Economics LUOA

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 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 describes a Federal Reserve monetary tool known as Open Market Operations?

OMO consists of the buying and selling of U.S. government securities, like U.S. Treasury bonds and other assets on the open market, to expand or contract the money supply.

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 a monetary tool of the Federal Reserve?

Tax Compliance

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

Which of the following best identifies the significance of the Federalist Papers (1787-1788)?

The Federalist Papers represent the best commentary on the problems of the Articles of Confederation and the nature of the U.S. Constitution (1787).

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!

Which of the following is incorrect regarding product innovation in a free-market economy?

The approval of central planners, a legislative majority, or business rivals are necessary for an entrepreneur to try out a new idea.

Which of the following represents a market clearing price?

a condition in which supply meets demand and stabilizes prices

A Republic is best defined as

a government of laws via representation as opposed to simply a government of men.

Inflation is...

a monetary phenomenon and expressed in the general rise in prices across an entire economy.

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

1. Why do nations adopt such strict import laws, and raise barriers to trade?"

a. Protectionism; that is, to protect domestic industries from foreign competitors.

4. What is the best cure for inflation?

b. A steady reduction in the rate of monetary growth is the only means by which inflation can be remedied.

3. What is the proper role of government relative to equality of opportunity?

b. Governments should protect the private use of private property and avoid hindering expressions of individuality in the market

4. Which of the following is not a true statement from a biblical perspective?

b. Human individuality is actually illusory. Man's value is best equated with group identity and equality of sameness.

4. Which of the following defines subsidy?

b. a government payment or tax credit provided to either the producers or consumers of certain goods

2. What sort of economic fallacy does protectionism rest upon?

b. 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

1. Thomas Sowell has proposed a thesis which attempts to explain differences in policy outlooks ultimately located in contrasting worldviews. Which of the following identifies this thesis?

c. conflicting visions of a constrained and unconstrained nature

Competition enhances ________ through constant interaction and exchange. Consumers compete against consumers, producers against producers.

cooperation

4. Which of the following is not a consequence of free international trade? Please read each option carefully.

d. 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.

5. Friedman identifies five general truths relative to inflation. Which of the following is not part of that analysis?

d. Inflation always benefits creditors, and especially banks, and, therefore, an unfavorable monetary policy to implement.

2. Which of the following is incorrect biblically?

d. 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.

5. When considering the fallacy of what is seen and what is not seen, what typically fails people's notice relative to protectionist policies? In other words, what is not immediately seen, but nevertheless, very real?

d. The new industry would be visible, but given the shift in the concentration of capital, other industries would be prevented from coming into existence—this is what is not immediately seen: all the losses!

3. Which of the following does not adequately explain why an inequality of external property exists?

d. 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.

2. What is meant by, or implied by, equality of opportunity as an economic principle?

d. all of the above

2. Why do governments increase the quantity of money too rapidly?

d. government demand for growth in spending, or government expenditures

3. Trade barriers negatively impact economic progress because

e. all of the above

1. An American founding principle of equality was equality before God. What is meant, or implied by this?

e. b and d - 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

A price ________ establishes a minimum price that can legally be charged. When a price floor is imposed above the current market equilibrium, it will alter the operation of markets.

floor

Not all goods are normal goods. If the demand for a good rises when income falls, the good is called an ________ ________. An example of this kind of good might be bus rides. As your income falls, you are less likely to buy a car or take a cab and more likely to ride a bus.

inferior good

A price index measures the cost of purchasing a market basket of goods at a point in time relative to the cost of purchasing the identical market basket during an earlier reference period. A base year is chosen and assigned a value of 100. As prices increase and the cost of purchasing the reference bundle of goods rises relative to the base year, the price index increases proportionally. A price index of 110 indicates that the general level of prices

is 10 percent higher than during the base period.

If the amount of goods and services for purchase increased in tandem with the supply of money, prices would be

more or less stable.

3. Fill in the Blank Progressives and modern critics of equality of opportunity have launched two significant criticisms against the Founders' view. First, that equality of opportunity is impossible to achieve. Second, to the extent that equality of opportunity has been tried, it has resulted in a gigantic inequality of outcomes. Equality of __________, in the Progressive view, is desirable and can only be achieved by massive government intervention.

outcomes

A key source of economic progress is free trade relations between nations, and such trade views ________via tariffs as detrimental and destructive to economies.

protectionism

Which of the following represents the amount of a good that sellers are willing and able to sell?

quantity supplied

5. 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, crediting of power, or vestment

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.

The availability of ________—goods that perform similar functions—underlies the law of demand. No single good is absolutely essential; everything can be replaced with something else.

substitutes

Competition encourages firms to

supply goods and services consumers value highly relative to cost.

One reason prices are "inflated" is because...

the money supply grows too quickly—the supply is much greater than the demand for it, leading to a general rise in prices.

The money supply in the United States is mainly measured...

through two units: M1 and M2.

2. Why does free international trade make it possible for each country to acquire goods, services, and resources more economically?

- 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. - People generally benefit more from international markets when they're allowed to purchase products or services at cheaper costs compared to domestic markets.

5. If society held to an economic vision of equality of results, how would this goal alter the role of government?

- Governments should attempt to equalize all human attributes to ensure there's no disparity or inequity in the acquisition of property. - Governments should pursue economic measures of social justice to ensure that everyone has the exact same economic success. - Governments should disregard natural human hindrances and propose policies which economically advance some over others in the name of social justice.

How does the rapid printing of money lead to a general rise in prices? (Choose all that apply).

- The supply of goods and services is outpaced by the supply of money, resulting in a greater degree of scarcity and a rise in prices generally. - Prices rise, generally, because people have more money in their pockets and effectively are able to spend more money on goods and services and, hence, bid up prices.

What is a price ceiling?

A price ceiling establishes a maximum price that can be charged for a good, service, or resource.

Which of the following is incorrect?

All of these are correct

Which of the following adequately captures changes in equilibrium?

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 statements is true?

Both are true.

This represents an analysis question. Does a change in the price of sugar and 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 is not a characteristic of a reliable form of money?

Compartmental

Which of the following is an incorrect statement?

Competition means central planning, or the direction of the whole economic system according to one unified plan.

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.

Which of the following is incorrect?

Federalism assumes that all power is lodged within the people generally.

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.

Is the monetary policy of inflation best equated with a mirage or oasis?

Inflation is a mirage, as people confuse money with wealth, as opposed to products and services and, therefore, assume the more dollars they acquire, the wealthier they are.

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 properly defines the term "jurisdiction"?

Jurisdiction refers to the lawful use of lawful authority.

Which of the following correctly identifies macroeconomics?

Macroeconomics emphasizes aggregate markets to discern GDP and CPI.

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.

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.

A good for which, other things equal, an increase in income leads to an increase in demand:

Normal Good

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

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.

Two goods for which an increase in the price of one leads to an increase in the demand for the other:

Substitutes

________ represents a condition in which the amount of a good offered for sale by producers is greater than the amount that buyers will purchase at the existing price. A decline in price will eliminate the surplus.

Surplus

Which of the following defines a Market Supply Curve?

The market supply curve is the sum of the individual supply curves of the firms.

Inflation is best defined as

a general rise in prices across an entire economy.

3. Just who exactly are the beneficiaries of pro-inflationary policies?

a. Debtors benefit the most and never creditors or savers!

3. Free International trade allows domestic producers and consumers to benefit from economies of scale. What is meant by this? Please read the options carefully.

a. 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.

1. Deflation results from...

a. a swift contraction of the money supply.

GDP cannot measure which of the following?

all of these are correct

Which of the following can lead to shifts in the supply curve?

all of these are correct

Competition...

allows people to gravitate towards what they do best as the goal of any free market is productivity and productive employment.

Competition exists...

as a consequence of economic scarcity.

5. Which of the following is incorrect relative to either the nature of a trade barrier or its consequences?

c. Trade barriers lower the cost of doing business with those protected industries.

Competition is the absence of ________, and the presence of an environment of freedom which maximizes one's volitional capacity to choose.

coercion

________ represents a state in which the conflicting forces of supply and demand are in balance.

equilibrium

1. Egalitarianism promotes

f. b and c b. equality of results c. redistribution of wealth.

Banks in the United States assist in the creation of money through the...

fractional reserve system.

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

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 objective of the Federal Reserve is

monetary equilibrium, by providing liquidity through lending to member banks.

A ________ can occur in a situation in which quantity demanded is greater than quantity supplied.

shortage

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.

Many assume, though falsely, that rapid increases in the money supply will have no negative consequences upon general prices but, somehow, increase everyone's purchasing power, or enable everyone to buy more goods and services than previously. Why is this not true? (Choose all that apply.)

- An increase in the supply of money does not lead to an increase in the supply of goods and services, or resources, because the law of supply and demand in relationship to the price system directly impacts the availability of goods and services, not the money supply. - Even if such an infusion of money doubled purchasing power, people cannot buy twice as many goods and services unless there are twice as many goods and services available.

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.

Which of the following defines the Law of demand?

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 best explains the location or nature of these terms as part of the American constitutional order and system: More Perfect Union, Justice, Domestic Tranquility, Common Defence, General Welfare, and the Blessings of Liberty?

All of these terms are located in the Preamble to the U.S. Constitution.

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.

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

You have $10,000 in cash and decide to deposit it in your checking account at your local bank. Since the reserve requirement is 10 percent, your bank must keep $1000 or 10 percent of your $10,000 deposit as reserves. But, the other $9000 generates excess reserves for the bank which can be used to extend additional loans. The bank extends a new loan to someone borrowing $9000 in the form of either checkable deposits or cash. No one else has less money, and the person taking out the loan now has an additional $9000. How much money has been added to the money supply?

Due to excess reserves, $9,000 has been added to the money supply.