Final Review

Freshmen

100

Adam Smith's "invisible hand" works only in a: a)command economy b) market economy c) planned economy d) traditional economy

b) market economy

200

North Korea's economic problems stem mainly from a) prolonged drought b) misguided central planning c) out of date farming methods d) unrestricted free markets

b) misguided central planning

300

The American Motor Company's decision to stop manufacturing the Gremlin automobile can best be described as an example of a) competition b) consumer sovereignty c) specialization d) voluntary exchange

b) consumer sovereignty

400

One of the major disadvantages of corporations is a) double taxation b) limited liability c) limited liability d) over specialization

a) double taxation

500

Stockholders in a corporation are at risk of losing a) dividends b) personal savings c) the right to profits earned d) the value of their investment

d) the value of their investment

Sophmore

100

A merger of a mining corporation and a company that manufactures mining equipment is called a a) cooperative merger b) conglomerate merger c) horizontal merger d) vertical merger

d) vertical merger

200

The segment of the labor force that has grown the most since the mid-1950s is a) college graduates b) high school graduates c) women d) workers

c) women

300

The word that best describes today's labor force is a) global b) local c) national d) technological

a) global

400

Which physical property of money allows sellers to make change? a) divisibility b) durability c) portability d) uniformity

a) divisibility

500

Investors who put all their money in investments with a guaranteed return still face the risk of a) corporations declaring bankruptcy b) economic factors affecting the value of stock c) losing purchasing power from inflation d) losing some of their principal

c) losing purchasing power from inflation

Junior

100

Which of the following makes credit unions different from other banks? a) automobile loans b) checking accounts c) home mortgages d) membership requirements

d) membership requirements

200

The type of bond that carries the highest risk and the highest yield is a a) junk bond b) municipal bond c) savings bond d) Treasury bond

a) junk bond

300

In the formula for determining Gross Domestic Product (C+I+G+X=GDP), X stands for a) exports b) external sales c) gross exports d) net exports

d) net exports

400

The type of unemployment that can be a sign of a healthy economy is a) cyclical unemployment b) frictional unemployment c) seasonal unemployment d) structural unemployment

b) frictional unemployment

500

When prices rose at a rate of about 322 percent per month in Germany in th 1920s, the German economy experienced a) creeping inflation b) deflation c) galloping inflation d) hyperinflation

d) hyperinflation

Senior

100

How does the Federal Reserve directly control the amount of money that banks create through making loans? a) open market operations b) bank closings c) setting the federal funds rate d) setting the reserve requirement

d) setting the reserve requirement

200

Which of these monetary policy actions by the Federal Reserve decreases the money supply? a) buying bonds on the open market b) lowering the discount rate c) lowering the reserve requirement d) selling bonds on the open market

d) selling bonds on the open market

300

How does the Fed change the federal funds rate? a) by buying and selling bonds in open market operations b) by changing the amount of reserves that banks hold c) by changing the rate that it charges other banks when they borrow money d) by setting the rate that banks charge when thy lend money to other banks

a) by buying and selling bonds in open market operations

400

What is the short term effect of contractionary money policy? a) consumer spending increases b) interest rates rise c) prices rise d) unemployment falls

b) interest rates rise

500

What is the result of expansionary monetary policy? a) banks lend more money b) business investment declines c) unemployment increases d) prices decrease

a) banks lend more money

Honors

100

What happens when the Fed buys bonds on the open market? a) demand for bonds and interest rates decrease b) demand for bonds and interest rates increase c) demand for bonds decreases and interest rates increase d) demand for bonds increases and interest rates decrease

d) demand increases and interest rates decrease

200

Which of the following scenarios represent fiscal and monetary policy working together? a) Fed buys bonds and government increases spending b) Fed buys bonds and government raises taxes c) Fed sells bonds and the government cuts taxes d) Fed sells bonds and the government increases spending

a) Fed buys bonds and government increases spending

300

Comparative advantage results when one trading nation produces something at a lower a) marginal benefit b) marginal profit c) opportunity cost d) production cost

c) opportunity cost

400

The ability of one trading nation to make a product more efficiently than another trading nation is called a) comparitive advantage b) favorable balance of trade c) voluntary export restraint d) absolute advantage

d) absolute advantage

500

International trade benefits only nations that a) export more than they import b) import more than they export c) participate in trade associations d) trade according to the law of comparative advantage

d) trade according to the law of comparative advantage