Flashcards About Economics Multiple Choice
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Economic decisions involve doing what with resources to produce goods and services for people to produce?
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Allocating
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Economics is about the production of goods and services, which requires the allocation of what?
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Resources
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In an economic system, decisions need to be made about producing resources and which of the following?
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Allocation
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Which of these government policies pursues the economic goal of equity?
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Providing welfare benefits
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Which of these government policies pursues the economic goal of growth?
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Increasing the money supply
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Which of these government policies pursues the economic goal of freedom?
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Protecting consumers from fraud
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What is the purpose of a free-market system?
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To allow consumers and producers to make their own decisions. The free-market system leaves economic decisions up to the free choices of consumers and producers.
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Which of these is one of the principles of a free-market system?
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The government must prevent consumers from being coerced. A coerced choice is not a free choice.
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Which of these is required to have a free-market system?
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Laws against theft, fraud and coercion
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Why do economists measure the gross domestic product?
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To see how much economic activity there is in a particular country. The GDP is the total of all goods and services produced in an economy.
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What does the inflation rate indicate?
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How quickly prices are rising overtime
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Which of these economic indicators is most likely to be high during a recession?
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Unemployment rate
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How does the assembly line benefit the economy?
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It increases productivity.
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How does use of cargo containers benefit the economy?
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By keeping distribution costs low
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How has the Internet benefited the economy?
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By improving communication and allowing greater trade specialization
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In a free-market system, consumers let producers know what they want to buy and how much they're willing to pay through what?
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Their purchases
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In order to know what people want to buy and how much they're willing to pay, producers pay attention to what?
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Consumer's purchases
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Producers use market research in order to do what?
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To find out what consumers want to buy
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Utility is a measure of what?
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Satisfaction
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The satisfaction that consumers get from their purchases is known as what?
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Utility
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Consumers use the cost-benefit analysis in order to maximize what?
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Utility
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The purpose of advertising is to do what?
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Influence consumer behavior
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A consumer who is reluctant to take chances has a high level of what?
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Risk aversion
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The non-monetary considerations that affect consumers' decisions are often based on what?
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Values and beliefs
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Match each type of market structure with an example of an industry that fits that type of competition
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Pure Competition: fast food Monopoly: cable television Monopolistic Competition: online auctioning Oligopoly: airlines
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Match each type of business with one of its features
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Sole proprietorship: unlimited liability General partnership: collective decision making Public corporation: stockholder control Government corporation: public regulation
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According to the law of supply and demand, when supply increases what else happens?
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Prices will decrease
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Which of these is most likely to lead to a decrease in the price of a good?
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Demand decreases and supply remains the same.
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What happens when demand for a good increases but its supply decreases?
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The price for the good increases.
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Match each of the terms below with an example that fits the term
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Fungibility: the production of potatoes Elasticity: the demand for jewelry Non-excludability: the provision of a public good Substitution: the switch from white bread to wheat bread
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Which of these is most likely to lead to an increase in wages?
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The formation of a labor union
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What is likely to happen if the size of the labor pool suddenly increases?
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Wages will go down
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A high level of what will most likely lead to a higher wage?
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Education
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Put the phases of the business cycle in the correct order in which they follow a depression
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1. recovery 2. boom 3. recession 4. depression
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Put the phases of the business cycle in the correct order in which they follow a recession
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1. depression 2. recovery 3. boom 4. recession
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Put the phases of the business cycle in the correct order in which they follow a boom
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1. recession 2. depression 3. recovery 4. boom
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Why is a fractional reserve banking system necessary?
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To enable banks to loan out money to make a profit
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What is the purpose of the required reserve ratio?
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To make sure banks have enough money on hand to meet customers' withdrawal requests. It protects banks against bank runs.
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Under a fractional reserve banking system, the amount of money loaned out can only increase if what happens?
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The required reserve ratio is lowered
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Which is not a policy tool used by the Fed?
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Making tax cuts
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What is not a way that the Fed can generate an increase in the money supply?
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Cutting taxes
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Which of these is the Fed not able to do?
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Prevent a budget deficit
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Which of these is most likely to lead to an increase in the price of a company's stock?
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Its outstanding shares are sold
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What is most likely to push the price of a company's stock higher?
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An increase in demand for the company's stock
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Which of these is most likely to lead to a decrease in the price of a company's stock?
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Its annual profits decrease
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Why is it possible to make money in the currency exchange market?
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Exchange rates are always fluctuating
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Buying a bond is similar to what?
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Giving a loan
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What kind of goods are sold in the commodity market?
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Raw, unprocessed goods
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When a company goes public, it begins doing what?
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Selling shares of stock
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An initial public offering (IPO) is when a company does what?
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Begins selling stock to the public
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The purpose of an initial public offering (IPO) is to do what?
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Raise money
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The government needs to provide public goods for what reason?
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Because private companies cannot profit by providing them
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Why are private companies unlikely to provide public goods?
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The non-excludability of public goods makes it difficult to profit from them
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Which of these prevents private companies from deciding to produce public goods?
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The profit motive
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Which of these promotes greater efficiency and lower prices by producing competition?
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Antitrust laws
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Antitrust laws promote greater efficiency and lower prices by protecting what?
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Competition
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Antitrust laws protect competition and bring about lower what?
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Prices
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Rationing is an attempt to limit shortages that naturally result from what?
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Price ceiling
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In order to limit the shortages that naturally result from a price ceiling, the government can do what to certain goods?
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Ration
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The government sets a price floor in order to protect what?
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A vulnerable industry
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Which of these results from the mobility of production that characterizes the current global economy?
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Outsourcing
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Companies use offshoring in order to do what?
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Reduce labor costs
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Low wages in the underdeveloped world give the U.S. an incentive to do what?
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Outsource
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Why is renting an apartment usually cheaper than buying a house?
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Buying a house involves paying off a loan and eventually owning the home, while renting is just giving money to a landlord
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Why is buying a house a better investment than renting an apartment?
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Mortgage payments increase the homeowner's equity. You can also eventually own the home.
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Which of these is a disadvantage of buying a house instead of renting an apartment?
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Homeowners must pay all of the repairs themselves
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What is the purpose of a budget?
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To keep expenses below income
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What is the goal of using a personal budget?
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To save for your future financial goals
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Why are student loans usually guaranteed by the government?
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Banks don't have any collateral for student loans
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Which of these is a form of self-help financial aid?
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Student loans
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What is one of the features of most student loans?
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Students don't have to begin repaying until they're done with school. Banks know that students are more likely to be able to repay a loan once they've graduated and gotten a decent job.
