1. EOCT REVIEW

2. 1.Which of the following is a microeconomic calculation?
A. Calculating GDP
B. Calculating the unemployment rate
C. Calculating the interest rate on a loan
D. Calculating the Consumer Price Index

3. C

4. 2.Which of the following benefits from the declining value of money during a period of high inflation?
A. a person with a savings account
B. A person with investments
C. a person who has borrowed money
D. A bank that has lent money

5. C

6. 3.Which of these is the MOST likely effect of a weak US Dollar?
A. Travel abroad will become more affordable for Americans
B. Goods imported from other countries will become more expensive
C. Foreigners will buy fewer US exports
D. Foreign investment in US businesses will decline

7. B

8. 4.If the government’s fiscal policy is designed to end a recession, which action would congress MOST likely take?
A. lower income taxes
B. raise income taxes
C. reduce government spending
D. raise the discount rate

9. A

10. 1. In a market economy, the allocation of goods and services is determined MOSTLY by
A. regulations of the federal government
B. decisions of advertisers
C. the needs of individuals
D. the incomes of individuals

11. D

12. 2. When people use their resources so that marginal benefits exceed marginal costs, they
A. make rational economic decisions
B. make irrational economic decisions
C. Eliminate the opportunity costs of decisions
D. Fail to use resources efficiently

13. A

14. 3. The main function of the Federal Reserve System in the US economy is to
A. establish monetary policy
B. establish fiscal policy
C. establish trade policy
D. balance the federal budget

15. A

16. 4. A major problem that both producers and consumers face in market economies is
A. lack of freedom
B. lack of efficiency
C. lack of profit motive
D. lack of economic security

17. D

18. 1. Which sentence describes the MOST likely effect of a US quota on Japanese imports?
A. reduced trade barriers for American exports to Japan
B. increased trade barriers for American exports to Japan
C. a positive trade balance
D. more choices and lower prices for American consumers.

19. B

20. 2. Which of the following is an example of a capital investment for a retail store?
A. hiring sales clerks and managers
B. renting retail space at a mall
C. Buying ads in a local newspaper
D. buying cash registers and displays

21. D

22. 3. In which of the following situations are two nations NOT 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 the product
D. Neither nation has a comparative advantage in producing either product

23. D

24. 4. When a product is selling at its equilibrium price
A. producers cannot supply enough of it
B. consumers want more of it than is available
C. producers supply as much as consumers demand
D. the price changes from day to day

25. C

26. 1.What is one advantage of choosing an insurance policy with a higher deductible, rather than a lower deductible?
A. Lower premiums
B. lower out-of-pocket costs for claims
C. higher coverage limit
D. lower coverage limit

27. A

28. 2. When a society invests in education, it improves its standard of living by improving its
A. Labor
B. Capital Goods
C. Human Capital
D. Entrepreneurship

29. C

30. 3. Which of the following is a total ban on the import of items from a particular country?
A. Quota
B. Embargo
C. Tariff
D. Standard

31. B

32. 4. In which situation might the Federal Reserve buy gov’t securities and lower the discount rate?
A. In a recession
B. When the inflation rate is too high
C. When aggregate demand is too high
D. When the economy is expanding

33. A

34. 1. When is it a benefit for workers to have a contract with a cost of living adjustment?
A. During a recession
B. During a depression
C. During an inflationary period
D. During a strike, or work stoppage

35. C

36. 2. Which type of business organization has the advantage of specialization but the disadvantage of unlimited liability?
A. Sole Proprietorship
B. Partnership
C. Corporation
D. Oligopoly

37. B

38. 3. Which form of credit has the disadvantages of variable interest rates and finance charges compounded monthly?
A. Bank Loans
B. Credit Union Loans
C. Installment Plans
D. Credit Cards

39. D

40. 4. If aggregate demand begins decreasing, followed by a decrease in aggregate supply, which stage of the business cycle is the economy entering?
A. A period of expansion
B. A period of slowdown
C. An inflationary period
D. A period of equilibrium

41. B

42. 1. Why does every economic decision involve an opportunity cost?
A. Because resources are scarce and wants are unlimited
B. Because few decisions have a marginal benefit
C. Because prices in a market economy are always too high
D. Because trade-offs are impossible to make in rational decisions

43. A

44. 2.When people invest in stocks, rather than bonds, what trade-off are they making?
A. Lower risks for lower returns
B. Higher risks for higher returns
C. Lower risks for higher returns
D. Higher risks for lower returns

45. B

46. 3. The shampoo market has a structure of monopolistic competition
3. The shampoo market has a structure of monopolistic competition. What is one important feature of this market structure?
A. One large firms controls prices in the market
B. A few large firms fix prices and control the market
C. A few large firms are interdependent and engage in frequent price wars
D. Firms with many similar products depend on product differentiation, or branding

47. D

48. 4. Keisha deposited $400 in a savings account that pays a simple interest of 3.5%/year. If she made no other deposits or withdrawals, how much interest had she earned at the end of the 3 years.
A. $14
B. $28
C. $42
D. $50

49. C

50. 1. If a nation’s imports for one year are worth $8
1. If a nation’s imports for one year are worth $8.6 billion and its exports are worth $8.5 billion the same year, that nation definitely has
A. A trade deficit
B. A trade surplus
C. A negative balance of payments
D. A positive balance of payments

51. A

52. 2. Among the Native Americans, beads were once used as a medium of exchange. The main reason why this type of money served its function was that it was
A. Easy to carry
B. Accepted as payment
C. Easily divisible into units
D. A precious metal in its community

53. B

54. 3. In a command economy, the means of production are owned by
A. Individuals
B. Family groups, or clans
C. Religious leaders
D. The government

55. D

56. 4. If in one year, the federal government takes in $100 billion in taxes and spends $99 billion, the nation definitely has
A. A budget deficit for that year
B. A budget surplus for that year
C. No national debt
D. A positive balance of payments

57. B

58. 1. An example of a technological monopoly
A. A public utility that serves everyone in a large city
B. A drug company with a patent for a new life-saving medicine
C. A software company that drives competitors out of business in a price war
D. A steel company that receives government subsidies.

59. B

60. 2. Which of these is NOT one of the major roles that the US gov’t plays in the economy
A. Providing private goods and services
B. Redistributing income through transfer payments
C. Protecting property rights
D. Resolving market failures

61. A

62. 3. The most important factor that determines a nation’s economic growth is
A. How fast its labor force increases
B. How quickly it can discover new resources
C. How much it can improve productive efficiency
D. How much its government improves its fiscal policy

63. C

64. 4. What kind of insurance pays you a monthly income if you are NOT able to work for an extended period of time?
A. Term life insurance
B. Whole life insurance
C. Disability insurance
D. Health insurance

65. C

66. 1. If inflation rates are sharply increasing, which fiscal policy would make the MOST sense?
A. Reduce government spending
B. Reduce income taxes
C. Reduce sales tax
D. Reduce the discount rate

67. A

68. 2. What kind of economy do MOST nations in the world have today?
A. Market
B. Command
C. Traditional
D. Mixed

69. D

70. 3. The best solution to problem of cyclical unemployment is
A. Using fiscal policy to expand the economy and create more jobs
B. Raising the minimum wage so that untrained workers earn as much as trained workers
C. Encouraging workers who have lost high-paying jobs to take lower-paying jobs
D. Retraining those whose skills are no longer marketable

71. A

72. 4. The automobile industry is controlled by a few companies whose pricing are interdependent. This market is an example of
A. Monopoly
B. Oligopoly
C. Monopolistic Competition
D. Perfect Competition

73. B

74. 1. The minimum wage is an example of a
A. Market failure
B. Market equilibrium price
C. Price floor
D. Price ceiling

75. C

76. 2. The Federal Deposit Insurance Company (FDIC) is a government agency that
A. Provides health insurance for low-income people
B. Provides mortgage insurance for homeowners
C. Protects banks from the risks of bankruptcy
D. Protects the savings of people who deposit their money in banks

77. D

78. 3. Payments for the use of land and capital are called
A. Rent and interest
B. Rent and wages
C. Interest and wages
D. Interest and profits

79. A

80. 4. If a bank pays 3% interest on saving accounts, how much interest will it charge for loans?
B. Less than 3%
C. More than 3%
D. The discount rate

81. C

82. 1. A division of labor improves efficiency on the job because it involves
A. Specialization
B. Voluntary exchange
C. Job security
D. Diversification

83. A

84. 2. In a market economy, how do people obtain MOST of the things they want and need?
A. Government transfer payments
B. Public goods and services
C. Voluntary exchange
D. Bartering and communal sharing

85. C

86. 3. What choice describes a macroeconomic calculation?
A. Calculating a families monthly budget
B. Calculating a firm’s annual profits
C. Calculating the unemployment rate
D. Calculating the interest on a personal loan

87. C

88. 4. When the US gov’t buys airplanes from an aircraft company, it makes a transaction in the
A. Factor Market
B. Product Market
C. Property Market
D. Public Market

89. B

90. 1. An increase in the demand for US 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. An increase in the value of foreign currency in the US
D. An increase in the price of imported goods in the US

91. A

92. 2. The BEST way to improve your credit rating is to
A. Never get a credit card
B. Never borrow money from a bank
C. Never forget to pay your bills on time
D. Never accumulate assets or collateral

93. C

94. 3. If the unemployment rate is slowly beginning to fall and the GDP is slowly beginning to rise, which phase of the business cycle are you in?
A. Recovery or expansion
B. Downturn, or contraction
C. Recession
D. An inflationary spiral

95. A

96. 4.Which gov’t institution regulates the money supply of the US economy?
A. The United States Treasury
B. The United States Mint
C. The Federal Reserve System
D. The Securities and Exchange Commission

97. C

98. 1. A tax on an imported good
A. Tariff
B. Quota
C. Embargo
D. Subsidy

99. A

100. 1. If the price of milk increases slightly, the demand for milk will NOT change very much. This market situation is an example of
A. Demand elasticity
B. Demand inelasticity
C. Supply elasticity
D. Supply inelasticity

101. B

102. 2. Janice decides to spend $20 on a ticket to a concert instead of buying a new blouse. What is the opportunity cost of her decision?
A. $20
B. The benefit of having a new blouse
C. The enjoyment of the concert
D. The opportunity to go out with friends.

103. B

104. 3. How is NAFTA similar to the EU?
A. Each increases trade barriers among neighboring nations
B. Each aims to eliminate trade barriers among neighboring nations
C. Each promotes free trade with all nations of the world
D. Each promotes protectionist policies against nations around the world

105. B