Economics Practice Questions

Which act makes defrauding consumers through the mail a federal crime? A. Wilson Tariff Act B. Mail Fraud Act of 1872 C. Clayton Act of 1914 D. Sherman Antitrust Act of 1890

Mail Fraud Act of 1872 (· The Mail Fraud Act of 1872 was the first legislation to protect consumers from mail scams. Since then, the courts have clarified its scope, and Congress has passed additional protective measures.)

In 2006, U.S. exports totaled $1,036,635, and U.S. imports totaled $1,853,938. Based on the percentages in the graphs, with which country did the United States have the greatest trade deficit? (flip for picture) A. Germany B. France C. Japan D. China

CHINA

Which of the following best explains how free market economies are able to achieve economic growth? A. Everyone is acting in their own self-interest, which motivates market growth. B. Firms keep producing incentives to encourage households to purchase more goods. C. Competition encourages innovation, which causes growth. D. Consumers can purchase all the goods they need, which causes firms to produce more.

Competition encourages innovation, which causes growth. (The innovations resulting from interfirm competition are a major cause of economic growth in free market economies.)

25. The cost curve above best illustrates which of the following economic concepts? (flip for pic) A. elasticity of supply B. law of diminishing returns C. return to capital D. economies of scale

Economies of scale

Match the definitions with the terms (flip for picture)

F P H B A N J C M D G I L O K E

The ways in which factors of production are combined determines the answer to which economic question? A. Who will consume goods? B. How will goods be distributed? C. How will goods be produced? D. How can we provide a safety net? ANSWER: How will goods be produced?

How will goods be produced? · (Different methods of production involve different combinations of land, labor, and capital.)

What happens when the Federal Reserve buys or sells government securities? A. It affects the money supply. B. It lowers the deficit. C. Spending could become uncontrollable. D. Taxes could be lowered.

It affects the money supply. (When the Federal Reserve buys government securities, it increases the money supply; when it sells them, the reverse occurs.)

Which of the following statements best describes the place of the United States in a world that is economically interdependent? A. It is a major importer and exporter of a variety of goods. B. It is too wealthy to need to join trade agreements. C. It is insulated from the employment effects of trade. D. It has a comparative advantage in one major area: technology.

It is a major importer and exporter of a variety of goods.

Globalization has led to increased competition worldwide. How may this benefit developed nations? a. It causes a reduction in prices for most goods. b. It reduces unemployment. c. It increases tariff revenues. d. It provides an incentive for innovation.

It provides an incentive for innovation. (The intensification of competition in a globalized marketplace serves a constant spur to innovation.)

Which of the following is considered capital when used to produce goods and services? A. water B. skills C. machines D. time

MACHINES

Assume that Nation A has a comparative advantage in producing corn and exports corn to Nation B. We can conclude that: A. labor costs are higher for corn producers in Nation B than in Nation A. B. Nation A can produce corn at a lower opportunity cost than Nation B. C. Nation B has an absolute disadvantage in producing corn relative to Nation B. D. Nation A also has an absolute advantage in producing corn relative to Nation B.

Nation A can produce corn at a lower opportunity cost than Nation B.

Which of the following statements about scarcity is true? A. Scarcity is only a problem when a country has too large a population. B. Scarcity is not a problem for the wealthy. C. Scarcity arises when there is a wide disparity in income distribution. D. Scarcity refers to the situation in which unlimited wants exceed limited resources.

Scarcity refers to the situation in which unlimited wants exceed limited resources.

When the price of a product goes down, what happens? A. Existing firms continue their usual output but earn less. B. New firms enter the market as older ones drop out. C. Some producers produce less, and others drop out of the market. D. Existing producers expand, and new producers enter the market.

Some producers produce less, and others drop out of the market. (Where some producers are able to adjust output to declining sales, others find that they can no longer secure the revenue needed to remain in business.)

Match each diagram below with its description. Assume that the economy is producing or attempting to produce at point A, and most members of society like meat and not fish. (flip for pic)

1st one: B 2nd one: C 3rd one: A

The Coffee Nook sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino? A. 2 1/2 Russian tea cakes B. $2.50 C. 2/5 of a Russian tea cake D. $1.00

2 1/2 Russian tea cakes

One could best determine likely price changes before they occur at the retail level, by examining: A. the GDP deflator. B. the household price index. C. the producer price index. D. the consumer price index.

the producer price index.

Which of the following is the best example of the law of supply? A. A cafe buys a new dishwasher to make work easier. B. A flour mill builds a new factory overseas. C. A farmer grows wheat to sell to a flour mill. D. A paper plate factory makes more plates when the market price goes up

A paper plate factory makes more plates when the market price goes up. (According to the law of supply, businesses will increase supply as the price of goods rises.)

Which of the following best describes a distinguishing characteristic of corporations? A. It is separate from those who own it and legally acts as a single person. B. Ownership is shared by more than one person. C. It can raise large amounts of money to finance growth. D. It is limited by government regulations. E. All of the above.

All of the above.

How do rising interest rates affect the business cycle? A. As interest rates rise, businesses borrow less, leading to contraction. B. As interest rates rise, the nation is more subject to external shocks, leading to contraction. C. As interest rates rise, lenders make more money, leading to expansion. D. As interest rates rise, consumer confidence rises, leading to expansion.

As interest rates rise, businesses borrow less, leading to contraction. · (When it is harder for businesses to borrow money, they invest less and output drops.)

Information presented in the production possibilities curve below best supports which of the following conclusions about how many roads and schools a community could build? (flip for chart) A. As the number of schools decreases, so does the number of roads. B. As the number of schools increases, the number of roads decreases. C. As the number of schools increases, so does the number of roads. D. The number of schools has no effect on the number of roads.

As the number of schools increases, the number of roads decreases. (The current curve is in black. 20 miles of road can be built if no schools are built, but no miles of road can be built if 5 schools are built.)

Which is not a source of income for the federal government? A. personal income taxes B. corporate income tax C. tariffs on imported goods D. bonds

BONDS (Bonds can be likened to loans; they do not in themselves add income)

What happens when the Federal Reserve lowers the discount rate? A. Banks usually raise their interest rates. B. Banks can lower their interest rates. C. Government spends more money. D. A recession usually occurs.

Banks can lower their interest rates. (The discount rate is the rate of interest banks must pay when they borrow money from a Federal Reserve Bank. If the Fed lowers the discount rate, banks can lower the interest rate they charge borrowers.)

With the introduction of new machinery, a factory is able to produce goods more quickly and cheaply than it previously could. Which of the following best describes a likely consequence of this development? A. At first, supply will rise, but then it will decrease. B. Costs will go down and supply will go up. C. Supply and costs will both decrease. D. Costs will drop, but supply will remain the same.

Costs will go down and supply will go up. (New technology tends to lower costs, thus enabling a firm to increase sales by reducing prices.)

Match the following terms to the appropriate definition. (flip for pic)

D F E B A C

Which is an example of the law of demand at work? A. Demand for pizza goes down when tacos become more popular. B. The price of pizza goes up when the price of cheese goes up. C. Demand for pizza rises when the price of pizza falls. D. The price of pizza falls when demand for pizza falls.

Demand for pizza rises when the price of pizza falls. (According to the law of demand, consumers will purchase more of a product when prices fall.)

in July, an automobile company announces that next year's models, which have more features, will start to arrive in September or October. What is likely to happen to demand for this year's model in August? A. Demand will stay the same and price will stay the same. B. Demand will fall in anticipation of lower prices. C. Demand will go to zero because everyone will want the new model. D. Demand will rise in anticipation of higher prices.

Demand will fall in anticipation of lower prices. (Demand will likely decline in August because consumers will anticipate a price cut on the current model)

Which of the following statements about the U.S. economy is true? A. Each year, many new jobs are created, but few existing jobs are destroyed and the unemployed find jobs quickly. B. Each year, many new jobs are created and many existing jobs are destroyed. C. Each year few jobs are created; therefore, it takes the unemployed a long time to find a new job. D. Each year, few new jobs are created but few existing jobs are destroyed, keeping unemployment low.

Each year, many new jobs are created and many existing jobs are destroyed.

Monetary policy refers to the actions the: A. Federal Reserve takes to manage government spending and taxes to pursue its economic objectives. B. Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives. C. President and Congress take to manage government spending and taxes to pursue their economic objectives. D. President and Congress take to manage the money supply and interest rates to pursue their economic objectives.

Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives.

Information presented in the graph below best supports which of the following conclusions? A. Federal spending increased significantly during World War II. B. Federal spending has no impact on the American economy. C. As a percentage of GDP, the amount of federal spending has never been greater than it is today. D. The federal government has always tried to influence the economy through massive public spending.

Federal spending increased significantly during World War II.

25. During which phase of the business cycle is an economy most likely to experience the developments described in the list below? o Inflationary pressures intensify. o Finding new workers becomes increasingly difficult. o Interest rates increase. o Demand begins to overtake supply. A. peak B. expansion C. trough D. contraction

PEAK (This question requires the examinee to analyze factors influencing the business cycle. As the economy nears full production during the peak phase of a business cycle, consumer demand becomes greater than companies are able to supply, most workers are already employed, and the demand for bank loans to fuel greater production drives up interest rates. Together, these factors begin to drive prices higher, initiating an inflationary spiral.)

The agency that provides information on the prevention of death and injuries associated with consumer products is the: A. U.S. Consumer Product Safety Commission. B. Occupational Safety and Health Administration. C. American Council on Science and Health. D. National Consumers League Alliance Against Fraud.

U.S. Consumer Product Safety Commission. ( The U.S. Consumer Product Safety Commission maintains the National Injury Information Clearinghouse.)

What payment do producers exchange for the use of labor? A. market price B. wages C. rent D. interest

WAGES (Wages are payment for labor.)

Which of the following best describes one difficulty that is likely to arise when a country shifts from a centrally planned economy to a free market economy? A. Entrepreneurs will have fewer opportunities to start new businesses. B. Farmers will have to produce crops the government instructs them to grow. C. Only poor quality goods will become available to consumers. D. Workers will lose job security and guaranteed incomes.

Workers will lose job security and guaranteed incomes. · (Unlike wage earners in free market economies, workers in centrally planned economies often have job security and guaranteed wages.)

A family buys groceries twice a week. Which arrow or arrows describe this? (flip) A. a and b B. a C. c D. a and d

a and b (Households pay firms for goods; firms supply households.)

A number of people have been standing in line for almost an hour waiting to be served at Kirala, a new Japanese restaurant. It is possible that some of the people in line will not be served at all before the restaurant closes. Which of the following could explain why the restaurant does not simply raise prices high enough to eliminate the lines? In situations where consumption takes place publicly, demand for the product is influenced by how many other people are buying the product. Consequently, a popular restaurant that increased its prices enough to eliminate lines might find that it had also eliminated its popularity. Firms may sometimes not raise their prices for fear that it violates peoples' sense of fairness and could alienate customers. Because the demand for restaurant meals is extremely inelastic, the relationship between price and the number of people patronizing such businesses is extremely weak.

a and b only

Suppose that a U.S. citizen purchases a German-made motor vehicle from a German car dealer. This would be recorded in the U.S. balance of payments as: A. a credit to the capital account only. B. a credit to the current account and a debit to the capital account. C. a debit to the current account and a credit to the capital account. D. a debit to the current account only. E. None of the above answers is correct.

a debit to the current account and a credit to the capital account. (The purchase of the car is a debit to the current account (imports of goods), while the transfer of money from the United States to Germany is a credit to the capital account (increase in U.S. assets held abroad)

Which of the statements below demonstrates that economic agents respond to incentives? Car owners purchase more gasoline from a station that sells gasoline at a lower price than other stations in the area. Banks fail to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. Firms increase production of a particular DVD when its selling price rises. A. a only B. b only C. c only D. a and b E. a, b, and c

a, b, and c

How do tariffs protect domestic industries from foreign competition? by making domestic products more attractive than foreign products by banning exports to a particular country or countries by banning imports from a particular country or countries by placing a limit on the amount of a commodity that can be imported

by making domestic products more attractive than foreign products (Tariffs are taxes on imported goods that increase their cost, making domestic goods more attractive to consumers.)

Nation A has a comparative advantage over Nation B in the production of bicycles. This means that Nation A: A. can produce bicycles at a lower opportunity cost than Nation B. B. can produce more expensive bicycles than Nation B. C. can produce more bicycles than Nation B. D. can produce better bicycles than Nation B.

can produce bicycles at a lower opportunity cost than Nation B.

An agreement about wages and working conditions is part of a process called: A. a profit. B. collective bargaining. C. a lockout. D. a boycott.

collective bargaining. (Unions engage in collective bargaining on behalf of their members.)

Which of the following is the best definition of deflation? A. income payments that businesses make to banks on borrowed money B. increases in the level of prices throughout the nation C. money left in a business after all costs have been paid D. decreases in the level of prices throughout the nation

decreases in the level of prices throughout the nation (Deflation is defined as a general decline in prices.)

Stockholders make money when the company that is issuing the stock pays: A. bonds. B. interest. C. dividends. D. capital gains.

dividends. ·(Most companies that issue stocks use a share of their profits to pay dividends to stockholders.)

25. A young worker with a "high risk, high reward" mentality would likely find which of the following investment options most appealing? A. futures contracts B. precious metals C. money market account D. corporate long-term bonds

futures contracts (requires the examinee to demonstrate knowledge of basic principles of personal finance, including principles of budgeting, different forms of credit, and savings and investment options. A futures contract is an agreement to buy or sell a specified commodity at a certain date at the market price of that commodity on that date. Popular among speculators seeking to make money by predicting market trends, these contracts can be acquired for currencies, various financial instruments, and referenced items, such as stock indexes, as well as traditional commodities. Although futures contracts are extremely risky, the profits to be made from accurate predictions can be substantial.)

The recommended first step in the consumer redress process is to: A. contact an appropriate government regulatory agency. B. see the local Chamber of Commerce. C. obtain the services of an attorney. D. go to the business that sold the good or service.

go to the business that sold the good or service. (Most complaints can be resolved by talking directly with the business that sold the good or service.)

Which of the following best describes the economy of the United States? A. centrally planned B. mixed, but more like a free market C. free market D. mixed, but more centrally planned

governments are best able to meet certain needs and wants of modern society. (In situations where the market is not responsive to social needs, government can often supply what is desired.)

Government intervention in a modern economy is useful because: A. the needs and wants of a modern society are always met by the marketplace. B. free market principles do not encourage growth. C. governments are best able to meet certain needs and wants of modern society. D. the marketplace has many incentives to create public works such as parks.

governments are best able to meet certain needs and wants of modern society. ·(In situations where the market is not responsive to social needs, government can often supply what is desired.)

Which of the following is most likely to slow economic growth? A. lower taxes B. increase in employment C. increase in the money supply D. higher taxes

higher taxes (Increases in taxes tend to slow economic growth because people have less money to spend.)

who owns the factors of production in a market economy? A. households B. individuals C. the market D. firms

households (Unlike command economies, where the state owns the factors of production, they are owned by households in a market economy.)

What typically takes up the largest portion of an individual's budget? A. housing, transportation, and food B. clothing, savings, and entertainment C. insurance, health, and charity D. insurance, savings, and transportation

housing, transportation, and food (Housing typically makes up about 24 percent of a person's budget, transportation about 17 percent, and food around 14 percent.)

Today in the United States, the top consumer complaint is: A. sweepstakes. B. internet auctions. C. identity theft. D. work-at-home plans.

identity theft. (According to the Federal Trade Commission, more than a third of all consumer complaints in recent years involved identity theft.)

One result of free trade has been to: a. eliminate the comparative advantage of one trading partner over another. b. reduce the role of multinational corporations in world trade. c. increase the pace of globalization. d. reverse the trend toward offshoring.

increase the pace of globalization. (Free trade has contributed to the creation of an intricate web of international trading partnerships; interdependence and globalization have increased significantly as a consequence of this development)

During a deep recession, the president announces a "stimulus plan" to "get the economy going again." This can best be seen as an effort to: A. reduce the money supply. B. institute an expansionary fiscal policy. C. apply supply-side economics. D. reduce the national debt.

institute an expansionary fiscal policy. (Federal payments to the private sector constitutes a fiscal policy (spending); using fiscal policy to increase output is an expansionary policy.)

Which of the following government actions would most likely cause a budget deficit? raising both taxes and spending cutting taxes without cutting spending raising taxes without raising spending cutting both taxes and spending

institute an expansionary fiscal policy. (Federal payments to the private sector constitutes a fiscal policy (spending); using fiscal policy to increase output is an expansionary policy.)

The largest source(s) of revenue for most banks is/are: A. tariffs. B. interest on loans. C. fees and service charges. D. new checking accounts.

interest on loans. (When consumers or businesses take out loans, they pay back the principal with interest. When interest rates are high, the borrower can pay considerably more than the original amount borrowed.)

The Federal Reserve's open market operations: A. involve the buying or selling of government securities. B. determine the amount of interest a bank must pay when borrowing money from the Fed. C. determine the amount of money that banks must keep on deposit. D. have little effect on the nation's money supply.

involve the buying or selling of government securities.

An advantage of a sole proprietorship is that the owner: A. keeps all profits. B. raises all money to expand. C. is responsible for all debts. D. All of the above.

keeps all profits. (Being able to keep all that one earns from the sale of goods and services is a major advantage of sole proprietorships.)

The physical flow from households to firms shown in the diagram most likely consists of (flip for pic) A. wages and salaries. B. goods and services. C. interest and profits. D. labor and land.

labor and land. (In a free market economy, firms pay workers for labor and may buy or rent land.)

Which type of business can generally produce goods and services most efficiently? A. sole proprietorships B. large corporations C. partnerships D. small corporations

large corporations (Large corporations typically have more land, labor, and capital than the other types of enterprises listed above.)

Pure competition is a market structure in which there are: A. many firms, each small relative to the size of the industry and producing virtually identical products, and in which no firm is large enough to have any control over prices. B. few firms, each large relative to the size of the industry and producing virtually identical products, and in which no firm is large enough to have any control over prices. C. many firms, each small relative to the size of the industry and producing virtually identical products, and in which at least one firm is large enough to have significant control over prices. D. many firms, each small relative to the size of the industry and producing highly differentiated products, and in which no firm is large enough to have any control over prices.

many firms, each small relative to the size of the industry and producing virtually identical products, and in which no firm is large enough to have any control over prices. (Producers in pure competition market structures are roughly the same size and produce similar products.)

An economy in which all boys become farmers when they are adults, just as their fathers and grandfathers did, is most likely a: A. centrally planned economy. B. free market economy. C. command economy. D. traditional economy.

mixed, but more like a free market · (Although the United States economy is a mixed system, it is based on free market principles.)

Consumers would most likely view an increase in the price of a good or service as a: A. negative incentive to purchase less of the good or service. B. positive incentive to purchase more of the good or service. C. positive incentive to purchase less of the good or service. D. negative incentive to purchase more of the good or service.

negative incentive to purchase less of the good or service. ·( Higher prices are a negative incentive that would likely cause consumers to purchase less of a good or service.)

imagine that you are an economist advising the President. The national unemployment rate is at 5 percent. What action would you recommend? A. an emergency program to create more government jobs B. a large increase in unemployment benefits C. no action, because the nation is at full employment D. a national training program to end structural unemployment

no action, because the nation is at full employment (Economists generally agree that an unemployment rate of 4 to 6 percent is normal.)

The central task of the Securities and Exchange Commission is to: A. oversee America's stock markets. B. provide protections for the basic rights of U.S. workers. C. set the rates at which corporations can borrow money. D. regulate the U.S. banking system.

oversee America's stock markets. (The main purpose of the Securities and Exchange Commission is to oversee the nation's stock markets. In carrying out its duties, the commission seeks to prevent illegal activities such as insider trading.)

When the International Monetary Fund arranges a debt rescheduling program for a less developed country, the country is very often required to A. impose stricter government controls on the economy. B. produce more goods for export. C. accept more foreign aid from developed countries. D. spend more money on education.

produce more goods for export. (By increasing exports, the less developed country can bring in the money needed to pay off its debts.)

To produce goods and services, labor, land, and capital are combined in a: A. series of decisions. B. benefit analysis. C. distribution cycle. D. production process.

production process. (Land, labor, and capital are factors of production.)

25. Supply-side economists are most concerned about how fiscal policy can be used to: A. raise the wages of workers. B. increase the consumption of goods. C. promote business investment. D. improve government services.

promote business investment. (Requires the examinee to examine factors influencing fiscal policy. The main concern of supply-side economists is to increase the overall supply of goods and services. Most supply-side adherents believe that this can best be achieved by providing various incentives, such as tax cuts, that are designed to promote business investment.)

Your neighbor argues that tariffs should be raised to preserve American jobs. You can infer from this that he or she favors: A. protectionism. B. internal financing. C. free trade. D. privatization.

protectionism. (Protectionists believe that high tariffs and import quotas should be used to shield U.S. firms—and their employees—from foreign competition.)

the biggest advantage of a mutual fund is that it: A. pays dividends to preferred customers. B. has returns guaranteed by the SEC. C. provides a diversified portfolio. D. takes advantage of dollar cost averaging.

provides a diversified portfolio. ·(Mutual funds invest in a variety of stocks and bonds.)

The federal government can best promote economic growth by: A. raising taxes to balance the federal budget. B. putting more money in people's pockets. C. increasing the national debt. D. reducing funds for entitlement programs.

putting more money in people's pockets. (Stimulus packages and tax breaks give consumers money that can be used to purchase goods and services, which creates a need for increased production and employment.)

corporations sell stock in order to: A. avoid government regulations. B. raise large amounts of money. C. invest in the economy. D. share responsibility for debt.

raise large amounts of money. (When stockholders invest in a corporation, the firm has more capital to invest in the business.)

When people make choices that will give them the greatest amount of satisfaction at a particular time based on the information they have at their disposal, it is called: A. conspicuous consumption. B. economic independence. C. rational self interest. D. egocentric consumption.

rational self interest. (Such choices are considered rational when they are based on credible information and reflective reasoning about what one is seeking.)

When prices begin to rise, the Federal Reserve would most likely: A. print more money. B. reduce the money supply. C. lower the discount rate. D. encourage loans.

reduce the money supply. (During periods of rising inflation, the Fed attempts to slow down the pace of economic activity by taking steps to reduce the money supply.)

The federal government uses fiscal policy mainly to: A. balance its budget. B. create a fair tax system. C. regulate economic growth. D. collect needed revenues.

regulate economic growth. (Fiscal policy is primarily used to expand or slow economic growth)

The Federal Reserve's most important job is to: A. make loans to banks. B. enforce laws that protect businesses. C. monitor government spending. D. regulate the money supply.

regulate the money supply. (The Fed is best able to maintain economic stability through its regulation of the money supply.)

Which is the term for the amount of money that the Federal Reserve requires banks to keep on hand? A. discount deposit B. demand deposit C. prime reserve D. reserve requirement

reserve requirement (The amount of money that the Federal Reserve requires banks to keep on hand in their vaults is called the reserve requirement.)

Financial intermediaries are institutions that link: A. banks and mutual funds. B. companies and pension funds. C. savers and borrowers. D. banks and the government.

savers and borrowers. (Financial intermediaries are institutions that help channel funds from savers to borrowers.)

Owners of which of the following types of business must assume the greatest degree of risk? a. large corporations b. partnerships c. small corporations d. sole proprietorships

sole proprietorships (Sole proprietors are alone liable for all debts, fines, or other financial obligations the business incurs; such losses are shared in partnerships, while limited liability laws provide some protection to investors in corporations.)

Consumers in financial trouble would be best advised to: A. borrow money. B. avoid talking with lenders. C. stop using credit. D. apply for a new card.

stop using credit. · In addition to contacting lenders and nonprofit credit counseling organizations, consumers in financial trouble should stop using credit.

When people searching for a job discover that that they are not qualified for any available positions, what type of unemployment do they face? A. frictional unemployment B. seasonal unemployment C. cyclical unemployment D. structural unemployment

structural unemployment · (Structural unemployment occurs when workers' skills do not match those needed for the jobs available).

Net income can best be described as: A. total earnings over a specific time period. B. take-home pay after taxes. C. the amount left after paying bills. D. the amount spent over a period of time.

take-home pay after taxes. · (Net income is the amount of money left after taxes have been deducted from one's pay.)

Which organization helps to settle trade disputes between countries? the International Monetary Fund the World Bank the World Trade Organization the United Nation

the World Trade Organization (A major function of the World Trade Organization is to resolve commercial disputes between countries.)

What is "absolute advantage"? A. the desire to produce more of a given product than a trading partner B. the knowledge that a country's resources are greater than another's C. the ability to produce more of a product using the same resources D. the growth in trade between two countries over time

the ability to produce more of a product using the same resources ·( Absolute advantage is the ability to produce more of a product than a trading partner using the same resources.)

Economists announce that the Consumer Price Index jumped 1 percent in June. This means: A. the core inflation rate is out of control. B. the price of all products will increase 12 percent during the year. C. the cost of a selection of common products increased by 1 percent. D. the purchasing power of a dollar increased by 1 percent.

the cost of a selection of common products increased by 1 percent. (The Consumer Price Index measures changes in the price of a standard group of goods, or "market basket.")

What usually happens when the gross domestic product (GDP) increases at a steady rate? A. a recession occurs B. unemployment increases C. the economy shrinks D. the economy expands

the economy expands (When the gross domestic product (GDP) increases at a steady rate, the economy is growing.)

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full-time college students. This would cause: A. the unemployment rate to increase. B. the labor force participation rate to decrease. C. the number of discouraged workers to increase. D. no change in the unemployment rate.

the labor force participation rate to decrease

Consumers who are about to borrow money for purchases should calculate: A. the manufacturer's warranty. B. the liquidity of their investment. C. the purchase price plus interest. D. the fringe benefits.

the purchase price plus interest. ( When making a purchase on credit, consumers should always determine how much interest charges will add to the total cost of the purchase.)

Which of the following is generally the greatest disadvantage of using a credit card to get cash advances? A. lack of online security B. up-front fees C. risk of overdrawing a bank account D. high late penalties

up-front fees (Cash advances can carry an up-front fee of between 2 and 4 percent of the amount advanced.)

Consumer groups are concerned with all of the following EXCEPT: A. whether products are safe. B. whether a product is popular in the marketplace. C. whether consumers have full knowledge of what they are buying. D. whether products are environmentally sound.

whether a product is popular in the marketplace. (· The popularity of a product in the marketplace is of greater concern to sellers than to consumer groups.)