ECON UNIT 2

A factor that most directly affects the demand for automobiles is A. the individual tastes and preferences of buyers. B. the cost of raw materials and natural resources. C. the availability of workers in automobile factories. D. a company's ability to respond to buyers' interest.

A

A responsibility the Federal Reserve has is to A. loan money to banks during a crisis. B. loan money to corporations for capital. C. provide banking services to consumers. D. provide financial services to banks.

A

According to the law of supply, price and quantity move A. along a track in the same direction. B. along a track in opposite directions. C. from different points toward one another. D. from the same point away from one another.

A

How does demand-pull inflation differ from cost-push inflation? A. Demand-pull inflation is driven by consumers, while cost-push inflation is driven by producers. B. Demand-pull inflation is driven by producers, while cost-push inflation is driven by consumers. C. Demand-pull inflation is driven by the private sector, while cost-push inflation is driven by the government. D. Demand-pull inflation is driven by the government, while cost-push inflation is driven by the private sector.

A

On a graph, a(n)_____shows the demand portion of equilibrium. A. demand curve B. supply curve C. equilibrium point D. excess supply

A

On a graph, an equilibrium point is where A. a supply curve and a demand curve meet. B. a supply curve is higher than a demand curve. C. the supply and demand curves head up. D. the supply and demand curves head down.

A

People might choose to use a debit card rather than cash for purchases because A. they do not want to carry around large amounts of cash. B. their banking institutions charge high fees for cash withdrawals. C. most items cost less when purchased with a debit card. D. debit cards have a higher value than cash and can buy more.

A

Read a passage from a speech given by President Barack Obama. Because of this plan, families who are struggling to pay tuition costs will receive a $2,500 tax credit . . . And Americans who have lost their jobs in this recession will be able to receive extended unemployment benefits. -President Barack Obama, February 4, 2009 Which statement best explains this passage? A. It describes government measures to stimulate demand and bring about a recovery. B. It describes government measures to increase production and bring about a depression. C. It describes a shift in government policies during a trough on the business cycle. D. It describes a shift in government policies during a peak on the business cycle.

A

Stagflation occurs when high inflation combines with A. high unemployment and a low level of production. B. low unemployment and a high level of production. C. a drop in buying power and a rise in workers' wages. D. a rise in buying power and a drop in workers' wages.

A

Supply and demand coordinate to determine prices by working A. together. B. competitively. C. with other factors. D. separately.

A

The Federal Reserve manages the nation's currency and money supply by A. manipulating interest rates and acting as a lender to banks. B. overseeing bank collections and payments on loans. C. dictating criteria and setting loan terms for banks. D. offering investment advice and adjusting interest rates.

A

The government has set a price floor on bread. Manufacturers cannot sell loaves for less than $5.00, which is a dollar above the market price. What will most likely result from this price control? A. The quantity demanded for bread will decrease, and the quantity supplied will increase. B. The quantity demanded and quantity supplied for bread will increase. C. The quantity demanded for bread will increase, and the quantity supplied will decrease. D. The quantity demanded and quantity supplied for bread will decrease.

A

The graph examines the market for graphic T-shirts. Based on the graph, which event could cause the change shown? (Graph shows line under a line (higher price/less quantity demanded) A. A product becomes less popular and fewer customers purchase it. B. A product becomes more popular and more customers purchase it. C. A product sells out of stores and customers can no longer purchase it. D. A product is restocked on store shelves and is ready for customer purchase.

A

The inflationary spiral explains the causes and effects of high inflation. The spiral usually begins with an increase in demand. What is the direct effect of this increase? A. Producers raise prices to continue to make a profit. B. The government prints more money, lowering the value of money. C. Workers negotiate with employers to receive more money. D. Consumers need higher wages to keep up with rising prices.

A

The main role of banks in the nation's economy is to A. store, lend, and invest money. B. store, lend, and borrow money. C. store, lend, and distribute money. D. store, lend, and approve money.

A

A consumer might respond to a negative incentive because it could be a chance to A. purchase a very popular item. B. buy a good at a cheap price. C. take advantage of a sale. D. avoid additional charges.

D

In the United States, dollar bills, nickels, and dimes are A. representative money. B. commodity money. C. various currencies. D. different denominations.

NOT A POSSIBLE: D

The term liquidity refers to A. how quickly money can be exchanged. B. the true monetary value of an investment. C. the shifting supply of money in the economy. D. how much wealth an individual has amassed.

A

The vertical axis of a demand curve shows A. the price of a product. B. the supply of a product. C. the interest in a product. D. the production cost of a product.

A

There are five stages in a recession. 1. job loss 2. falling production 3. falling demand (occurs twice) 4. peak production In which order do these stages occur? A. 4, 3, 2, 1, 3 B. 3, 2, 1, 3, 4 C. 4, 3, 2, 3, 1 D. 4, 2, 3, 1, 3

A

Typically, low inflation is a sign of A. a healthy economy because it results from a steady rise in demand. B. a healthy economy because it results from a steady rise in supply. C. a struggling economy because it results from a steady fall in demand. D. a struggling economy because it results from a steady fall in supply.

A

What happens when the quantity of a good supplied at a given price is greater than the quantity demanded? A. excess supply B. stable prices C. exact equilibrium D. increased production

A

What is the difference between a price floor and a price ceiling? A. A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good. B. A price floor is the maximum price allowed for a good. A price ceiling is the minimum price allowed for a good. C. A price ceiling below the equilibrium price has no effect. D. A price floor above the equilibrium price has no effect.

A

When might it be important to know a currency's exchange rate? A. when planning expenses for an overseas trip B. when changing money into smaller denominations C. when preparing to buy something expensive D. when deciding which college is the best value

A

When production is very high but demand is very low, it can lead to A. a recession. B. a recovery. C. prosperity. D. the peak.

A

Which explains the connection between the law of demand and excess demand? A. The law states that decreases in price leads to greater quantity demanded and limited supply, which occurs during excess demand. B. The law states that increases in price increases leads to greater quantity demanded and limited supply, which occurs during excess demand. C. The law states that decreases in price leads to greater supply and equilibrium, which occurs during excess demand. D. The law states that increases in price leads to greater supply and equilibrium, which occurs during excess demand.

A

Which scenario is an example of demand-pull inflation? A. Consumers have more money to buy cars, and the prices of cars and car accessories rise as a result. B. An increase in workers' wages raises the production cost of cars, and car prices rise as a result. C. The demand for cars falls as consumers have less disposable income, and car prices fall as a result. D. A government bailout helps car manufacturers lower their costs, and car prices fall as a result.

A

Which statement best describes the effects of low and high interest rates on the economy? A. Low interest rates encourage consumers to borrow and spend, while high interest rates encourage saving. B. High interest rates discourage consumers from investing, while low interest rates encourage investment. C. High interest rates encourage consumers to borrow and spend, while low interest rates encourage saving. D. Low interest rates encourage consumers to invest, while high interest rates discourage investment.

A

Which statement best explains how elasticity and incentives work together? A. An elastic good, such as a game, is more likely to respond to incentives. B. An inelastic good, such as a game, is more likely to respond to incentives. C. An elastic good, such as a game, is less likely to respond to incentives. D. An inelastic good, such as a game, is less likely to respond to incentives.

A

Which statement best explains the law of supply? A. The quantity supplied by producers increases as prices rise and decreases as prices fall. B. The quantity supplied by producers decreases as prices rise and increases as prices fall. C. The quantity supplied by consumers increases as prices rise and decreases as prices fall. D. The quantity supplied by consumers decreases as prices rise and increases as prices fall.

A

What types of money are included in the M2 category? Check all that apply. A. currency B. savings accounts C. checking accounts D. commodity money E. short-term investment accounts

A B C E

Which occurs during market equilibrium? Check all that apply. A. Supply and demand meet at a specific price. B. Supply is slightly greater than demand. C. Supply and demand meet at a specific quantity. D. Supply and demand meet at a demand point. E. Supply and demand meet at a supply point.

A C

Which are the roles of a bank? Check all that apply. A. Storing and holding money B. Making purchases to create profits C. Lending money D. Investing in the economy E. Creating money for the economy

A C D

A market supply schedule shows A. the products of two companies only. B. the prices and quantity in an entire market. C. how prices affect a single producer. D. how prices affect a group of consumers.

B

How might a drop in price for washing machines affect the demand for dryers? A. The demand for dryers would have no relation to the changing prices of washing machines. B. The demand for dryers would most likely increase as the price for washing machines dropped. C. The demand for dryers would most likely decrease as the price for washing machines dropped. D. The demand for dryers would only be affected by an increase in the price of washing machines.

B

The equation calculates an annual rate in economics. (Final value-initial value/initial value*100) What rate does the equation calculate? A. employment rate B. inflation rate C. demand rate D. supply rate

B

The lowest amount a manufacturer can pay factory workers is an example of A. an incentive. B. a price floor. C. a price ceiling. D. an elastic service.

B

What explains the difference between retail and commercial banking? A. Commercial banks loan money to small businesses, while retail banks loan money to large corporations. B. Retail banks loan money to small businesses, while commercial banks loan money to large corporations. C. Commercial banks help small businesses make capital purchases, while retail banks help big businesses invest. D. Retail banks help big businesses make capital purchases, while commercial banks help consumers invest.

B

What might cause a change in the value of fiat money? A. a change in the value of commodities B. a change in government regulations C. a change in materials used to make money D. a change in individuals' spending habits

B

Which explains why the price indicated by p2 on the graph is higher than the equilibrium price? A. As prices rise, quantity demanded goes up. B. As prices rise, quantity demanded goes down. C. As prices rise, quantity demanded stays the same. D. As prices rise, quantity demanded disappears.

B

Which is the best definition of inflation? A. a gradual decrease in the price of goods and services B. a gradual increase in the price of goods and services C. an exponential decrease in the price of goods and services D. an exponential increase in the price of goods and services

B

Which needs to happen to the price indicated by p2 on the graph in order to achieve equilibrium? (P2 is higher and has less quantity demand then equilibrium) A. It needs to be increased. B. It needs to be decreased. C. It needs to reach the price ceiling. D. It needs to remain unchanged.

B

Which of the following is a characteristic of the prosperity phase of the business cycle? A. stagnant prices B. high levels of production C. ambivalence about the economy D. reduced incomes

B

Which statement best explains the law of demand? A. The quantity demanded by consumers increases as prices rise, then decreases as prices fall. B. The quantity demanded by consumers decreases as prices rise, then increases as prices fall. C. The quantity demanded by producers increases as prices rise, then decreases as prices fall. D. The quantity demanded by producers decreases as prices rise, then increases as prices fall.

B

A currency is a system of money created and used by A. an individual or a group of people. B. all people who live in the same era. C. a nation or region of the world. D. a town, city, or state within a region.

C

Exchange rates can indicate economic health by A. showing exactly how much of each nation's currency is liquid. B. revealing how much of each nation's income goes to savings. C. showing the relative strength of different nations' currencies. D. examining spending patterns across nations and continents.

C

In the market, actions known as incentives affect A. producers only. B. consumers only. C. consumers or producers. D. neither consumers nor producers.

C

This is a graph of the business cycle. Time is measured along the x-axis. What is measured along the y-axis?(looks like a s flipped upsidown and fallen to the left) A. employment levels B. prices C. economic output D. demand

C

Typically, high inflation is a sign of A. a healthy economy because it results from a fall in production costs. B. a healthy economy because it results from a rise in consumer interest. C. a struggling economy because wages cannot keep up with the increase in prices. D. a struggling economy because it results from a fall in consumer interest.

C

What kind of money is a gold certificate considered to be? A. commodity B. fiat C. representative D. currency

C

What would happen if currency in all countries had fewer denominations? A. People would be more likely to confuse the value of currencies. B. Exchanging money between countries would be much easier. C. People could not charge as many different prices for goods. D. All goods would be more expensive than they currently are.

C

Which best describes how a recession develops as demand and production decrease? A. The recession enters a recovery period. B. The recession slows. C. The recession accelerates. D. The recession starts and stops.

C

Which statement best describes incentives? A. Incentives are mostly positive. B. Incentives are mostly negative. C. Incentives can be positive or negative. D. Incentives are neither positive nor negative.

C

In economics, if a good is inelastic, A. consumers have lost an interest in purchasing it. B. producers have lost an interest in manufacturing it. C. its supply or demand is too sensitive to price changes. D. its supply or demand is not sensitive to price changes.

D

The graphs show the US unemployment rate and the price of whole milk between 2006 and 2012. What do these graphs indicate about the relationship between employment levels and prices during economic cycles? A. There is no link between prices and unemployment. B. Rising unemployment rates drive prices higher. C. Falling prices drive unemployment rates lower. D. As unemployment rates rise, average prices fall.

D

The total amount of a product available in a market at a given price is called the A. count. B. demand. C. number. D. supply.

D

These are the four stages of the business cycle: 1. Depression 2. Prosperity 3. Recession 4. Recovery In which order do these stages occur? A. 1, 3, 4, 2 B. 3, 1, 2, 4 C. 1, 2, 3, 4 D. 2, 3, 1, 4

D

Which best explains why banks consider interest on loans to be important? A. Interest enables them to control the economy. B. Interest helps them to satisfy customers. C. Interest enables them to stockpile money. D. Interest helps them cover business costs.

D

Which is an example of a negative incentive for producers? A. a chance to make more money B. a special sale at a department store C. a coupon clipped from a newspaper D. a sharp increase in production costs

D

Which is the correct order of entities that benefit when banks make a profit? A. employees, shareholders, and the economy B. shareholders, shoppers, and the economy C. employees, companies, and the economy D. shareholders, companies, and the economy

D

Which of the following conditions is most indicative of recovery? A. The economy has stopped shrinking. B. The economy begins to peak. C. The GDP continues to shrink. D. The economy is growing again.

D

Why is gasoline weighted more heavily than tomatoes in a calculation of the annual inflation rate in the United States? A. Gasoline costs more to produce and purchase than tomatoes. B. Gasoline is imported from other nations at a higher rate than tomatoes. C. Americans purchase many more boxes of tomatoes than barrels of gasoline. D. Americans spend more money on gasoline than tomatoes, on average.

D

A fee banks charge in exchange for borrowing money is called______

INTEREST

Income reaches the highest level at the_______ point of the business cycle.

PEAK