prices from going down
to set legal price ceilings
to lower prices

98. Why does a government place price ceilings, such as rent control, on some "essential"
goods?
to prevent inflation during boom times
to keep business people from making large profits
to keep the goods from becoming too expensive
to reduce demand for these goods
99. What is the main principle of Adam Smith's The Wealth of Nations?

Profits are made by selling people what they need.

Business prospers by finding out what people want and providing it.
People do not always get what they need.
A price-based system provides few incentives for businesses.

100. The country who first invented paper money?

USA
China
Turkey
England

100