ECON 125-HK2.

Economics for Managers Exam

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> TAKE ASSESSMENT: EXAM 1

Questi
2 points
on 1

Sav
e

Which of the following economic systems abolishes all private

property?
communism
socialism
fascism
all of the above

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2 points
on 2

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e

The profit motive is one characteristic of a command economy.

True
False

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2 points
on 3

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e

In a market system, the government enforces laws ensuring that

private enterprises and conditions of competition will prevail.
True
False

Questi
2 points
on 4

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e

The most common type of business in the United States is the

corporation.
True
False

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2 points
on 5

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e

Laissez-faire is a policy of no government intervention in the

economic activities of individuals and businesses.
True
False

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2 points
on 6

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e

In a partnership, each partners liability is limited to his or her

contribution to the partnership.
True
False

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2 points
on 7

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e

There are no government-regulated markets in the U.S. economy.

True
False

Questi
2 points
on 8

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e

Which of the following is not among the United States economic

goals?
full employment
stable prices
healthy economic growth
equal distribution of income

Questi
2 points
on 9

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e

Under the U.S. market system, land and capital goods are owned
mainly by
the federal government
individuals and firms
local governments
state governments

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2 points
on 10

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e

The biggest disadvantage of a sole proprietorship is the lack of

distinction between the business and the owner.
True

False

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2 points
on 11

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e

In the United States, marketing cooperatives are most commonly

found in the agriculture industry.
True
False

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2 points
on 12

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e

Self-interest is a major tenet of economic liberalism.

True
False

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2 points
on 13

Sav
e

Which of the following is considered a command economy?

communism
socialism
fascism
all of the above

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2 points
on 14
Economics is considered a physical science.

Sav
e

True
False

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2 points
on 15

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e

The difference between a capital good and a consumer good

depends on
the purpose for which it is used
how it was produced
what it is
how quickly it is used up

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2 points
on 16

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e

Positive economics deals with what is as opposed to what ought

to be.
True
False

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on 17

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e

Production is the creation or addition of utility.

True
False

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on 18

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e

Consumption is the ultimate end of economic activity.

True
False

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on 19

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e

The relationship between the price of a book and the number of

volumes purchased would be an example of microeconomics.
True
False

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2 points
on 20

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e

An example of a macroeconomic model is

the price of chicken influences the quantity of chicken bought
the size of the total national output depends on the size of total
spending
the output of a product is influenced by the cost of production for
the product
all of the above

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2 points
on 21

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e

The largest share of the total income of the United States is

currently being distributed in the form of
interest
rent

wages
profits

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on 22

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e

Which of the following areas of study is included in the field of

macroeconomics?
electricians wage rates
monopolistic pricing
price of automobiles
general price level

Questi
2 points
on 23

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e

The total value of the goods and services produced over a period of
time represents an economys
planned savings
total income
total wealth
capital

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on 24

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e

Stocks and bonds are counted as part of total wealth.

True
False

Questi
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on 25

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e

The stock of labor talents and skills is known as

a public good
the functional distribution
human capital
enterprise

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2 points
on 26

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e

One cause for the uneven standard of living throughout the world is
the uneven distribution of resources.
True
False

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2 points
on 27

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e

In exercising the principle of comparative advantage, a nation with

no absolute advantage should produce a commodity in which it
faces a lower opportunity cost than its trading partners face.
True
False

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on 28

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e

Government regulations which affect entrepreneurial activities

within a nation also affect total output and the standard of living.
True

False

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on 29

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e

A need to make choices exists because of

scarcity of resources
the abundance of goods
unlimited human needs and wants
both (a) and (c)

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on 30

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e

The principle of comparative advantage applies to

individuals only
business firms only
nations only
individuals, businesses, and nations

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on 31

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e

Economics can be defined as the study of choices.

True
False

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on 32

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Suppose that Country A has an absolute advantage over country B

in the production of both wheat and cloth. The opportunity cost of 1
unit of wheat is 2 units of cloth in Country A and 3 units of cloth in
Country B. If each country specializes in producing the good in which
it is relatively more efficient and then trades for the other good, it
follows that
all the resulting gains in consumption will go to Country A
all the resulting gains in consumption will go to Country B
each country will experience half the resulting gains in
consumption
the allocation of the resulting consumption gains will be
determined by bargaining between the two countries.

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2 points
on 33

Sav
e

Exercising the principle of comparative advantage between nations

primarily involves
specialization
transportation costs
currency exchange rates
domestic income tax rates

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2 points
on 34
An example of technological development is to increase output
through
raising pay
working longer hours
hiring more workers

Sav
e

using better machines

Questi
2 points
on 35

Sav
e

An economys production possibilities curve could shift outward as a

result of a(n)
increased level of technology
reduction in the quantity of capital goods
decrease in the production of goods
decrease in the amount of available resources

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2 points
on 36

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e

A nation needs an abundance of all productive resources in order to

attain a high standard of living.
True
False

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2 points
on 37
To solve their basic long-term economic problems, developing
countries primarily need
food
clothing
technical assistance
shelter

Sav
e

Questi
2 points
on 38

Sav
e

A surplus quantity will occur when

quantity demanded is greater than quantity supplied
price is above equilibrium
demand is elastic
price is below equilibrium

Questi
2 points
on 39

Sav
e

A change in demand would be illustrated by

a drop in price, which causes people to buy more
an increase in price, which causes people to buy less
a change in peoples preferences that causes them to buy either
more or less than before
all of the above

Questi
2 points
on 40

Sav
e

If 12 units of a good are sold when the price is $1 per unit, and 8
units are sold at a price of $1.50 per unit, then demand is
elastic
inelastic
of indeterminate elasticity
unit elastic

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on 41

e
The more substitutes for a good, the more elastic its demand tends
to be.
True
False

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on 42

Sav
e

A demand curve generally

is a straight horizontal line
is a straight vertical line
slopes downward to the right
slopes downward to the left

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2 points
on 43

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e

The quantity supplied and price tend to vary

inversely
independently
in an unrelated fashion
directly

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on 44

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Price elasticity of demand tends to be greater for substitute items

than for complementary goods.
True

False

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on 45

Sav
e

To maintain a price below the equilibrium price,

demand must increase
supply must increase
the government must set a ceiling price
supply must decrease

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2 points
on 46

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e

An increase in demand will cause the demand curve to

move to the right
move to the left
become more vertical
become more horizontal

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2 points
on 47

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e

Price ceilings usually create surpluses since supply is increased.

True
False

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on 48

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e

Price floors can create shortages if price floors are above market
prices.
True
False

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2 points
on 49

Sav
e

When the supply of a product increases but the demand for the
product remains unchanged, the equilibrium price of the product will
fall, and equilibrium quantity will decrease
be unaffected
first rise and then return to the original price level
fall, and equilibrium quantity will increase

Questi
2 points
on 50

Sav
e

On a price/quantity graph, a straight horizontal demand curve

has zero price elasticity
is perfectly elastic
is perfectly inelastic
is perfectly unit elastic

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE

ASSESSMENT: EXAM 2

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2 points
on 1

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A firm is making a profit under conditions of monopolistic

competition if, at the equilibrium output,
AR is above MR
MR is above AR
AR is above AVC
AR is above ATC

Questi
2 points
on 2

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e

Firms in monopolistic competition sell a similar but differentiated

product.
True
False

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2 points
on 3

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e

A major characteristic of a monopoly is the ability of the monopolist

to influence price.
True
False

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2 points
on 4
The Federal Trade Commission
prevents mergers that substantially lessen competition
rules on the antitrust activities of labor unions
issues patents

Sav
e

polices deceptive advertising

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2 points
on 5

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e

If a monopolist lowers its price from $45 to $42 in order to increase

its sales volume, marginal revenue
equals $45
equals $42
is less than $42
is between $45 and $42

Questi
2 points
on 6

Sav
e

The first act to declare monopolies illegal in the United States was
the
Sherman Antitrust Act
Clayton Act
Federal Trade Commission Act
Robinson-Patman Act

Questi
2 points
on 7
One company that retained its monopoly position for years through
control of raw materials was
Aluminum Company of America (ALCOA)
Proctor & Gamble
Ford Motor Company

Sav
e

U.S. Steel

Questi
2 points
on 8

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Monopsony is a market condition in which there is only one seller.

True
False

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2 points
on 9

Sav
e

If firms in monopolistic competition are earning short-run profits,

barriers to entry will allow the profits to continue in the long run
total supply in the market will decrease in the long run as firms
reduce output to keep prices high
the entry of new firms will eliminate the profits in the long run
each existing firm will experience an increase in its average
revenues in the long run

Questi
2 points
on 10

Sav
e

Oligopoly is a market structure in which

there are only two sellers
there are relatively few producers
no firm can influence price
there are many producers

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on 11

e
All firms in monopolistic competition must sell at the same price.
True
False

Questi
2 points
on 12

Sav
e

The major characteristic of a monopoly is

the degree of control over price it can exercise
its ability to produce numerous products
its price elasticity of demand
its source of revenue

Questi
2 points
on 13

Sav
e

Under which type of market structure is the firms pricing decision

the most difficult?
perfect competition
monopoly
monopolistic competition
oligopoly

Questi
2 points
on 14
Under perfect competition, if a firm is suffering a loss,
MR exceeds ATC

Sav
e

AR equals AVC
AR equals ATC
AR is less than ATC

Questi
2 points
on 15

Sav
e

The difference between the price firms would be willing to accept for
their goods and the price they actually receive is called
consumer surplus
consumer efficiency
allocative efficiency
producer surplus

Questi
2 points
on 16

Sav
e

In the long run, under conditions of perfect competition, market

forces come into play to
enhance profits
increase demand
eliminate profits
separate MR and AR

Questi
2 points
on 17
Under conditions of perfect competition, an individual producer
always maximizes output
operates where MR equals MC

Sav
e

never suffers a loss

operates where MR is greater than MC

Questi
2 points
on 18

Sav
e

If all firms adhere to the conditions of perfect competition, short-run

losses are avoided.
True
False

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2 points
on 19

Sav
e

If a firm in a perfectly competitive industry is producing at a point

where TR equals TC and the market demand increases, then the firm
will be making
economic profits; it will expand output
economic profits; output will not change
normal profits; output will expand
normal profits; output will not change

Questi
2 points
on 20

Sav
e

In perfect competition, if the market price is at the same level as the

minimum point of the firms average total cost curve, the best the
firm can hope for is to break even.
True
False

Questi
2 points
on 21

Sav
e

In a perfectly competitive industry, if TR exceeds TC, then in the long

run
firms will exit the industry
new firms will enter the industry
there will be no change in the number of firms
the market supply will shift to the left

Questi
2 points
on 22

Sav
e

A prime example of perfect competition is the U.S. auto industry.

True
False

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2 points
on 23

Sav
e

Elaines firm is in a perfectly competitive industry. Why doesnt

Elaine try to sell more of her product by lowering its price below the
market price?
her demand curve is not elastic
doing so would be considered unethical price chiseling
her competitors would not allow it
she can sell all she wants at the market price

Questi
2 points
on 24

Sav
e

Which of the following is correct when the perfectly competitive firm

is producing its long-run equilibrium output level?
MR equals MC
AR equals ATC
P equals MC
all of the above

Questi
2 points
on 25

Sav
e

Under conditions of perfect competition, short-run equilibrium does

not necessarily exist where
profit is maximized or loss minimized
MR = AR
MR = MC
MR = ATC

Questi
2 points
on 26

Sav
e

According to the simple circular flow concept, whenever planned

investment is less than planned saving
inventories accumulate
output increases
prices rise
employment increases

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2 points
on 27

Sav
e

In the circular flow, investment refers to spending on

government bonds
certificates of deposit
capital goods
consumer goods

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2 points
on 28

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e

Inventory accumulation occurs whenever

output is less than spending
output exceeds spending
investment exceeds saving
a deficit budget occurs

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2 points
on 29

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e

A decrease in investment can cause a decrease in the price level

without affecting total output.
True
False

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2 points
on 30
In the circular flow, nonprofit institutions are
counted as businesses
excluded

Sav
e

treated separately
counted as households

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2 points
on 31

Sav
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During a period of unemployment, a deficit budget will most likely

have which of the following effects on business activity?
increase total output
cause prices to rise
have a neutral effect
cause prices and total output to fall

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2 points
on 32

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e

An increase in planned savings always results in an increase in

planned investment.
True
False

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2 points
on 33
If the federal government spends less than it receives from taxes,
it has a surplus budget with injections exceeding leakages
it has a deficit budget with injections exceeding leakages
it has a deficit budget with leakages exceeding injections
it has a surplus budget with leakages exceeding injections

Sav
e

Questi
2 points
on 34

Sav
e

In the simple circular flow model, if planned I exceeds planned S,

then
the economy is not at equilibrium
the size of the circular flow is increasing
if the economy is at full employment, then prices will rise
all of the above

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2 points
on 35

Sav
e

If inventories are accumulating, income must be greater than

spending.
True
False

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2 points
on 36

Sav
e

Whenever exports exceed imports (and other planned injections

equal other planned leakages), the economy
remains stable
expands
contracts
deflates

Questi
2 points
on 37
Which of the following statements concerning the circular flow

Sav
e

model is (are) correct?

an increase in planned savings always generates an increase in
planned investment spending
planned investment spending is an injection into the circular flow
increased investment always results in decreased savings
all of the above

Questi
2 points
on 38

Sav
e

It is true that a stable economy occurs when

total injections into the circular flow are large enough to make up
for government tax leakages
total leakages from the circular flow are great enough to offset the
effects of government spending
total planned leakages from the circular flow are exactly equal to
total planned injections into the circular flow
actual saving is equal to planned investment

Questi
2 points
on 39

Sav
e

In a mature industry, all firms operate with constant returns to scale.

True
False

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2 points
on 40
If the accounting profit equals $200,000 and implicit costs equal
$40,000, the economic profit equals

Sav
e

$240,000
$200,000
$160,000
$40,000

Questi
2 points
on 41

Sav
e

If the firm produces one more unit of output and total cost rises from
$1,000 to $1,050, marginal cost is
$1,050
$1,000
$2,050
$50

Questi
2 points
on 42

Sav
e

The major factor accounting for diseconomies of scale is

management inefficiency.
True
False

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2 points
on 43
Average revenue (AR) is equal to
total revenue/output
total revenue minus total cost
price per unit

Sav
e

both (a) and (c)

Questi
2 points
on 44

Sav
e

The average fixed cost remains constant even in the long run.
True
False

Questi
2 points
on 45

Sav
e

A production function is
a technique for determining the most profitable rate of output
the relationship between a combination of inputs and a quantity of
output
an important factor in determining the shape of the long-run
supply curve
all of the above

Questi
2 points
on 46

Sav
e

If the selling price of a product is $10, the average total cost is $8,
and total sales are 5,000 units, the total profit will be
$5,000
$8,000
$10,000
$20,000

Questi
2 points
on 47

Sav
e

The production function relates outputs to inputs.

True
False

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2 points
on 48

Sav
e

As units of input are added to the productive process, the marginal

product
increases
decreases
remains the same
declines then rises

Questi
2 points
on 49

Sav
e

The average product decreases any time the marginal product is

decreased.
True
False

Questi
2 points
on 50
If output changes in fixed proportion to a change in all of a firms
productive resources, the firm has
constant marginal returns

Sav
e

constant returns to scale

decreasing marginal returns
decreasing returns to scale

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE

ASSESSMENT: EXAM 3

Questi
2 points
on 1

Sav
e

If planned investment decreases, the multiplier will decrease the

equilibrium income.
True
False

Questi
2 points
on 2

Sav
e

The change in the level of planned spending that results from a

change in the price level is indicated by the movement of the
economy along a given
aggregate expenditure curve
aggregate demand curve
aggregate supply curve
both (a) and (b)

Questi
2 points
on 3
In the Keynesian model, whenever unplanned inventory increases
occur in the economy, production is likely to

Sav
e

speed up slowly
slow down
remain unchanged
speed up immediately

Questi
2 points
on 4

Sav
e

If planned construction investment increases by $30 billion and the

MPC is two-thirds, total output will increase by
$30 billion
$20 billion
$45 billion
$90 billion

Questi
2 points
on 5

Sav
e

Keynes recommended the use of government deficit spending to

overcome widespread unemployment.
True
False

Questi
2 points
on 6

Sav
e

According to the Keynesian analysis, as income increases, the

marginal propensity to consume will rise.
True
False

Questi
2 points
on 7

Sav
e

Says Law states that

supply is greater than demand
supply is less than demand
demand generates supply
supply generates demand

Questi
2 points
on 8

Sav
e

The time lags lead monetarists to contend that monetary policy is

counterproductive.
True
False

Questi
2 points
on 9

Sav
e

The classical doctrine assumed that the normal equilibrium position

for the economy was at full employment.
True
False

Questi
2 points
on 10
According to the Keynesian analysis, equilibrium occurs at the point
where total aggregate expenditure equals total output.

Sav
e

True
False

Questi
2 points
on 11

Sav
e

In the Keynesian model, the most important influence on planned

consumption is
the interest rate
expectations
disposable income
the price level

Questi
2 points
on 12

Sav
e

The multiplier is the reciprocal of the marginal propensity to

consume.
True
False

Questi
2 points
on 13
Aggregate expenditure in the U.S. economy includes spending for
U.S. output by
households and businesses, but not governments
households, businesses, and the federal government, but not state
and local governments
households, businesses, and all governments except foreign ones

Sav
e

households, businesses, and governments, both domestic and

foreign

Questi
2 points
on 14

Sav
e

The bulk of the M1 money supply is made up of

silver dollars and gold bars
checkable deposits
travelers checks
money market funds

Questi
2 points
on 15

Sav
e

If a new cash deposit creates excess reserves of $5,000 and the

required reserve ratio is 10 percent, the banking system can
increase the money supply by a maximum of
$50,000
$500
$5,000
$4,500

Questi
2 points
on 16

Sav
e

An increase in the velocity of money can have an effect similar to

that of an increase in the money supply.
True
False

Questi
2 points
on 17

Sav
e

If a bank has $60,000 in legal reserves and is subject to a 10 percent

reserve requirement, it could have outstanding checkable deposits
to the extent of
$60 million
$600,000
$6 million
$60,000

Questi
2 points
on 18

Sav
e

If a workers money wage increases at a faster pace than the CPI, his
or her real wage will rise.
True
False

Questi
2 points
on 19

Sav
e

The Treasury issues all paper currency today.

True
False

Questi
2 points
on 20
Funds that earn a fixed rate of interest and must be held for a
stipulated period of time are known as
checkable deposits

Sav
e

time deposits
savings deposits
money market funds

Questi
2 points
on 21

Sav
e

Included in the official U.S. money supply are

U.S. government bonds
corporate stocks
checkable deposits
all of the above

Questi
2 points
on 22

Sav
e

The U.S. money supply measure that consists of currency plus

travelers checks and checkable deposits is referred to as
M1
M2
M3
M1 + M2

Questi
2 points
on 23
The quantity theory of money assumes that
the national economy tends to operate at less than full
the velocity of money is unstable

Sav
e

the national economy tends to operate at full employment

the velocity of money varies with changes in interest rates

Questi
2 points
on 24

Sav
e

If the CPI in City A is 150 and the CPI in City B is 135,

the dollar has greater purchasing power in City B
prices are higher in City A than they are in City B
City B must be using a different base year
none of the above

Questi
2 points
on 25

Sav
e

The value or purchasing power of the dollar can be obtained by

dividing $1 by the CPI.
True
False

Questi
2 points
on 26

Sav
e

Stored value and smart cards are forms of electronic banking.

True
False

Questi
2 points
on 27

Sav
e

Each Federal Reserve Bank has its own board of directors.

True
False

Questi
2 points
on 28

Sav
e

The First Bank of the United States was chartered by

the federal government
the state of New York
the city of New York
Suffolk County

Questi
2 points
on 29

Sav
e

All members of the Board of Governors are members of the Feds

Open Market Committee.
True
False

Questi
2 points
on 30

Sav
e

The Federal Reserve System was established in

1980
1913
1864
1791

Questi
2 points
on 31

Sav
e

Members of the Board of Governors are

appointed by Congress
selected by the U.S. President
elected by member banks
selected by the U.S. Treasury Department

Questi
2 points
on 32

Sav
e

By buying government securities, the Federal Open Market

Committee adds to member banks reserves.
True
False

Questi
2 points
on 33

Sav
e

The Board of Governors of the Federal Reserve System is

under the jurisdiction of the U.S. President
responsible to the Secretary of the U.S. Treasury
independent within the U.S. government
responsible to the Council of Economic Advisors

Questi
2 points
on 34

Sav
e

The members of the Board of Governors of the Federal Reserve

System are appointed by the U. S. President.
True
False

Questi
2 points
on 35

Sav
e

Various studies have recommended changes in the Federal Reserve

structure and policy that include
having Congress set the discount rate
placing monetary policy in the control of Congress
dissolving the Board of Governors
making each appointment to the Board of Governors a lifetime
appointment

Questi
2 points
on 36

Sav
e

If the Federal Open Market Committee desired to tighten credit, it

would
buy securities in the open market
sell securities in the open market
lower the discount rate
raise the discount rate

Questi
2 points
on 37
Competition in U.S. banking has been increased by

Sav
e

the expansion of interstate banking

the expansion of foreign bank branches into the United States
the movement of brokerage houses and large corporations into
traditional banking activities
all of the above

Questi
2 points
on 38

Sav
e

If a Federal Reserve Bank wanted to tighten the money supply, it

would
lower the reserve requirement
buy securities in the open market
raise the discount rate
lower the discount rate

Questi
2 points
on 39

Sav
e

The existence of undistributed corporate profits tends to cause

NNP to be smaller than GDP
national income to be larger than personal income
national income to be smaller than NNP
personal income to be larger than disposable personal income

Questi
2 points
on 40
National income is equivalent to total earnings in the form of wages,
rent, interest, and profits.

Sav
e

True
False

Questi
2 points
on 41

Sav
e

The GDP counts durable goods only during their year of production.
True
False

Questi
2 points
on 42

Sav
e

Imports constitute a minus figure in national income accounting.

True
False

Questi
2 points
on 43

Sav
e

GDP overstates national income because it does not make any

adjustment for national debt.
True
False

Questi
2 points
on 44
The national income accounts for the United States are prepared by
the
Bureau of Labor Statistics

Sav
e

U.S. Department of Commerce

Federal Reserve Board
President Council of Economic Advisors

Questi
2 points
on 45

Sav
e

Excluded from the GDP are

military services
postal services
medical services
nonmonetary transactions

Questi
2 points
on 46

Sav
e

The difference between GDP and final sales equals

depreciation
exports
imports
net inventory change

Questi
2 points
on 47
In dollar value, the nominal GDP in the United States is in the vicinity
of
between 3 and 4 billion
between 4 and 5 billion

Sav
e

between 4 and 5 trillion

between 10 and 12 trillion

Questi
2 points
on 48

Sav
e

The GDP and NI figures are not equal because

business profits are included in GDP but not in NI
depreciation and indirect taxes are included in GDP but not in NI
all taxes must be deducted from GDP to arrive at NI
none of the above

Questi
2 points
on 49

Sav
e

Current disposable income can be adjusted for price changes and

population changes to yield real per capita disposable income.
True
False

Questi
2 points
on 50

Sav
e

Personal consumption expenditures account for approximately twothirds of the GDP in the United States.
True
False

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE

ASSESSMENT: EXAM 4

Questi
2 points
on 1

Sav
e

U.S. workers have

neither substantial geographic nor occupational mobility
both substantial geographic and occupational mobility
substantial geographic mobility but not occupational mobility
substantial occupational mobility but not geographic mobility

Questi
2 points
on 2

Sav
e

Many economists believe that increases in the minimum wage tend

to create a labor surplus.
True
False

Questi
2 points
on 3
The rate of unemployment that can be expected from normal
frictional unemployment in an otherwise fully employed labor force
is known as the
natural rate of unemployment
full-employment unemployment rate
structural unemployment rate
Humphrey-Hawkins unemployment rate

Sav
e

Questi
2 points
on 4

Sav
e

If workers are changing jobs voluntarily and it takes a while for them
to find new jobs, they are an example of
structural unemployment
frictional unemployment
technological unemployment
none of the above

Questi
2 points
on 5

Sav
e

Underemployment includes employed workers not performing at full

capacity.
True
False

Questi
2 points
on 6

Sav
e

The Humphrey-Hawkins Acts target rates for unemployment and

inflation were reached by their target date of 1983.
True
False

Questi
2 points
on 7

Sav
e

Which type of unemployment is the most difficult to cure?

functional

seasonal
cyclical
structural

Questi
2 points
on 8

Sav
e

The idea of the natural rate of unemployment is that

frictional and structural causes prevent employment in the
economy from ever becoming 100 percent of the labor force
each industry has its average turnover rate, and this rate
determines its natural rate of unemployment
the market system requires that a pool of unemployed people be
available to limit the power of workers
none of the above

Questi
2 points
on 9

Sav
e

The total U.S. labor force excludes members of the armed services
stationed outside the United States.
True
False

Questi
2 points
on 10

Sav
e

The Full Employment and Balanced Growth Act set a 1983 U.S.
inflation rate target of
1 percent
2 percent

3 percent
4 percent

Questi
2 points
on 11

Sav
e

The total labor force includes all persons in the noninstitutional

population who are either working or seeking work.
True
False

Questi
2 points
on 12

Sav
e

The natural rate of unemployment is usually

equal to the full-employment rate of unemployment
higher than the full-employment rate of unemployment
lower than the full-employment rate of unemployment
double the full-employment rate of unemployment

Questi
2 points
on 13
If the percentage of the population that is below the poverty line has
decreased, then the number of
poor must have increased
poor must have decreased
poor may have increased
people above the poverty line must have increased

Sav
e

Questi
2 points
on 14

Sav
e

If a Lorenz curve were constructed for the distribution of wealth, the

curve would
indicate greater inequality for wealth than income
indicate less inequality for wealth than income
be identical to the Lorenz curve for income
be a straight line from the origin

Questi
2 points
on 15

Sav
e

The total number of people in poverty has changed little since the
late 1960s.
True
False

Questi
2 points
on 16

Sav
e

The poverty rate for blacks is almost three times that for whites.
True
False

Questi
2 points
on 17

Sav
e

If everyone had the same income, the Lorenz curve would become
the line of income equality.
True

False

Questi
2 points
on 18

Sav
e

The official poverty threshold line is adjusted annually for

income taxes
inflation
average household size
average family size

Questi
2 points
on 19

Sav
e

In 2004, households with incomes less than $22,629 received

3.4 percent of aggregate income
5.7 percent of aggregate income
8.2 percent of aggregate income
10 percent of aggregate income

Questi
2 points
on 20

Sav
e

Nonfamily households earn less than 50 percent of the income

earned by family households.
True
False

Questi
2 points
on 21

Sav
e

The Lorenz curve shows the

percent of families on the vertical axis and percent of income on
the horizontal axis
percent of families on the horizontal axis and the cumulative
percent of income on the vertical axis
cumulative percent of income on the vertical axis and the
cumulative percent of families on the horizontal axis
cumulative percent of families on the vertical axis and the
cumulative percent of income on the horizontal axis

Questi
2 points
on 22

Sav
e

A minimum wage rate job raises a family out of poverty.

True
False

Questi
2 points
on 23
In discussing the distribution of income among families, the term
lowest fifth indicates
the poorest five percent of families
the poorest twenty percent of families
the smallest twenty percent of families
the percentage of families receiving one-fifth of the income

Sav
e

Questi
2 points
on 24

Sav
e

If income were distributed solely according to productivity, some

individuals would not receive any income.
True
False

Questi
2 points
on 25

Sav
e

Cost-push inflation is characterized by

the wage-price spiral
administered pricing
stagflation
the multiplier

Questi
2 points
on 26

Sav
e

Inflation and unemployment can never exist at the same time.

True
False

Questi
2 points
on 27
To most effectively combat inflation by raising taxes, the
government should
target funds that would otherwise be held idle
also increase government spending

Sav
e

target households with low marginal propensities to consume

target funds that would otherwise be spent on consumption or
investment

Questi
2 points
on 28

Sav
e

During an inflationary period, the Fed is inclined to purchase

government securities to combat inflation.
True
False

Questi
2 points
on 29

Sav
e

In the 1970s, the war in Vietnam caused a fiscal drag on the

economy.
True
False

Questi
2 points
on 30

Sav
e

Government policies designed to lower aggregate demand in order

to combat inflation are known as
expansionary policies
contractionary policies
anti-growth policies
recession policies

Questi 2 points

Sav

on 31

e
During the 19901991 recession, the U.S. governments large
budget deficits and budget reduction commitments limited its ability
to use fiscal policy to stimulate the economy.
True
False

Questi
2 points
on 32

Sav
e

When the U.S. Treasury sells bonds to the public to finance

government spending and then the Fed buys the bonds through
open-market purchases, the Fed is
monetizing the debt
decreasing the money supply
decreasing bank reserves
increasing the difficulty of raising funds for government spending

Questi
2 points
on 33

Sav
e

Fiscal policy deals with

interest rates
the money supply
the government budget
bank credit

Questi
2 points
on 34

Sav
e

In the late 1960s, a 10 percent surcharge on U.S. personal and

corporate income taxes was imposed as an expansionary measure.
True
False

Questi
2 points
on 35

Sav
e

If the government finances increased spending strictly through

higher taxes, this action
increases the multiplier effect
has no impact on the multiplier effect
decreases the multiplier to a value greater than one
decreases the multiplier to one

Questi
2 points
on 36

Sav
e

The Economic Recovery Tax Act of 1981 reduced personal income

taxes by 25 percent over a three-year period.
True
False

Questi
2 points
on 37

Sav
e

Jawboning by the Carter Administration proved to be an

unsuccessful contractionary policy.
True
False

Questi
2 points
on 38

Sav
e

The U.S. economy has experienced no minor cycles since World War
II.
True
False

Questi
2 points
on 39

Sav
e

Agricultural explanations of the business cycle are not as important

today as they were 50 to 75 years ago, because today
agricultural production is more mechanized
agricultural production is a smaller portion of the total economy
agricultural production is greater
we eat less

Questi
2 points
on 40

Sav
e

The underconsumption theory is classified as a real or physical

cause of the business cycle.
True
False

Questi
2 points
on 41

Sav
e

During the expansion phase of the business cycle, profit margins

increase due to a widening cost-price relationship.
True

False

Questi
2 points
on 42

Sav
e

Which of the following is the most valid expression of a theory of

underconsumption as a cause of business cycles?
capital goods production encroaches on consumer goods
production
income equals production, but not all income is used for current
purchasing power
people want more goods than the economy is capable of
producing; therefore, they must cut their consumption
expectations
the economy provides insufficient purchasing power to buy back
the goods it produces

Questi
2 points
on 43

Sav
e

A recession occurs whenever theres a decline in real GDP for two or

more successive quarters.
True
False

Questi
2 points
on 44

Sav
e

Involuntary inventory accumulation may occur during the

contracting phase of the business cycle.
True
False

Questi
2 points
on 45

Sav
e

A hurricane is considered an external force in business cycle

analysis.
True
False

Questi
2 points
on 46

Sav
e

During the contraction phase of the business cycle,

prices fall relative to costs, reducing profit margins
costs fall relative to prices, reducing profit margins
prices fall relative to costs, increasing profit margins
costs fall relative to prices, increasing profit margins

Questi
2 points
on 47

Sav
e

An example of an external force in business fluctuations is

falling interest rates due to lagging demand in a contraction
a devaluation in the nations currency
variations in inventories
the lag between price changes and cost changes

Questi
2 points
on 48
Economists use the phrase business cycle when discussing
movements in interest rates

Sav
e

changes in economic productivity

fluctuations in employment
fluctuations in total output around the trend

Questi
2 points
on 49

Sav
e

The underinvestment theory is classified as a monetary cause of the

business cycle.
True
False

Questi
2 points
on 50

Sav
e

As the economy moves into the trough of the business cycle, there is
a sizable reduction in the output of capital goods.
True
False

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE

ASSESSMENT: EXAM 5

Questi
2 points
on 1

Sav
e

Overseas investments by U.S. citizens are recorded as credit items

in the capital account of the U.S. balance of payments.
True
False

Questi
2 points
on 2

Sav
e

Under a fixed or controlled exchange rate system, if the United

States wanted to increase the value of the dollar, it could buy
foreign currencies with dollars.
True
False

Questi
2 points
on 3

Sav
e

Since World War II, international exchange rates have been

fixed all the time
floating all the time
fixed most of the time until the early 1970s, and floating most of
the time since then
determined by the use of exchange controls

Questi
2 points
on 4
Under a system of fixed exchange rates, excess demand for foreign
currency at the official exchange rate would cause
the exchange rate to rise
the exchange rate to fall
the government to buy foreign currency from the countrys
importers
the government to sell foreign currency to the countrys importers

Sav
e

Questi
2 points
on 5

Sav
e

The course of international monetary policy is directed primarily by

the
Federal Reserve
World Bank
International Monetary Fund
leaders of the Group of Seven nations

Questi
2 points
on 6

Sav
e

Overseas investments by U.S. citizens show up in the U.S. balance of

payments as
credit items
debit items
current account items
investment income

Questi
2 points
on 7

Sav
e

A debit item on the U.S. balance of payments is any transaction that

results in a loss by U.S. sellers
results in a loss by U.S. buyers
makes foreigners use up their holdings of U.S. dollars
makes U.S. dollars available to foreigners

Questi 2 points

Sav

on 8

e
Under the gold standard, a country that is experiencing a gold
outflow
has a balance of payments deficit
has a shrinking money supply
is experiencing a fall in output
all of the above

Questi
2 points
on 9

Sav
e

When a U.S. citizen invests in foreign assets, the transaction is

recorded in the balance of payments as a
credit in capital account
debit in the capital account
credit in the current account
debit in the current account

Questi
2 points
on 10

Sav
e

Since World War II, the importance of gold in international exchange

has increased.
True
False

Questi
2 points
on 11
A freely floating exchange rate exists when

Sav
e

governments set pegs for the exchange rate but occasionally

adjust them
offshore banks determine the exchange rate
supply and demand forces are allowed to determine the rate at
which currencies are exchanged for each other
governments use international reserves only to influence exchange
rates

Questi
2 points
on 12

Sav
e

An appreciation of the U.S. dollar would

encourage foreigners to invest in the United States
discourage foreigners from buying U.S. goods
discourage the travel abroad of U. S. citizens
encourage foreign travel in the United States

Questi
2 points
on 13

Sav
e

Under the gold standard, a country experiencing a gold outflow

has a balance of payments surplus
had an increasing money supply
experienced a decline in output
experienced an increase in output

Questi
2 points
on 14
Under a system of floating exchange rates, increased demand of
U.S. citizens for Japanese goods will cause

Sav
e

the Japanese yen to depreciate against the U.S. dollar

the U.S. dollar to appreciate against the Japanese yen
the Japanese yen to appreciate against the U.S. dollar
the exchange rate between the Japanese yen and the U.S. dollar to
remain unchanged

Questi
2 points
on 15

Sav
e

Under the gold standard, a nation experiencing chronic trade deficits

had to increase its money supply while reducing its holdings of gold.
True
False

Questi
2 points
on 16

Sav
e

Appreciation of the U.S. dollar encourages travel abroad by U.S.

citizens.
True
False

Questi
2 points
on 17

Sav
e

If trade between the United States and Canada were totally free of
restrictions, the incomes of most Canadian workers would decrease.
True
False

Questi 2 points

Sav

on 18

e
The revenue and protective purposes of a tariff are largely
incompatible.
True
False

Questi
2 points
on 19

Sav
e

Using tariffs to support diversification of a nations industrial

structure
has little application to developing countries
is based on the need to protect high domestic wages
is based on the need to make the economy less vulnerable to
demand fluctuations for its products
is designed to encourage specialization by the nations producers
in just one or a few goods

Questi
2 points
on 20

Sav
e

In comparing a revenue tariff versus a protective tariff on the same

good, a revenue tariff would tend to be
less than a protective tariff
greater than a protective tariff
equal to a protective tariff
greater than or equal to a protective tariff

Questi
2 points
on 21

Sav
e

The General Agreement on Tariffs and Trade (GATT) was replaced by

the World Trade Organization (WTO).
True
False

Questi
2 points
on 22

Sav
e

The rule of origin defines the maximum percentage of a countrys

exported product that can be sold in the United States.
True
False

Questi
2 points
on 23

Sav
e

Tariff protection
encourages the optimum use of scarce resources
has no impact on use of scarce resources
prevents the optimum use of scarce resources
eliminates the scarcity of resources

Questi
2 points
on 24
A provision that permits raising tariffs if domestic producers are
suffering under an existing tariff is known as
a trading bloc
exchange control
antidumping

Sav
e

an escape clause

Questi
2 points
on 25

Sav
e

Beginning in 2002, Economic Monetary Union members no longer

print their own money.
True
False

Questi
2 points
on 26

Sav
e

Chile has been invited to join the European Union.

True
False

Questi
2 points
on 27

Sav
e

The principle of comparative advantage is associated with

restricting consumer choices
greater production at higher prices
specialization and exchange
comparing the efficiency of alternative tariffs

Questi
2 points
on 28
The primary function of the Export-Import Bank is to assist in

Sav
e

guaranteeing markets for U.S. importers

financing exports from the United States
providing foreign currency to U.S. banking institutions
reducing tariff rates between trading nations

Questi
2 points
on 29

Sav
e

Exports from China into the U.S. have most seriously impacted the
automobile industry
furniture industry
travel industry
cosmetics industry

Questi
2 points
on 30

Sav
e

Although political arguments strongly favor free trade, most

decisions affecting international trade are made in the economic
arena.
True
False

Questi
2 points
on 31
Who does not gain when a tariff is imposed?
domestic producers of the good
domestic workers in the protected industry

Sav
e

domestic consumers of the good

domestic suppliers in the protected industry

Questi
2 points
on 32

Sav
e

The Export-Import Bank is owned by 150 nations, including the

United States.
True
False

Questi
2 points
on 33

Sav
e

Consider a tariff levied on the importer of a consumer good. The

tariff is ultimately paid by
the importer
the consumer
competing foreign firms
competing domestic firms

Questi
2 points
on 34
The size of the national debt relative to GDP will not be reduced by
paying off some of the debt
lowering the federal deficit
having the GDP grow faster than the debt
having creditors forgive part of the debt

Sav
e

Questi
2 points
on 35

Sav
e

In the United States, income is taxed only by the federal

government.
True
False

Questi
2 points
on 36

Sav
e

Whether a tax is shifted forward or backward depends on the price

elasticities of demand and supply.
True
False

Questi
2 points
on 37

Sav
e

Which of the following taxes is not collected from the consumer on

the final sale of goods and services?
consumption tax
national sales tax
value-added tax
flat tax

Questi
2 points
on 38

Sav
e

The full-employment balanced budget always shows a surplus.

True

False

Questi
2 points
on 39

Sav
e

The governments ability to repay the national debt is governed only

by the total assets of the economy.
True
False

Questi
2 points
on 40

Sav
e

When the federal budget is used as a tool for economic stabilization,

the ideal goal is to
balance the budget over the entire business cycle
balance the budget each year
balance the budget during expansions
run a surplus during contractions

Questi
2 points
on 41

Sav
e

As a percentage of GDP, the U.S. national debt held by the public is

larger than in any major European country.
True
False

Questi
2 points
on 42

Sav
e

A consumption tax is usually collected on

wages and salaries
interest income
dividend income
none of the above

Questi
2 points
on 43

Sav
e

When the government uses tax revenue to pay off portions of the
national debt, total purchasing power in the economy
increases
decreases
is not affected at any level
remains the same but changes individually

Questi
2 points
on 44

Sav
e

As interest rates rise,

the temptation to borrow increases
the cost of carrying the national debt rises
the likelihood of a surplus budget increases
the need for deficit spending to reinvigorate the economy grows

Questi
2 points
on 45
A balanced federal budget

Sav
e

cannot have an expansionary effect on the economy

can have an expansionary effect on the economy if the
government finances spending with taxes on idle funds
can have an expansionary effect on the economy if the
government finances spending with taxes on funds that would
have been used for private consumption
can have an expansionary effect on the economy if the
government finances spending with taxes on funds that would
have been used for private investment

Questi
2 points
on 46

Sav
e

The U.S. income tax is based on the principle of

cost of service
benefit received
ability to pay
equality of sacrifice

Questi
2 points
on 47

Sav
e

The U.S. national debt has declined continuously as a percentage of

GDP since World War II.
True
False

Questi
2 points
on 48
Which of the following is not a necessary characteristic for a tax to
qualify as a good tax?

Sav
e

justifiability
convenience
being economical
equality

Questi
2 points
on 49

Sav
e

The equality-of-sacrifice doctrine would require larger taxes from

higher-income groups.
True
False

Questi
2 points
on 50

Sav
e

The sales tax is proportional with respect to the tax base of the
amount of purchases.
True
False

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STAT 125-HK. Business Statistics Midterm Exam

MGT 101 Principles Of Management Final Exam Answer

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