Name: ________________________ Class: ___________________ Date: __________

ID: A

Economics Pre/Post Test Multiple Choice Identify the choice that best completes the statement or answers the question. 1. How are economic questions answered in a command economy? a. by producers b. by consumers c. by the government d. by supply and demand 2. Money serves as a standard of value because a. we spend it b. we save it c. we compare prices d. we earn profits 3. In Year 1, the cost of a market basket of goods was $840. In Year 2, the cost of the same basket was $875. Which figure below is closest to the consumer price index for Year 2? a. $35 b. $875 c. 10.5 d. 104

6. In the past 20 years, computers have increased the productivity of the American economy. This is one reason for a. the shift from curve AB to curve EF b. the shift from curve AB to curve CD c. movement from point G to point H d. movement from point H to point G

4. If a nation's imports for one year are worth $5.2 billion and its exports are worth $5.3 billion the same year, that nation definitely has a. a trade deficit, or negative trade balance b. a trade surplus, or positive trade balance c. a negative balance of payments d. a positive balance of payments

7. Product differentiation, or branding, is a characteristic of firms in which kind of market structure? a. perfect competition b. monopolistic competition c. monopoly d. oligopoly

5. Darrell deposited $650 in a savings account with a simple interest rate of 3.2% per year. If he made no other deposits or withdrawals, how much interest had he earned at the end of 2 years? a. $2.08 b. $20.80 c. $4.16 d. $41.60

8. Which worker BEST illustrates the problem of cyclical unemployment? a. a factory worker whose skills are no longer marketable b. a college graduate who turns down one job because she wants a better one. c. a sales rep laid off during an economic downturn d. a landscaper who can't find a job in the winter

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Name: ________________________

ID: A

9. Which one of these conclusions CANNOT be drawn from the data? a. The United States has an absolute advantage in the production of shirts. b. The United States has an absolute advantage in the production of tractors. c. The United States has a comparative advantage in the production of shirts. d. The United States has a comparative advantage in the production of tractors.

12. Of the following, which situation might cause the shift of the supply curve from SI to S2? a. Good weather leads to an increase in the blueberry crop. b. Bad weather leads to a reduction in the blueberry crop. c. New scientific studies show that eating blueberries is good for your health. d. The government increases subsidies to blueberry growers.

10. A person who invests in mutual funds is choosing an investment that a. has the lowest risks and the lowest returns b. has the highest risks and the highest returns c. has the highest risks and the lowest returns d. has a balance of low risk/low return and high risk/high return options

13. If aggregate demand is increasing sharply, while aggregate supply is increasing very slowly, which result is MOST likely? a. a business boom b. an economic slowdown c. demand-pull inflation d. a decline in GDP

11. Which basic economic problem does the U.S. share with all other nations? a. scarcity of resources b. lack of technology c. lack of public services d. too much government control

14. Which of the following statements about the disadvantages of credit cards is FALSE? a. Many credit cards charge annual fees. b. Credit card finance charges are compounded monthly. c. Credit cards charge variable, rather than fixed, rates of interest. d. Credit cards are not often useful in an emergency.

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Name: ________________________

ID: A

15. Which currency depreciated in value? a. the euro b. the dollar c. both d. neither 16. Henry decides to deposit $50 of his birthday money into his college savings account, rather than spending it on a video game. What is the opportunity cost of his decision? a. the interest he will earn on his savings b. a better chance of going to college in the future c. the enjoyment he misses by not buying the game d. the opportunity he gains by pleasing his parents

18. What is one conclusion that can be made from the graph? a. The labor market for people in education and health services is not promising. b. Incomes for people in professional and business services are low and not rising as quickly as those in other fields. c. Incomes for people in leisure and hospitality are low and not rising as quickly as those in other fields. d. Incomes are rising rapidly for workers in all three areas of the labor market.

17. Which type of business organization has the advantage of limited liability but the disadvantage of less control over business decisions? a. partnership b. corporation c. sole proprietorship d. perfect competition

19. In which situation might the Federal Reserve sell government securities and raise the discount rate? a. in a recession b. in a depression c. when the inflation rate is high d. when aggregate supply is too high 20. Which of the following is a limit on the number of a particular item that can be imported from a particular country? a. a quota b. a tariff c. an embargo d. a standard 21. Workers with a cost of living adjustment in their contracts a. receive raises every month b. can never be fired or laid off c. suffer less from inflation than other workers d. suffer more from inflation than other workers

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Name: ________________________

ID: A

25. Which of the following is a disadvantage of choosing an insurance policy with a higher deductible, rather than a lower deductible? a. higher premiums b. higher out-of-pocket costs for claims c. higher coverage limit on claims d. lower coverage limit on claims Study the information below and use it to answer the question that follows.

22. The flow of labor into the job market is illustrated by a. 1 to 3 b. 4 to 2 c. 5 to 7 d. 6 to 1 23. Which of the entrepreneurship? a. b. c. d.

following

is

an

example

of

a person who invests in computer stocks a person who starts a new online business a person who takes a job with a high-tech firm a person who buys land and builds herself a new house 26. According to the data on the graph, this nation's GDP is about a. $18.1 billion b. $20.5 billion c. $19.3 billion d. $16 billion 27. Leo and Alex have a car washing business. Currently, each man washes a car and then waxes that car by himself. The BEST way to improve their efficiency would be if a. Leo and Alex wash and wax each car together b. Leo waxes Alex's cars and Alex waxes Leo's cars c. Leo washes a11 the cars and Alex waxes all the cars d. One day, Leo washes all the cars, while Alex waxes; the next day, they switch jobs

24. Dan traveled to Mexico and took $200 in U.S. currency. When he exchanged the $200 for an equivalent sum in pesos, he received about a. 214 pesos b. 2,140 pesos c. 186 peso d. 1,860 pesos

28. Which sentence describes market conditions at the equilibrium, or market clearing, price? a. Supply is greater than demand b. Demand is greater than supply. c. Price ceilings determine supply and demand. d. Supply and demand are equal.

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Name: ________________________

ID: A

29. In which of the following situations are two nations MOST likely to trade? a. Each nation has an absolute advantage in producing one of the two products both want. b. Each nation has a comparative advantage in producing one of the two products both want. c. Neither nation has an absolute advantage in producing either product. d. Neither nation has a comparative advantage in producing either product.

32. What is one conclusion that can be made from the graph? a. The number of unemployed people in Germany is twice the number of unemployed in Japan. b. The rate of unemployment in France is more than twice that of Japan. c. The United States has the lowest unemployment rate of the five nations. d. The number of unemployed people in France is much higher than the number of unemployed people in the United States. 33. Two advantages of a market economy, as compared with a command economy are a. more security and more equity b. more control over prices and wages c. more freedom and more efficiency d. more limits on profits and more public , goods

30. Suppose the government set a binding price ceiling of $3 per box of cereal. What would be the quantity demanded and the quantity supplied? Demanded Supplied Demanded Supplied a. 50 50 b. 50 60 c. 60 40 d. 40 60 31. Which sentence describes the MOST likely effect of a U.S. tariff on imports? a. reduced trade barriers for American exports abroad b. more choices and lower prices for American consumers c. more sales for some American firms and less sales for others d. a positive American trade balance and a positive balance of payments

34. Which kind of tax does the data in the table illustrate? a. proportional b. regressive c. progressive d. property

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Name: ________________________

ID: A

35. Which group in the United States establishes the nation's monetary policy? a. the Federal Reserve b. the Senate c. the House of Representatives d. the president's Cabinet

39. Melissa wants to buy a living room set that costs $1,800. She could get a 4-year personal loan from a bank at a fixed annual interest rate of 8.7%. She could also get a 4-year loan from a finance company that charges 8.5%compounded annually. Which answer correctly compares the total costs of the loan with simple interest and the loan with compound interest?

a. b. c. d.

Simple $62.64 $626.40 $31.70 $317.00

Compound $69.22 $694.52 $31.32 $313.20

40. If the government's fiscal policy is designed to expand the economy, which action would Congress be MOST likely to take? a. buy government bonds b. decrease income taxes c. lower the discount rate d. decrease government spending 41. Which of these choices is the MOST likely effect of a strong U.S. dollar? a. Travel abroad becomes more affordable b. U.S. imports become more expensive. c. U.S. exports increase. d. The U.S. trade deficit improves.

36. Imagine that the graph shows U.S. government expenditures for a particular year. If the GDP I for that year was $12 trillion, what percentage of the nation's nominal GDP was made up of government expenditures? a. about 5% b. about 10% c. about 20% d. about 25%

42. Which one of the following might benefit from spiraling rates of inflation? a. someone who has borrowed money b. someone who has lent out money c. an investor d. a saver

37. A person who opposes free trade would MOST likely a. support a reduction in tariffs b. call for an end to quotas c. call for supporting American jobs d. oppose protectionist policies 38. Which of the following is true about a rational economic decision? a. Marginal costs exceed marginal benefits b. Marginal benefits exceed marginal costs. c. Opportunity costs are less than marginal benefits. d. Opportunity costs are balanced by total benefits.

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Name: ________________________

ID: A

47. If the price of new cars decreases slightly, the demand for new cars is likely to increase greatly. This market situation is an example of a. demand elasticity b. demand inelasticity c. supply elasticity d. supply inelasticity 48. What is one result of the North American Free Trade Agreement (NAFTA)? a. increased trade barriers among the United States, Canada, and Mexico b. reduced trade barriers among the United States, Canada, and Mexico c. increased tariffs for European imports into North America d. reduced quotas for Japanese imports into North America

43. According to the graph, what is the market clearing price for couches? a. $300 b. $400 c. $500 d. $600

49. One major difference between banks and credit unions is that a. banks offer savings accounts and loans, while credit unions offer only credit cards b. banks charge simple interest, while credit unions charge compound interest c. banks are profit-making firms while credit unions are non-profit institutions d. credit unions are profit-making firms, while banks are non-profit institutions

44. Which issue below might a professor of microeconomics specialize in? a. causes of rising unemployment rates in the United States b. effects of declining GDP in European nations c. relationship of supply and demand in the housing market d. evaluating the effectiveness of monetary policy vs. fiscal policy 45. How are MOST public goods and services paid for in the United States? a. by taxes b. by user fees c. by charitable donations from individuals d. by charitable donations from corporations 46. Which government decision below represents possible effects of deregulation? a. The government strengthens antipollution measures against factories, leading to cleaner air but higher prices. b. The government lessens control of the TV industry, leading to more choices but higher prices for consumers. c. The government forbids age discrimination in the workplace, leading to fairer hiring practices. d. The government controls prices charged by public utilities, resulting in affordable energy but declining service

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Name: ________________________

ID: A

Use the information below to answer the following question.

53. Imagine that the government put a maximum limit on the price of gasoline, a limit that was lower than the equilibrium price that would be established in a free market. What name do economists give the resulting price and supply situation? a. price floor; shortage b. price floor; surplus c. price ceiling; shortage d. price ceiling; surplus

50. If Danielle's income and expenses remain the same, how much money per month can she afford to save? a. $60 b. $160 c. $900 d. $1,260

54. Which point on the graph represents an inefficient use of resources? a. Point A b. Point C c. Point D d. Point E

51. Which of the following represents an investment in human capital? a. A company invests in new computers for on-the-job use. b. A company hires 100 new employees in all branches of its corporation c. A company raises wages for all factory workers and office workers. d. A company offers free job-related education to employees.

55. What is the MOST important function of government patents in a market economy? a. to protect consumers from being cheated b. to allow entrepreneurs to earn profits c. to allow one corporation to benefit from the ideas of another d. to protect sole proprietors from corporate takeovers

52. Which of the following is an example of government transfer payments? a. Medicare payments to the poor and elderly b. interest payments on the national debt c. salary payments to government employees d. payments to private industries involved in highway construction

56. What is the relationship between the national debt and the government's budget deficit this year? a. There is no connection between them. b. They are the same. c. This year's budget deficit adds to the size of the national debt. d. The national debt guarantees a budget deficit this year.

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Name: ________________________

ID: A

57. Since the early 1960s, the U.S. government has forbidden all imports from Cuba. This situation is an example of a. a quota b. an embargo c. a tariff d. a subsidy

60. Which sentence BEST describes the organization of the Federal Reserve System? a. It consists of all the banks and credit unions in the United States. b. It consists of one large bank in Washington, D.C. and the U.S. Mint c. It consists of 12 regional banks and the Federal Open Market Committee. d. It consists of the president, the Cabinet, and the Congress.

58. A sales tax is considered a regressive tax because a. it has a more serious impact on the rich than the poor b. it has a more serious impact on the poor than the rich c. it decreases sales for all types of businesses d. it decreases sales for small businesses more than sales for large businesses

61. If the unemployment rate of a nation is slowly beginning to rise and the GDP is slowly beginning to fall, which phase of the business cycle is beginning? a. expansion, or upturn b. contraction, or downturn c. recession d. depression Study the information below, and use it to answer the question that follows.

62. The table shows the changing value of the U.S. dollar in terms of the South Korean won. Which of the following BEST explains the cause of the changes from Year 1 to Year 3? a. South Koreans increased their demand for American goods and services. b. Americans increased their demand for South Korean goods and services. c. The South Korean inflation rate was higher than the U.S. inflation rate. d. South Koreans increased their investments in U.S. companies.

59. What might have caused the aggregate demand curve to shift from ADI to AD2? a. High interest rates reduced consumer borrowing and spending. b. Low interest rates increased consumer borrowing and spending. c. Increasing worker productivity led to a surplus of consumer goods. d. Decreasing worker productivity led to a shortage of consumer goods

9

Name: ________________________

ID: A

Study the information in the graph and use it answer the following question.

67. When the U.S. government hires postal workers and FBI agents, it makes transactions in the a. factor market b. product market c. public market d. property market 68. Which choice BEST describes an area that a macroeconomist might specialize in? a. how advertising affects the demand for automobiles b. how prices in the steel industry are determined by labor costs c. how U.S. fiscal policy affects the U.S. unemployment rate d. how medical costs are affected by demand for emergency services

63. What is one conclusion you can make from the data? a. Of all the nations, the U.S. pays the highest hourly compensation rates for labor. b. Hourly compensation rates for Japanese labor are similar to those for Korean labor. c. Hourly compensation rates for French labor are higher than those for German labor. d. Hourly compensation rates for labor in the U.S., Canada, and Japan are about 4 times higher than those in Hong Kong.

69. Payments for the use of capital are called a. rent b. wages c. interest d. profit

64. Salaries for workers trained in advanced technology are higher because a. the demand for them is high, compared to the supply b. the supply of them is high, compared to the demand c. government subsidies pay the salaries of most technology workers d. government price floors guarantee minimum salaries for technology workers

Study the graph below and use it answer the question that follows.

65. Your creditworthiness, or ability to get a loan, depends on a. only your income and your current debts b. only the assets you can use as collateral c. only your history of paying bills and repaying loans d. your income, debt, assets, and credit history

70. A printing company upgraded its capital equipment by buying a new press that increases its production rate. What effect should this investment have on the company's prices and the quantity it produces? Price Quantity a. rises rises b. rises drops c. drops drops d. drops rises

66. A reduction in the demand for U.S. exports will usually result in a. an increase in the international value of the dollar b. a decrease in the international value of the dollar c. a decrease in the value of foreign currency in the United States d. a decrease in the price of foreign imports in the United States

71. To obtain goods and services, people in capitalist economy depend MOSTLY on a. voluntary exchange b. public goods and services c. government regulation d. communal ownership

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Name: ________________________

ID: A

72. Using labor in an assembly line in the manufacturing process is an example of worker a. diversification b. specialization c. inefficiency d. marginalization

77. After working in a chain bookstore for ten years, Janice decided to leave the company and open her own bookstore. To raise capital, she sold all the stock she had bought in the chain, rented space downtown, ordered books, stacked the shelves, and opened for business. Janice's store is an example of a. a corporation b. a sole proprietorship c. a partnership d. an oligopoly

73. If a bank charges 4% interest on loans, how much interest will it pay on savings? a. 4% b. less than 4% c. more than 4% d. the discount rate

78. The market for gasoline is controlled by a few large companies whose pricing decisions are interdependent, which sometimes lead to "price wars." This market is an example of what kind of market structure? a. monopoly b. monopolistic competition c. oligopoly d. perfect competition 79. When nations focus on producing the things they make MOST efficiently and then trade for other goods, the result is usually a. a decrease in the variety and total amount of goods available worldwide b. an increase in the variety and total amount of goods available worldwide c. an increase in the variety, but a decrease in the total amount of goods available d. an increase in the total amount, but a decrease in the variety of goods available

74. If unemployment begins incomes begin declining, what immediate change would occur in the graph? a. The supply curve would shift to the left. b. The supply curve would shift to the right. c. The demand curve would shift to the left. d. The demand curve would shift to the right. 75. Steve had $10,000 in his savings account when his bank declared bankruptcy. Which of the following is true? a. Steve lost all of his savings b. Steve lost half of his savings. c. Steve got all of his money back. d. Steve may get some of his money back.

80. The BEST solution to the problem of structural unemployment is a. using fiscal policy to expand the economy and create more jobs b. raising the minimum wage c. encouraging workers who have lost high- paid jobs to take lower-paid jobs d. retraining those whose skills are no longer marketable

76. Which of the following is an example of a price floor? a. a rent-controlled apartment b. a variable interest rate c. the exchange rate d. the minimum wage

81. Which kind of economy do MOST nations in the world have today? a. command b. market c. mixed d. traditional

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Name: ________________________

ID: A

Study the infromation below and answer the question that follows.

82. Which is the BEST example of a progressive tax in the United States? a. personal income tax b. excise tax c. property tax d. Social Security tax 83. If government fiscal policy is intended to stop spiraling inflation rates, which action would Congress be MOST likely to take? a. reduce income taxes b. reduce government spending c. reduce the discount rate d. reduce the sales tax

89. Based on the data in the table, this nation has an unemployment rate of about a. 11% b. 12.5% c. 15% d. 16%

84. Which kind of insurance is also an investment plan? a. term life insurance b. whole life insurance c. property insurance d. disability insurance

90. If, in one year, the federal government takes in $50 billion dollars in taxes and spends $49 billion, the nation has a. a budget deficit b. a budget surplus c. a positive balance of payments d. no national debt

85. The BEST strategies to insure an economy's long-term growth are to a. invest in technology and human capital b. increase the labor supply and decrease wages c. decrease profits and increase wages d. maintain firm price ceilings and price floors 86. Public schools and highways are examples of a. private goods b. public goods c. transfer payments d. market failures 87. The BEST example of a natural monopoly is a. a drug company b. a software company c. a public utility d. a steel company 88. A disadvantage shared by sole proprietorships and partnerships is a. little control over decision making b. inability to specialize c. responsibility to stockholders d. unlimited liability

12

ID: A

Economics Pre/Post Test Answer Section MULTIPLE CHOICE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44.

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ID: A

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