Economics Exam Study
Which of the following best identifies a market monopoly, or the consequences of such?
A market monopoly characterizes a firm which uniquely specializes in the creation of a specific good or service, which customers are incentivized to purchase and other firms incentivized to invest in.
Which of the following defines the Law of Supply?
A principle that states there is a direct relationship between the price of a good and the quantity of it producers are willing to supply.
What is the best cure for inflation?
A steady reduction in the rate of monetary growth is the only means by which inflation can be remedied.
Which of the following correctly defines the term 'Worldview'?
A worldview is a philosophy of life which attempts to address and answer the grand questions of life in such a way that man can actually live, or live according to his design.
Do landlords benefit from rent controls?
Absolutely not. They are forced to subsidize the rents paid by their tenants which result in net losses.
According to Madison, what sort of property is considered to be most valuable?
According to Madison, the most sacred form of property is a man's conscience.
Which of the following is not a major entitlement program?
All of the above are major U.S. entitlement programs.
Which of the following adequately capture changes in equilibrium?
All of these are correct
According to Madison, governments are not just, nor property secure under it when...
All of these are correct.
In considering a biblical worldview statement on property, which of the following affirms the ownership of property from the Scriptures?
All of these are correct.
Which of the following does not address the importance of studying the implications of constitutional federalism for economic policy?
All of these are correct.
Which of the following is incorrect? GDP does not count non-market production. GDP cannot measure the economic output of an underground economy. GDP cannot make adjustments for leisure or recreation. GDP cannot adjust for harmful situations, like terrorist attacks or natural disasters such as hurricanes, tornadoes, or massive fires.
All of these are correct..
This represents an analysis question. Does a change in the price of sugar or an input for making ice cream affect the supply curve or the demand curve?
By raising the costs of production, it reduces the amount of ice cream that firms produce and sell at any given price, altering the supply curve.
Which of the following spending categories did most New Deal programs fall into (that most social welfare programs still require)?
Category IV: You spend another person's money on someone else.
Which of the following is not a characteristic of competition?
Competition necessitates legislation which supports the economic needs of infant industries by protecting them from more innovative and seasoned industries dominating the market.
If the interpretation of the congressional authorization to meet the general welfare of the United States as indicated in Article 1, Section 8, clause 1 is separated from the subsequent list of enumerated powers, then Congress has what sort of authority in securing the General Welfare of the United States?
Congress has an unlimited grant of congressional taxing and spending authority in order to achieve the general welfare of the United States and can use its own discretion to determine what the general welfare is.
Consider the following: A firm has just developed a new product which consumers signal they demand through purchases given a particular set price. With this, this firm is also making an economic profit with its new exceptional, but seemingly unique product, giving them a virtual monopoly on it. If the market remains free, which of the following will happen over a period of time?
Consider the following: A firm has just developed a new product which consumers signal they demand through purchases given a particular set price. With this, this firm is also making an economic profit with its new exceptional, but seemingly unique product, giving them a virtual monopoly on it. If the market remains free, which of the following will happen over a period of time?
Which of the following best identifies the subjective theory of value?
Consumers will weigh the value of any good or service relative to its incentive and the importance of such a good or service relative to their self-interest.
What is covetousness?
Covetousness is the inordinate longing of the wealth of others and its gain through unjust means.
A graph of the relationship between the price of a good and the quantity demanded:
Demand Curve
A table that shows the relationship between the price of a good and the quantity demanded:
Demand Schedule
In the final analysis, why do economic exchanges even occur?
Economic exchanges occur because individuals value a product they exchange another for more because they believe that product will better satisfy their personal needs or wants.
Which of the following best defines or characterizes economic profit in a free market?
Economic profit is understood as total revenue minus total cost.
Which of the following does not express how exchange promotes economic progress?
Economic transactions promote the economic progress of one party at the expense of another due to the principle of exploitation.
What is Leonard Read's main point in "I Pencil"
Economics cannot be planned, as no one possesses all the necessary knowledge and skills to produce even a simple pencil.
Free International trade allows domestic producers and consumers to benefit from economies of scale. What is meant by this? Please read the options carefully.
Economy of scale relates to the cost advantages of enterprises in relation to the amount of goods and services they're able to produce relative to the size of their operations. Larger firms are able to reduce costs per unit given increased production and operational efficiencies and require large markets, often supplied through international trade.
According to Ewert, the Christian left asserts that free-markets are based upon and encourage an ethic of selfishness. How does Ewert counter this?
Ewert has discerned that though the "free market does allow "self-directed' actions, it does not require 'selfish' economic actions."' The market itself does not require an attitude of selfishness to direct the production and sale of goods and services.
Which of the following is incorrect?
Federalism assumes that all power is lodged within the people generally.
Which of the following is not a consequence of free international trade? Please read each option carefully.
Free international trade results in the dumping of products in international markets, thus intentionally undercutting domestic labor forces, driving up costs and, therefore, producing antagonisms between nations. The only peaceful option is to promote tariffs, which are a natural consequence of free international trade.
Which of the following is not true relative to the Christian left's moral indictment of the free market?
Free markets actually encourage the formation and maintenance of the most basic human community, such as the family. The right to private property, which free markets require, is vitally connected to the integrity of the family unit.
Which of the following best captures the essence of the Biblical Christian Worldview?
God applies to the whole of life.
Which of the following is not a fundamental biblical proposition relative to economics?
God has determined that man position himself as a servant of the earth and, therefore, to ensure that the environment is perpetually protected.
Which of the following is not a moral criteria of the free-market or a necessary part of the ethical foundations of Economics?
Good Intentions
Which of the following is not a characteristic of the free market?
Government Coercion
Why do governments increase the quantity of money too rapidly?
Government demand for growth in spending, or government expenditures.
Which of the following is not a major source or principle of economic progress?
Government regulatory policies that reduce trade encourage and promote economic progress.
What is the proper role of government relative to equality of opportunity?
Governments should protect the private use of private property and avoid hindering expressions of individuality in the market.
If society held to an economic vision of equality of results, how would this goal alter the role of government? Choose all that apply.
Governments should pursue economic measures of social justice to ensure that everyone has the exact same economic success. Governments should attempt to equalize all human attributes to ensure there's no disparity or inequity in the acquisition of property. Governments should disregard natural human hindrances and propose policies which economically advance some over others in the name of social justice.
Which of the following is not a true statement from a biblical perspective?
Human individuality is actually illusory. Man's value is best equated with group identity and equality of sameness.
Which of the following is not a true statement from a biblical perspective? Each individual shares in an equality of value distinct from the rest of creation because each bear God's image. One's ultimate value is not defined by group integration, gender association, or social membership. Human individuality is actually illusory. Man's value is best equated with group identity and equality of sameness. Human individuality affirms man's dual nature (internal and external characteristics) and establishes the principle of self-government.
Human individuality is actually illusory. Man's value is best equated with group identity and equality of sameness.
Entitlement programs have what sort of impact upon work incentives?
If transfer payments and benefits generally exceed the income of those taking advantage of such programs and find that their disposable incomes increase if they do not raise their income levels through work, they are not incentivized to increase their work efforts.
Why do we find that the values of different goods are very different in degree, and that the value of a good frequently changes?
In a free market, the value of any good is established based upon the satisfaction of our needs and, therefore, differences in importance relative to individual preferences.
Friedman identifies five general truths relative to inflation. Which of the following is not part of that analysis?
Inflation always benefits creditors and especially banks and, therefore, is a favorable monetary policy to implement.
Which of the following is not a consequence of inflation?
Inflation results in economic stability and predictability.
Which of the following is not true about the consequences of inflation?
Inflation will benefit all economics groups and, in the long run, increases overall economic growth.
Which of the following defines the Law of demand?
It is a principle that states there is an inverse relationship between the price of a good and the quantity of it buyers are willing to purchase.
Which of the following properly defines the term 'jurisdiction?
Jurisdiction refers to the lawful use of lawful authority.
Milton Friedman concludes Read's "I Pencil" with Adam Smith's comments about an "invisible hand," which Read emphasized. Read the following quote by Smith found in his The Theory of Moral Sentiments (1759) and then answer the following question: Every individual... neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. What does Smith mean by this "invisible hand" which Friedman and Read both highlight?
Labor cooperation and production is possible without government coercion.
GDP and CPI, employment, fiscal policy such as taxation, monetary policy, the money supply, and inflation, which includes a discussion of the Federal Reserve System, as well as international trade are all...
Macroeconomic concerns.
Which of the following correctly identifies macroeconomics?
Macroeconomics emphasizes aggregate markets to discern GDP and CPI.
Which of the following represents James Madison's interpretation of the"'General Welfare and Common Defence" clause?
Madison explained that the "common defense" and "general welfare" are "general expressions" understood through the "specification of the objects" which follow the clause, as their relationship was indicated by a semi-colon.
The federal budget of the United States consists of which of the following prominent categories of spending?
Mandatory and Discretionary
Which of the following defines a Demand Curve?
Many people will predictably reject purchasing a product the more costly it becomes, thus producing a corresponding drop in the demand for that product or service—demand curves slope downward.
Which of the following represents a term used to describe the effects of a change in the current production situation or process?
Marginal
Which of the following represents the change in total value of benefit derived from an action such as consumption of an additional unit of a good or service? It reflects the maximum amount that the individual considering the action would be willing to pay for it.
Marginal Benefit
Which of the following represents the change in total cost resulting from an action such as the production of an additional unit of output?
Marginal Cost
Which of the following correctly identifies microeconomics?
Microeconomics highlights local, individual economic decisions of producers and consumers within various markets.
Which of the following correctly identifies monetary policy?
Monetary policy is a national policy pursued to ensure money is available for the whole economy.
Money must retain certain characteristics if it's going to make a reliable medium of exchange. One of these characteristics is that money should be assayable. What is meant by this?
Money cannot be readily counterfeited.
What does Read mean when he uses the term "master mind" when explaining the operation of free markets?
No one person or civil authority is dictating market operations; no "master mind" exits.
Do minimum wage laws really help the poor and those who are young and considered unskilled workers?
No. While increasing the minimum wage will increase the wages of low-skilled workers, their on-the-job training opportunities will decline.
Situations and circumstances other than the rapid infusion of money into an economy that can generate an inflationary phenomenon is...
None of these are correct.
Which of the following does not identify a condition necessary for exchanges to occur?
One party to the exchange must have sufficient power to coerce the other party into the transaction.
All worldviews must answer four philosophical dilemmas, each of which addresses a life concern in a final way. What does the Ontological question attempt to address in a final way.
Ontology attempts to provide final answers to questions of origins, or the ground of being and existence.
Why does free international trade make it possible for each country to acquire goods, services, and resources more economically? (Choose all that apply)
People generally benefit more from international markets when they're allowed to purchase products or services at cheaper costs compared to domestic markets. Countries benefiting from various and peculiar natural resources, geographic and climatological circumstances as well as specialization in production techniques as compared to other countries, can produce such products more economically, making their products more attractive to international buyers.
Which of the following does not represent a fundamental reason as to why all poverty relief programs that create or perpetuate dependence, reward sloth, or level those who work hard along with those who hardly work at all, fail?
Poverty relief programs of this nature do not tend to go far enough in their giving or simply lack the backing of nations with vast budgets.
Fill in the Blank The ________ to the U.S. Constitution represents a justification clause, or enacting clause, by which is meant that it justifies the creation of the Constitution for the purpose of achieving six great and grand objects for which the various power schemes and checks and balances are intended to serve and achieve.
Preamble
Why are price-coordinated economies superior to command economies in allocating scarce resources and meeting demand?
Price-coordinated economies are able to harness variable uses of scare resources in order to meet consumer demand.
How does the market price system incentivize production to meet consumer demand?
Prices incentivize producers to meet demand by drawing them into various production efforts through the profit motive and, thus, meeting consumer demand.
The legal protection of the private ownership of private property is necessary for free markets to thrive. Which of the following does not make an adequate case for this principle?
Private property is never taken care of as well as public property owned by the government because people can be coerced into doing what is right for everyone within a public ownership framework.
Free-market competition directs the movement of markets relative to producers' responses to consumers and vice versa. Which of the following does not adequately capture this?
Producers desire the lowest price that the market (consumers) will bear given their propensity to produce goods and services for charitable causes.
Which of the following is not characteristic of the nature of profit in free-market economics?
Profits are generally the result of the continual rise of prices.
Which of the following represents a consequence(s) of profits?
Profits will positively alter innovation, resulting in quality products, efficiently distributed goods and services, and an economical use of scare resources.
Why do nations adopt such strict import laws and raise barriers to trade?"
Protectionism; that is, to protect domestic industries from foreign competitors.
Which of the following identifes the two main categories of external incentives?
Rewards and Punishments
Read the following quote by Nahum Sarna, a noted scholar of Jewish history, taken from his book Understanding Genesis. Determine which option best describes or conveys his point of emphasis. The idea that there is an intimate, in fact, inextricable connection between the socio-moral condition of a people and its ultimate fate is one of the main pillars upon which stands the entire biblical interpretation of history.
Sarna is asserting that a Biblical interpretation of history is linked to an understanding of ideas and their consequences in the moral and social life of any society.
Consider the following quote by Dr. Francis Schaeffer found in his How Should We then Live? and identify which option best explains his main point. A culture or an individual with a weak base can stand only when the pressure on it is not too great. As an illustration, let us think of a Roman bridge. The Romans built little humpbacked bridges over many of the streams of Europe. People and wagons went over these structures safely for centuries, for two millennia. But if people today drove heavily loaded trucks over these bridges, they would break. It is this way with the lives and value systems of individuals and cultures when they have nothing stronger to build on than their own limitedness, their own finiteness. They can stand when pressures are not too great, but when pressures mount, if then they do not have a sufficient base, they crash - just as a Roman bridge would cave in under the weight of a modern six-wheeled truck. Culture and freedoms of people are fragile. Without a sufficient base, when such pressures come only time is needed — and often not a great deal of time ─ before there is a collapse.
Schaeffer utilizes Roman methods of bridge-building to convey the critical role of ideas in supplying lasting answers to life. When these ideas, or worldviews for that matter, are found weak and wanting, they crash like a little Roman humpback bridge because life-pressures are too great.
How does the price system solve the problem of alternative applications of labor and capital to meet thousands of different needs and wants of different urgencies in society?
Since there is no fixed supply of labor and capital, or any resource for that matter, the price system communicates to producers what to make more efficiently and to consumers where to purchase quality items more cheaply.
Two goods for which an increase in the price of one leads to an increase in the demand for the other:
Substitutes
Which of the following is not a monetary tool of the Federal Reserve?
Tax Compliance
Which of the following is incorrect biblically?
The Bible asserts an egalitarian approach to life, whereby all individuals should relinquish any rights to the private ownership of property for the public good.
Which of the following is incorrect biblically? Man's ultimate value is grounded in God, Who in turn made individuals in His image. All mankind bear the same degree of value and dignity; eternal value is God created and God imposed. Human individuality is a vital reality, and such differentiation produces different and unequal economic results. The Bible asserts an egalitarian approach to life, whereby all individuals should relinquish any rights to the private ownership of property for the public good.
The Bible asserts an egalitarian approach to life, whereby all individuals should relinquish any rights to the private ownership of property for the public good.
Ewert points out that the so-called secular left appears to have moderated its opposition to free markets based upon pragmatic as opposed to philosophical reasons. Nevertheless, the "Christian left" is still much less influenced by the demonstrated failure of state-directed economic policies. According to Ewert, why is this the case?
The Christian left appears to prioritize the moral superiority of socialism—they are convinced that capitalism must be judged on its "moral" merits, and in comparison to socialism, it is far more immoral.
James Madison's interpretation of the General Welfare clause is represented by which of the following?
The Congressional authority to achieve the General Welfare of the United States is limited and defined by the subsequent list of specified congressional powers.
What is the monetary policy institution of the United States?
The Federal Reserve
What is the purpose of the Preamble to the U.S. Constitution?
The Preamble limits and defines the general scope of the national government's authority, and the powers the Constitution delegates to the various branches are intended to meet these great objects!
What exactly is "the division of labor" which Adam Smith and Leonard Read refer to? [choose all that apply]
The division of labor refers to a variety of labor capacities distributed among a multitude of people with differing degrees of skills. The division of labor refers to a division of very complex productive efforts into much simpler tasks which a multitude of individuals perform for purposes of production.
Which of the following is not true about rent controls?
The individuals intended to be benefited from rent control actually are, and surpluses in rentals can now be expected.
Which of the following defines a Market Supply Curve?
The market-supply curve is the sum of the individual supply curves of the firms.
According to Madison, what is the primary purpose of civil-government?
The primary purpose of government is the protection of man's property in both its external and internal forms; a man's rights relative to his property and the property a man has in his rights.
Which of the following is not a consequence of Rent Controls?
The quality of housing will improve.
What is the fallacy of the welfare state?
The very fallacy of the welfare state is the spending categories required for its existence—waste and the misappropriation of funds is inevitable, while force is required to collect the money.
Which of the following does not adequately explain why an inequality of external property exists?
There exists an obvious inequality of ownership and, in large part, because those who are wealthy take advantage of those who are poor, and thus accumulate wealth through the systematic theft of their property; social injustices represent the main reason for such disparities in property ownership.
________ promotes economic progress because individuals exchange products, or trade, resulting in vast quantities of goods and services due to specialization and mass production.
Trade
The Price System Utilizes Alternative Applications of Labor and Capital to Meet Market Demands.
True
Which of the following statements is true relative to voluntary exchanges? (Choose all that apply).
What is being exploited in a voluntary transaction is not someone who is a party to the transaction but the transaction itself. Economic exploitation, properly understood, is to take advantage of a potential voluntary exchange to economically improve one's circumstances.
Does voluntary exchange permit individuals to realize gains derived from cooperative effort?
Yes. Cooperation assumes interdependence among individuals with diverse gifts and talents and, therefore, individuals exchange what they create for what they need.
According to Reverend Sirico, we must make some rather "crucial distinctions" which will assist us in understanding the connection between morality and economic liberty more adequately. A series of such distinctions are presented below. Which one of the following will assist us in this endeavor?
a distinction between rights and privileges
A minimum-wage law is...
a government mandated price floor that will result in surpluses in the labor market.
A Republic is best defined as...
a government of laws via representation as opposed to simply a government of men.
Which of the following defines subsidy?
a government payment or tax credit provided to either the producers or consumers of certain goods
Rent control is...
a government-mandated price ceiling that will result in shortages in the rental-housing market.
Inflation is...
a monetary phenomenon and expressed in the general rise in prices across an entire economy.
According to Reverend Sirico, "To ensure that free markets are preserved as much as possible by our public policies, . . . we must provide __________."
a robust explanation of their 'moral value.'
Deflation results from...
a swift contraction of the money supply.
Which of the following represents the philosophical nature of the U.S. Constitution (1787)?
a system of limited civil-government for purposes of ensuring ordered liberty
In the history of the United States at Common Law relative to private Torts (which relates to private wrongs), there was no legal duty to act as a Good Samaritan. What does this mean?
all of the above
Trade barriers negatively impact economic progress because...
all of the above
What is meant by, or implied by equality of opportunity as an economic principle?
all of the above
Why do taxes generally discourage production?
all of the above
Why does rent control worsen the longer it continues?
all of the above
Competition exists...
as a consequence of economic scarcity.
FDR's "Brain Trust" consisted primarily of...
close advisers drawn from the academies who shifted from the belief in individual responsibility, laissez-faire, and a decentralized and limited government to the belief in social responsibility and a centralized and powerful government.
Fill in the appropriate blanks: The principle of property, linked to individuality, issued forth in an equality of civil protection for liberty of__________ and the necessary freedoms to pursue __________and religious duties owed to God and neighbor. Such duties include charity and private philanthropy.
conscience moral
Spontaneous order develops when individuals are all acting according to individual plans, as just the right amount of goods and services become readily available. This process also requires tremendous ______________, as no central planner is needed to make certain that items come into existence.
coordination
Profits are calculated by relating ______ to prices by communicating which goods to produce and how to most efficiently produce them.
costs
Profits will quickly solve a shortage and provoke greater levels of economic ______, especially a more efficient use of property and scarce resources.
efficiency
In 19th century early America, private charity and philanthropy were possible because those who accumulated fortunes were able to donate freely. Which of the following allows these sorts of moral obligations of serving one's neighbor?
equality of opportunity and personal liberty which allows one to fulfill his moral obligations under God
Egalitarianism promotes... (Choose all that apply)
equality of results. redistribution of wealth.
Banks in the United States assist in the creation of money through the...
fractional reserve system.
Which of the following will not promote a country's economic prosperity?
high marginal tax rates
An ______ is a basic motivating element which spurs us to make decisions and pursue actions—any kind of action—as well as market-related ones.
incentive
________ affect our economic choices, that is, our choices among alternative, incompatible uses of scarce resources.
incentives
Profits actually guide the factors of production, such as ______, labor, and capital in accordance with demand.
land
Which of the following does not capture the essence or consequence of free-market competition?
lower quality of production and higher prices of products and services
Decisions are made at the ________, as individuals should exchange when marginal benefits exceed marginal costs.
margins
Fill in the Blank Regardless of the country, inflation is always and everywhere a ________ phenomenon! Inflation is a printing press issue, and that means it's a government issue, as governments are in charge of a nation's printing presses!
monetary
The free market is moral because it's based on merit. Individuals are rewarded when they produce goods and provide services that people want. The free market requires that you think about others and their needs and attempt to please them. This is also referred to as the ________________.
morality of the market
The _________ coordinates the interaction between supply and demand.
price system
In short, economic analysis indicates that high tax rates will reduce________ activity, retard capital formation, and promote wasteful use of resources. Predictably, the income of a country that imposes high marginal-tax rates will fall below its potential.
productive
The bottom line is that incentives do matter, and ______ direct productive efforts and activities to gain advantages and benefits.
profits
Which of the following represents the amount of a good that sellers are willing and able to sell?
quantity supplied
As Beisner note in his article "Biblical Justice vs. Social Justice," the Bible does not demand wealth ________ or equalization.
redistribution
Fill in the Blank As Beisner notes in his article "Biblical Justice vs. Social Justice," the Bible does not demand wealth ________ or equalization.
redistribution
What is meant by Enumerated Powers found within the U.S. Constitution?
relates specifically to a particular delegation or accounting and crediting of power or vestment
Discretionary Spending...
relates to spending on programs funded through annual appropriations acts or appropriations legislation and consists of spending fixed for a specified amount of time.
CPI represents an economic index which...
represents the general level of prices related to the cost of purchasing a basket of goods compared to the purchase of that same market basket at a previous period.
Competition encourages firms to...
supply goods and services consumers value highly relative to cost.
An American founding principle of equality was equality before God. What is meant, or implied, by this? Choose all that apply.
that all individuals bear a personal equality before God Who shows no respect of persons that all men are unequal in respect to abilities and characteristics
The policy imperative of the Franklin Delano Roosevelt Administrations was...
the New Deal
Which of the following represents a core economic fallacy from which other economic fallacies are derived?
the fallacy of examining only the short-term consequences of any given economic policy
What sort of economic fallacy does protectionism rest upon?
the fallacy of looking only at one side of the policy or of noticing what is immediately seen while neglecting the results that are not seen
Which of the following represents a topic or issue which arises under macroeconomics?
the gross domestic product, or GDP of a nation
The division of labor results in an increase in the amount of work done. Which of the following is not a circumstance which promotes such productivity?
the intervention of civil-government to coordinate production efforts
Real GDP is defined as...
the market value of final goods and services produced within a country during a specific time period, usually a year but adjusted for inflation.
In free economies, ________ always expresses a judgment of the estimation in which something is held because individuals will judge an item to have value if they want it, desire it, or need it.
value
Market transactions only occur if both parties or all parties benefit from the exchange. This ________ ________ would not occur if one party was being exploited at the expense of the other party—both parties benefit and are wealthier because of the exchange.
voluntary exchange
Annual Budgets were first legislatively authorized in the United States...
with the Budget and Accounting Act of 1921.