Quizes Economics

ECONOMICS: PRINCIPLES AND PRACTICES Section Quizzes
New York, New York
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TO THE TEACHER
With Section Quizzes you are able to evaluate your students knowledge and comprehension of key ideas and concepts on a daily basis. One quiz is provided for every section of Economics: Principles and Practices. Various types and formats of questions are provided, which allow for the different learning abilities of your students. Answers to the quizzes can be found at the back of the booklet.
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ONTENTS
What Is Economics?
Chapter 1
1 Scarcity and the Science of Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Basic Economic Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Economic Choices and Decision Making . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 2 Economic Systems and Decision Making
1 2 3 4 5 6 7 8 9
1 Economic Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Evaluating Economic Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Capitalism and Economic Freedom . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 3 Business Organizations
1 Forms of Business Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Business Growth and Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Other Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 4 Demand
1 What Is Demand? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2 Factors Affecting Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3 Elasticity of Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Chapter 5 Supply
1 What Is Supply? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2 The Theory of Production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3 Cost, Revenue, and Profit Maximization . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Chapter 6 Prices and Decision Making
1 Prices as Signals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2 The Price System at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3 Social Goals vs. Market Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Chapter 7 Market Structures
1 Competition and Market Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2 Market Failures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3 The Role of Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Chapter 8 Employment, Labor, and Wages
1 2 3 4
Chapter 9
The Labor Movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Resolving Union and Management Differences . . . . . . . . . . . . . . . . . . . . . Labor and Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employment Trends and Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Economics of Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Federal Tax System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State and Local Tax Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current Tax Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Economics of Government Spending . . . . . . . . . . . . . . . . . . . . . . . . . . Federal Government Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State and Local Government Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . Deficits, Surpluses, and the National Debt . . . . . . . . . . . . . . . . . . . . . . . .
22 23 24 25 26 27 28 29 30 31 32 33
Sources of Government Revenue
1 2 3 4
Chapter 10
Government Spending
1 2 3 4
Chapter 11
Money and Banking
1 The Evolution of Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2 Early Banking and Monetary Standards . . . . . . . . . . . . . . . . . . . . . . . . . . 35 3 The Development of Modern Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Chapter 12 Financial Markets
1 Savings and the Financial System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2 Investment Strategies and Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . 38 3 Investing in Equities, Futures, and Options . . . . . . . . . . . . . . . . . . . . . . . . 39
Chapter 13 Economic Performance
1 2 3 4
Chapter 14
Measuring the Nations Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GDP and Changes in the Price Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . GDP and Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business Cycles and Fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poverty and the Distribution of Income . . . . . . . . . . . . . . . . . . . . . . . . . . .
40 41 42 43 44 45 46 47
Economic Instability
1 2 3 4
Chapter 15
The Fed and Monetary Policy
1 The Federal Reserve System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 2 Monetary Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 3 Monetary Policy, Banking, and the Economy . . . . . . . . . . . . . . . . . . . . . . . 50
Chapter 16 Achieving Economic Stability
1 2 3 4
Chapter 17
The Cost of Economic Instability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Macroeconomic Equilibrium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stabilization Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Economics and Politics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51 52 53 54
International Trade
1 Absolute and Comparative Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 2 Barriers to International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3 Financing and Trade Deficits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Chapter 18 Comparative Economic Systems
1 2 3 4
Chapter 19
The Spectrum of Economic Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Rise and Fall of Communism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Transition to Capitalism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Various Faces of Capitalism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58 59 60 61
Developing Countries
1 Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 2 A Framework for Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 3 Financing Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Chapter 20 Global Economic Challenges 65 66 67 68
1 The Global Demand for Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Economic Incentives and Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Applying the Economic Way of Thinking . . . . . . . . . . . . . . . . . . . . . . . . . . Answer Key . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Name
Date
Class
1,
1
SCORE
CARCITY AND THE SCIENCE OF ECONOMICS
Matching: Match each item in Column A with the items in Column B. Write the correct letters in the blanks. (10 points each)
A
1. scarcity 2. need 3. land 4. capital 5. Gross Domestic Product
B
a. b. c.
factor of production that includes natural resources not created by humans a basic requirement for survival dollar value of all final goods, services, and structures produced within a countrys borders in a 12-month period condition that results from society not having enough resources to produce all the things people would like to have factor of production that involves risk takers in search of profits factor of production that includes tools, equipment, machinery, and factories used in the production of goods and services
d.
e. f.
Multiple Choice: In the blank at the left write the letter of the choice that best completes the statement or answers the question. (10 points each)
6. Which of the following is NOT a basic economic question? a. WHAT to produce b. WHEN to produce c. FOR WHOM to produce d. HOW to produce
Copyright by The McGraw-Hill Companies, Inc.
7. What is the fundamental problem of economics? a. scarcity c. the factors of production
b. capital d. labor
8. Which of the following lists the four factors of production? a. land, labor, wants, entrepreneurs b. land, labor, capital, scarcity c. labor, needs, capital, entrepreneurs d. land, labor, capital, entrepreneurs 9. Which of the following is NOT a capital good? a. a bulldozer at a construction site c. an oven at a bakery b. a cash register at a clothing store d. a television set for sale at an appliance store d. analysis.
10. The study of economics includes all of the following EXCEPT a. description. b. prediction. c. production.
Section Quizzes
Name
Date
Class
1,
2
SCORE
ASIC ECONOMIC CONCEPTS
A
1. good 2. service 3. market 4. productivity 5. human capital
B
a. b. c. d. e. f.
work that is performed for someone location or other mechanism that allows buyers and sellers to exchange a certain economic product an item that is economically useful or satisfies an economic want basic requirements for survival the sum of the skills, abilities, health, and motivation of people a measure of the amount of output produced by a given amount of inputs in a specific period of time
6. For something to have value, it must a. cost a lot of money. c. be on sale. 7. Which of the following is an example of a service? a. hair spray c. scissors 8. Which of the following is an example of a good? a. a car c. a car wash 9. Specialization refers to a. the process of creating goods and services. c. arranging work so that individual workers
do fewer tasks than before.
b. have utility. d. never go out of style. b. a haircut d. a blow dryer

b. a tune-up d. an oil change b. the use of the four factors of production. d. performing one task relatively more efficiently
than another.
10. What is economic interdependence? a. peoples reliance on each other to provide

goods and services c. the relationship between the four factors of production
b. the ability to produce all goods and services d. the result of a division in labor
Section Quizzes
Name
Date
Class
1,
3
SCORE
CONOMIC CHOICES AND DECISION MAKING B

1. opportunity cost 2. production possibilities frontier 3. trade-offs 4. free enterprise economy 5. standard of living e. a. b. c. d.
alternative choices
where consumers and privately owned businesses answer the three basic economic questions the quality of life based on the possession of the necessities and luxuries that make life easier the cost of the next best alternative when a choice is made diagram representing various combinations of goods and services an economy can produce when all resources are fully employed a tool that can be used to help make an economic decision by identifying alternatives and criteria to evaluate the alternatives
f.
6. Which of the following best describes the relationship between trade-offs and opportunity costs? a. Opportunity costs are incurred when b. Opportunity costs are the opposite of trade-offs.
trade-offs are made.
c. Trade-offs lower the opportunity costs of an

economic decision.
d. Trade-offs occur when there are no opportunity

costs.
7. Imagine you decide to purchase a soccer ball for $35. Which of the following is an opportunity cost of
your decision?
a. the time spent deciding to spend your money c. $35 in cash
b. something else that could have been bought d. the time spent making the purchase and the tax
paid on the ball
8. Which of the following is NOT a characteristic of a production possibilities frontier? a. It illustrates the concept of opportunity costs. b. It is based on full employment of all resources. c. It is used by economists as a tool for d. It indicates the ideal production levels for goods
description and analysis. and services.
9. The study of economics helps people to a. become better decision makers. c. understand the free-enterprise system.
b. make wise choices for political candidates. d. all of the above
10. Which of the following is NOT an example of economic decision making? a. writing a thesis b. building simple models c. using cost-benefit analysis d. taking small, incremental steps
Section Quizzes 3
Name
Date
Class
2,
1
SCORE
CONOMIC SYSTEMS
A
1. economic system 2. traditional economy 3. command economy 4. market economy 5. market economy advantage
B
a. b. c. d. e.
economic system in which basic economic decisions are made by a central authority economic system in which basic economic activity stems from ritual, habit, or custom economic system in which traditional, command, and market economies are mixed an organized way of providing for the wants and needs of a society economic system in which basic economic decisions are made by people and firms acting in their own best interests relatively small degree of government interference
f.
6. Which of the following is NOT a strength of a market economy? a. It can adjust to change over time. b. It gives producers and consumers freedom. c. It has decentralized decision making. d. It supports all of its people equally. 7. All of the following are weaknesses of a command economy EXCEPT that it a. requires a large decision-making bureaucracy. b. provides few incentives for people to work hard. c. lacks the flexibility to deal with minor problems. d. can change direction drastically in a short time. 8. Which of the following societies are examples of traditional economies? a. United States, Japan, Germany b. African Mbuti, Australian Aborigines c. North Korea, Cuba d. South Africa, Egypt, Democratic Republic
of the Congo
9. What type of economy recently collapsed in the communist bloc countries of Eastern Europe and the
former Soviet Union?
a. a traditional economy c. a market economy
b. a command economy d. a free enterprise economy
10. Who would you most likely find participating in a market economy? a. a government official deciding how much b. a teenage girl deciding how to spend the extra
wheat to plant this season money she earned working overtime
c. a hunter deciding where to hunt to provide

his family with a meal that night
d. a worker deciding to leave his job early because

the production quota has been met
Section Quizzes
Name
Date
Class
2,
2
SCORE
E
A
VALUATING ECONOMIC PERFORMANCE
B
1. economic efficiency 2. price stability 3. Social Security 4. fixed income 5. economic freedom c. d. e. f. a. b.
an income that does not increase even though prices go up an economic goal that is based on the desire of people to use resources wisely an economic goal that is based on a sense of fairness an economic goal that is based on the desire of people to make their own decisions an economic goal that is based on preventing inflation a federal program of disability and retirement benefits
6. Which of the following is NOT a major economic and social goal of the United States? a. economic interdependence b. economic security c. economic growth d. economic efficiency 7. Economic goals are important because they a. tell us WHAT and HOW to produce. c. help people determine if an economic system
meets their needs.
b. answer the FOR WHOM to produce question. d. tell the government what kinds of regulations
are needed.
8. Which is an example of economic growth? a. When a new ball bearing plant opens, 1,500
jobs are created. c. An employer is fined for refusing to hire women to fill new job openings.
b. The price of vegetables increases sharply in the

spring.
d. A man decides to quit working as a waiter and

begin a career in marketing.
9. Why is economic growth an important goal of the United States? a. Americans have a strong sense of fairness. b. Economic growth leads to price stability. c. Americans believe that it is the only way d. Economic growth is needed to better satisfy the
to achieve economic equality. wants and needs of a growing population.
10. Which of the following is NOT an example of a trade-off among social and economic goals? a. An increase in the minimum wage raises b. A trade barrier protects jobs in the United States.
unemployment.
c. A military dictator seizes control of a nations

government.
d. An increase in property taxes funds a new high

school.
Section Quizzes
Name
Date
Class
2,
3
SCORE
APITALISM AND ECONOMIC FREEDOM
A
1. capitalism 2. profit motive 3. competition 4. voluntary exchange 5. mixed economy
B
a. b. c. d.
the struggle among sellers to attract consumers while lowering costs economy in which free economic activity is subject to some government intervention and regulation the driving force that encourages people and organizations to improve their material well-being a characteristic of capitalism in which buyers and sellers freely and willingly engage in market transactions concept that the consumer is the ruler of the market economic system in which private citizens own the factors of production
e. f.
6. All of the following are characteristics of capitalism EXCEPT a. private property rights. b. economic freedom. c. profit motive. d. government control. 7. What is another term for a modified private enterprise economy? a. mixed economy b. pure capitalism c. command economy d. free enterprise 8. Why are entrepreneurs important in a free enterprise economy? a. Entrepreneurs do not pay taxes. b. Entrepreneurs help define the seven economic
and social goals.
c. Entrepreneurs pay high wages to their

employees.
d. Entrepreneurs start new businesses.
9. How do consumers exercise their power in the American economy? a. by deciding what to purchase b. by working for businesses c. by becoming entrepreneurs d. by saving their money 10. Who plays the roles of protector, consumer, regulator, and promoter of economic goals in the United
States?
a. entrepreneurs c. businesses
b. government d. workers
Section Quizzes
Name
Date
Class
3,
1
SCORE
F
A
ORMS OF BUSINESS ORGANIZATION
B
1. sole proprietorship 2. limited life 3. limited partnership 4. corporation 5. bankruptcy d. a. b. c.
a business owned and run by one person business organization in which at least one partner is not active in the daily running of the business business organization in which all partners are responsible for the management and financial obligations of the business business organization recognized by law as a separate legal entity having all the rights of an individual a firm ceases to exist when the owner dies, quits, or sells the business a court-granted permission to an individual or business to cease or delay debt payments
e. f.
6. What is the most common form of business organization in the United States? a. sole proprietorship b. partnership c. corporation d. limited partnership 7. What is the main strength of the corporate form of business organization? a. ease of raising financial capital b. ease of establishment c. ease of management d. freedom from business income taxes 8. A government document granting permission to create a corporation is called a a. dividend. b. charter. c. bond. d. proxy. 9. Basic ownership of a corporation, including voting rights, takes the form of a. bonds. b. preferred stock. c. partnerships. d. common stock. 10. All of the following are strengths of the partnership form of business organization EXCEPT a. ease of management. b. limited life. c. ease of establishment. d. lack of special taxes.
Section Quizzes
Name
Date
Class
3,
2
SCORE
USINESS GROWTH AND EXPANSION
A
1. merger 2. net income 3. depreciation 4. multinational 5. vertical merger
B
a. b. c. d. e. f.
a non-cash charge a firm takes for the general wear and tear on its capital goods a corporation that has operations in a number of different countries determined by subtracting expenses, including taxes, from revenue business combination of firms involved in different steps of manufacturing or marketing a combination of two or more businesses to form a single firm business combination involving firms that produce the same kind of product
6. A corporation that has at least four businesses, each making unrelated products, none of which is responsible for a majority of its sales, is called a
a. multinational. c. conglomerate. 7. Horizontal mergers involve a. two or more firms in different countries. c. two or more firms involved in different steps
of manufacturing or marketing.
b. horizontal corporation. d. vertical merger. b. two or more firms that produce the same
kind of product.
d. two or more firms that produce different

products.
8. Which of the following statements is true? a. All conglomerates are multinationals. c. A conglomerate is another term for
a multinational.
b. All multinationals are conglomerates. d. A multinational is often a conglomerate.
9. Which are important for their ability to move resources, products, and financial capital across national
boundaries with relative ease?
a. corporations c. mergers
b. conglomerates d. multinationals
10. What is a major reason for conglomerate mergers? a. diversification b. multinationals c. unlimited life d. conglomeration
Section Quizzes
Name
Date
Class
3,
3
SCORE
THER ORGANIZATIONS
A
1. nonprofit organization 2. cooperative 3. labor union 4. collective bargaining 5. professional association
B
a. b. c. d. e.
negotiations between representatives of labor and management business organization that promotes the welfare of its members and the community economic institution that works in a businesslike manner but does not seek financial gain organization of workers formed to represent its members interests in various employment matters group of people in a specialized occupation that works to improve the working conditions, skill levels, and public perceptions of the profession voluntary association of people formed to carry on some kind of economic activity that will benefit its members
f.
6. Which of the following is an example of a service cooperative? a. Greenville Teachers Credit Union b. Association of Manufacturing Workers c. Better Business Bureau d. Mason Chamber of Commerce
7. Which of the following best illustrates the indirect role of government? a. a state park b. a citys fire department c. the Tennessee Valley Authority d. regulation of public utilities 8. All of the following are typical Chamber of Commerce activities EXCEPT a. educational programs. b. demonstrating against new housing
developments.
c. neighborhood clean-up campaigns.
d. lobbying for favorable business legislation.
9. Which of the following is most likely NOT a nonprofit organization? a. church b. neighborhood association c. public school d. corner grocery store 10. Why are government controls needed on public utilities? a. Public utilities are investor- or municipal-owned. b. Public utilities usually have no competition. c. Public utilities provide important public services. d. Public utilities are responsible for water and
electric services.
Section Quizzes
Name
Date
Class
4,
1
SCORE
W HAT IS DEMAND?
A
1. microeconomics 2. demand curve 3. demand 4. marginal utility 5. diminishing marginal utility
B
a. b. c. d. e. f.
graph showing the quantity demanded at each and every price at a given time the decrease in satisfaction or usefulness received from each additional unit of a product the desire, ability, and willingness to buy a product listing that shows the quantity demanded at all possible prices at a given time area of economics that deals with behavior and decision making of small units the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product
6. The Law of Demand states that a. more will be purchased at low prices than at
high ones. c. approximately the same amount will be purchased at low prices than at higher prices.
b. less will be purchased at low prices than at

high ones. d. all people have the ability, desire, and willingness to buy.
7. The demand curve is always a. upward sloping. b. downward sloping.
c. level.
d. irregular.
8. Buying only one instead of two sodas at lunch time describes what concept? a. demand b. consumerism c. marginal utility d. diminishing marginal utility 9. All of the following must exist for there to be demand EXCEPT a. a desire to buy a product. b. producers to sell a product. c. an ability to buy a product. d. a willingness to buy a product. 10. Which of the following statements does NOT describe the demand curve? a. Prices are listed on the vertical axis. b. Quantities demanded are listed on the
horizontal axis.
c. The demand curve represents the various

combinations of prices and quantities demanded that could occur in the market.
d. It shows the demand for a product over time

rather than at a given point in time.
10
Section Quizzes
Name
Date
Class
4,
2
SCORE
F
A
ACTORS AFFECTING DEMAND
B
1. change in quantity demanded 2. income effect 3. substitution effect 4. substitutes 5. complements a. b. c. d. e. f.
change in quantity demanded due to a change in price that alters a consumers real income illustrated by movement along the demand curve products that tend to be used together a change in quantity demanded due to a change in the relative price of a product the demand for an economic product varies inversely with its price products that can be used in place of other products
6. Which of the following would cause a change in the quantity demanded for a product? a. changing consumer tastes b. increasing consumer income c. decreasing the price of the product d. changing prices of related products 7. How does the demand curve respond to an increase in demand? a. The curve shifts left. b. The curve shifts right. c. There is movement along the curve. d. There is no change in the curve. 8. All of the following would cause a change in demand of a product EXCEPT a. a decrease in consumer income. b. the substitution effect. c. changing consumer tastes. d. an increase in the price of related products. 9. All of the following are examples of complements EXCEPT a. butter and margarine. b. flashlights and batteries. c. peanut butter and jelly. d. cameras and film. 10. A change in the number of consumers can cause a. the demand curve to shift. c. the market demand curve to shift. b. a substitution effect. d. prices to fall.
Section Quizzes
11
Name
Date
Class
4,
3
SCORE
LASTICITY OF DEMAND
A
1. elasticity 2. demand elasticity 3. elastic 4. unit elastic 5. inelastic
B
a. b.
the extent to which a change in price causes a change in the quantity demanded describes demand when a given change in price causes a relatively smaller change in the quantity demanded describes demand when a given change in price causes a proportional change in the quantity demanded analysis of the effects of a price change to determine elasticity a measure of responsiveness that shows how a dependent variable such as quantity responds to an independent variable such as price describes demand when a given change in price causes a relatively larger change in the quantity demanded
c.
d. e.
f.
6. Total expenditures are determined by a. multiplying the price of a product by the

quantity demanded. c. dividing the price of the product by demand.
b. measuring the elasticity of a product.

d. dividing the demand for the product by its price.
7. The relationship between the change in price and total expenditures for an elastic demand curve is a. variable. b. unit elastic. c. inverse. d. direct. 8. All of the following are determinants of demand elasticity EXCEPT a. whether the purchase of the product can b. whether there are adequate substitutes for the
be delayed. product.
c. whether the purchase of the product requires

a large portion of income.
d. whether the product has utility.
9. A company decreases the price of a gallon of milk by 10 percent and the companys total revenues fall
significantly. What term best describes the demand for milk?
a. elastic
b. inelastic
c. unit elastic
d. demand elastic
10. All of the following products have relatively inelastic demand EXCEPT a. a physicians services. b. tobacco products. c. stereo equipment.
12
d. prescription drugs.
Section Quizzes
Name
Date
Class
5,
1
SCORE
W HAT IS SUPPLY?
A
1. supply 2. quantity supplied 3. supply curve 4. supply elasticity 5. subsidy
B
a. b. c.
amount that producers bring to the market at any given price measure of the way in which quantity supplied responds to a change in price a graph showing the various quantities supplied at each and every price that might prevail in the market the amount of a product that would be offered for sale at all possible prices that could prevail in the market listing of quantities that would be offered for sale at all possible prices that could prevail in a market a government payment to an individual, business, or other group to encourage or protect a certain type of economic activity
d.
e. f.
6. The Law of Supply states that a. the quantity supplied varies inversely with
b. the quantity supplied varies irregularly with

its price. d. the quantity supplied varies directly with its price.
its price. c. the quantity demanded varies inversely with its price.
7. All of the following can cause an increase in supply EXCEPT a. a decrease in the cost of inputs. b. fewer sellers in the marketplace. c. an increase in productivity. d. a change in taxes or subsidies. 8. Which product is likely to have the most elastic supply curve? a. ice cream cones b. automobiles c. ships d. dishwashing machines 9. The supply curve is a. downward sloping. c. upward sloping. b. level. d. irregular.
10. Increased government regulations can cause the supply curve to a. shift to the left. b. shift to the right. c. increase. d. decrease.
Section Quizzes
13
Name
Date
Class
5,
2
SCORE
HE THEORY OF PRODUCTION
A
1. Law of Variable Proportions 2. production function 3. raw materials 4. marginal product 5. total product
B
a.
concept that describes the relationship between changes in output to different amounts of a single input while other inputs are held constant a period of production that allows producers to change the amount of all inputs total output produced by a firm the extra output or change in total product caused by the addition of one more unit of variable input unprocessed natural products used in production states that in the short run, output will change as one input is varied while the others are held constant
b. c. d. e. f.
6. All of the following are stages of production EXCEPT a. increasing returns. b. diminishing returns. c. equaling returns. d. negative returns. 7. The period of production that allows producers to change only the amount of the variable input called
labor is
a. the long run. c. the production function. 8. A production function shows a. changes in output in response to changes
in input. c. the optimum level of production.
b. the short run. d. a stage of production. b. changes in input that result from changes in
output. d. the optimum level of the four factors of production.
9. In what order do the three stages of production occur? a. negative returns, diminishing returns, b. diminishing returns, increasing returns, negative
increasing returns c. increasing returns, diminishing returns, negative returns returns d. increasing returns, negative returns, diminishing returns
10. The stages of production are based on a. the way total product changes over time. c. the way inputs change in response to
business decisions.
14
b. the way marginal product changes as variable

inputs are added. d. the way output changes independent of input.
Section Quizzes
Name
Date
Class
5,
3
SCORE
OST, REVENUE, AND PROFIT MAXIMIZATION
A
1. fixed cost 2. variable cost 3. marginal cost 4. total revenue 5. e-commerce
B
a. b. c. d. e. f.
cost that a business incurs even if the plant is idle and output is zero extra cost incurred when a business produces one additional unit of a product sum of the fixed and variable costs cost that changes when the business rate of operation or output changes electronic business or exchange conducted over the Internet the number of units sold multiplied by the average price per unit
6. Cost-benefit decision making that compares the extra benefits to the extra costs of an action is called a. marginal revenue. b. marginal costs. c. marginal analysis. d. marginal output. 7. The total cost of production is determined by a. adding fixed and variable costs. c. multiplying fixed and variable costs. b. adding marginal and fixed costs. d. multiplying marginal and fixed costs.
8. All of the following are examples of variable costs EXCEPT a. labor. b. freight. c. interest payments on bonds. d. electricity. 9. If a businesss fixed costs are large relative to its variable costs, it is likely to a. be more profitable than a firm whose fixed b. produce in Stage III of the production function.
costs are small relative to variable costs. c. produce durable goods rather than services.
d. operate longer hours than a firm whose fixed

costs are small relative to variable costs.
10. Profit is maximized when a. marginal cost is less than marginal revenue. c. marginal cost is greater than marginal revenue.
b. marginal cost is equal to marginal revenue. d. marginal cost is growing at the same rate as
marginal revenue.
Section Quizzes
15
Name
Date
Class
6,
1
SCORE
P
A
RICES AS SIGNALS
B
1. price 2. price flexibility 3. rationing 4. rebate 5. ration coupon a. b. c. d. e. f.
system under which an agency allocates products allows the market economy to accommodate change signals that convey information to buyers and sellers a ticket or receipt that entitles the holder to obtain a certain amount of a product the monetary value of a product as established by supply and demand a partial refund of the original price of the product
6. Prices perform the allocation function well because they do all of the following EXCEPT a. provide neutrality, favoring neither the b. provide flexibility, absorbing unexpected
producer or consumer. shocks.
c. enable the government to use rationing.
d. provide ways for consumers to make decisions.
7. All of the following are characteristics of rationing EXCEPT a. rationing is often viewed as unfair. b. rationing creates high administrative costs. c. rationing decreases the incentive to work. d. rationing provides an efficient link between
producers and consumers.
8. In a market economy, a high price is a signal for a. producers to produce more and buyers to
buy less. c. producers to produce less and buyers to buy less.
b. producers to produce more and buyers to

buy more. d. producers to produce less and buyers to buy more.
9. In a market economy, a low price is a signal for a. producers to produce more and buyers to
buy less. c. producers to produce less and buyers to buy less.
b. producers to produce more and buyers to

buy more. d. producers to produce less and buyers to buy more.
10. Economists think of prices as a system because a. they help buyers and sellers allocate resources
between markets. c. they convey information to other countries.
b. they convey information to the government. d. they make rationing necessary at times.
16
Section Quizzes
Name
Date
Class
6,
2
SCORE
T HE PRICE SYSTEM AT WORK

A
1. economic model 2. market equilibrium 3. surplus 4. equilibrium price 5. shortage
B
a. b. c.
a set of assumptions that can be used to help analyze behavior and predict outcomes the price at which neither a surplus or shortage of a product exists a situation in which prices are relatively stable and the quantity supplied is equal to the quantity demanded a situation in which the quantity demanded is greater than the quantity supplied an item priced particularly low to attract customers a situation in which the quantity supplied is greater than the quantity demanded at a given price
d. e. f.
6. In a competitive market, the adjustment process moves toward market a. equilibrium. b. surplus. c. shortage. d. model. 7. If there is a shortage in a market, the price is likely to a. increase. b. decrease. c. remain the same. d. fluctuate. 8. If there is a surplus in a market, the price is likely to a. increase. b. decrease. c. remain the same. d. fluctuate. 9. The theory of competitive pricing represents a. a model by which to measure the
performance of other less competitive markets. c. a set of ideal conditions and outcomes.
b. an important theory in economics. d. all of the above
10. An economic model is described by all of the following EXCEPT a. it is a set of assumptions that can be listed in b. it can be used to help analyze behavior.
a table, illustrated with a graph, or even stated algebraically. c. it can be used to predict outcomes.
d. it is usually so complex that it can be

understood only by economists.
Section Quizzes
17
Name
Date
Class
6,
3
SCORE
OCIAL GOALS VS. MARKET EFFICIENCY
A
1. price ceiling 2. price floor 3. target price 4. nonrecourse loan 5. deficiency payment
B
a.
a check sent to producers that makes up the difference between the actual market price and the target price the lowest legal price that can be paid to most workers floor price for farm products carries neither a penalty nor further obligation to repay if not paid back a maximum legal price that can be charged for a product partial refund of the original price of a product
b. c. d. e. f.
6. Which of the following is an example of a price ceiling? a. minimum wage b. free lunch program c. rent control d. government subsidies 7. Price ceilings that are artificially low are likely to create a. a price floor. b. a surplus. c. an equilibrium. d. a shortage.
8. Price floors that are artificially high are likely to create a. a price ceiling. b. a surplus. c. an equilibrium. d. a shortage. 9. Why might a government interfere in a market economy by setting prices? a. to achieve the goals of equity and security b. to insure an entrepreneurs profit c. to distort market outcomes d. to allow the price system to transmit accurate
information
10. What is meant by the phrase markets talk? a. Market changes are written about in
newspapers and magazines. c. Businesspeople rely on good communication to conduct business.
b. Government officials base decisions on the

stock market. d. Markets reflect the thoughts and feelings of buyers and sellers.
18
Section Quizzes
Name
Date
Class
7,
1
SCORE
OMPETITION AND MARKET STRUCTURES
A
1. perfect competition 2. nonprice competition 3. oligopoly 4. collusion 5. economies of scale
B
a. b.
market structure in which a few very large sellers dominate the industry market situation in which a large number of wellinformed and independent buyers and sellers exchange identical products market situation in which there is only one seller of a product that has no close substitutes the use of advertising, giveaways, or other promotional campaigns to convince buyers one product is better than another a situation in which the average cost of production falls as the firm gets larger a formal agreement to set prices or to otherwise behave in a cooperative manner
c. d.
e. f.
6. Perfect competition is characterized by all of the following EXCEPT a. a small number of buyers and sellers. b. well-informed buyers and sellers. c. identical products. d. independent buyers and sellers. 7. A monopoly based on the absence of other sellers in a certain location is called a. an oligopoly. b. a natural monopoly. c. a geographic monopoly. d. economies of scale. 8. Monopolistic competition is separated from pure competition by a. collusion. b. profit maximization. c. product differentiation. d. imperfect competition. 9. Oligopoly is a market structure with a great deal of a. competition among firms. b. interdependence among firms. c. independence among firms. d. profits among firms. 10. A monopolys prices are determined by a. competing firms. c. perfect competition. b. market equilibrium. d. the monopoly.
Section Quizzes
19
Name
Date
Class
7,
2
SCORE
M ARKET FAILURES
A
1. market failure 2. externality 3. negative externality 4. positive externality 5. public goods
B
a. b. c. d. e. f.
an unintended side effect that either benefits or harms an uninvolved third party an unwanted harm, cost, or inconvenience suffered by a third party because of actions by others products that are collectively consumed by everyone condition necessary for a competitive free enterprise economy a benefit received by a third party that had nothing to do with the activity that generated the benefit occurs when any one of the four conditions necessary for a competitive free enterprise economy is significantly altered
6. All of the following may lead to a market failure EXCEPT a. resource mobility. b. inadequate competition. c. insufficient information. d. prices do not reflect the costs of production. 7. Which of the following is NOT a public good? a. community park c. armed forces 8. What is the result of inadequate competition? a. the development of a monopoly c. excessive political influence by businesses b. fire department d. movie theater b. artificial shortages and higher prices d. all of the above
9. Positive and negative externalities are called market failures because a. they cause imperfect competition. b. they lead to higher prices. c. their costs and benefits are not reflected in d. they provide public goods.
the market prices paid by buyers and sellers.
10. Which of the following is an example of resource mobility? a. an engineer asking for a higher wage b. an aircraft factory laying off engineers c. an engineer taking a job at a different factory d. an aircraft factory selling its products overseas
20
Section Quizzes
Name
Date
Class
7,
3
SCORE
HE ROLE OF GOVERNMENT
A
1. trusts 2. Clayton Antitrust Act 3. price discrimination 4. Robinson-Patman Act 5. cease and desist order
B
a. b. c. d. e. f.
strengthened previous legislation regarding price discrimination built on Sherman Antitrust Act by extending government powers against monopolies an FTC ruling requiring a company to stop an unfair business practice legally formed combinations of corporations or companies practice of charging customers different prices for the same product requirement that businesses reveal information to the public
6. Which of the following antitrust laws was enacted first? a. Federal Trade Commission Act b. Clayton Antitrust Act c. Sherman Antitrust Act d. Robinson-Patman Act 7. The federal law that first outlawed price discrimination is the a. Federal Trade Commission Act. b. Clayton Antitrust Act. c. Sherman Antitrust Act. d. Robinson-Patman Act. 8. Public disclosure supports competition by a. providing buyers and sellers with information. c. converting private businesses into
government agencies.
b. revealing competitive trade secrets. d. concentrating information in the hands of the

government.
9. Which of the following would most likely be subject to government monopoly regulations? a. a computer software company b. a large oil company c. a local restaurant d. a local cable company 10. The government takes part in the United States economy to a. encourage competition and fair play. b. prevent monopolies and reduce costs of
imperfect competition.
c. regulate industries in which monopolies serve

the public good.
d. all of the above
Section Quizzes
21
Name
Date
Class
8,
1
SCORE
HE LABOR MOVEMENT
A
1. macroeconomics 2. craft/trade union 3. strike 4. boycott 5. right-to-work law
B
a. b. c. d. e. f.
a mass refusal to buy products from targeted employers or companies refusal to let employees work until management demands are met area of economics that deals with the economy as a whole a state law making it illegal to force workers to join a union as a condition of employment an association of skilled workers who perform the same kind of work a refusal to work until certain demands are met
6. All of the following are methods used by unions EXCEPT a. a strike. b. a picket. c. a boycott. d. a lockout. 7. Unions are important in todays economy because a. they played a major role in promoting legislation affecting wages today. b. they played a major role in promoting legislation affecting working conditions today. c. they have a membership of nearly 16.3 million people. d. all of the above 8. The Great Depression a. turned popular opinion against unions. c. destroyed the labor movement. b. turned popular opinion in favor of unions. d. gave rise to the first unions.
9. The National Labor Relations Board was created by the a. Norris-LaGuardia Act. b. Wagner Act. c. Fair Labor Standards Act. d. Taft-Hartley Act. 10. All of the following factors helped give rise to unions EXCEPT a. early government support. b. low pay. c. little job security. d. poor working conditions.
22
Section Quizzes
Name
Date
Class
8,
2
SCORE
ESOLVING UNION AND MANAGEMENT DIFFERENCES
A
1. closed shop 2. union shop 3. grievance procedure 4. arbitration 5. injunction
B
a. b. c.
a provision in the collective bargaining process for resolving issues that may arise in the future a court order not to act (for example, strike or lockout workers) a type of collective bargaining in which both sides agree to place their differences before a third party whose decision will be accepted as final and binding arrangement in which the employer agrees to hire only union members arrangement in which workers are not required to join a union but must pay union dues arrangement in which workers must join a union soon after they are hired and must remain members for the duration of their jobs
d. e. f.
6. What do right-to-work laws prohibit? a. mandatory union membership c. compulsory arbitration

b. collective bargaining d. adding grievance procedures to final contracts
7. In a modified union shop, workers a. must join a union soon after they are hired and remain members for the duration of their jobs. b. do not have to belong to a union to be hired and cannot be made to join one to keep their jobs. c. are not required to join a union but must pay union dues. d. none of the above 8. Which of the following generally occurs first in union-management negotiations? a. mediation b. arbitration c. fact-finding d. collective bargaining 9. A woman joins a package shipping firm as a truck driver. She is required to join the labor union six weeks
after she starts work, and she must remain a member. What type of union arrangement exists at the firm?
a. closed shop
b. union shop
c. modified union shop
d. agency shop
10. When labor and management bring in a neutral third party to help settle a dispute, they are resolving
their differences through
a. arbitration.
Section Quizzes
b. fact-finding.
c. mediation.
d. injunction.
23
Name
Date
Class
8,
3
SCORE
ABOR AND WAGES
A
1. unskilled labor 2. semiskilled labor 3. wage rate 4. equilibrium wage rate 5. skilled labor
B
a.
people who have enough mechanical abilities and skills to operate machines that require a minimum amount of training people who are able to operate complex equipment and can perform their tasks with little supervision people who work with their hands because they lack the training and skills required for other tasks wage that leaves neither a surplus or a shortage in the labor market people with the highest level of knowledge-based education and managerial skills standard amount of pay given for work performed
b. c. d. e. f.
6. Which of the following is NOT a theory used to explain differences in wages? a. traditional theory of wage determination b. theory of equilibrium wage rate c. theory of negotiated wages d. signaling theory 7. Regional differences in wage rates are influenced by all of the following factors EXCEPT a. cost of living. b. location. c. labor mobility. d. labor grades. 8. Labor mobility refers to a. the ability and willingness of workers to obtain more education to move into higher paying jobs. b. the ability and willingness of workers to relocate in markets where wages are higher. c. the ability and willingness of workers to move between labor grades. d. all of the above 9. The traditional theory of wage determination holds that differences in wage rates can be explained by a. supply and demand. b. regional differences. c. collective bargaining. d. labor mobility. 10. The wage theory that states that differences in wage rates are determined by collective bargaining is the a. traditional theory of wage determination. b. theory of equilibrium wage rate. c. theory of negotiated wages. d. signaling theory.
24
Section Quizzes
Name
Date
Class
8,
4
SCORE
E
A
MPLOYMENT TRENDS AND ISSUES B

1. two-tier wage system 2. glass ceiling 3. set-aside contract 4. current dollars 5. constant dollars a. b. c. d. e. f.
dollars that are not adjusted for inflation guaranteed contract reserved exclusively for a targeted group dollars adjusted to remove inflation wage, fringe benefit, or work rule given up when labor contracts are renegotiated system that keeps high wages for current workers, but has a much lower wage for newly hired workers invisible barrier that obstructs advancement
6. All of the following are reasons for declining union membership EXCEPT a. many employers have made a determined effort to keep unions out of their businesses. b. many new workers are second-income earners who tend to accept lower wages. c. unions ceased to improve working conditions for their members. d. the expense of union-made goods has hurt sales and led to lay-offs. 7. All of the following are reasons women receive less pay than men EXCEPT a. women have different skills. b. women tend to enter lower paying fields. c. women encounter discrimination. d. women do not work as hard as men do.
8. Comparable worth refers to a. the value of a job to society. c. the minimum wage. 9. In constant dollars, the minimum wage has a. decreased since 1968. c. increased since 1968.
b. equal pay for different types of work that are

equally demanding. d. the relative worth of men and women in the workplace.
b. remained the same since 1968. d. fluctuated since 1968.
10. The Civil Rights Act of 1964 accomplished all of the following EXCEPT a. it prohibited wage and salary discrimination between men and women. b. it prohibited employment discrimination on the basis of gender, race, color, religion, and national
origin.
c. it established the Equal Employment Opportunity Commission. d. it allowed the government to bring suit against a company for discrimination.
Section Quizzes
25
Name
Date
Class
9,
1
SCORE
HE ECONOMICS OF TAXATION
A
1. sin tax 2. individual income tax 3. sales tax 4. progressive tax 5. regressive tax
B
a. b.
high tax designed to raise revenue and reduce consumption of a socially undesirable product tax that imposes a higher percentage rate of taxation on persons with high incomes than on those with low incomes complex tax on peoples earnings simple tax levied on most consumer purchases tax that imposes the same percentage rate of taxation on everyone, regardless of income tax that imposes a higher percentage rate of taxation on persons with low incomes than on those with high incomes
c. d. e. f.
6. Taxes can have all of the following economic effects EXCEPT a. altering resource allocation. b. changing consumer behavior. c. affecting a nations productivity and growth. d. removing sources of revenue. 7. The three criteria for effective taxes are a. efficiency, simplicity, and regressiveness. c. equity, progressiveness, and efficiency. b. efficiency, simplicity, and progressiveness. d. equity, simplicity, and efficiency.
8. The ability-to-pay principle of taxation states that a. only people who have the ability to pay should be taxed. b. those who benefit from government services should pay for them. c. people should be taxed according to their ability to pay. d. the government should assess taxes only if it is clear that citizens will have the ability to pay. 9. An exception or oversight in the tax law that allows some people and businesses to avoid paying taxes is
called a
a. sin tax. c. marginal tax.
b. tax loophole. d. tax exception.
10. Paying $1,000 tax on $10,000 of taxable income, $4,000 on $20,000 of taxable income, and $20,000 on
$60,000 of taxable income in an example of a tax system that is
a. proportional. c. progressive.
26
b. regressive. d. average.
Section Quizzes
Name
Date
Class
9,
2
SCORE
HE FEDERAL TAX SYSTEM
A
1. Internal Revenue Service 2. FICA 3. excise tax 4. estate tax 5. gift tax
B
a. b. c. d. e. f.
tax on the manufacture or sale of selected items tax on donations of money or wealth branch of the Treasury Department in charge of collecting taxes tax on the transfer of property when a person dies federal tax used to pay for Social Security and medicare tax on peoples earnings
6. The individual income tax is a(n) a. proportional tax. c. regressive tax.
b. progressive tax. d. excise tax.
7. What is the single largest source of revenue for the federal government? a. corporate income taxes b. FICA taxes c. individual income taxes d. user fees 8. The government uses indexing to revise tax brackets so that workers do not pay higher taxes just because a. of individual income taxes. b. they are unemployed. c. they are married. d. of inflation. 9. The payroll taxes that are deducted directly from peoples paychecks are a. medicare and Social Security. b. individual income and Social Security. c. corporate income and medicare. d. FICA and individual income. 10. The gift tax is used to prevent people from avoiding the a. excise tax. b. estate tax. c. income tax. d. customs duty.
Section Quizzes
27
Name
Date
Class
9,
3
SCORE
TATE AND LOCAL TAX SYSTEMS
A
1. intergovernmental revenue 2. property tax 3. tax assessor 4. sales tax 5. public lotteries
B
a. b. c. d.
fastest-growing source of state revenues in the 1980s second largest source of revenue for state governments person who assigns value to property for tax purposes funds collected by one level of government that are distributed to another level of government for expenditures a tax on tangible and intangible possessions real estate, buildings, and anything permanently attached to them
e. f.
6. The largest source of revenue for states is a. property taxes. c. income taxes.
b. sales taxes. d. intergovernmental revenues.
7. The property tax that raises the most revenue for local governments is the tax on a. automobiles. b. intangible personal property. c. real estate. d. tangible personal property. 8. The three largest sources of revenue for local governments are a. utility and liquor store income, property tax, and intergovernmental revenues. b. utility and liquor store income, property tax, and sales taxes. c. sales taxes, intergovernmental revenue, and property tax. d. sales taxes, intergovernmental revenue, and utility and liquor store income. 9. Which is an example of intangible personal property? a. a necklace b. a bond c. a fur coat d. an automobile 10. All of the following tax deductions can appear on a payroll withholding statement EXCEPT a. federal excise taxes. b. FICA taxes. c. federal income taxes. d. state income taxes.
28
Section Quizzes
Name
Date
Class
9,
4
SCORE
URRENT TAX ISSUES
A
1. accelerated depreciation 2. investment tax credit 3. alternative minimum tax 4. capital gains 5. value-added tax
B
a. b. c. d. e.
reduction in business taxes tied to investment in new plants and equipment profits from the sale of an asset held for 12 months final burden of a tax tax placed on the value that manufacturers add at each stage of production personal income rate that applies whenever the amount of taxes paid falls below some designated level larger than normal depreciation charges which allowed firms to reduce federal income tax payments
f.
6. The alternative minimum tax did all of the following EXCEPT a. ensured people pay a minimum tax of b. made it difficult for the very rich to avoid taxes.
20 percent. c. replaced the capital gains tax.
d. limited the use of loopholes in the tax code.
7. Which of the following is a disadvantage of the value-added tax (VAT)? a. The VAT is hard to avoid. b. The VAT is invisible to consumers. c. The VAT is easy to collect. d. The VATs incidence is widely spread. 8. Which of the following is NOT an advantage of a flat tax? a. The flat tax is simple. b. The flat tax closes or minimizes most tax
loopholes.
c. The flat tax removes behavior incentives in

the tax code.
d. The flat tax would reduce the need for

accountants and larger portions of the IRS.
9. What prompted federal tax reform in 1986? a. The tax code favored the rich and powerful. c. Not enough tax revenues were being raised.
b. The tax laws were too old. d. Taxes were being collected inefficiently.
10. Overall, who benefited most from tax reform in 1997? a. politicians b. the lowest 20 percent of wage and
income earners
c. the top 20 percent of wage and

income earners
d. the middle 60 percent of wage and

income earners
Section Quizzes
29
Name
Date
Class
10,
1
SCORE
HE ECONOMICS OF GOVERNMENT SPENDING
A
1. per capita 2. public sector 3. private sector 4. transfer payment 5. distribution of income
B
a. b. c. d.
part of the economy made up of private individuals and privately-owned businesses per person transfer payment one level of government makes to another way in which income is allocated among families, individuals, or other designated groups in the economy payment for which the government receives neither goods nor services part of the economy made up of federal, state, and local governments
e. f.
6. The two broad categories of government spending are a. defense and welfare. b. the purchase of goods and services and
payments to disadvantaged groups.
c. public and private.
d. payments and transfers.

7. Public sector spending first began to rise significantly in the a. 1920s. b. 1940s. c. 1960s. d. 1980s. 8. How much money does the public sector spend each year? a. thousands of dollars b. millions of dollars c. billions of dollars d. trillions of dollars 9. All of the following are examples of transfer payments EXCEPT a. the purchase of fighter jets. b. Social Security. c. unemployment compensation. d. funds to build interstate highways. 10. All of the following are effects of increased government spending EXCEPT a. a direct change in the allocation of resources. b. an indirect change in the allocation of resources. c. an alteration in the distribution of income. d. a decrease in competition between the public
and private sectors.
30
Section Quizzes
Name
Date
Class
10,
2
SCORE
EDERAL GOVERNMENT EXPENDITURES
A
1. federal budget 2. fiscal year 3. mandatory spending 4. discretionary spending 5. appropriations bill
B
a. b. c. d. e. f.
programs that must receive annual authorization amount by which federal government expenditures exceed revenues an act of Congress that allows federal agencies to spend money for specific purposes annual plan outlining proposed revenues and expenditures for the coming year spending authorized by law that continues without the need for annual approvals of Congress a 12-month financial planning period that may or may not coincide with the calendar year
6. Government health expenditures include a joint federal-state insurance program for low-income persons
called
a. medicare. c. Medicaid.
b. OSHA. d. Social Security.
7. All of the following are examples of discretionary spending EXCEPT a. defense expenditures. b. Coast Guard expenditures. c. welfare programs. d. medicare. 8. Who formulates the federal budget? a. the Senate c. the president b. the House of Representatives d. the Congressional Budget Office
9. What role does the Office of Management and Budget (OMB) play in establishing the federal budget? a. The OMB assembles the budget under presidential guidelines. b. The OMB approves the final budget. c. The OMB evaluates the economic impact of proposed congressional actions on the budget. d. The OMB determines how the money in the budget will be distributed among the major categories of
spending.
10. In addition to the interest rate, what determines how much interest the federal government spends on the
federal debt?
a. how much money it raises c. how much money it spends
b. how much money it borrows d. how much money it invests
Section Quizzes
31
Name
Date
Class
10,
3
SCORE
TATE AND LOCAL GOVERNMENT EXPENDITURES
A
1. balanced budget amendment 2. intergovernmental expenditures 3. insurance trust funds 4. elementary and secondary education 5. interest on debt
B
a. b. c. d. e. f.
state funds invested for use when people retire, become unemployed, or are injured on the job costs incurred by both state and local governments for borrowing money constitutional amendment requiring that annual spending not exceed revenues largest category of state spending funds used to support state colleges and universities major spending responsibility of local governments
6. Of the four categories listed below, which accounts for the largest amount of local expenditures? a. insurance trust funds b. public utilities c. highways d. higher education 7. All of the following are local officials with approval power for spending EXCEPT a. the mayor. b. the council. c. the judge. d. the tax assessor. 8. Which of the following is NOT an example of a local government? a. school districts b. municipalities c. neighborhood associations d. counties 9. Who pays for the maintenance on the state highway linking Tyler, Texas, with Corsicana, Texas? a. Tyler b. Corsicana c. Texas d. the federal government 10. Of the four categories listed below, which accounts for the largest amount of state expenditures? a. police protection b. public utilities c. elementary and secondary education d. higher education
32
Section Quizzes
Name
Date
Class
10,
4
SCORE
D EFICITS, SURPLUSES, AND

THE NATIONAL DEBT
A
1. deficit spending 2. federal debt 3. trust funds 4. crowding-out effect 5. entitlement
B
a. b. c. d. e. f.
spending in excess of revenues collected broad social programs for eligible individuals amount borrowed to finance deficit spending budget with neither a surplus or deficit accounts used to fund types of expenditures higher-than-normal interest rates that are caused by heavy government borrowing
6. From the choices below, identify when the federal government began significant deficit spending. a. 1960s b. 1970s c. 1980s d. 1990s 7. Which of the following statements best describes the relationship of the federal deficit to the federal
debt?
a. b. c. d.
The The The The
federal federal federal federal
deficit is another term for the federal debt. deficit leads to borrowing, which adds to the federal debt. debt leads to borrowing, which adds to the federal deficit. debt is the opposite of the federal deficit.
8. Which of the following is an example of an entitlement payment? a. federal money given to a contractor in exchange for military uniforms b. federal money given to a senior citizen as a Social Security payment c. federal money spent to pay interest on the federal debt d. federal money spent to build a new public highway 9. All of the following are differences between the federal debt and private debt EXCEPT a. the federal debt is owed to ourselves, rather than to others. b. the federal government does not have to repay the debt by a specific date. c. the federal debt is the total amount of money borrowed from investors. d. the federal government does not lose purchasing power. 10. All of the following are effects of the federal debt EXCEPT a. income distribution is altered. b. purchasing power is transferred. c. incentives to work, save, and invest d. interest rates are lowered.
are decreased.
Section Quizzes
33
Name
Date
Class
11,
1
SCORE
HE EVOLUTION OF MONEY
A
1. money 2. medium of exchange 3. measure of value 4. fiat money 5. specie
B
a. b. c. d. e. f.
ingots or bars of precious metals money in the form of coins made from silver or gold a common denominator that can be used to express worth in terms that most individuals understand money by government decree any substance that serves as a medium of exchange, a measure of value, and a store of value something accepted by all parties as payment for goods and services
6. Money functions as all of the following EXCEPT a. a store of value. c. a medium of exchange. 7. A mutual coincidence of wants is a. difficult to achieve in a barter economy. c. impossible to achieve in a barter economy. 8. Early colonists in Virginia used tobacco as a. specie. c. commodity money. 9. What is the origin of the American dollar? a. the Austrian taler and wampum c. wampum and shillings
b. a monetary standard. d. a measure of value. b. easy to achieve in a barter economy. d. difficult to achieve in a money economy. b. fiat money. d. wampum. b. the Spanish peso and shillings d. the Spanish peso and Austrian taler
10. To be a successful medium of exchange, money must be all of the following EXCEPT a. easily available. b. portable. c. durable. d. easily divisible.
34
Section Quizzes
Name
Date
Class
11,
2
SCORE
ARLY BANKING AND MONETARY STANDARDS B

1. monetary standard 2. legal tender 3. Treasury coin notes 4. gold standard 5. inconvertible fiat money standard c. a. b.
paper currency issued by the Treasury that was redeemable in both gold and silver mechanism designed to keep the money supply portable, durable, divisible, and limited in supply monetary standard under which the basic currency unit is equivalent to, and can be exchanged for, a specific amount of gold uniform currency backed by government bonds a monetary standard under which the fiat money supply cannot be converted into gold or silver by its citizens fiat currency that must be accepted in payment for debts
d. e.
f.
6. Under what monetary standard does the United States currently operate? a. the gold standard b. the inconvertible fiat money standard c. the silver standard d. the greenback standard 7. All of the following were problems with banking before the Civil War EXCEPT a. state banks issued their own currencies. b. wildcat banks printed large amounts of currency. c. many banks issued more currency than d. the economy grew faster than the gold stock.
they could back.
8. Which of the following statements about a gold standard is FALSE? a. The government cannot print too much b. People feel more secure about their money.
paper currency.
c. It is easier to expand the money supply.
d. The government risks draining its gold reserves.
9. Greenbacks and United States notes were issued to a. raise money to finance the Civil War. b. stabilize the monetary supply. c. change the monetary standard. d. pay interest on the federal debt. 10. Created during the Civil War, the National Banking System a. was made up of banks chartered by the federal government. b. resulted in shifting the paper money supply from being entirely privately-issued to being entirely
publicly-issued. c. eventually replaced state-chartered banks. d. all of the above
Section Quizzes 35
Name
Date
Class
11,
3
SCORE
HE DEVELOPMENT OF MODERN BANKING
A
1. Federal Reserve System 2. thrift institution 3. mutual savings bank 4. credit union 5. savings and loan association
B
a. b. c. d. e. f.
depository institution that invests the majority of its funds in home mortgages depositor-owned financial organization operated only for the benefit of its depositors bank that caters to the interests of business and commerce financial institutions that accepted the deposits of small investors nonprofit service cooperative that is owned by, and operated for, the benefit of its members system that functions as the central bank of the United States
6. The Federal Reserve System is a. owned by the government. c. publicly controlled.
b. unable to lend money to other banks. d. under the authority of Congress.
7. Which of the following statements about the Great Depression is FALSE? a. Thousands of banks failed. b. Banking reforms followed the Great Depression. c. Runs on banks were common. d. A new banking system was created. 8. The federal agency that insures bank deposits in the event of a bank failure is the a. DDA. b. FDIC. c. FSLIC. d. Fed. 9. One of the oldest thrift institutions in the United States is the a. mutual savings bank. b. savings and loan association. c. credit union. d. savings bank. 10. Which of the following institutions experienced serious crisis and reform during the 1980s? a. mutual savings banks b. commercial banks c. savings and loan associations d. credit unions
36
Section Quizzes
Name
Date
Class
12,
1
SCORE
AVINGS AND THE FINANCIAL SYSTEM
A
1. savings 2. financial system 3. financial assets 4. pension 5. mutual fund
B
a.
regular payment intended to provide income security to someone who has worked a certain number of years the dollars that become available in the absence of consumption company that sells stock in itself to individual investors and invests this money in other stocks and bonds network of savers, investors, and financial institutions that work together to transfer savings to investors institutions that bring together the funds that savers provide and lend them to others claims on the property and the income of the borrower
b. c.
d.
e. f.
6. Saving is necessary for a. a traditional economy. c. financial assets.

b. mutual funds. d. capital formation.
7. The financial institutions that bring together funds that savers provide and then lend those funds to others
are called
a. mutual funds. c. financial assets.
b. financial systems. d. financial intermediaries.
8. All of the following are examples of financial assets EXCEPT a. bonds. b. savings books. c. mutual funds. d. certificates of deposit. 9. All of the following are examples of nonbank financial institutions EXCEPT a. credit unions. b. finance companies. c. life insurance companies. d. real estate investment trusts. 10. What sector(s) of the economy provide(s) the most savings? a. the federal government b. the public sector c. state and local governments d. households and businesses
Section Quizzes 37
Name
Date
Class
12,
2
SCORE
NVESTMENT STRATEGIES AND FINANCIAL ASSETS
A
1. 401(k) plan 2. CDs 3. junk bonds 4. municipal bonds 5. IRAs
B
a. b. c. d. e. f.
long-term, tax-sheltered time deposits that an employee can set up as part of a retirement plan bonds issued by state and local governments exceptionally risky bonds a tax-deferred investment and savings plan that acts as a personal pension fund for employees United States government obligations with maturities of two to 10 years loans investors make to financial institutions
6. All of the following are considered the main components of bonds EXCEPT a. coupon. b. maturity. c. par value. d. yield. 7. A bonds principal, or total amount borrowed, is called its a. investment potential. b. par value. c. rating. d. insured rate. 8. A market in which money is loaned for periods of more than one year is known as a a. capital market. b. money market. c. primary market. d. secondary market. 9. A bonds current yield is determined by a. adding the annual interest to the purchase price. b. subtracting the annual interest from the purchase price. c. dividing the annual interest by the purchase price. d. dividing the purchase price by the annual interest. 10. High return on an investment is associated with a. no risk. c. high risk. b. low risk. d. estimated probabilities of outcomes.
38
Section Quizzes
Name
Date
Class
12,
3
SCORE
NVESTING IN EQUITIES, FUTURES, AND OPTIONS
A
1. equities 2. securities exchanges 3. over-the-counter market 4. futures contract 5. options
B
a. b. c. d. e. f.
agreement to buy or sell at a specific date at a predetermined price, with the option to withdraw stocks that represent ownership shares in corporations market in which a transaction is made immediately at the prevailing price places where buyers and sellers meet to trade securities agreement to buy or sell at a specific date at a predetermined price electronic marketplace for securities that are not traded on an organized exchange
6. The great majority of stocks in the United States are traded on a. Wall Street. b. the New York Stock Exchange. c. the over-the-counter market. d. the American Stock Exchange. 7. The Efficient Market Hypothesis argues that a. stocks are always priced about right and bargains are hard to find. b. stocks are usually priced low and bargains are easy to find. c. stocks are usually priced high and bargains are hard to find. d. stocks are always priced about right and bargains are easy to find. 8. All of the following are securities exchanges EXCEPT a. the New York Stock Exchange. b. the American Stock Exchange. c. the NASDAQ. d. the Chicago Stock Exchange. 9. Which stock markets performance does the Dow-Jones Industrial Average reflect? a. the over-the-counter market b. the American Stock Exchange c. the global stock exchange d. the New York Stock Exchange 10. All of the following are examples of futures trading EXCEPT a. a futures contract. b. a spot transaction. c. a call option. d. a put option.
Section Quizzes
39
Name
Date
Class
13,
1
SCORE
M EASURING THE NATIONS OUTPUT

A
1. national income accounting 2. Gross Domestic Product 3. Gross National Product 4. Net National Product 5. output-expenditure model
B
a.
dollar value of all final goods, services, and structures produced in one year with labor and property supplied by U.S. residents dollar amount of all final goods and services produced within a countrys national borders in a year system of statistics and accounts that track overall economic performance macroeconomic model used to analyze the economys performance products used in making other products already counted in GDP calculated by subtracting depreciation from GNP
b. c. d. e. f.
6. All of the following are included in GDP EXCEPT a. the income from a garage sale. c. the value of a new house.
b. the value of a new car. d. the sale of an ice cream cone.
7. Which of the following statements about GNP is FALSE? a. GNP measures the output of all Americans, b. GNP is based on GDP.
including those who produce goods outside of the country. c. GNP is smaller than GDP in the United States.
d. GNP is the most important measure of the

economys overall performance.
8. All of the following are basic sectors of the United States economy EXCEPT a. the income sector. b. the consumer sector. c. the government sector. d. the investment sector. 9. Which is the best measure of the nations income? a. GDP c. ROW b. GNP d. NNP
10. Which of the following statements about sectors and incomes is FALSE? a. The consumer sector receives its income in the form of disposable personal income. b. The business sector receives its income from depreciation and retained earnings. c. The foreign sector receives its income from borrowed savings. d. The government sector receives its income from taxes.
40 Section Quizzes
Name
Date
Class
13,
2
SCORE
DP AND CHANGES IN THE PRICE LEVEL
A
1. market basket 2. price index 3. real GDP 4. consumer price index 5. producer price index
B
a. b. c. d. e. f.
GDP not adjusted to remove the distortion of inflation price index of about 90,000 items in 364 categories GDP adjusted to remove the distortion of inflation a statistical series that can be used to measure changes in prices over time a representative selection of goods and services index of prices received by domestic producers for their output
6. What is the implicit GDP price deflator? a. a price index that measures price changes in GDP b. a measure designed to record the effects of inflation on consumers c. a price index that records the prices businesses receive d. a method used to calculate current GDP 7. To construct a price index, all of the following are needed EXCEPT a. a base year. b. the current inflation rate. c. a market basket. d. the price of market basket items.
8. Economists know it is important to track inflation because a. it distorts prices. b. it distorts statistics about overall economic
performance.
c. it makes prices rise.
d. it worries many people.
9. All of the following statements about real GDP are true EXCEPT a. real GDP reflects what the GDP would be if b. real GDP removes the distortion of inflation
the purchasing power of the dollar had not changed from what it was in its base year. c. real GDP is the same as current GDP. from GDP.
d. real GDP is the same as GDP in constant dollars.
10. Which of the following is the correct way to calculate real GDP? a. Divide constant GDP by the implicit GDP price deflator and then multiply by 100. b. Divide current GDP by the implicit GDP price deflator and then multiply by 100. c. Multiply current GDP by the implicit GDP price deflator. d. Multiply constant GDP by the implicit GDP price deflator.
Section Quizzes
41
Name
Date
Class
13,
3
SCORE
DP AND POPULATION
A
1. center of population 2. fertility rate 3. net immigration 4. population pyramid 5. dependency ratio
B
a. b. c. d. e.
point where the country would balance if it could be laid flat and if everyone weighed the same the net change in population caused by people moving into and out of the country average remaining life span of people who reach a given age number of births that 1,000 women are expected to undergo in their lifetime ratio based on the number of children and elderly for every 100 persons in the working age bracket of 18 through 64. bar graph that shows the breakdown of population by age and gender
f.
6. The official count of all people in the United States is called a. the urban population. b. the fertility rate. c. the rural population. d. the decennial census. 7. Since colonial times, the rate of growth of the United States population has a. steadily increased. b. steadily decreased. c. remained constant. d. varied frequently. 8. Which best describes the movement of the center of population of the United States? a. north to south b. south to north c. east to west d. west to east 9. All of the following factors affect population growth EXCEPT a. demographers. b. fertility rate. c. life expectancy. d. net immigration. 10. Since colonial times, the average size of a household in the United States has a. increased. b. decreased. c. remained the same. d. decreased and then increased.
42
Section Quizzes
Name
Date
Class
13,
4
SCORE
CONOMIC GROWTH
A
1. growth triangle 2. standard of living 3. tax base 4. capital-to-labor ratio 5. labor productivity
B
a. b. c. d. e. f.
total capital stock divided by the number of workers in the labor force incomes and properties that may be taxed table that shows annual compound rates of growth between selected periods of time quality of life based on the possession of necessities and luxuries that make life easier ratio of output produced per unit of labor input resources that can be replenished
6. Real GDP per capita is the preferred measure of economic growth over the long run because a. current GDP cannot be accurately measured. b. prices and the population change over time. c. the standard of living can be measured only d. labor productivity changes over time.
in the short run.
7. The United States experienced almost no growth in real GDP per capita a. between 1929 and 1939. b. between 1940 and 1970. c. during the 1970s. d. in the late 1990s.
8. Which of the following statements about economic growth is FALSE? a. Economic growth raises the standard of living. b. Economic growth helps solve domestic problems. c. Economic growth decreases the tax base. d. Economic growth helps foreign trade partners. 9. Which of the following factors affect economic growth? a. land b. capital c. labor d. all of the above 10. Increasing productivity results in a. increasing economic growth. c. stabilization of economic growth. b. decreasing economic growth. d. sporadic economic growth.
Section Quizzes
43
Name
Date
Class
14,
1
SCORE
USINESS CYCLES AND FLUCTUATIONS
A
1. business cycles 2. business fluctuations 3. peak 4. trough 5. recession
B
a. b. c. d. e. f.
point in the business cycle when real GDP stops increasing nonsystematic upturns and downturns of real GDP point in the business cycle when real GDP stops decreasing severe economic state with high unemployment, acute shortages, and excess manufacturing capacity period during which real GDP declines for two quarters in a row, or six consecutive months systematic upturns and downturns of real GDP
6. What are the two phases of the business cycle? a. peak and trough c. depression and expansion
known as
b. depression and recession d. recession and expansion
7. A severe recession with high unemployment, acute shortages, and excess manufacturing capacity is a. a trend line. c. a trough. b. a depression. d. a business fluctuation.
8. Which of the following factors did NOT contribute to the Great Depression? a. disparity in the distribution of income b. easy and plentiful credit c. massive government spending for d. the global economy
wartime goods
9. All of the following factors contribute to business cycles EXCEPT a. capital spending. b. business fluctuations. c. inventory adjusting. d. industrial innovation. 10. The index of leading indicators a. predicted the Great Depression. c. is used to predict changes in business cycles. b. is completely reliable. d. was designed to detect external shocks.
44
Section Quizzes
Name
Date
Class
14,
2
SCORE
NEMPLOYMENT
A
1. unemployment rate 2. frictional unemployment 3. structural unemployment 4. cyclical unemployment 5. technological unemployment
B
a. b.
results from changes in the weather or changes in the demand for certain products occurs when a fundamental change in the operations of the economy reduces the demand for workers and their skills number of unemployed persons divided by the total number of persons in the civilian labor force unemployment caused by workers who are between jobs unemployment directly related to swings in the business cycle occurs when workers with less skills, talent, or education are replaced by machines that do their jobs
c. d. e. f.
6. When a construction worker cannot work because of a winter snowstorm, he is a. cyclically unemployed. b. structurally unemployed. c. seasonally unemployed. d. frictionally unemployed. 7. A telephone receptionist loses his job when a computerized voice mail system is installed at his office. He is a. seasonally unemployed. b. frictionally unemployed. c. cyclically unemployed. d. technologically unemployed. 8. An assembly line worker in an automobile plant is laid off during a recession. She is a. seasonally unemployed. b. frictionally unemployed. c. cyclically unemployed. d. technologically unemployed. 9. The unemployment rate understates employment conditions for all of the following reasons EXCEPT a. some workers are between jobs for one reason or another. b. some people who worked in high-paying jobs may be working in minimum-wage jobs that they do
not want.
c. some people who worked in full-time jobs may be working in part-time jobs that they do not want. d. some people may have become too frustrated or discouraged to look for work in the past four weeks. 10. To an economist, full employment is reached when the unemployment rate drops below a. 1 percent. b. 2.5 percent. c. 3.5 percent. d. 4.5 percent.
Section Quizzes
45
Name
Date
Class
14,
3
SCORE
NFLATION
A
1. price level 2. deflation 3. creeping inflation 4. galloping inflation 5. hyperinflation
B
a. b. c. d. e. f.
intense form of inflation that can go as high as 100 to 300 percent per year the relative magnitude of prices at one point in time an increase in the general price level a decrease in the general price level inflation in the range of 500 percent a year and above inflation in the range of 1 to 3 percent per year
6. To calculate the inflation rate, economists a. divide the change in the price level by the ending price level and divide by 100. b. divide the change in the price level by the ending price level and multiply by 100. c. divide 100 by the change in the price level. d. divide the change in the price level by the beginning price level and multiply by 100. 7. All of the following are theories regarding the cause of inflation EXCEPT a. government deficit. b. wage-price spiral. c. cost-pull. d. excessive monetary growth. 8. An economist who attributes inflation to no single group is holding to the a. demand-pull theory of inflation. b. cost-push theory of inflation. c. wage-price spiral theory of inflation. d. excessive monetary growth theory of inflation. 9. According to the excessive monetary growth theory of inflation, extra money in the economy is spent,
leading to a
a. wage-price effect. c. demand-pull effect.
b. cost-push effect. d. government deficit effect.
10. All of the following are consequences of inflation EXCEPT a. the dollar buys less. b. speculation increases. c. interest rates decrease. d. the distribution of income is altered.
46
Section Quizzes
Name
Date
Class
14,
4
SCORE
OVERTY AND THE DISTRIBUTION OF INCOME
A
1. Lorenz curve 2. poverty guidelines 3. welfare 4. food stamps 5. workfare
B
a. b.
government-issued coupons that can be redeemed for food economic and social programs that provide regular assistance from the government or private agencies because of need program that requires welfare recipients to provide labor in exchange for benefits graph that illustrates how much the actual distribution of income varies from an equal distribution tax that would make cash payments to certain groups below the poverty line annual dollar amounts used to evaluate the money income that families and unrelated individuals receive
c. d. e. f.
6. If all families received exactly the same income, the Lorenz curve would appear as a. an upward sloping curve. b. a diagonal line. c. a downward sloping curve. d. a horizontal line.
7. Which of the following is NOT a reason for income inequality? a. economic growth b. education c. wealth d. discrimination 8. To an economist, an individual is living in poverty if a. his or her income is below a certain level. b. he or she is uneducated. c. he or she has difficulty finding work. d. his or her abilities are below average. 9. About how many Americans are currently living in poverty? a. less than 1 million b. between 1 and 15 million c. between 15 million and 30 million d. more than 30 million 10. The income gap has widened since 1980 for all of the following reasons EXCEPT a. a structural change in the economy that changed from goods production to service production. b. a growing gap between well-educated and poorly-educated workers. c. a growth in monopoly power. d. declining unionism.
Section Quizzes 47
Name
Date
Class
15,
1
SCORE
T HE FEDERAL RESERVE SYSTEM

A
1. member bank 2. Federal Open Market Committee 3. bank holding company 4. currency 5. coins
B
a. b. c. d. e. f.
makes decisions about the growth of the money supply and the level of interest rates commercial banks that are members of, and hold stock in, the Fed metallic forms of money paper component of the money supply corporation that owns one or more banks gives the Fed the authority to extend truth-inlending disclosures
6. The Fed is owned by a. member banks. c. all banks. 7. Which banks are members of the Fed? a. all state banks c. some state banks and all national banks
b. the federal government. d. the people of the United States. b. some state banks and some national banks d. all state banks and all national banks
8. Which one of the following is NOT part of the Federal Reserve System? a. the Board of Governors b. the Federal Open Market Committee c. the Federal Advisory Council d. the Comptroller of the Currency 9. The Fed is responsible for all of the following EXCEPT a. regulating holding companies. b. supervising foreign banks in the United States. c. approving bank mergers. d. regulating credit unions. 10. The Fed provides all of the following services EXCEPT a. overseeing the activities of the b. check clearing.
Treasury Department.
c. enforcing consumer legislation.
d. maintaining currency and coins.
48
Section Quizzes
Name
Date
Class
15,
2
SCORE
M ONETARY POLICY
A
1. monetary policy 2. reserve requirement 3. excess reserves 4. discount rate 5. margin requirements
B
a. b. c. d. e.
rule stating that a percentage of every deposit be set aside as legal reserves the interest the Fed charges on loans to financial institutions credit rules pertaining to loans for specific commodities or purposes minimum deposits left with a stockbroker to be used as down payments to buy other securities the expansion and/or contraction of the money supply in order to influence the cost and the availability of credit legal reserves in excess of the reserve requirement
f.
6. When a bank keeps $12 from a $100 deposit as legal reserves, it is using a. the Federal Reserve System. b. a fractional reserve system. c. a legal reserve system. d. a fractional deposit system. 7. What does a bank use to make loans? a. excess reserves c. legal reserves b. reserve requirements d. member bank reserves
8. All of the following actions by the Fed would promote an easy money policy EXCEPT a. increasing the reserve requirement. b. buying government securities. c. lowering the discount rate. d. announcing that it anticipates adopting an
easy money policy.
9. All of the following actions by the Fed would promote a tight money policy EXCEPT a. increasing the reserve requirement. b. selling government securities. c. having an official testify to Congress that a d. lowering the discount rate.
tight money policy is likely.
10. All of the following are tools of monetary policy EXCEPT a. selective credit controls. b. moral suasion. c. tight money controls. d. open market operations.
Section Quizzes
49
Name
Date
Class
15,
3
SCORE
M ONETARY POLICY, BANKING,

AND THE ECONOMY
A
1. prime rate 2. quantity theory of money 3. real rate of interest 4. M1 5. M2
B
a. b. c.
the market rate of interest minus the rate of inflation the best or lowest interest rate commercial bankers charge their customers represents the components of the money supply that most closely conform to moneys role as a store of value changes in the supply of money affect the general level of prices creating extra money to offset deficit spending represents the components of the money supply that most closely match moneys role as a medium of exchange
d. e. f.
6. The quantity theory of money holds that excessive increases in the monetary supply a. must keep pace with inflation. b. increase interest rates. c. lead to inflation. d. decrease interest rates. 7. The dilemma faced by the Fed when considering monetary policy is the choice between a. inflation and interest rates. b. inflation and monetizing the debt. c. interest rates and reserves. d. monetizing the debt and interest rates. 8. At times the Fed monetizes the debt in order to a. keep inflation from rising. c. keep the deficit from rising. b. keep interest rates from rising. d. keep interest rates from falling.
9. The Fed remains largely independent from politics for all of the following reasons EXCEPT a. the Fed is privately owned by its member banks. b. members of the Board of Governors serve 14-year terms. c. the Fed sets interest rates with an eye towards the long-term health of the economy. d. the president and Congress appoint new members to vacant seats on the Board of Governors. 10. The Fed has defined different categories of money, M1 and M2, according to the moneys a. source. b. function. c. form. d. value.
50 Section Quizzes
Name
Date
Class
16,
1
SCORE
HE COST OF ECONOMIC INSTABILITY
A
1. stagflation 2. GDP gap 3. misery index 4. social costs 5. economic costs
B
a. b. c. d. e.
price of economic instability in human terms period of healthy growth and low inflation price of economic failures that waste the resources of the nation and its people period of stagnant growth combined with inflation difference between the actual GDP and the potential GDP that could be produced if all resources were fully employed sum of the monthly inflation and unemployment rates
f.
6. Which is an example of the uncertainty caused by economic instability? a. A politician is reelected. b. A consumer delays a purchase. c. A manufacturer increases output. d. An economist measures the GDP gap. 7. The social costs of economic instability include all of the following EXCEPT a. stagflation. b. wasted resources. c. political instability. d. crime and damage to family values.
8. Which of the following statements is FALSE? a. A healthy economy helps the country deal with its social problems. b. Economic instability is at the root of all social problems. c. Economic instability can lead to reduced spending on social programs. d. A healthy economy helps people feel more certain about the future. 9. Economists measure the cost of economic instability with a. the misery index. b. the GDP gap. c. constant GDP. d. both a and b 10. Economic instability wastes all of the following EXCEPT a. human resources. b. natural resources. c. tax revenues. d. capital resources.
Section Quizzes
51
Name
Date
Class
16,
2
SCORE
M ACROECONOMIC EQUILIBRIUM
A
1. aggregate supply curve 2. aggregate demand curve 3. macroeconomic equilibrium 4. downward 5. upward
B
a. b. c. d. e.
slope of the aggregate supply curve the level of real GDP consistent with a given price level slope of the aggregate demand curve shows the quantity of real GDP that would be purchased at various price levels total value of goods and services that all firms would produce in a specific period of time at various price levels shows the amount of real GDP that could be produced at various price levels
f.
6. Macroeconomic equilibrium is a. determined by the intersection of the supply curve and the demand curve. b. determined by the aggregate supply curve. c. determined by the intersection of the aggregate supply curve and the aggregate demand curve. d. determined by the aggregate demand curve. 7. What effect would a decrease in production costs for all firms have on the aggregate supply curve? a. The curve would level off. b. The curve would shift to the right. c. The curve would shift to the left. d. The curve would not change. 8. What effect would a decrease in consumer savings have on the aggregate demand curve? a. The curve would level off. b. The curve would shift to the right. c. The curve would shift to the left. d. The curve would not change. 9. The aggregate demand curve has the slope it does because a. it must intersect the aggregate supply curve. b. people are willing to purchase less at higher c. there is a single money supply of a fixed size
in the economy at any one time. prices. d. the market tends toward equilibrium.
10. All of the following would cause aggregate supply to increase EXCEPT a. an increase in labor productivity. b. an increase in interest rates. c. the development of new technologies. d. a decrease in government regulation.
52
Section Quizzes
Name
Date
Class
16,
3
SCORE
TABILIZATION POLICIES
A
1. fiscal policy 2. Keynesian economics 3. monetarism 4. Laffer curve 5. supply-side economics
B
a. b. c. d. e. f.
set of actions designed to lower unemployment by stimulating aggregate demand policies designed to stimulate output and lower unemployment by increasing production federal governments attempt to stabilize the economy through taxing and government spending programs that automatically trigger benefits if changes in the economy threaten peoples incomes hypothetical relationship between federal tax rates and tax revenues doctrine that places primary importance on controlling the money supply to stabilize the economy
6. All of the following are elements of the Keynesian economic framework EXCEPT a. the consumption function. b. the multiplier. c. the Laffer curve. d. the accelerator. 7. All of the following are related to demand-side policies EXCEPT a. fiscal policy. b. monetarism. c. Keynesian economics. d. the output-expenditure model. 8. Those who favor supply-side policies would tend to support the government playing a. an expanded role in the economy. b. a reduced role in the economy. c. no role in the economy. d. a role in monetary policies only. 9. Unemployment insurance and federal entitlement programs are two examples of a. supply-side policy. b. monetarism. c. wage-price controls. d. automatic stabilizers. 10. Which of the following policies would likely be favored by a monetarist? a. increasing the money supply at a steady rate determined by growth in real GDP and productivity b. increasing government spending to offset a reduction in spending in the investment sector c. lowering business tax rates to provide an incentive for businesses to produce more d. deregulating industries to minimize the governments role in the economy
Section Quizzes
53
Name
Date
Class
16,
4
SCORE
CONOMICS AND POLITICS
A
1. Council of Economic Advisers 2. discretionary fiscal policy 3. passive fiscal policy 4. structural fiscal policy 5. political economics
B
a.
three-member group that reports on economic developments and recommends strategies to the president policy that does not require a new or special action to take effect term for economics in the 1800s policy that someone must choose to implement policy put in operation to strengthen the economy in the long run describes political concern for economic effects
b. c. d. e. f.
6. The use of discretionary fiscal policy has declined for all of the following reasons EXCEPT a. the relatively short duration of recessions. b. government gridlock. c. Congressional budget caps have limited federal spending. d. the government usually knows of upcoming recessions far in advance. 7. The United States relies most on which of the following policies? a. passive fiscal policies b. structural fiscal policies c. discretionary fiscal policies d. monetary policy 8. All of the following describe economists EXCEPT a. economists have different backgrounds and experiences. b. economists are sharply divided into competing schools of thought with little overlap of ideas and
beliefs. c. economists sometime seem to offer conflicting advice. d. economists are continually seeking new answers to new problems.
9. Which is the best description of the role of the Council of Economic Advisers? a. report economic developments and b. carry out monetary policy
propose strategies c. implement presidential economic policies
d. keep the public informed about economic issues
10. A president might ignore the recommendations of professional economic advisers in order to a. avoid an unpopular decision. b. adhere to the principles of political economics. c. avoid participating in economic politics. d. maintain presidential monetary authority.
54
Section Quizzes
Name
Date
Class
17,
1
SCORE
A BSOLUTE AND COMPARATIVE

ADVANTAGE
A
1. exports 2. imports 3. absolute advantage 4. comparative advantage 5. international trade
B
a. b. c. d. e. f.
limit placed on the quantities of a product that can be imported goods and services that one country buys from other countries a countrys ability to produce a product relatively more efficiently than another country goods and services that a country produces and then sells to other countries a countrys ability to produce more of a given product than another country exchange of goods and services among the nations of the world
6. The basis for international trade stems from a. absolute advantage. c. bartering.
b. the differences in production costs from one

country to another.
d. the similarity in production costs from one

country to another.
7. The United States imports a. thousands of dollars in products each year. c. billions of dollars in products each year.
b. millions of dollars in products each year. d. trillions of dollars in products each year.
8. Which of the following is proof that international trade is beneficial? a. the concept of absolute advantage b. the concept of comparative advantage c. the fact that free nations choose to trade d. the fact that different regions in the United
States specialize in economic activities
9. The ability of a country to produce more of a given product is a. absolute advantage. b. comparative advantage. c. specialization. d. international trade. 10. The ability of a country to produce a good at a relatively lower opportunity cost is a. absolute advantage. b. comparative advantage. c. specialization. d. international trade.
Section Quizzes 55
Name
Date
Class
17,
2
SCORE
B ARRIERS TO INTERNATIONAL TRADE

A
1. tariff 2. dumping 3. protectionists 4. free traders 5. balance of payments
B
a. b. c. d. e. f.
people who favor few or no trade restrictions tax placed on imports to increase their price in the domestic market selling products abroad for less than it cost to produce them at home a deficit in the balance of payments people who favor trade barriers that protect domestic industries the difference between the money a country pays to, and receives from, other nations when it engages in international trade
6. All of the following are means to restrict international trade EXCEPT a. quotas. b. tariffs. c. trade deficits. d. import licenses. 7. The most frequent argument used to support trade barriers is that they a. promote national defense. b. promote infant industries. c. protect domestic jobs. d. keep American money in the United States.
8. Which of the following liberalized free trade among Canada, the United States, and Mexico in the 1990s? a. the Reciprocal Trade Agreements Act b. the General Agreement on Tariffs and Trade c. the World Trade Organization d. the North American Free Trade Agreement 9. All of the following were direct results of the 1930 Smoot-Hawley Tariff EXCEPT a. twenty-three countries signed the General Agreement on Tariffs and Trade. b. the price of many imported goods rose nearly 70 percent. c. other nations retaliated with similarly high tariffs. d. international trade nearly came to a halt. 10. In recent years international trade has been a. at a standstill. c. decreasing. b. flourishing. d. nonexistent.
56
Section Quizzes
Name
Date
Class
17,
3
SCORE
INANCING AND TRADE DEFICITS
A
1. foreign exchange rate 2. floating exchange rate 3. trade deficit 4. trade surplus 5. trade-weighted value of the dollar
B
a.
system under which the forces of supply and demand establish the value of one countrys currency in terms of another countrys currency system under which the price of one currency is fixed in terms of another occurs when the value of imported products exceeds the value of exported products index showing the strength of the dollar against a group of foreign currencies occurs when the value of exported products exceeds the value of imported products the price of one countrys currency in terms of another countrys currency
b. c. d. e. f.
6. Foreign exchange is necessary in international trade because a. each country has its own monetary system. b. the United States went off the gold standard. c. international trade is conducted in d. it prevents a devaluation of the currency.
foreign markets.
7. For most of the 1900s, the world depended on a. fixed exchange rates. c. the gold standard.
b. floating exchange rates. d. flexible exchange rates.
8. The trade-weighted value of the dollar explains that when the dollar is strong, a. the trade deficit decreases. b. the trade deficit is not affected. c. the trade deficit increases. d. international trade increases. 9. What problem is most directly associated with a trade deficit? a. devaluation of a nations currency b. unemployment in import industries c. inflation d. fixed exchange rates 10. Today, most economists view trade deficits as a. needing legislated exchange rate
adjustments to correct. c. needing legislated tariffs to correct.
b. needing legislated quotas to correct. d. needing no legislation because they are largely
self-correcting.
Section Quizzes
57
Name
Date
Class
18,
1
SCORE
T HE SPECTRUM OF ECONOMIC SYSTEMS

A
1. socialism 2. communism 3. capitalism 4. Great Depression 5. efficiency
B
a. b. c. d.
evidence of the instability of capitalism economic system in which the means of production are privately owned main advantage of capitalism economic system in which the government owns and runs the majority of the basic productive resources political and economic framework where all property is collectively owned and labor is organized for the common advantage of the community what determines prices under capitalism
e.
f.
6. What is a major advantage of socialism? a. It is more efficient than capitalism. c. It results in low production costs.
b. More people share in the benefits of society. d. It is free from economic instability.
7. All of the following are disadvantages of socialism EXCEPT a. it is normally less efficient than capitalism. b. taxes are generally higher in socialist countries. c. socialism ignores the production of many d. special interests often become entrenched and
public goods. hold great political influence.
8. A major disadvantage of capitalism is that it a. ignores poor people and the less productive
members of society. c. relies on supply and demand to set prices.
b. provides for too much individual freedom. d. answers the basic economic questions in a
decentralized manner.
9. All of the following are disadvantages of communism EXCEPT a. fear of unemployment and inadequate b. few individual freedoms.
social services.
c. little incentive to innovate and produce.
d. inefficient centralized planning.
10. All of the following are advantages of communism EXCEPT a. the equality of workers wages. b. public goods and services are provided to
everyone.
c. the lack of uncertainty in career choices, job

placement, and job security.
d. consumers needs are satisfied.
58
Section Quizzes
Name
Date
Class
18,
2
SCORE
HE RISE AND FALL OF COMMUNISM
A
1. Five-Year Plan 2. collectivization 3. Gosplan 4. perestroika 5. storming
B
a. b. c.
fundamental restructuring of the Soviet economy and government a comprehensive, centralized economic plan designed to achieve rapid industrialization practice of rushing production at the end of the month to make up for the slower pace at the beginning of the month the forced common ownership of all agricultural, industrial, and trading enterprises small peasant farms collected into a single unit for joint operation the central planning authority in the former Soviet Union
d. e. f.
6. Who led the revolution that overthrew the Russian government in 1917? a. Joseph Stalin b. Vladimir Ilyich Lenin c. Mikhail Gorbachev d. Boris Yeltsin 7. Lenin introduced his New Economic Policy (NEP) to a. industrialize the Soviet Union. c. reintroduce some capitalist methods.
my under
b. collectivize Soviet agriculture. d. organize a Five-Year Plan.
8. In 1928 the Soviet Union underwent a forced transformation from an agricultural to an industrial econoa. the Gosplan. c. perestroika. b. the Five-Year Plan. d. the Soviet Plan.
9. All of the following led to the collapse of the Soviet economy EXCEPT a. a lack of worker incentives. b. a reliance on production quotas. c. inadequate supply of consumer goods. d. the introduction of a market economy. 10. Who attempted to restructure the Soviet Unions economy through his policy of perestroika? a. Vladimir Ilyich Lenin b. Joseph Stalin c. Mikhail Gorbachev d. Boris Yeltsin
Section Quizzes
59
Name
Date
Class
18,
3
SCORE
T HE TRANSITION TO CAPITALISM
A
1. privatization 2. Solidarity 3. black market 4. Great Leap Forward 5. vouchers
B
a. b. c. d. e. f.
Polish labor union established by Lech Walesa in 1980 Chinas second Five-Year Plan forced common ownership of all agricultural, industrial, and trading enterprises certificates given or sold at very low prices and then exchanged for shares of privatized companies the conversion of state-owned factories and property to private ownership market in which entrepreneurs and merchants sell goods illegally
6. All of the following are problems with capitalism EXCEPT a. a system of privatization must be developed. b. communist ruling classes must have their political power solidified. c. the threat of economic instability must be confronted. d. workers must learn to live with a new set of incentives. 7. In Poland, Hungary, and the Czech Republic, the transition to privatization was facilitated a. by the military. b. by holding free elections. c. with aid from the United States. d. by using vouchers. 8. All of the following countries are currently involved in the transition to capitalism EXCEPT a. Russia. b. Czech Republic. c. Cuba. d. Chile. 9. What factor accelerated the move toward capitalism in Mexico? a. the Great Leap Forward b. Solidarity c. NAFTA d. privatization 10. Which statement best describes the current role of capitalism in China? a. China is acting in a capitalist manner by privatizing industries and introducing market reforms. b. The Chinese government is allowing experiments in capitalism. c. China has had a capitalist economy since 1949. d. The Chinese government has forbidden any capitalist activities.
60
Section Quizzes
Name
Date
Class
18,
4
SCORE
HE VARIOUS FACES OF CAPITALISM
A
1. keiretsu 2. infrastructure 3. collateral 4. transparency 5. Asian Tigers
B
a. b. c. d. e. f.
property or other security used to guarantee repayment of a loan requiring a large amount of capital per person a tightly knit group of Japanese firms governed by an external board of directors Hong Kong, Singapore, Taiwan, and South Korea network of public goods necessary to support a large population term for making business deals visible to everyone
6. All of the following have contributed to Japans rapid economic growth in the 1970s and 1980s EXCEPT a. intense worker loyalty. b. the ability and willingness to develop c. a high cost of living. 7. During the 1990s Japan experienced a. unprecedented economic growth. c. expansion in the banking field.
new technology. d. a partially closed economy.
b. unprecedented industrial growth. d. stagnation and recession. b. Taiwan. d. Hong Kong.
8. Prior to 1997, the most successful Asian Tiger was a. Singapore. c. South Korea.
9. The Asian Tiger with the smallest per capita GNP is a. Singapore. b. Taiwan. c. South Korea. d. Hong Kong. 10. During the 1990s, Sweden a. had a purely socialist economy. c. retreated from socialism. b. had a purely capitalist economy. d. retreated from capitalism.
Section Quizzes
61
Name
Date
Class
19,
1
SCORE
CONOMIC DEVELOPMENT
A
1. developing countries 2. zero population growth 3. capital flight 4. International Monetary Fund 5. World Bank
B
a. b. c. d. e. f.
countries whose average per capita GNP is a fraction of that in more industrialized countries legal or illegal export of a nations currency and foreign exchange international corporation that makes loans and provides financial assistance to developing countries condition of balance between average number of births and deaths money borrowed from foreign banks and government advises all nations on monetary and fiscal policies
6. Which of the following statements about developing countries is FALSE? a. The international community helps developing countries because they believe it is their moral
responsibility to help those who have less than they do.
b. The international community helps developing countries to ensure a stable supply of raw materials. c. The international community helps developing countries to promote particular political ideologies. d. The international community helps developing countries to prevent international trade competition. 7. The gap in per capita income between industrialized and developing countries a. is the same as it has been for decades. b. is getting wider. c. is getting smaller. d. does not exist. 8. How is population an obstacle to economic development in developing countries? a. The populations of many developing nations are too small to support healthy economies. b. The populations of many developing nations are too large for available resources to support. c. The populations of many developing nations are growing too slowly. d. The populations of many developing nations are shrinking rapidly. 9. All of the following are barriers to economic development in developing nations EXCEPT a. limited natural resources. b. corruption in government. c. inadequate capital flight. d. war and its aftermath. 10. There are many developing countries in all of the following regions EXCEPT a. North America. b. Africa. c. South America. d. Asia.
62
Section Quizzes
Name
Date
Class
19,
2
SCORE
FRAMEWORK FOR DEVELOPMENT
A
1. primitive equilibrium 2. takeoff 3. high development 4. semidevelopment 5. transition
B
a. b. c. d. e. f.
final stage of economic development fourth stage of economic development second stage of economic development sixth stage of economic development third stage of economic development first stage toward economic development
6. A country overcomes the barriers of primitive equilibrium and begins rapid economic growth. In what
stage of economic development is the country?
a. semidevelopment c. takeoff
b. transition d. high development
7. In what stage of development is the United States economy? a. semidevelopment b. transition c. takeoff d. high development 8. Which of the following is a World Bank recommendation that applies to both industrialized and developCopyright by The McGraw-Hill Companies, Inc.
ing countries?
a. increase financial support c. invest in people
b. improve the climate for free enterprise d. revise macroeconomic policies
9. All of the following are actions industrialized nations could take to help developing nations EXCEPT a. reducing trade barriers. b. improving the climate for free enterprise. c. increasing financial support. d. supporting policy reforms. 10. All of the following are actions developing nations could take to help developing countries EXCEPT a. increasing financial support. b. investing in the education and welfare of people. c. lowering trade barriers to promote d. revising macroeconomic policies.
international trade.
Section Quizzes
63
Name
Date
Class
19,
3
SCORE
F
A
INANCING ECONOMIC DEVELOPMENT
B
1. expropriation 2. soft loans 3. free-trade area 4. customs union 5. cartel e. f. c. d. a. b.
group of producers or sellers who agree to limit the production or sale of a product to control prices agreement in which countries reduce trade barriers and tariffs among themselves loans that may never be paid back agreement in which countries abolish tariffs and trade restrictions among themselves and adopt uniform tariffs for nonmember countries taking over of foreign property without payment customs union consisting of European member nations
6. For a developing country to improve economically, it must have a. foreign investment. b. capital. c. loans from international agencies. d. soft loans from international agencies. 7. Which of the following economies developed by saving in a market economy? a. Chile b. Cuba c. China d. Hong Kong 8. The Organization of Petroleum Exporting Countries (OPEC) is an example of a. a free-trade area. b. a cartel. c. a customs union. d. an international agency. 9. All of the following are examples of development with external funds EXCEPT a. producing more than is consumed. b. attracting foreign private investment. c. obtaining assistance from industrialized d. borrowing from international agencies.
countries.
10. What is the worlds single largest market in terms of population and output? a. the European Union b. the Organization of Petroleum Exporting
Countries (OPEC)
c. North America
d. the United States
64
Section Quizzes
Name
Date
Class
20,
1
SCORE
HE GLOBAL DEMAND FOR RESOURCES
A
1. subsistence 2. nonrenewable resources 3. embargo 4. gasohol 5. aquifers
B
a. b. c. d. e. f.
fundamental economic problem state in which a population produces only enough to support itself underground water-bearing rock formations fuel that is a mixture of 90 percent unleaded gasoline and 10 percent ethanol resources that cannot be replenished once they are used restriction on the export or import of a commodity in trade
6. Which statement best summarizes Malthuss argument about population growth? a. Population increases at a constant rate while resources increase geometrically. b. Population increases geometrically while resources decrease at a constant rate. c. Population increases geometrically while resources increase at a constant rate. d. Population increases geometrically while resources decrease geometrically. 7. When did Malthus publish his Essay on the Principles of Population? a. 1698 b. 1798 c. 1898 d. 1998 8. All of the following are nonrenewable energy sources EXCEPT a. oil. b. coal. c. natural gas. d. solar power. 9. All of the following are renewable energy sources EXCEPT a. nuclear energy. b. hydroelectric power. c. biomass. d. solar energy. 10. In general, interest in renewable sources of energy has a. decreased in recent years. b. increased in recent years. c. been discouraged by the government. d. been encouraged by oil companies.
Section Quizzes
65
Name
Date
Class
20,
2
SCORE
CONOMIC INCENTIVES AND RESOURCES
A
1. glut 2. pollution 3. acid rain 4. pollution permits 5. pollution tax
B
a. b. c. d. e. f.
contamination of air, water, or soil by the discharge of poisonous or noxious substances substantial undersupply substantial oversupply mixture of water and sulfur dioxide that makes a mild form of sulfuric acid tax companies pay according to the amount of pollutants they release federal permits allowing public utilities to release pollutants into the air
6. In general, the price system a. helps promote the conservation of

scarce resources. c. must be regulated to conserve scarce resources.
b. is the reason resources are scarce. d. controls the scarcity of resources.
7. Which statement accurately describes the effects of deregulation of natural gas prices in the 1960s? a. The price of natural gas increased. b. Exploration and production of natural c. Demand for natural gas decreased and
supplies were conserved. gas increased. d. all of the above
8. In general, businesses pollute a. to damage the environment. c. to lower production costs.
b. to challenge government regulations. d. to protest pollution taxes.
9. Government efforts to reduce pollution include all of the following EXCEPT a. taxing pollution. b. legislating pollution standards. c. taking over polluting industries. d. issuing pollution permits. 10. According to an economist, what makes a resource scarce? a. It is nonrenewable. b. The quantity demanded exceeds the
quantity supplied.
c. It has a relatively high price.
d. It is polluted.
66
Section Quizzes
Name
Date
Class
20,
3
SCORE
A PPLYING THE ECONOMIC WAY

OF THINKING
A
1. National Council on Economic Education 2. cost-benefit analysis 3. modified free enterprise economy 4. capitalism 5. marginal analysis
B
a. b. c. d. e. f.
economic system that largely failed in the 1900s comparing the costs of an action with its benefits the dominant economic force in todays world important economic decision making tool that examines the costs and benefits at the margin organization dedicated to the improvement of economic literacy in the United States free enterprise economy with some government involvement
6. The National Council on Economic Education recommends that the last step in economic decision making
should be to
a. determine the personal or broad social goals to be obtained. b. select the economic concepts needed to understand the problem and use them to appraise the merits
of each solution. c. decide which alternative best leads to the attainment of the most goals or the most important goal. d. state the problem or issue.
7. All of the following statements about cost-benefit analysis are true EXCEPT a. firms use cost-benefit analysis when they make decisions to produce or purchase equipment. b. government agencies use cost-benefit analysis when they evaluate programs. c. individuals use cost-benefit analysis when they make decisions. d. economists use cost-benefit analysis when they decide what to write in textbooks. 8. Which economic system is best able to adapt to changing world conditions? a. capitalism b. communism c. socialism d. traditional
9. Many countries have discovered that it is necessary to modify pure capitalism to a. be ruthlessly efficient. b. be the only remaining economic system. c. satisfy economic goals. d. lessen its dominance in the world. 10. The study of economics is useful because a. it offers a lot of information. c. economists can earn good salaries. b. it helps people become better decision makers. d. it can help students make good grades.
Section Quizzes
67
ANSWER KEY
Chapter 1
Section 1.1
Chapter 3
Section 3.1
1. d 2. b 3. a 4. f 5. c
Section 1.2
6. b 7. a 8. d 9. b 10. c 6. b 7. b 8. a 9. d 10. a 6. a 7. b 8. d 9. d 10. a
1. a 2. e 3. b 4. d 5. f
Section 3.2
6. a 7. a 8. b 9. d 10. b 6. c 7. b 8. d 9. d 10. a 6. a 7. d 8. b 9. d 10. b
1. c 2. a 3. b 4. f 5. e
Section 1.3
1. e 2. c 3. a 4. b 5. d
Section 3.3
1. d 2. e 3. a 4. b 5. c
1. c 2. f 3. d 4. a 5. e
Chapter 2
Section 2.1
Chapter 4
Section 4.1
1. d 2. b 3. a 4. e
6. d 7. d 8. b 9. b 10. b 6. a 7. c 8. a 9. d 10. c 6. d 7. a 8. d 9. a 10. b
1. e 2. a 3. c 4. f 5. b
Section 4.2
6. a 7. b 8. d 9. a 10. d 6. c 7. b 8. b 9. b 10. c 6. a 7. c 8. d 9. b 10. c

69
5. f
Section 2.2
1. b 2. e 3. f 4. a 5. d
Section 2.3
1. b 2. a 3. d 4. f 5. c
Section 4.3
1. f 2. c 3. a 4. d 5. b
Section Quizzes
1. e 2. a 3. f 4. c 5. b
ANSWER KEY
Chapter 5
Section 5.1
Chapter 7
Section 7.1
1. d 2. a 3. c 4. b 5. f
Section 5.2
6. d 7. b 8. a 9. c 10. a 6. c 7. b 8. a 9. c 10. b 6. c 7. a 8. c 9. d 10. b
1. b 2. d 3. a 4. f 5. e
Section 7.2
6. a 7. c 8. c 9. b 10. d 6. a 7. d 8. d 9. c 10. c 6. c 7. b 8. a 9. d 10. d
1. f 2. a 3. e 4. d 5. c
Section 5.3
1. f 2. a 3. b 4. e 5. c
Section 7.3
1. a 2. d 3. b 4. f 5. e
1. d 2. b 3. e 4. a 5. c
Chapter 6
Section 6.1
Chapter 8
Section 8.1
1. e 2. b 3. a 4. f 5. d
Section 6.2
6. c 7. d 8. a 9. d 10. a 6. a 7. a 8. b 9. d 10. d 6. c 7. d 8. b 9. a 10. d
1. c 2. e 3. f 4. a 5. d
Section 8.2
6. d 7. d 8. b 9. b 10. a 6. a 7. b 8. d 9. b 10. c 6. b 7. d 8. b 9. a 10. c

Section Quizzes
1. a 2. c 3. f 4. c 5. d
Section 6.3
1. d 2. f 3. a 4. c 5. b
Section 8.3
1. e 2. b 3. c 4. d 5. a
70
1. c 2. a 3. f 4. d 5. b
ANSWER KEY
Section 8.4 Section 10.2
1. e 2. f 3. b 4. a 5. c
6. c 7. d 8. b 9. a 10. a
1. d 2. f 3. e 4. a 5. c
Section 10.3
6. c 7. a 8. c 9. a 10. b 6. b 7. d 8. c 9. c 10. d 6. c 7. b 8. b 9. c 10. d
Chapter 9
Section 9.1
1. c 6. d 7. d 8. c 9. b 10. c 6. b 7. c 8. d 9. a 10. b 6. d 7. c 8. a 9. b 10. a 6. c 7. b 8. c 9. a 10. c 2. d 3. a 4. f 5. b

Section 10.4
1. a 2. c 3. d 4. b 5. f
Section 9.2
1. a 2. c 3. e 4. f 5. b
1. c 2. e 3. a 4. d 5. b
Section 9.3
Chapter 11
Section 11.1
1. d 2. e 3. c 4. b 5. a
Section 9.4
1. e 2. f 3. c 4. d 5. b
Section 11.2
6. b 7. a 8. c 9. d 10. a 6. b 7. d 8. c 9. a 10. d 6. c 7. d 8. b 9. a 10. c
1. f 2. a 3. e 4. b 5. d
1. b 2. f 3. a 4. c 5. e
Section 11.3
Chapter 10
Section 10.1
1. f 6. b 7. b 8. d 9. a 10. d 2. d 3. b 4. e 5. a
1. b 2. f 3. a 4. e 5. d
Section Quizzes
71
ANSWER KEY
Chapter 12
Section 12.1 Section 13.4
1. c 6. d 7. d 8. c 9. a 10. d 6. d 7. b 8. a 9. c 10. c 6. c 7. a 8. c 9. d 10. b 2. d 3. b 4. a 5. e
6. b 7. a 8. c 9. d 10. a
1. b 2. d 3. f 4. a 5. c
Section 12.2
Chapter 14
Section 14.1
1. d 2. f 3. c 4. b 5. a
Section 12.3
1. f 2. b 3. a 4. c 5. e
Section 14.2
6. d 7. b 8. c 9. b 10. c 6. c 7. d 8. c 9. a 10. d 6. d 7. c 8. c 9. c 10. c

1. b 2. d 3. f 4. e 5. a
1. c 2. d 3. b 4. e 5. f
Section 14.3
Chapter 13
Section 13.1
1. b 6. a 7. d 8. a 9. b 10. c 6. a 7. b 8. b 9. c 10. b 6. d 7. b 8. c 9. a 10. b 2. d 3. f 4. a 5. e

Section 14.4
1. c 2. b 3. a 4. f 5. d
Section 13.2
1. d 2. f 3. b 4. a 5. d
6. b 7. a 8. a 9. d 10. c
1. e 2. d 3. c 4. b 5. f
Section 13.3
Chapter 15
Section 15.1
1. a 2. d 3. b 4. f 5. e
72
1. b 2. a 3. e 4. d 5. c
6. a 7. c 8. d 9. d 10. a
Section Quizzes
ANSWER KEY
Section 15.2
Chapter 17
6. b 7. a 8. a 9. d 10. c 6. c 7. a 8. b 9. d 10. b
Section 17.1
1. e 2. a 3. f 4. b 5. d
Section 15.3
1. d 2. b 3. e 4. c 5. f
Section 17.2
6. b 7. c 8. c 9. a 10. b 6. c 7. c 8. d 9. a 10. b 6. a 7. a 8. c 9. a 10. d
1. b 2. d 3. a 4. f 5. c
1. b 2. c 3. e 4. a 5. f
Section 17.3
Chapter 16
Section 16.1
1. d 2. e 3. f 4. a 5. c
Section 16.2
6. b 7. a 8. b 9. d 10. c 6. c 7. b 8. b 9. c 10. b 6. c 7. b 8. b 9. d 10. a 6. d 7. d 8. b 9. a 10. a
1. f 2. a 3. c 4. e 5. d
Chapter 18
Section 18.1
1. f 2. d 3. b 4. c 5. a
Section 16.3
1. d 2. e 3. b 4. a 5. c
Section 18.2
6. b 7. c 8. a 9. a 10. d 6. b 7. c 8. b 9. d 10. c 6. b 7. d 8. c 9. c 10. a

73
1. c 2. a 3. f 4. e 5. b
Section 16.4
1. b 2. d 3. f 4. a 5. c
Section 18.3
1. a 2. d 3. b 4. e 5. c
1. e 2. a 3. f 4. b 5. d
Section Quizzes
ANSWER KEY
Section 18.4
Chapter 20
6. c 7. d 8. d 9. c 10. c
Section 20.1
1. c 2. e 3. a 4. f 5. d
1. b 2. e 3. f 4. d 5. c
Section 20.2
6. c 7. b 8. d 9. a 10. b 6. a 7. d 8. b 9. c 10. b 6. c 7. d 8. a 9. c 10. b
Chapter 19
Section 19.1
1. a 2. d 3. b 4. f 5. c
Section 19.2
6. d 7. b 8. b 9. c 10. a 6. c 7. d 8. d 9. b 10. a 6. b 7. d 8. b 9. a 10. a
1. c 2. a 3. d 4. f 5. e
Section 20.3
1. f 2. e 3. a 4. b 5. c
Section 19.3
1. e 2. b 3. f 4. c 5. d
1. e 2. c 3. b 4. d 5. a
74
Section Quizzes
Section Quizzes
Teachers Notes
75
Teachers Notes
76
Section Quizzes

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ECONOMICS: PRINCIPLES AND PRACTICES Section Quizzes

New York, New York

Woodland Hills, California

1 Economic Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Evaluating Economic Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Capitalism and Economic Freedom . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 Forms of Business Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Business Growth and Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Other Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sources of Government Revenue

Money and Banking

The Fed and Monetary Policy

1 Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 2 A Framework for Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 3 Financing Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

CARCITY AND THE SCIENCE OF ECONOMICS

7. What is the fundamental problem of economics? a. scarcity c. the factors of production

ASIC ECONOMIC CONCEPTS

b. have utility. d. never go out of style. b. a haircut d. a blow dryer

10. What is economic interdependence? a. peoples reliance on each other to provide

CONOMIC CHOICES AND DECISION MAKING B

c. Trade-offs lower the opportunity costs of an

d. Trade-offs occur when there are no opportunity

a. the time spent deciding to spend your money c. $35 in cash

b. make wise choices for political candidates. d. all of the above

Copyright by The McGraw-Hill Companies, Inc.

a. a traditional economy c. a market economy

b. a command economy d. a free enterprise economy

c. a hunter deciding where to hunt to provide

d. a worker deciding to leave his job early because

VALUATING ECONOMIC PERFORMANCE

b. The price of vegetables increases sharply in the

d. A man decides to quit working as a waiter and

c. A military dictator seizes control of a nations

d. An increase in property taxes funds a new high

APITALISM AND ECONOMIC FREEDOM

Copyright by The McGraw-Hill Companies, Inc.

c. Entrepreneurs pay high wages to their

d. Entrepreneurs start new businesses.

ORMS OF BUSINESS ORGANIZATION

Copyright by The McGraw-Hill Companies, Inc.

USINESS GROWTH AND EXPANSION

d. two or more firms that produce different

b. All multinationals are conglomerates. d. A multinational is often a conglomerate.

c. neighborhood clean-up campaigns.

d. lobbying for favorable business legislation.

b. less will be purchased at low prices than at

7. The demand curve is always a. upward sloping. b. downward sloping.

Copyright by The McGraw-Hill Companies, Inc.

c. The demand curve represents the various

d. It shows the demand for a product over time

ACTORS AFFECTING DEMAND

Copyright by The McGraw-Hill Companies, Inc.

6. Total expenditures are determined by a. multiplying the price of a product by the

b. measuring the elasticity of a product.

d. dividing the demand for the product by its price.

c. whether the purchase of the product requires

d. whether the product has utility.

b. the quantity supplied varies irregularly with

Copyright by The McGraw-Hill Companies, Inc.

b. the way marginal product changes as variable

OST, REVENUE, AND PROFIT MAXIMIZATION

Copyright by The McGraw-Hill Companies, Inc.

d. operate longer hours than a firm whose fixed

c. enable the government to use rationing.

d. provide ways for consumers to make decisions.

Copyright by The McGraw-Hill Companies, Inc.

b. producers to produce more and buyers to

b. producers to produce more and buyers to

T HE PRICE SYSTEM AT WORK