ECON Final Exam Review
describe the relationship between the number of AAA ratings given from 2000-2006 and the amount of profit made by credit rating agencies during that same time period. A AAA ratings increased dramatically and profits for credit rating agencies increased dramatically ' B AAA ratings increased dramatically and profits for credit rating agencies stayed the same C AAA ratings increased dramatically and profits for credit rating agencies decreased dramatically D AAA ratings decreased dramatically and profits for credit rating agencies increased dramatically E AAA ratings decreased dramatically and profits for credit rating agencies decreased dramatically
A AAA ratings increased dramatically and profits for credit rating agencies increased dramatically
who was the chairman of the national bank during the Regan, Bush, and Clinton administrations? A Alan Greenspan B Eliot Spitzer C Robert Rubin D Ben Bernanke
A Alan Greenspan
Why did Marx suggest that, in a free-market economy, capitalists (entrepreneurs) are stealing from their workers? A Capitalism creates a system in which workers are not paid for the full value of the goods and services they produce B Capitalism forces workers to labor on small portions of a product and separates them from having ownership of the goods and services they produce C Capitalism requires workers to unify and share ownership of the means of production of a society D Capitalism incorporates a mix of free-market economics and socialist policies E none of the above
A Capitalism creates a system in which workers are not paid for the full value of the goods and services they produce
The total amount of wealth produced by a country is its_______________ A Gross Domestic Product B Total Domestic income C Anual National Wealth D Gross National product
A Gross Domestic Product
How are socialist programs usually payed for A wealthy entrepruenuers B foriegn investors C taxes D socialist programs are usually free E all of the above
C taxes
Which of the following best describes how Karl Marx thought communism would affect society? A communism would make people unmotivated to work B communism would lead to strong central governments that would abuse their power. C communism would lead to inequality in society D all of the above E none of the above
E none of the above
which of the following best describes Karl Marx's view of private property A private property is necessary to motivate people to work B private property should exist but it should be heavily taxed C none of these answers are true D Karl Marx did not write about private property E private property should be illegal
E private property should be illegal
which of the following IS NOT an example of how socialism has shaped the American Economy? A Highly skilled employees are given pay bonuses for their successes and hard work. B taxes are used to pay for police and fire services C public school is offered for free D government subsidies are used to help pay for certain industries such as farming, medicine, and air travel E all of the above are examples of socialism in modern "capitalist" economies
A Highly skilled employees are given pay bonuses for their successes and hard work.
what is an entreprenuer? A a person who gathers land labor and capital to produce goods and services for profit B A person who works as an employee C a person who buys products at a store D all of these are correct
A a person who gathers land labor and capital to produce goods and services for profit
What type of economic policies led to the accumulation of debt in Iceland? A deregulation B command economics C mercatalism D socialism
A deregulation
what are the four resources (factors of production) in economics A entrepreneurs, land, labor, capital B money, land, labor, capital C entrepreneurs, land, money, accountants D none of these are correct
A entrepreneurs, land, labor, capital
which of the following best explains how modern mixed economies are like command economies A governments make investments in important industries like technology and aerospace B Entrepreneurs are allowed to make a profit and have private property C private companies compete against eachother D all of the above E none of the above
A governments make investments in important industries like technology and aerospace
A sum paid or charged for the use of money or for borrowing money A interest B dividend C appreciation D depreciation
A interest
Common CDO's were made up of loans for which home buyers had only paid as little as ________ % of the price of their homes. A less than 1% B less than 10% C less than 20% D less than 50% E Less than 30%
A less than 1%
What resource made Venezuela very rich during Hugo Chave's presidency? A oil B socialism C labor D land
A oil
Which of the following DOES NOT describe the effects of socialism in Venezuela A oil prices fell and made Venezuela bankrupt B Venezuela spent more money than it had and had to take out loans from other countries to pay for social programs C Venezuela printed huge amounts of money to pay back its loans and continue to fund social programs for the poor. This caused Hyperinflation and made Venezuela's currency nearly worthless D Social programs lifted many people out of poverty and the poorest Venezuelans have had their lives improved due to better access to healthcare, housing, and education
A oil prices fell and made Venezuela bankrupt
which type of investors were most compelled to buy CDO's because they were required to invest only in AAA-rated investments? A retirement funds B investment banks C Short term traders D speculators
A retirement funds
What is a scarce rescource? A something that is limited B something that is unlimited C Something that is used to produce goods and services D Something that can only be invested to generate interest over long periods of time.
A something that is limited
this type of investment gives the investor partial ownership of a company A stocks B bonds C mutual funds D compound interest E diversification
A stocks
which of the following offers the highest potential for profit A stocks B bonds C mutual funds D fixed income funds
A stocks
Microeconomics studies A the decisions of individuals and individual companies B the decisions of large groups C the decisions of governments D the decisions of employees in a business
A the decisions of individuals and individual companies
This term is used to describe the way that markets regulate themselves through the law of supply and demand A the invisible hand B command economy C socialism D self-interest E all of the above
A the invisible hand
what is the highest rating given to investments that are considered to be the most safe? A AA B AAA C A+ D A1 E GDP
B AAA
why did AIG go bankrupt? A people stopped buying CDOs from AIG B AIG had to pay back investors who purchased CDOs and speculators who bought derivatives of CDOs C AIG had invested heavily in CDOs and had also purchased derivatives betting that the value of CDOs would continue to increase D all of the above
B AIG had to pay back investors who purchased CDOs and speculators who bought derivatives of CDOs
Describe what role the company AIG played in the CDO market? A AIG issued loans that were combined by investment banks to create CDOs. B AIG insured investors who purchased CDOs and paid back investors who bought CDOs when the CDOs went bad and lost money. C AIG purchased CDO's from investment banks hoping to make a profit from the interest rates of the CDOs. D AIG combined housing loans into CDO's to sell to investors. E AIG bet against CDO's by purchasing insurance policies against them and by purchasing derivatives which "shorted" the CDO market
B AIG insured investors who purchased CDOs and paid back investors who bought CDOs when the CDOs went bad and lost money.
This term refers to a collection of debts that are sold to investors hoping to profit on the interest rates once the debts are paid. A Penny Bids Dossiers (PBDs) B Collateralized Debt Obligations (CDOs) C Cooperative Loan Investments (CLIs) D Comunalized Debt Agreements (CDAs)
B Collateralized Debt Obligations (CDOs)
a loan given to a company or government with a guaranteed interest rate A stocks B bonds C mutual funds D compound interest E diversification
B bonds
which of the following statements best describes a difference between communism and socialism? A communism is a form of socialism B communism believes that private property should be illegal C socialism aims to redistribute wealth in order to pay for social programs for the poor D all of these describe a difference between communism and socialism. E none of these describe a difference between communism and socialism.
B communism believes that private property should be illegal
Payment to stock owners which companies give to share the company's profits with investors A interest B dividend C appreciation D depreciation
B dividend
which of the following is the least risky investment? A stocks B government bonds C mutual funds D equity funds
B government bonds
Why did Karl Marx argue that modern work (specialization) leads to alienation? A it creates a system in which workers are not paid for the full value of the goods and services they produce B it forces workers to labor on small portions of a product and separates them from having ownership of the goods and services they produce C it requires workers to unify and share ownership of the means of production of a society D it incorporates a mix of free-market capitalism and socialist policies
B it forces workers to labor on small portions of a product and separates them from having ownership of the goods and services they produce
Which of the following is an example of capital in economics? A money B machines C water D laborers
B machines
why are mixed economies more likely to have quality cars at cheaper prices than command economies? A governments make investments in important industries like technology and aerospace B private companies can compete against each other C public school is offered for free to all citizens D all of the above
B private companies can compete against each other
Macroeconomics studies A the decisions of individuals and individual companies B the decisions of societies and governments C the decisions of business owners D the decisions of employees in a business
B the decisions of societies and governments
who decides what to produce, how much, and at what price in a command economy? A entrepreneurs B the government C the wealthy D the workers E none of the above
B the government
according to Adam Smith, why do the butcher and the baker produce meat and bread in a free market economy? A they want to help consumers and provide them with nutrition B they are self-interested and motivated by profit C they are passionate about the products they make D all of the above
B they are self-interested and motivated by profit
which statement best describes how CDO's affected the housing loan market? A CDO's encouraged lending banks to give more loans and decreased the average price of American homes B CDO's encouraged lending banks to give fewer loans and decreased the average price of American homes C CDO's encouraged lending banks to give more loans and increased the average price of American homes D CDO's encouraged lending banks to give fewer loans and increased the average price of American homes E none of these statements describe how CDO's affected the housing loan market
C CDO's encouraged lending banks to give more loans and increased the average price of American homes
Which of the following DOES NOT describe how Hugo Chavez created a command economy? A Chavez kicked out oil companies and took control of the oil industry. B Chavez nationalized industries and took government control over many companies C Chavez allowed some private companies to continue operating within Venezuela D Chavez took the profits from national industries and used it to provide services for the poor such as housing, electricity, health care, and education
C Chavez allowed some private companies to continue operating within Venezuela
which of the following answers best explains why there has never been a truly free market economy A Wealthy and powerful entrepreneurs do not want free markets because they hurt profit. B free market economies are wasteful because they often are ineffective at predicting consumer demand for goods and services and they often produce surplusses or deficits. C Free market economies require some government interventions to protect people's rights to private property and to prevent abuses of private corperations. D Free market economies require a very strong government and no government has ever been successful in creating a truly free market
C Free market economies require some government interventions to protect people's rights to private property and to prevent abuses of private corperations.
what is the national bank of the United States called? A Bank of America B The national reserve C The federal reserve D the federal bank
C The federal reserve
this occurs when one reinvests profits made from a stock back into the principal investment, allowing the investor to increase their profits exponentially over time. A stocks B bonds C mutual funds D compound interest E diversification
D compound interest
Which of the following DOES NOT describe the government's reaction to the financial crises that resulted from the collapse of the CDO market? A The government gave AIG over 150 billion dollars to repay major banks and investors that had purchased insurance policies for CDOs B The government paid over 700 billion dollars of taxpayer dollars to bail out investment banks C The government passed strong regulations which made it illegal for banks to sell risky investments to clients while secretly betting against those same investments D The government gave billions of dollars in payments to save auto manufacturers and airlines that went bankrupt due to the financial crisis.
C The government passed strong regulations which made it illegal for banks to sell risky investments to clients while secretly betting against those same investments
which statement best describes Karl Marx's view of unemployment? A some level of unemployment is unavoidable in a society because there are not enough jobs for everyone B Unemployment is negative because it shows that an economy is not operating at efficiency. If every one had a job, the economy could be more productive C Unemployment is positive because modern economies are highly effective and it is no longer necessary for everyone to work. D Unemployment is a social problem and not an economic problem. Unemployment only exists because some people do not want to work E none of the above
C Unemployment is positive because modern economies are highly effective and it is no longer necessary for everyone to work.
what is a rational choice A a choice that was made using math B a choice that was made using science C a choice that serves one's self-interest D a choice that benifits society as a whole
C a choice that serves one's self-interest
Which of the following IS NOT usually considered a scarce resource? A Land B Labor C air D time
C air
where did 1/3 of government regulators in Iceland go to work after they left thier jobs? A other countries B thermo-electric companies C banks D law firms
C banks
Which of the following IS NOT a characteristic of a free market economy? A Private property B profit motive C economic equality D competition E all of the above are characteristics of a free market economy
C economic equality
Which of these words best explain why you should invest your money A prospectus B diversification C inflation D compound interest
C inflation
what effect does scarcity have in the study of economics? A it lowers the price of goods B it lowers productivity C it forces people to make choices on how to use resources D it has very little effect on economics
C it forces people to make choices on how to use resources
This term refers to the ratio of how much money a bank keeps in its vaults versus how much money it borrows A loan percentage B Risk factor C leverage D Stability
C leverage
Which of the following IS NOT considered a resource (or a factor of production) in economics A water B employees C money D technology E knowlege
C money
a type of investment option which allows the investor to own a small share of a collection of investments in many different markets. This type of investment is generally managed by professional financial analysts and pays a relatively stable rate of return A stocks B bonds C mutual funds D compound interest E diversification
C mutual funds
which of the following examples DOES NOT represent Laissez Fair economic policies A no income tax B no minimum wage C no private property D no safety regulations or environmental protections E all of the above represent Laissez fair economic policies
C no private property
which statement best explains why mixed economies are more likely than free market economies to make investments in important industries such as technology and aerospace? A public school is offered for free to all citizens so citizens of countries of mixed economies which creates a culture that values technological advancement B private companies want to develop better products and so they invest in research and development C the government can use tax dollars to fund development in fields that do not always make a profit D Private companies make a profit from funding these types of investments
C the government can use tax dollars to fund development in fields that do not always make a profit
according to Karl Marx, who should own the factors of production? (choose the best answer) A entrepreneurs B the poor C the President D The workers E Marx believed that nobody should own the factors of production
D The workers
what evidence shows that investment bankers knew that the CDO's they encouraged their clients to buy were bad investments? A investment bankers sent emails to their co-workers describing the CDO's as bad deals B investment banks took out billions of dollars in insurance policies for CDOs with AIG C investment banks received warnings from financial analysts, journalists, and members of the government that CDO's were bad investments D all of the above E none of the above
D all of the above
Which of the following DOES NOT describe Karl Marx's theory of communism? A workers should take control of the factors of production through violent revolution B private property should be made illegal and the wealth and resources of a society should be shared with the entire population C a strong central government would be necessary for the early stages of communism but eventually, the government should be eliminated and society should be run by the workers D all of these describe Marx's theory of communism E none of these describe Marx's theory of communism
D all of these describe Marx's theory of communism
which of these concepts best explains why free market economies usually produce a variety of products very efficiently at affordable prices? A private property B profit motive C self-interest D competition
D competition
which answer best describes why command economies are generally more wasteful than free market economies A entrepreneurs are less effective at deciding what to produce and how much than government systems. B private companies often underproduce goods and services in order to create scarcity and drive up the price of their products C individual buyers and sellers are not motivated by profit D government systems are often ineffective at estimating public demand for goods and services and so they over produce and create surplusses
D government systems are often ineffective at estimating public demand for goods and services and so they over produce and create surplusses
which statement(s) best describes the effect of communism on Cuba's economy? i. highly skilled workers choose to work in unskilled private positions in order to make more profit ii. many businesses employ more workers than are necessary and offer poor quality products because they are not motivated to make a profit iii. government investment creates technological advancements on a large scale iv. many people participate in illegal economic activities A i only B ii and iii C ii, iii, and iv D i, ii, and iv E i, ii, iii, iv
D i, ii, and iv
This term means making loans to people who may have difficulty maintaining the repayment schedule A risk prone B unqualified C prime D subprime
D subprime
which of the following IS NOT a product of socialist movements in the United States A the 8 hour work day B public schools C free education for military veterans D Laws prohibiting child labor and requiring Safety standards in the work place E all of the above are products of socialist movements in the United States
E all of the above are products of socialist movements in the United States
which statement best describes how investment banks changed from 1940 to present day? A banks grew much larger and controlled much greater amounts of capital B investment bankers were given permission to make riskier investments without risking their own money C government regulations for banks became much more relaxed D none of these statements accurately describe how banks changed from 1940 to present day E all of these statements accurately describe how banks changed from 1940 to present day
E all of these statements accurately describe how banks changed from 1940 to present day
Who is Henry Paulson? A He was CEO of Goldman Sachs while the bank sold billions of dollars of bad CDOs B He was the highest paid CEO on wallstreet C He was Secretary of the Treasury during George W Bush's administration D He was a government official who encouraged fewer government regulations on the amount of money banks could borrow. E all of these statements are true
E all of these statements are true
the practice of investing in a variety of different markets. A stocks B bonds C mutual funds D compound interest E diversification
E diversification
which of the following DOES NOT describe the effects of the 2008 financial collapse A many of the major investment banks went bankrupt B millions of people lost their savings funds C unemployment rose to 10% of the population D millions of factory workers in countries all over the world lost their jobs E Major automobile manufactures went bankrupt in the United States F all of the above describe the effects of the 2008 financial collaps
F all of the above describe the effects of the 2008 financial collaps
CHOSE THE ANSWER(s) which best answer the question: How did speculation (purchasing derivatives) of CDOs affect AIG? i.AIG sold CDOs to investors knowing that they were bad investments ii. AIG Insured both investors of CDOs and speculators who bought derivatives of CDOs. AIG made billions of dollars from monthly insurance payments made by both investors and speculators of CDOs iii.AIG made billions of dollars betting that CDOs would increase in value iv.AIG had to pay back investors who purchased CDOs and speculators who bought derivatives of CDOs. Therefore a CDO worth $100 million could have cost AIG billions of dollars when the CDO failed A i. only B ii. only C iii. only D iv. only E i. and ii. F ii. and iv. G iii. and iv. H i. ii. and iii. I ii. iii. and iv. J all of the above statements are true
F ii. and iv.