ECON FINAL EXAM REVIEW

Goods that are considered to be needs tend to be

inelastic when the price changes.

Which unemployment rate do most economists consider to be acceptable in the United States?

5%

What makes enforcing safety standards a challenge for the Food and Drug Administration? A. Many foods are imported from other countries, and the FDA must ensure those foods meet the same standards as US goods. B. The FDA faces competition from the EPA, which sets standards for product labeling. C. The FDA has no control over advertising laws, which may conflict with safety standard laws. D. Many raw materials are exported to other countries, and the FDA must ensure those materials meet the same standards as international goods.

A

A government might enact expansionary spending when it is trying to A. increase aggregate demand for goods. B. decrease aggregate demand for goods. C. slow an economic expansion. D. lower a budget deficit.

A increase aggregate demand for goods

A purpose of government regulation in a mixed-market economy is to protect A. property rights. B. corporate rights. C. investor rights. D. states' rights.

A property rights

Which statement best describes why a government's actions are important in macroeconomics? Check all that apply. A. Government controls industry through policy. B. Government is both a consumer and a producer. C. Government can prevent changes and challenges. D. Government can use policy to influence the economy. E. Government can accurately predict economic trends.

A, B, D

Which factors can affect a stock's price? Check all that apply. A. market performance B. the company's financial health C. the quantity products produced D. location of the company E. the economy

A, B, E

What are the signs of high inflation? Check all that apply. A. Production begins to fall. B. Production begins to rise. C. Interest rates decrease. D. Interest rates increase. E. Purchasing power falls. F. Banks grant fewer loans..

A, D, E, F

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. 4,3,2,1,3

Which helps enable an oligopoly to form within a market? A. Costs of starting a competing business are too high. B. The government restricts market entry. C. The number of options in a market confuses consumers. D. No competition exists between producers.

A. Costs of starting a competing business are too high

Which best describes the nature of cause and effect in the context of the business cycle? A. Each effect has other effects. B. Causes and effects cannot be easily defined. C. A cause has multiple independent effects. D. Each effect has a cause.

A. Each effect has other effects

Why is competition limited in an oligopoly? A. High entry costs prevent new producers from entering the market. B. Producers completely refuse to engage in price wars. C. No major distinctions exist between producers. D. Producers actively segment the market to avoid competition.

A. High entry costs prevent new producers from entering the market

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. Store, lend, and invest money

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 quantity demanded for bread will decrease, and the quantity supplied will increase

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. a recession

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. high unemployment and a low level of production

Who sets the price in a monopolistic competition? A. producers and consumers B. consumers only C. government D. producers only

A. producers and consumers

Banks pay interest to customers through a A. savings account. B. credit card account. C. mortgage account. D> 401k account.

A. savings account

A regulatory agency that makes sure banks follow federal laws is A. the FDIC. B. the FDA. C. the SEC. D. the EPA.

A. the FDIC

Which is an example of a government monopoly in the United States? A. the US Postal Service B. the Internal Revenue Service (IRS) C. the US Environmental Protection Agency (EPA) D. the National Park Service

A. the US Postal Service

Which event most likely explains renewed demand in a recovery period? A. Consumers choose to save more and spend less. B. Economic policy renews consumer confidence and demand. C. Producers decrease prices to prompt demand and recovery. D. Production decreases to prompt increased demand.

B. Economic policy renews consumer confidence and demand

Which best describes the idea behind the "invisible hand"? A. Producers decide what to make for consumers, which guides the economy. B. Individuals seeking their own self interest benefit the economy as a whole. C. Government sets policy for producers and consumers, which guides the economy. D. Consumers decide what they need and want to buy, which guides the economy.

B. Individuals seeking their own self interest benefit the economy as a whole

Which best describes the availability of substitutes in a monopoly? A. Price points vary. B. There are no substitutes. C. There are different brands. D. Products have different features.

B. Price points vary

Which is an effect of stagflation? A. Trade with other economies increases. B. The value of a country's currency drops. C. Prices for goods fall sharply and suddenly. D. The GDP rises along with production levels.

B. The value of a country's currency drops

An entrepreneur who needs large amounts of capital to create and distribute a new invention would most likely visit A. a community banker. B. an investment banker. C. a commercial banker. D. an executive banker.

B. an investment banker

Which best describes how an investor makes money from an equity investment? A. by earning interest B. by selling the asset for a profit C. by raising capital D. by growing the asset

B. by selling the asset for profit

Bank deposits help the nation's economy by providing A. protection for consumers from theft. B. giving banks the money to loan and invest. C. providing protection for banks on investments. D. giving consumers the ability to save money.

B. giving banks the money to loan and invest

Milton Friedman led a new economic school of thought called A. laissez faire. B. monetarism. C. price signaling. D. the invisible hand.

B. monetarism

How are progressive taxes and regressive taxes similar? A. Both charge high-income individuals more. B. Both are considered flat taxes. C. Both are determined based on income. D. Both are types of indirect taxes.

C Both are determined based on income

What types of investments do banks use to make a profit? Check all that apply. A. opening checking accounts B. starting new businesses C. buying stocks and bonds D. buying several properties E. issuing loans to all customers F. buying the rights to loans

C, D, F

Which can be traded in a commodities market? A. cars B. computers C. oil D. clothing

C. Oil

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. The recession accelerates

Which best describes the role that government and business play in investments? A. They both use taxes to support a country's growth. B. They both invest money to earn a profit. C. They both receive capital to use for growth. D. They both act as angel investors for start-ups.

C. They both receive capital to use for growth

Economists use gross national product (GNP) to measure A. economic output within a nation, regardless of ownership. B. the output of foreign-owned businesses within a nation. C. the output of a nation's citizens, regardless of where they are. D. any business activity taking place outside a country.

C. the output of a nation's citizens, regardless of where they are

Are the buying and selling of stocks centralized activities? Why or why not? A. Yes, the New York Stock Exchange is the principal exchange for the nations of the world. B. No, people can buy stocks anywhere, and they do not need to go through a market. C. Yes, the world's stock markets are coordinated exchanges, and they are dependent on one another. D. No, there are many stock markets around the world, and they are independent of one another.

D. NO, there are many stock markets around the world, and they are independent of one another

Why are imports, which bring goods into a country, considered a leakage factor? A. Imports do not generate domestic income. B. Domestic industry loses ground as imports increase. C. Imports are taxed heavily, which is a secondary leakage factor. D. The money paid to producers of imports leaves the country.

D. The money paid to producers of imports leaves the country

Which is the correct order of entities who 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. shareholders, companies, and the economy

Wellness Pharmaceuticals has released a new antidepressant, Lexabuzac. Which type of monopoly does the company most likely have on this medication? A. natural monopoly B. de facto monopoly C. government monopoly D. technological monopoly

D. technological monopoly

Which best explains how contractionary policies can hamper economic growth? A. They increase consumer demand. B. They can increase inflation. C. They reduce taxes which raises deficits. D. They reduce disposable income.

D. they reduce disposable income

The circular flow model examines interactions between which two groups?

Households and firms

The lowest amount a manufacturer can pay factory workers is an example of

a price floor

Which is an example of a negative incentive for producers?

a sharp increase in production costs

Which best describes what generally occurs in financial markets?

assets are traded

Which body or group is most able to use money to influence the economy?

government

Which statement best describes the circular flow model?

the model represents the movement of money and resources throughout the economy