Economics Unit 5
What is a desirable long-term growth rate of the GDP to show the economy is healthy while minimizing effects of inflation? 2 percent to 3 percent 6 percent to 8 percent 10 percent to 15 percent 20 percent to 30 percent
2 percent to 3 percent
What is true about labor and economic growth? Rising unemployment is a leading indicator of an economic boom. The labor market is the first to recover after a recession. A skilled supply of labor enables producers to innovate and grow. The unemployment rate is at zero during economic expansion.
A skilled supply of labor enables producers to innovate and grow.
Which is a characteristic of the takeoff stage of Rostow's Five Stages of Economic Growth? The population as a whole has its basic needs met and enjoys a high standard of living focused on consumer goods. A country begins to grow rapidly and new industries start to emerge that drive further economic development. Advancements in technology require a skilled labor force competent in electronics, medicine, and engineering. The labor of a country is unskilled and focuses on agricultural production, animal husbandry, and the harvesting of timber.
Advancements in technology require a skilled labor force competent in electronics, medicine, and engineering. Wrong
Why might the economy slow during wartime? (Select all that apply.) An economy may need to divert resources to a war effort. People might stock up on products, which would cause inflation. People might choose to save money instead of buy new products. A government may reduce tariffs with rival nations.
An economy may need to divert resources to a war effort. People might stock up on products, which would cause inflation. Partial People might choose to save money instead of buy new products.
How does an increase of the retiree (elderly) population impact the economy? An increase in nonproducing citizens increases gross national product. An increase in nonproducing citizens increases per capita GDP. An increase in nonproducing citizens decreases per capita GDP. An increase in nonproducing citizens decreases the consumer price index.
An increase in nonproducing citizens decreases per capita GDP.
Which entity regulates the Federal Reserve Bank by requiring board governors to testify about their work? Department of Commerce US Mint Supreme Court Congress
Congress
Which accurately describes price indexes economists use to monitor prices and inflation? Consumer price indexes economists use to measure prices and inflation include the consumer price index, the producer price index, and the GDP deflator. Consumer price indexes economists use to measure prices and inflation include the gross national product and the gross domestic product. Consumer price indexes economists use to measure prices and inflation include the Lorenz curve and the Phillips curve. Consumer price indexes economists use to measure prices and inflation include NASDAQ, S&P 500, and the Dow Jones.
Consumer price indexes economists use to measure prices and inflation include the gross national product and the gross domestic product. Wrong Consumer price indexes economists use to measure prices and inflation include the consumer price index, the producer price index, and the GDP deflator.
How does the law of comparable advantage lead to international trade? Countries that do not engage in trade are in a stronger position economically than countries that do trade. Countries that cannot produce products efficiently have to trade for the goods and services that other countries have. Countries make products they can produce efficiently and are able to get the rest of what they need through trade. Countries that have more resources are able to trade for a wider variety of items that can be offered for sale.
Countries that have more resources are able to trade for a wider variety of items that can be offered for sale. Wrong
What is one reason economic growth is very important for the United States? Economic growth can help close the gap between rich and poor. Economic growth can help raise the standard of living for people. Economic growth can help address the nation's environmental problems. Economic growth can help the nation sell more savings bonds.
Economic growth can help raise the standard of living for people.
What is true regarding economic growth? (Select all that apply.) Economic growth reduces the consumer price index (CPI). Economic growth raises per capita gross domestic product (GDP). Economic growth creates jobs and in turn provides income. Economic growth decreases the tax base.
Economic growth raises per capita gross domestic product (GDP). Partial Economic growth creates jobs and in turn provides income.
Read the sentence. According to its charter, the Federal Reserve Bank is governed by a(n) _[blank]_ of governors. Which correctly completes the sentence? association chamber league board
board
Which describes frictional unemployment? Floyd quits his job at the store to look for a better-paying job in manufacturing. Floyd loses his job at the factory, and he does not have the skills for other available jobs. Floyd works at a retail store during the holidays, and he is laid off at the start of the new calendar year. Floyd is working at a yogurt shop when he decides to quit his job and go back to school.
Floyd quits his job at the store to look for a better-paying job in manufacturing.
Which describes a way that gross domestic product (GDP) is used to measure the economy? If GDP decreases for 12 months straight, a country is in a trough. If GDP decreases for six months straight, a country is in a recession. If GDP increases for six months straight, a country is facing rapid inflation. If GDP increases for 12 months straight, a country is in a contraction.
If GDP decreases for six months straight, a country is in a recession.
How does a change in population impact gross domestic product (GDP)? If the population decreases and production decreases, per capita GDP will increase. If the population increases but production stays the same, per capita GDP will decrease. If the population increases and production increases, per capita GDP will decrease. If the population decreases and production increases, per capita GDP will decrease.
If the population increases but production stays the same, per capita GDP will decrease.
How does an individual become a governor of a Federal Reserve branch? by popular vote by presidential appointment by Senate majority vote by congressional appointment
by presidential appointment
How has income inequality in the United States changed? (Select all that apply.) Income inequality has increased partly due to the rise of single parents. Income inequality has increased partly due to the demand for skilled workers. Income inequality has decreased due to welfare programs funded by the government. Income inequality has decreased due to improved public education.
Income inequality has decreased due to improved public education. \ Income inequality has increased partly due to the demand for skilled workers.
How can a developing nation improve its economy if it lacks natural resources? It can place high tariffs on all of its imports. It can default on loans owed to foreign banks. It can engage in international trade. It can flood foreign exchange markets with its currency.
It can engage in international trade.
Why is measuring economic performance important? (Select all that apply.) It can help individuals know how their standard of living could be affected. It can help legislators know whether they should write more tax laws. It can help businesses know how their ability to take risks with new products could be affected. It can help governments know how their spending could be affected.
It can help businesses know how their ability to take risks with new products could be affected. It can help governments know how their spending could be affected.
How can the World Bank help developing nations economically? It can sell medical drugs and other treatments to clinics at a very low cost, saving the patients money. It can protect and negotiate free trade deals between neighboring nations. It can provide loans to developing countries to build new infrastructures. It can work to remove serious health problems so resources can shift to economic growth.
It can protect and negotiate free trade deals between neighboring nations. Wrpmg
How does the Federal Reserve stabilize and safeguard the nation's economy? (Select all that apply.) It regulates and oversees the NASDAQ stock exchange. It distributes currency and oversees fiscal conditions. It regulates banks and defends consumer credit rights. It implements American monetary policy.
It distributes currency and oversees fiscal conditions. It regulates banks and defends consumer credit rights. Partial
What are functions of the Federal Reserve? (Select all that apply.) It creates US coins. It enters US currency into circulation. It offers financial services within the government. It prints US dollars.
It enters US currency into circulation. It offers financial services within the government.
How does a rise in life expectancy impact population growth? It slows population growth. It does not impact population growth. It increases population growth. It reverses population growth.
It increases population growth.
What is true regarding seasonal unemployment? It is not as troubling to the government as other types of unemployment. It is likely to last longer than other types of unemployment. It has negative costs similar to those of other types of unemployment. It is much harder to predict than other types of unemployment.
It is not as troubling to the government as other types of unemployment.
Why is gross domestic product (GDP) important? It is used to set the national debt limits. It is the leading indicator of the economy's overall health. It determines what the tax and spending policies will be each year. It is the only measure used to determine whether deficit spending is possible.
It is the leading indicator of the economy's overall health.
Which accurately describes the consumer price index (CPI)? It measures the total dollar value of all final goods and services produced in an economy. It is the most cited index for tracking prices and measuring inflation. It is the most cited index for tracking the rise of the national debt. It is measured by subtracting the sum of total exports from the sum of total imports.
It is the most cited index for tracking prices and measuring inflation.
How can free trade be harmful to a country militarily? It may focus on trade instead of developing military skills that it would need in a crisis. It may struggle financially by removing tariffs from goods and not have the revenue it would need for a conflict. It may lose the ability to produce important products it would need during wartime. It may trade with countries that wish to do it harm and not realize it until it is too late.
It may trade with countries that wish to do it harm and not realize it until it is too late. Wrong
Read the statement. Country A is running a trade deficit. What must Country A do to reverse this trend? It must hire more workers to increase products for export. It must continue the course it is currently following. It must increase trade exports with other countries. It must print more money so people will spend more.
It must increase trade exports with other countries.
Why would wealthy nations have an interest in the development of poor nations? (Select all that apply.) It leads to migration between the countries. It opens up new markets for goods and services. They feel an ethical or moral obligation to do so. They want to improve tariff revenues with imports.
It opens up new markets for goods and services. They feel an ethical or moral obligation to do so.
What does the consumer price index (CPI) measure? It averages the total cost of all final goods produced. It tracks increases in prices to measure inflation. It adds the cost of goods produced, and then subtracts exports. It measures the change in stock prices against a change in consumer prices.
It tracks increases in prices to measure inflation.
Which antipoverty program offers medical insurance for low-income individuals and families? Pell grants Social Security Capital gains Medicaid
Medicaid
Which is an example of regional cooperation to promote economic growth? Neighboring countries set up quotas on resources that can be sold. Neighboring countries sign a pact to limit immigration into their countries. Neighboring countries remain separate but work together to promote peace. Neighboring countries negotiate tariffs and duties regarding trade.
Neighboring countries negotiate tariffs and duties regarding trade. Wrong
What are consequences of rapid inflation? (Select all that apply.) Individual purchasing power increases, which results in an increase in demand. Individual purchasing power decreases, which results in a decrease in demand. Savings accounts become less desirable because interest earned is lower than inflation People postpone purchasing expensive items, such as homes, until prices drop.
People postpone purchasing expensive items, such as homes, until prices drop. Individual purchasing power decreases, which results in a decrease in demand. Partial
What impact can government policies have on the business cycle? Policies that decrease spending may cause an economic expansion. Policies that raise interest rates may cause an economic contraction. Policies that lower interest rates may cause an economic contraction. Policies that lower taxes may cause an economic contraction.
Policies that lower interest rates may cause an economic contraction. WRONG
Why does nominal gross domestic product (GDP) sometimes seem larger than real GDP? Real GDP includes inflation in its calculation, whereas nominal GDP does not. Real GDP uses an accurate calculation, whereas nominal GDP does not. Real GDP counts only final products, whereas nominal GDP does not. Real GDP counts imports, whereas nominal GDP does not.
Real GDP includes inflation in its calculation, whereas nominal GDP does not.
Which is an argument in support of protectionist trade policies? Restricting trade preserves jobs in the United States. Restricting trade supports strong relations between countries. Restricting trade ensures a wide variety of products. Restricting trade keeps the cost of products down.
Restricting trade keeps the cost of products down. Wrong
How does the Federal Reserve Bank fit into the balance of power among the three branches of the federal government established by the Constitution? The Chair of the Federal Reserve is appointed in a secret meeting. The Chair of the Federal Reserve is elected by popular vote. The Chair of the Federal Reserve is appointed by the president and approved by the Senate. The Chair of the Federal Reserve is appointed by Congress and approved by the Supreme Court.
The Chair of the Federal Reserve is appointed by the president and approved by the Senate.
What is a basic function of the Federal Reserve? The Federal Reserve implements new tax laws. The Federal Reserve enforces tariffs and trade agreements. The Federal Reserve determines the yearly federal budget. The Federal Reserve enters currency into circulation.
The Federal Reserve determines the yearly federal budget. Wrong The Federal Reserve enters currency into circulation.
Which accurately describes how the Federal Reserve is funded? The Federal Reserve receives a portion of income tax revenues paid for by the people. The Federal Reserve earns interest from its ownership of government securities. The Federal Reserve is funded by international banks, including World Bank. The Federal Reserve is funded by Congress and is part of the Department of Commerce.
The Federal Reserve earns interest from its ownership of government securities.
What are the duties and responsibilities of the Federal Reserve? (Select all that apply.) The Federal Reserve implements American monetary policy. The Federal Reserve establishes and oversees America's tax code. The Federal Reserve establishes rules and regulations concerning insider trading. The Federal Reserve stabilizes and safeguards the nation's economy.
The Federal Reserve establishes rules and regulations concerning insider trading. The Federal Reserve stabilizes and safeguards the nation's economy.
Why is the Federal Reserve managed by federal government oversight? The Federal Reserve is responsible for printing and coining money. The Federal Reserve is responsible for collecting income taxes. The Federal Reserve is responsible for stabilizing prices. The Federal Reserve is responsible for paying off government debt.
The Federal Reserve is responsible for stabilizing prices.
Why is federal oversight crucial to the operation of the Federal Reserve Bank? The Federal Reserve controls the nomination of legislators to committees. The Federal Reserve funds mandatory government expenditures. The Federal Reserve sets rules and regulations for the New York Stock Exchange. The Federal Reserve is the nation's central banking system.
The Federal Reserve is the nation's central banking system.
Which accurately describes a cause for inflation? The Federal Reserve raises interest rates and slows economic activity. The government places too much money into circulation. The government places too little money into circulation. The Federal Reserve requires banks to keep more money on reserve.
The Federal Reserve raises interest rates and slows economic activity.
How does Congress hold the Federal Reserve accountable? (Select all that apply.) The Federal Reserve's board of governors can be called to appear before a tribunal of the US Supreme Court. The Government Accountability Office (GAO) can audit the Federal Reserve's activities. The president of the United States can veto policies concerning interest rates. Appointees of the Federal Reserve can appear before congressional committees to provide testimony.
The Federal Reserve's board of governors can be called to appear before a tribunal of the US Supreme Court. Wrong Appointees of the Federal Reserve can appear before congressional committees to provide testimony. Yes
What is an argument for free trade? The availability of natural resources increases. The possibility of a trade freeze decreases. The supply of products decreases. The distribution of income improves.
The availability of natural resources increases. Wrong The possibility of a trade freeze decreases.
Read the scenario. A United States company produces widgets in Brazil. Which is true about the calculation of widget production? The dollar value of the widgets would be included in a GNP calculation. The dollar value of the widgets would be included in both a GNP and a GDP calculation. The dollar value of the widgets would not be included in either a GNP or a GDP calculation. The dollar value of the widgets would be included in a GDP calculation.
The dollar value of the widgets would be included in a GDP calculation. Wrong
Read the sentence. The cost of lumber has increased 145 percent since last quarter. What is the most likely outcome in the furniture market? The market will see a rapid rise in inflation because inelastic products respond quickly to market forces. The market will see demand-pull inflation because consumers need more of the product. The market will see no inflation because there has not been a change in personal income. The market will see cost-push inflation because the increased cost of inputs force prices higher.
The market will see demand-pull inflation because consumers need more of the product. Wrong
What does the theory of comparative advantage suggest? The nation that should produce a good is the one with the lowest opportunity cost. The nation that should produce a good is the one that can produce the most. The nation that should produce a good is the one with the largest labor force. The nation that should produce a good is the one that has the most natural resources.
The nation that should produce a good is the one that has the most natural resources. Wrong The nation that should produce a good is the one with the lowest opportunity cost.
What does a decline in gross domestic product (GDP) communicate to economists? The total dollar value of all intermediate goods and services within a 12-month period decreased. The prices of all final goods and services within a 12-month period decreased. The total dollar value of all final goods and services within a 12-month period decreased. The rate of inflation of all intermediate goods and services within a 12-month period decreased.
The total dollar value of all final goods and services within a 12-month period decreased.
How might developing countries obtain funding? (Select all that apply.) They can attain microloans from neighboring countries. They can acquire grants from foreign countries. They can gain loans from private investors. They can obtain financial assistance from World Bank.
They can attain microloans from neighboring countries. They can obtain financial assistance from World Bank. Partial
How do improvements in technology impact economic growth in the long run? They generate an increase in capital investment, which slows growth. They make production more efficient, which leads to growth. They cause a shift in resources during implementation, which slows growth. They trigger an increase in hiring, which leads to growth.
They make production more efficient, which leads to growth.
What position did labor unions take on the free trade agreements passed in the 1990s? They were in favor of them because they believed new products would be offered. They were in favor of them because they believed US wages would rise. They were opposed to them because they feared the loss of US jobs. They were opposed to them because they wanted the tariff revenue.
They were opposed to them because they feared the loss of US jobs.
How can infant industries be harmed by open free trade? They will face pressure to produce products quickly. They will have to use expensive raw materials from their own countries. They will not survive due to high production costs. They will not receive the revenue from tariffs.
They will have to use expensive raw materials from their own countries. Wrong
Which accurately describes the barter system during the colonial era of the United States before a national currency evolved? Squash and chili peppers were common mediums of exchange. Tobacco and animal skins were common mediums of exchange. Coffee and cocoa beans were common mediums of exchange. Silk and tea were common mediums of exchange.
Tobacco and animal skins were common mediums of exchange.
What has happened when demand-pull causes inflation? Incomes did not keep pace with the cost of goods. Too much money chased too few goods. Businesses made up for lost revenue by increasing prices. There was not enough money to buy up the supply.
Too much money chased too few goods.
How do gross national product (GNP) and gross domestic product (GDP) differ? While GNP includes investments as well as production of goods and services, GDP only includes production of goods and services. While GNP includes imports and exports of goods and services, GDP only includes the net exports of goods and services. While GNP includes production of all goods and services, GDP only includes production of final goods and services. While GNP includes production by all people and businesses of a country, GDP only includes production within a country's borders.
While GNP includes production by all people and businesses of a country, GDP only includes production within a country's borders.
What will contribute most quickly to economic growth? a decrease in a low-skilled immigrant population a decrease in a school-age population an increase in a highly skilled working-age population an increase in an educated retirement-age population
an increase in a highly skilled working-age population
What is a benefit of international trade? an improvement in pollution an improvement in working conditions an increase in wages
an increase in the variety of goods
What is the Government Accountability Office (GAO)? a government agency that answers to Congress and audits the United States Mint a private agency that advises the dent about fiscal policy an internal review agency of the Federal Reserve used to promote its mission an independent agency that answers to Congress and audits the Federal Reserve
an independent agency that answers to Congress and audits the Federal Reserve
What is the trade-weighted value of the dollar? an index showing the current foreign exchange value of the US dollar compared to prior decades while accounting for inflation an index showing the value of foreign currencies compared against the US stock market an index showing the value of the US dollar compared against the US stock market an index showing the measurement of the foreign exchange value of the US dollar in relation to foreign currencies commonly used in trade
an index showing the measurement of the foreign exchange value of the US dollar in relation to foreign currencies commonly used in trade
Read the sentences. When measuring GDP, it is important to note that businesses' goods flow to consumers, whose payments for those goods provide profits for those businesses. This process can be depicted as flowing in a _[blank]_ shape. Which accurately completes the sentence? rectangular linear circular unidentifiable
circular
Which best explains why a nation would want to engage in international trade? comparative advantage trade deficits tariff enforcement inexpensive labor
comparative advantage
Read the passage. This is the most widely used measure of inflation and is sometimes viewed as an indicator of the effectiveness of government economic policy. It provides information about price changes in the nation's economy to government, business, labor, and private citizens, and it is used by them to help guide economic decisions. What is being described? export price index import price index consumer price index producer price index
consumer price index
Which form of currency was authorized by the Continental Congress and eventually became worthless due to inflation? greenbacks Spanish dollars English pounds continentals
continentals
Which is most likely to be implemented by the government to overcome structural unemployment? temporary assistance programs to provide aid through the holidays tax incentives to stimulate business growth career counseling to help people find the jobs they really want
courses or programs to help workers develop new skills
Which can lead to an economic expansion? governments implementing new taxes industries holding surplus inventory development of a new industry unemployment that is rising
development of a new industry
What is included in the calculation of GDP? dollar value of black market products dollar value of final goods and services dollar value of underground services dollar value of intermediate goods and services
dollar value of black market products Wrong dollar value of final goods and services
What is the formula for measuring GDP? final goods and services multiplied by the price intermediate goods and services multiplied by the price final goods and services divided by the price intermediate goods and services divided by the price
final goods and services multiplied by the price
The Federal Reserve Board consists of which of the following members? state senators (four positions)
governor (five positions) chairman of the board vice chairman of the board
What is the primary tool used to measure inflation? consumer price index durable goods shipments gross national product gross domestic product
gross domestic product Wrong
What does the consumer price index (CPI) measure? inflation supply income stocks
inflation
What are consequences of a weak dollar? (Select all that apply.) increase in the cost of exports increase in the cost of imports unemployment in import industries unemployment in export industries
ncrease in the cost of exports increase in the cost of imports unemployment in import industries Partial
Read the sentence. The Federal Reserve's board of governors consists of _[blank]_ members. Which correctly completes the sentence? seven five eight nine
seven
How are exchange rates determined in a flexible exchange rate system? inflation and deflation supply and demand US dollar compared to the euro US dollar compared to the pound
supply and demand
Who appoints the Board of Governors of the Federal Reserve System? the US House of Representatives the US Senate the US President the US Supreme Court
the US President
What is a benefit of international trade? the diffusion of culture and ideas between nations the use of a fixed exchange rate in modern global society an increase in tariffs between competing nations a decrease in trade of ideas and cultural practices between nations
the diffusion of culture and ideas between nations
Where are the Federal Reserve branches located? only in Washington, DC throughout the United States along the Pacific coast along the Atlantic coast
throughout the United States
What is a goal of the North American Free Trade Agreement? to protect the jobs of workers and increase wages to reduce legislative oversight and improve production to increase tariffs and raise revenues to decrease trade barriers and tariffs
to decrease trade barriers and tariffs
Read the scenario. The United States engages in free trade with Holland. Last year, the United States decided to put a 75 percent tariff on imported tulips. Why would the United States impose that tariff? to guarantee low prices for US consumers to ensure that the two countries have a steady supply of tulips to protect US tulip growers from competition to promote other types of trade between the two countries
to ensure that the two countries have a steady supply of tulips Wrong to guarantee low prices for US consumers Wrong
What is the purpose of the North American Free Trade Agreement? to improve work visa programs between Mexico, Cuba and the United States to increase trade between Mexico, the United States, and Canada to impose tariffs between Mexico, the United States and Canada to increase skilled labor forces in Mexico, Cuba and the United States
to impose tariffs between Mexico, the United States and Canada Wrong
When might a country produce a product even though it cannot do so efficiently? (Select all that apply.) to ensure national security to minimize the sale of exports to increase the balance of trade to ensure a trade deficit
to increase the balance of trade to ensure national security
Why was the Federal Reserve created? to implement a new progressive federal tax system to oversee the New York Stock Exchange following the stock market crash to regulate banks and defend consumer credit rights to manage congressional spending and balance the federal budget
to manage congressional spending and balance the federal budget Wrong to regulate banks and defend consumer credit rights
Why does the Federal Reserve often drop interest rates during an economic contraction? to lower existing loan payments to keep banks in business to encourage borrowing to prevent an economic trough
to prevent an economic trough Wrong
What reasons do protectionists cite most for restricting trade? (Select all that apply.) to protect national security and prohibit US reliance on other countries to protect US jobs due to cheap labor in other countries to protect US taxpayers from increased income and corporate tax rates to protect US infant industries that tend to have high production costs
to protect US jobs due to cheap labor in other countries to protect US infant industries that tend to have high production costs Partial
When would nominal GDP appear lower than real GDP? when the rate of growth is positive when the rate of growth is negative when the rate of inflation is negative when the rate of inflation is positive
when the rate of inflation is positive Wrong when the rate of inflation is negative
Read the statement. The exchange rate for converting US dollars to the British pound is .767. How much is $200 US worth in Great Britain? £263 £153 £276 £352
£153