USA Test Prep Microeconomics – Flashcards
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A way to measure the economy's performance is to measure categories of national...
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income. Economists use GDP and national income to show the performance of the economy
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Which of these ULTIMATELY controls the money supply in the United States?
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Federal Reserve ultimately controls the money supply in the United States.
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What is one way the government CANNOT influence income redistribution?
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Open Market Policy is a monetary policy of the Federal Reserve, and is therefore not a function of the government's fiscal policy for income redistribution
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In a free-enterprise economy, the LEAST LIKELY effect of economic growth would be...
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increase in poverty levels
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The economy is experiencing negative GDP growth and high unemployment. Which fiscal policy action should the government implement in an attempt to fix this problem?
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increase spending
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Inflation is expected to be high for the foreseeable future, you expect to have stable employment, and you would like to borrow money to buy a house. All else equal, a savvy economics student would
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borrow the money, knowing that the payments would be made with increasingly cheaper dollars.
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State governments often decide to place a "sin tax" on specific products or goods, like alcohol and tobacco. Which rationale is LEAST LIKELY to encourage governments to adopt a "sin tax"?
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While it is true that "sin taxes" disproportionally affect lower income groups, this is not a reason that governments would want to adopt them.
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In which situation might GDP (gross domestic product) NOT be an accurate indicator of the health of a country's economy?
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The country has suffered a disaster and is receiving financial aid from overseas. In this situation, the availability of money for purchasing goods and services may not accurately reflect economic growth in the country.
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What would MOST LIKELY happen if the Federal Reserve decided to increase the reserve requirement in banks?
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The amount of money circulating in the economy would decrease.
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In the graph, the year with the highest unemployment rate is 1983. What was the approximate unemployment rate in that year?
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10.2%
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Under which economic system would factors of production MOST LIKELY be owned by the government?
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command economy. Committees and departments decide what will be made, how it will be made, how much it will cost, and all of the other decisions that are usually made by private firms in a market economy.
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How does this map relate to the distribution of natural resources for countries such as South Africa?
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South Africa is rich in gold, and they need to learn to mine gold effectively in order to trade for other resources from other African countries.
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An opportunity cost is
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the next-best alternative you give up in order to do something else.
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In a market economy, prices are established by
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the interaction of supply and demand
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Increased education and training within a nation will most likely result in
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an increase in Gross Domestic Product (GDP)
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As one of the factors of production, capital can be defined as
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the equipment and factories needed to produce goods
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Which statement describes an opportunity cost that could result from the government regulating businesses?
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Government regulations can lead to an increase in production costs.
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Mr. Green is opening a new bakery. He has purchased an industrial oven which can accommodate twenty loaves of bread at a time. This oven represents which factor of production?
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capital
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In order to decrease fuel consumption in the US, the EPA (Environmental Protection Agency) has raised standards for fuel efficiency on cars sold here. One economic assumption made by the EPA is that, since our economic system is mostly market based,
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The EPA can assume that consumers will shop for more fuel-efficient cars, which means that the car makers will have a market for the newer, more efficient, vehicles.
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Which of these terms is the BEST synonym for the word "entrepreneur"?
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"business owner", a person who undertakes the responsibility of owning a business.
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If the government decided to subsidize the production of bobble-head dolls
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the supply curve will shift to the right. A government subsidy will reduce production costs. Because of this, suppliers would be willing to produce more items.
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In the product market,
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producers sell goods and services to consumers.
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What would be the situation if the price was moved from p2 to p3?
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there would be a shortage of widgets
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Demand for orange juice increases at the same time that the supply decreases. Which of these could explain that scenario?
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Consumers hear of the benefits of vitamin C contained in oranges, while citrus farmers suffer from a severe frost.
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− Cost of inputs increases − Number of sellers decreases These changes would MOST LIKELY have which impact on the market?
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supply would decrease
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What is the name of the point at which supply and demand intersect?
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equilibrium
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Which of these is MOST LIKELY a result of apartment rent controls?
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shortage of apartments
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One of the BEST measures of success for businesses and their entrepreneurs is
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profit
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The diagram shows the circular flow of goods and resources. What is the primary purpose of this chart?
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It shows how households and businesses interact in a market economy.
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Which type of market typically produces the highest level of output at the lowest price to consumers?
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perfect competition
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Which effect of high inflation might make it difficult for students to pay for college?
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High interest rates
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In this passage, what would make Gary's transaction non-beneficial?
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if the car had actually been in a wreck
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Who benefits the MOST during periods of unexpected inflation?
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banks who are collecting on loans with adjustable interest rates. Adjustable rate loans have an interest rate that will rise with inflation; therefore, the banks collecting those loans will be able to keep the interest rate rising with the rate of inflation.
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The Federal Reserve institutes a tight monetary policy in order to reign in inflation. What is a likely consequence of such action?
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The unemployment rate will rise Tight monetary policies aim to fight inflation. These policies restrict the amount of money in circulation. A consequence of not having as much money available would mean that some businesses would not have access to loans that would help them pay workers.
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Andre creates a budget for himself. He would like to buy a new video game each month, but doesn't have enough money to do so in his current budget. Which parts of Andre's budget could he increase to have enough money for the new video game each month?
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income
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In the business cycle model, a recession is MOST LIKELY
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a recession is MOST LIKELY a period during which the real GDP decreases for two quarters in a row. A prolonged recession is called a "depression."
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Overall levels of income, employment, and prices are determined by the spending and production decisions of all of the following EXCEPT
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net imports. Overall levels of income, employment, and prices are determined by the spending and production decisions of all of the following EXCEPT net imports. Net exports are included with businesses, households, and government.
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The United States increases its imports from Europe. What will be the effects on relative value of the Dollar and the Euro on the currency exchange market?
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The relative value of the dollar will depreciate and the euro will appreciate. The US will demand more European products, will drive the demand of the euro up and the demand of the dollar down.
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Fiscal policy affects which two parts of aggregate demand directly?
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Government spending and consumption affect aggregate demand directly. Aggregate demand is the same as GDP. The components of GDP that are affected directly are government spending and consumption.
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When a person agrees to a regular, fixed payment of wages over a period of time, he/she agrees to earn a
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A salary is an income that is paid out regularly over an agreed-upon time. It differs from a wage in that a wage is usually given based on hours worked. Salaries are most always fixed, regardless of the amount of time the employee works.
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Which statement would MOST LIKELY be claimed by the author of this passage?
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Based on the discussion of high trade costs, the presence of numerous tariffs, and problems with customs procedures and duties it is clear that the author feels that man-made trade barriers are the biggest challenge facing Africa's international trade success.
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What would be reasonable monetary policy during a period of high inflation?
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reduce the money supply. put downward pressure on prices as investment and spending slows.
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The European Union was created specifically for what purpose?
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to encourage free trade. The elimination of trade barriers- such as quotas and tariffs- was key to making sure European nations could trade easily with on another.
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Which item is NOT a means to finance government spending?
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Government subsidies
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A technology company needs 10 workers experienced in a newly developed programming language. Plenty of applicants express interest in the job; however, only three have the necessary education and experience to complete the work. The remaining unemployed individuals are an example of ___ unemployment.
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structural unemployment because there is a mismatch between the good (qualified) workers looking for jobs and the vacancies available.
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How does the Federal Reserve achieve these goals?
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Raising and lowering short-term interest rates is one of the monetary policies that the Federal Reserve can use to help stimulate the economy. Taxation and government spending are fiscal policies that the government can use. Minimum wage is a price floor to raise the standard of living.
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The federal government decides to offset a $50 billion decline in business spending. The government could spend $50 billion directly on projects, or it could reduce tax rates by the same amount. Whether the action taken by the federal government is direct or indirect, the result is MOST LIKELY
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a higher federal deficit.
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Taxes are a form of government revenue. Which of these is a tax source?
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personal income is a tax source.
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Input costs (Rising costs and technology) Subsidies Taxes and Regulations Future expectation of prices These would change WHAT part of the market?
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supply
