When aggregate demand exceeds aggregate supply in …arabiamtnhs.dekalb.k12.ga.us/Downloads/ECONOMICS EOCT...16. Study the information below and use it to answer the question that

Name:_____________________________________________ Date:________________________

1. The Federal Reserve System is comprised of

A. one central bank in Washington, D.C., and a number of branch banks

B. one central bank in Washington, D.C.

C. 12 Federal Reserve Banks across the United States and a number of branch banks

D. the U.S. Treasury, Bureau of Engraving and Printing, and the Office of Management and Budget (OMB)

2. When aggregate demand exceeds aggregate supply in an economy, the MOST immediateresult is

A. inflation

B. deflation

C. unemployment

D. a budgetary surplus

3. A decision by the Federal Reserve to lower the discount rate is intended to

A. encourage borrowing and spending, thus increasing aggregate demand

B. make borrowing more difficult, thus reducing aggregate demand

C. increase the unemployment rate, thus increasing aggregate demand

D. contract the money supply, thus reducing aggregate demand

4. The BEST example of structural unemployment in an economy is someone

A. between jobs or entering the work force

B. out of work due to a change in the business cycle

C. out of work due to a seasonal downturn in business

D. whose job skills do not match the economy's needs

Economics (SupplyandDemand)

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5. Suppose the U.S. government decides to lower the income tax rates. How will this affect the aggregate supplyor aggregate demand curves for consumer goods?

A. a shift to the right in the aggregate supply curve

B. a shift to the left in the aggregate supply curve

C. a shift to the right in the aggregate demand curve

D. a shift to the left in the aggregate demand curve

6. If Congress and the President agree to lower taxes and raise government spending, one likely result of thesepolicies will be

A. an increase in unemployment

B. a decrease in inflation

C. an increase in the federal deficit

D. a decrease in interest rates

7. Which of the following would MOST likely cause inflation?

A. an increase in the costs of production

B. an increase in the unemployment rate

C. a decrease in consumer spending

D. a decrease in the Gross Domestic Product

8. When the Federal Reserve buys government securities on the open market, what effect does this action haveon the nation's money supply and aggregate demand?

Money Supply Aggregate Demand

A. increases increases

B. increases decreases

C. decreases increases

D. decreases decreases


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9. The Federal Reserve conducts open-market operations when it

A. changes the reserve requirement for banks

B. raises or lowers the discount rate

C. buys or sells government securities

D. changes the prime interest rate

10. When nations specialize in the production of goods in which they possess a comparative advantage, whichof the following is a result?

A. The nations have an incentive to trade.

B. Consumers are hurt because prices will increase.

C. Economic efficiency is less likely to be achieved.

D. The nations become more self-sufficient and less interdependent.

11. Study the information below and use it to answer the question that follows.

Foreign Exchange Rates

(Tuesday, July 3, 2001)

Keisha traveled to Canada and took $100 in U.S. currency. When Keisha exchanged the $100 for an equivalentsum in Canadian dollars, she received about

A. 33 Canadian dollars

B. 66 Canadian dollars

C. 100 Canadian dollars

D. 150 Canadian dollars


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12.

If the United States has a balance of trade deficit with China, it means that

A. the U.S. imports more products from China than it exports to China.B. the U.S. exports more products to China than it imports from China.C. U.S. dollars are more valuable in China than the Chinese currency is in the U.S.D. American companies are investing more in their operations in China than China is investing in the United States.

13.

Which generalization is the MOST accurate comparison of absolute advantage and comparative advantage?

A. A nation can have either an absolute advantage or a comparative advantage in production, but not bothB. A nation can have an absolute advantage without having a comparative advantage in productionC. A nation that has an absolute advantage will automatically have a comparative advantage in productionD. A nation that has a comparative advantage will automatically have an absolute advantage in production

14.

According to the information, one U.S. dollar

A. can be exchanged for more Japanese yen than Indian rupees.B. can be exchanged for approximately two U.K. pounds.C. is worth more Canadian dollars than Indian rupees.D. is worth less than one Japanese yen.

15.

If the value of the currency of Country X depreciates, or lowers, the MOST LIKELY result is

A. Country X will increase imports and decrease exports.B. the nation's imports are less expensive for domestic buyers.C. the nation's exports are more affordable in the global market place.D. the currency of Country X will be pegged, or fixed, instead of free-floating.


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According to the production possibilities information, the opportunity cost of moving from point A to point Bcould be expressed as

A. 2 aircraft carriers.

B. 8 submarines.

C. 6 aircraft carriers.

D. 20 submarines.

17. In the U.S., how are public goods paid for?

A. Private firms collect fees from their employees.

B. Non-profit organizations collect charitable donations from people.

C. The government collects tax revenues from individuals and firms.

D. Corporations make profits from selling goods and services.

18. One important assumption underlying market economies is that

A. significant government regulation is needed to direct business activity.

B. competition promotes economic efficiency.

C. society's wealth must be evenly distributed.

D. central planning promotes economic equity.


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19. Which of the following determines the division of the economy's output among groupsand individuals in a market system?

A. the incomes of individuals

B. labor unions through collective bargaining

C. marketing departments within firms

D. federal and state laws

20. The headline "Automated Plant to Begin Operations Next Month" is MOST connected with which basiceconomic question?

A. How much to produce?

B. How to produce?

C. What to produce?

D. For whom to produce?

21. Some power plants burn coal to produce electricity. The furnace of a coal-burning power plant would beclassified as

A. entrepreneurship

B. labor

C. capital

D. land

22. In which economic system does the government own the means of production?

A. traditional

B. mixed

C. market

D. command


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23. In economics, the term "scarcity" is defined as a situation in which there

A. are limited resources but unlimited wants and needs.

B. are fewer jobs than there are members of the labor force.

C. is not enough money in a country's treasury to pay off its foreign debt.

D. are fewer skilled workers than there are high-level job openings.

24. The idea that producers make goods that consumers like and are willing to pay for is aprinciple of which of the following economic systems?

A. traditional

B. command

C. market

D. socialism

25. The opportunity cost in collecting money for savings in a glass jar is the

A. ability to use the money at any time.

B. interest the money could have earned in a savings account at a bank.

C. cost of a glass jar.

D. time spent counting it.

26. Idaho grows potatoes while Georgia grows peaches. This production is an example of

A. economic interdependence

B. regional specialization

C. cooperative markets

D. joint production


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What will happen in the future if this nation currently operates at point B?

A. More capital goods will be produced, adding to economic growth in the future.

B. Fewer capital goods will be produced in order to satisfy consumer demand.

C. More goods will be produced, so economic growth will be reduced in the future.

D. Fewer goods will be produced, so the curve will move toward the origin.

28. Which of the following is an investment in human capital?

A. worker training and education

B. new machines

C. paid vacations

D. unemployment benefits

29. Which of the following is NOT typically associated with command economies?

A. public ownership of the means of production

B. clearly defined private property rights

C. central planning of resource use

D. government determined output quotas


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30. Country X is currently investing heavily in research and development (R&D), mainly inthe areas of information and communications technologies. All of the following arepredictable results of these investments EXCEPT

A. future economic growth

B. future increases in labor productivity

C. the creation of labor-intensive industries

D. the creation of advanced capital goods

31. What happens when many people want to buy a product but there is not enough of it?

A. The price goes up.B. More people buy the product.C. The price goes down.D. Fewer people want the product.

32. One year there was very little rain. Because of this, Georgia farmers have fewer melons. What MOST LIKELYhappened next?

A. Georgia farmers sent most of their melons to other states.B. Prices for melons went down.C. Georgia farmers made lots of money.D. Prices for melons went up.

33.

Company X produces 200 units of a new product. There are not enough resources to produce additional units to fillthe demand. This basic economic concept is called

A. capital.B. opportunity cost.C. production cost.D. scarcity.

34.

Decentralized decision-making resulting in buyers and sellers freely engaging in commerce is an example of a(n)

A. mixed economy.B. command economy.C. voluntary exchange.D. involuntary exchange.


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35.

Ashley would like to buy a reliable car for under $10,000. Jeremy has a reliable car that he would like to sell for$8,000 to buy a truck for his business. If Ashley buys Jeremy's car, the sale is an example of a(n)

A. voluntary, fraudulent exchange.B. involuntary, fraudulent exchange.C. voluntary, non-fraudulent exchange.D. involuntary, non-fraudulent exchange.

36.

Which statement most accurately compares market and command economies?

A. While market economies have free price systems, command economies distribute wealth equally.B. Market economies encourage consumer sovereignty, while command economies use central planning.C. Neither market nor command economies encourage production competition.D. Both market and command economies encourage individual profit motive.

37.

The government becomes involved in the economy by providing public goods and services, redistributing income,protecting property rights, and resolving market failures when

A. the public opinion of a country demands it.B. specific firms in private industry demands it.C. the potential benefits of involvement outweigh the costs.D. the potential costs of involvement outweigh the potential benefits.

38.

Complete the sentence. Frictional unemployment

A. occurs when a fundamental change in economy reduces the demand for certain workers.B. occurs every year and is related to weather or changes in demand for certain products.C. occurs when workers are short-term unemployed, or in the process of changing jobs.D. occurs over a period of three to five years and is related to changes in technology.

39.

A contraction of the monetary supply would MOST LIKELY result in

A. higher price levels and lowering interest rates.B. higher interest rates and lowering price levels.C. a lower reserve requirement, which would generate fewer loans.D. a higher reserve requirement, which would generate more loans.

40.

If the Federal Reserve raises the reserve requirement, it is MOST LIKELY exercising

A. fiscal policy.B. monetary policy.C. fiscal conservatism.D. monetary conservatism.


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41.

Monetary policy includes actions

A. by the judicial branch to regulate the money supply.B. by individuals and states to regulate the money supply.C. by the Federal Reserve System to regulate the money supply.D. by states and the federal government to regulate the money supply.

42.

Fiscal policy is the federal government's attempt to

A. stabilize the economy through controlling the money supply.B. stabilize the economy through taxing and government spending.C. decrease aggregate demand by increasing government spending.D. increase aggregate supply by increasing sales and property taxes.

43.

The federal government is concerned that investment spending declined by $40 billion, and the unemployment rate ison the rise. To offset the economic slowdown, the federal government could

A. use fiscal polices to spend $40 billion in new projects and grants.B. use monetary policies to spend $40 billion in new projects and grants.C. use fiscal policies to decrease the money supply and cut unemployment rates.D. use monetary policies to decrease the money supply and cut unemployment rates.

44. Suppose the downward sloping market demand curve for personal computers remains the same but newtechnology enables personal computer companies to reduce the price of personal computers. The MOST likelyresult of this decrease in price would be that

A. consumers would buy fewer personal computers

B. producers would produce fewer personal computers

C. consumers would buy the same number of personal computers as they did before the price decreased

D. consumers would buy a greater number of personal computers


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45. When the U.S. government purchases a submarine from a company, the government hasmade a major transaction in the

A. factor market

B. public market

C. product market

D. foreign exchange market

46. Which type of business organization is LEAST able to accumulate capital for investment?

A. sole proprietorship

B. partnership

C. corporation

D. franchise

47. Which statement reflects the role of prices in a market economy?

A. They signal producers about how to use scarce resources.

B. They are an obstacle to the efficient flow of resources.

C. They are mostly determined by the government to serve public interests.

D. They are generally ignored by consumers.

48. Sharon decided to open a dry-cleaning business. She borrowed some money from hersister and took a loan from a bank. She hired one helper. What is a disadvantage ofSharon's business as described?

A. no separation of ownership and control

B. ease of organizing the firm

C. unlimited liability

D. double taxation


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49. Which of the following is true about a shareholder in a corporation?

A. A shareholder is part owner of that business.

B. A shareholder may not share in the earnings of that corporation.

C. A shareholder may not transfer his share to another party without permission.

D. A shareholder is liable for any debts accumulated by that corporation.

50. Use the information below to answer the question that follows.

According to the circular flow model shown, the flow of land, labor, capital, and entrepreneurship isillustrated by paths

A. 2 and 5

B. 4 and 2

C. 5 and 7

D. 7 and 4


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Which of the following conclusions can be made from the graph?

A. Technological advances in the computer industry will cause a shift from S1 to S3.

B. Higher taxes will cause a shift from S1 to S2.

C. Expanded markets for computers will cause a shift from S1 to S3.

D. Entry of new firms into the computer industry will cause a shift from S1 to S2.

52. In which market structure does a firm have greatest control over its product's price?

A. perfect competition

B. monopoly

C. oligopoly

D. monopolistic competition

53. When economists refer to "demand," they mean which of the following?

A. how much satisfaction buyers receive from a purchase

B. how much consumers will purchase at different prices

C. how much sellers will supply at a particular price

D. how much people want the product if it is free


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54. An increase in the price of cars is MOST likely to have which of the following effects on the market fortires?

A. It would increase the demand for tires and raise their price.

B. It would decrease the demand for tires and lower their price.

C. It would increase the demand for tires and lower their price.

D. It would decrease the demand for tires and raise their price.


The equilibrium wage for a certain labor market is shown on the graph. The

impact of establishing a minimum wage of $7 per hour on this labor market would be

A. an increase in the quantity of laborers demanded

B. a shift of the labor demand curve to the right

C. a shortage of 30,000 workers

D. a surplus of 60,000 workers


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56. Interdependence and price leadership are characteristics of firms in what kind of marketstructure?

A. monopoly

B. oligopoly

C. monopolistic competition

D. perfect competition

57. Last summer it was so dry that corn could not grow well. Since there will be less corn to sell, what will probablyhappen?

A. The price will increase.B. Stores will not sell any corn.C. The price will decrease.D. Stores will lose lots of money.

58. Toys often cost less to buy right after the holidays. Which of the following BEST explains why?

A. More people want to buy them.B. Fewer people want to buy them.C. They cost more to make in the winter.D. Store owners do not have sales in the summer.

59. The price of corn went down. What might be a reason for this?

A. More corn was produced.B. Bad weather ruined many corn crops.C. Advertising made more people want corn.D. Corn farmers wanted to make more money.

60. Freezing weather in Florida ruined much of the orange crop one year. What happened to the price of orange juice?

A. It went down a lot.B. It went down a little.C. It went up.D. It did not change.

61. Because it did not rain very much in the Southeast, the peanut crop was destroyed. Which of the following wouldPROBABLY happen next?

A. The price of peanut butter would go up.B. More peanuts would be harvested.C. The price of peanut butter would go down.D. More people would eat peanut butter.


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62. If there is more of a product (something you buy) available or it is easy to get, what might happen to the price ofthat product?

A. It might go up.B. It might go down.C. It might stay the same.D. The product might not be available.

63. Gasoline is made from oil. If oil is hard to get, what will MOST LIKELY happen?

A. The price of gas will go down.B. Most gas stations will close.C. The price of gas will go up.D. Many people will drive more.

64. If the price of peaches goes up at the grocery store, what will shoppers MOST LIKELY do?

A. buy all the peaches the store hasB. buy oranges and bananas insteadC. buy more peaches than other kinds of fruitD. buy canned peaches

65. All of the students in your school want to buy the same new game. Only one store has a few of the games left.What might happen?

A. The price of the game could go up.B. No students could buy the game.C. The price of the game could go down.D. No students would want to play the game.

66. One year there was very little rain in a large farming area. As a result, what happened when people went to thegrocery store?

A. They found higher prices and fewer products.B. There were lots of frozen foods in the freezer section.C. There were some very good bargain prices on all kinds of food.D. The produce section was full of many kinds of fruits and vegetables.

67. One year, not much corn was grown. Which of the following MOST LIKELY happened next?

A. The cost of corn went up.B. The cost of corn went down.C. People ate more corn products.D. Grocery stores had more corn to sell.


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68.

Use the map below to answer this question.

What type of map is shown above?

A. physical mapB. landform mapC. political mapD. road map

69. When a new toy comes out, it is often very expensive. A year later, the price of the toy often goes down a lot.Why?

A. The toys are harder to sell.B. There are not as many toys left to sell.C. The toy is the same.D. The toy is different.

70.

If the price of a good is too high in a market economy and more producers are attracted to the market,

A. consumers will demand more of the product.B. the government steps in to regulate the price.C. sellers will compete to meet consumer demands.D. production rates will decrease to lower the price of a good.


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71. Suppose Evan inherits 10,000 shares of common stock in Company ABC. Assuming this company staysprofitable and Evan decides to hold on to all 10,000 shares, he will likely receive

A. regular interest payments from Company ABC.

B. capital gains from Company ABC.

C. certificates of deposit from Company ABC.

D. dividends from Company ABC.

72. The income that results from saving money in a bank is called

A. wages.

B. rents.

C. interest.

D. dividends.

73. The BEST example of a progressive tax in the United States is

A. the federal excise tax on gasoline

B. the Social Security tax

C. the federal personal income tax

D. state sales taxes

74. Which of the following is MOST likely to cause wages to increase for United Statesworkers?

A. an increase in interest rates

B. an increase in the value of the dollar

C. an increase in worker productivity

D. an increase in retirement rate among United States workers


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75. Who is hurt MOST by unanticipated inflation?

A. savers at a fixed rate of interest

B. borrowers at a fixed rate of interest

C. workers with a union cost-of-living adjustment in their contracts

D. speculators in gold and other precious metals

76. Loans extended for longer periods of time often involve higher interest rates in order to

A. compensate the lender for greater risk

B. compensate the buyer for using savings to make a purchase

C. encourage consumers to buy durable goods for extended periods of time

D. encourage savings

77.

Bob decides to use his last $5 to buy a pizza lunch even though his gas tank is nearly empty. Using a rational decisionmaking model, Bob determines

A. the price of pizza is less than the price of gasoline.B. gasoline is too expensive for him right now.C. food is more valuable to him than gasoline.D. gasoline is more valuable to him than pizza.

78.

In 1991, the Secretary of Labor appointed a commission to determine skills people need to succeed in the worldof work in a document called the SCANS report. In the "Interpersonal Competency" section, the report outlinedthe following necessary skills:

Teaches others new skills

Works with diversity

All of these skills require workers to

A. work well with other employees.B. acquire and evaluate information.C. work with a variety of technologies.D. identify, organize, and allocate resources.


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79.

Which of the following groups is hurt LEAST by a rising rate of inflation?

A. owners of stocks and bondsB. service providers fulfilling long-term contractsC. homeowners paying back large fixed rate loansD. retired persons living on a Social Security income

80.

Ken makes $50,000 per year and Kirby makes $30,000 per year. Ken pays a higher average tax rate on his incomethan Kirby. This infers that taxes on income are

A. regressive.B. proportional.C. progressive.D. marginal.

81.

The main difference between a credit union and a commercial bank is that

A. only commercial banks offer checking account services to its members.B. commercial banks make loans, but don't offer checking or savings account services.C. credit unions don't make home and car loans, whereas commercial banks do make home and car loans.D. credit unions are only available to specific customers, but commercial banks are available to the everyone.

82.

Bob has $25,000 that he would like to invest in a diversified manner. Bob's BEST investment option to accomplishthis goal would be to

A. purchase $25,000 worth of a company's stock.B. purchase $25,000 worth of zero coupon bonds.C. purchase $25,000 worth of shares in a mutual fund.D. purchase $25,000 worth of U.S. government securities.

83.

In order for a bank to have the chance to make a profit, they must

A. charge borrowers a lower interest rate than they charge depositors.B. pay depositors a lower interest rate than they charge borrowers.C. charge borrowers a higher fee than they charge to depositors.D. charge borrowers and depositors the same interest rates.

84.

Credit worthiness is MOST AFFECTED by

A. whether or not one owns a house.B. payment history on current loans.C. job history showing many different types of jobs.D. the amount of funds currently available in a savings account.


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85.

Eric has $2,000 that he wants to place in a savings account. He has researched two accounts, and both accounts pay3.5% interest. Account X pays simple interest. Account Y pays compound interest. Eric should choose

A. account X because it would pay tax free interest.B. account Y because it would pay interest on interest.C. account X because the interest rate would increase over time.D. account Y because the interest rate would decrease over time.

86.

Carlton is injured while working at a retail store. Which type of insurance is MOST LIKELY to provide benefitswhile he is temporarily out of work?

A. life insuranceB. disability insuranceC. property insuranceD. automobile insurance

87.

Alicia owns a home in the suburbs. If a neighbor wrecks an automobile in Alicia's yard and damages property, Aliciais protected from financial loss by

A. the neighbor's automobile liability policy.B. the neighbor's property insurance policy.C. Alicia's disability insurance policy.D. Alicia's automobile liability policy.


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Answer Key

1. C) 12 Federal Reserve Banks across the United States and a number of branch banks

2. A) inflation

3. A) encourage borrowing and spending, thus increasing aggregate demand

4. D) whose job skills do not match the economy's needs

5. C) a shift to the right in the aggregate demand curve

6. C) an increase in the federal deficit

7. A) an increase in the costs of production

8. A) increases increases

9. C) buys or sells government securities

10. A) The nations have an incentive to trade.

11. D) 150 Canadian dollars

12. A) the U.S. imports more products from China than it exports to China.

13. B) A nation can have an absolute advantage without having a comparative advantage in production

14. A) can be exchanged for more Japanese yen than Indian rupees.

15. C) the nation's exports are more affordable in the global market place.

16. A) 2 aircraft carriers.

17. C) The government collects tax revenues from individuals and firms.

18. B) competition promotes economic efficiency.

19. A) the incomes of individuals


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20. B) How to produce?

21. C) capital

22. D) command

23. A) are limited resources but unlimited wants and needs.

24. C) market

25. B) interest the money could have earned in a savings account at a bank.

26. B) regional specialization

27. A) More capital goods will be produced, adding to economic growth in the future.

28. A) worker training and education

29. B) clearly defined private property rights

30. C) the creation of labor-intensive industries

31. A) The price goes up.

32. D) Prices for melons went up.

33. D) scarcity.

34. C) voluntary exchange.

35. C) voluntary, non-fraudulent exchange.

36. B) Market economies encourage consumer sovereignty, while command economies use central planning.

37. C) the potential benefits of involvement outweigh the costs.

38. C) occurs when workers are short-term unemployed, or in the process of changing jobs.

39. B) higher interest rates and lowering price levels.

40. B) monetary policy.


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41. C) by the Federal Reserve System to regulate the money supply.

42. B) stabilize the economy through taxing and government spending.

43. A) use fiscal polices to spend $40 billion in new projects and grants.

44. D) consumers would buy a greater number of personal computers

45. C) product market

46. A) sole proprietorship

47. A) They signal producers about how to use scarce resources.

48. C) unlimited liability

49. A) A shareholder is part owner of that business.

50. C) 5 and 7

51. D) Entry of new firms into the computer industry will cause a shift from S1 to S2.

52. B) monopoly

53. B) how much consumers will purchase at different prices

54. B) It would decrease the demand for tires and lower their price.

55. D) a surplus of 60,000 workers

56. B) oligopoly

57. A) The price will increase.

58. B) Fewer people want to buy them.

59. A) More corn was produced.

60. C) It went up.

61. A) The price of peanut butter would go up.


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62. B) It might go down.

63. C) The price of gas will go up.

64. B) buy oranges and bananas instead

65. A) The price of the game could go up.

66. A) They found higher prices and fewer products.

67. A) The cost of corn went up.

68. D) road map

69. A) The toys are harder to sell.

70. C) sellers will compete to meet consumer demands.

71. D) dividends from Company ABC.

72. C) interest.

73. C) the federal personal income tax

74. C) an increase in worker productivity

75. A) savers at a fixed rate of interest

76. A) compensate the lender for greater risk

77. C) food is more valuable to him than gasoline.

78. A) work well with other employees.

79. C) homeowners paying back large fixed rate loans

80. C) progressive.

81. D) credit unions are only available to specific customers, but commercial banks are available to the everyone.

82. C) purchase $25,000 worth of shares in a mutual fund.

83. B) pay depositors a lower interest rate than they charge borrowers.

84. B) payment history on current loans.

85. B) account Y because it would pay interest on interest.

86. B) disability insurance


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87. A) the neighbor's automobile liability policy.


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When aggregate demand exceeds aggregate supply in …arabiamtnhs.dekalb.k12.ga.us/Downloads/ECONOMICS EOCT...16. Study the information below and use it to answer the question that