Economic Questions

Question 1

1. Describe in detail two things you might do to resolve a deficit in your budget.

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3,000 points

Question 2

1. In the expenditure approach to calculating GDP, GDP = ________. Finish the equation and provide a thorough definition of each variable.

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3,000 points

Question 3

1. Your investment advisor wants you to purchase an annuity that will pay you $25,000 per year for 10 years. If you require a 7% return, what is the most you should pay for this investment? Show all your work for full credit.

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3,000 points

Question 4

1. What is the importance of measuring per capita GDP?

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3,000 points

Question 5

1. In 2013, the US imported over $440 billion in goods from China. Why might this number not paint an accurate picture of US trade with China?

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3,000 points

Question 6

1. In what ways do countries benefit from trade?

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1,000 points (Extra Credit)

Question 7

1. Average propensity to consume refers to the

		dollars of income spent for current consumption.
		percentage of income saved.
		expenditures for the minimum necessities of life.
		percentage of income spent for current consumption.
		fact that people with higher incomes spend more for the necessities of life.

1,000 points

Question 8

1. After the United States introduces a tariff in the market for widgets, the price of widgets in the United States will:

		decrease.
		increase.
		remain the same.
		change in an indeterminate manner.

1,000 points

Question 9

1. The income statement is specific to

		one point in time.
		a specific period of time.
		last year.
		next year.
		none of these.

1,000 points

Question 10

1. Which of the following is included in the calculated gross domestic product?

		Mr. Kelly buys a used lawn mower from his neighbor Mr. Templeton.
		A local ice cream store sells $17,000 worth of cones and sundaes on July 4th.
		Suzanne buys a love seat and chair for $85 at the yard sale on the corner.
		Farmer Fred sells his second tractor to his son.

1,000 points

Question 11

1. Henry has $2,500 for a down payment and thinks he can afford monthly payments of $400. If he can finance a vehicle with an 8%, 3-year loan, what is the maximum amount Henry can spend on the car?

		$12,765
		$14,400
		$14,079
		$15,265
		$16,879

1,000 points

Question 12

1. Raising a tariff on vitamin E would:

		reduce imports of vitamin E.
		increase U.S. consumption of domestically produced vitamin E.
		decrease total U.S. consumption of vitamin E.
		all of the above.

1,000 points

Question 13

1. The first step in the auto-buying process should be

		test drive several cars.
		begin negotiations.
		consider alternative buying strategies.
		decide whether to trade in your used car or to sell if yourself.
		analyze how much car you can afford.

1,000 points

Question 14

1. Imposing a quota on metal softball bats shipped into the United States would likely:

		increase the price of the bats but decrease the total quantity of bats purchased in the United States.
		increase the price of the bats and the total quantity of bats purchased in the United States.
		leave the price of the bats unchanged but decrease the quantity purchased in the United States.
		leave both the price of bats and the quantity purchased in the United States unchanged.

1,000 points

Question 15

1. The main reason why one nation trades with another is to

		save its natural resources from rapid depletion.
		benefit from the advantages of specialization.
		eliminate the danger of retaliation from other nations.
		improve political alliances.

1,000 points

Question 16

1. Consumption is the purchase of goods and services by:

		households.
		government.
		business firms.
		foreign buyers.

1,000 points

Question 17

1. The more frequently a bank compounds interest, ____ will be.

		the higher the stated interest rate
		the lower the stated interest rate
		the higher the APY
		the lower the APY
		a and c

1,000 points

Question 18

1. Which of the following is true about underground economies?

		Underground economies represent a greater percentage of GDP in developing countries than in developed countries.
		Higher taxation and labor regulation are reasons why we see more underground activities.
		The underground economy includes legal activities that are concealed for the purpose of tax evasion.
		all of the above

1,000 points

Question 19

1. Funds in a ____ must remain on deposit for a stated time period in order to avoid an interest penalty.

		certificate of deposit
		U.S. Treasury bill
		checking account
		mutual fund
		passbook savings

1,000 points

Question 20

1. The largest single expenditure component of US GDP is:

		consumption.
		investment.
		government purchases.
		net exports.

1,000 points

Question 21

1. Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?

		$115,000
		$140,000
		$142,200
		$165,000
		$167,200

1,000 points

Question 22

1. Allowing free trade can lead to greater output because of the principle of:

		absolute advantage.
		rule of 70.
		comparative advantage.
		scarcity.

1,000 points

Question 23

1. The Annual Percentage Yield is the same as the

		compound rate.
		real rate.
		simple rate.
		effective rate.
		nominal rate.

1,000 points

Question 24

1. Final goods or services used to compute GDP refer to:

		the sum of all wages paid to laborers.
		the factors of production used to produce output.
		goods and services purchased by the ultimate users.
		the value of outstanding shares of stock of manufacturing firms.

1,000 points

Question 25

1. Enforcement of property rights is likely to result in:

		more incentives to invest.
		lower rates of economic growth.
		political instability.
		corruption.

1,000 points

Question 26

1. Becky graduated with a master degree in Personal Financial Planning. After working two years in a small financial planning firm, Becky earns $60,000 annually and saves $10,000 a year. What is her average propensity to consume?

		16.7%
		25.5%
		75.7%
		83.3%
		95.5%

1,000 points

Question 27

1. Which of the following goals is stated in a way that is most useful for developing a financial plan?

		Make a $12,000 down payment on an automobile in 4 years
		Retire with a comfortable lifestyle in 25 years
		Buy a $125,000 house in 6 years
		Purchase a $40,000 boat
		Join the country club when retired in 20 years

1,000 points

Question 28

1. GDP equals $5 trillion. If consumption equals $3.5 trillion, investment equals $1 trillion, and government spending equals $1.5 trillion, then:

		exports exceed imports by $1 trillion.
		imports exceed exports by $1 trillion.
		net exports equal zero.
		exports exceed imports by $1.5 trillion.

1,000 points

Question 29

1. The balance sheet describes a family's wealth

		at a certain point in time.
		as an annual summary.
		as a time period less than one year.
		at a future time.
		none of these

1,000 points

Question 30

1. Which of the following is not part of GDP?

		the value of a new home built and purchased during the year
		the value of shares of Microsoft stock bought and sold during the year
		the value of long distance telephone services rendered during the year
		the value of new furniture produced during the year

1,000 points

Question 31

1. Net worth is measured by

		bank card balances.
		house mortgage balances.
		amount owed on an automobile loan.
		assets minus liabilities.
		insurance premium.

1,000 points

Question 32

1. In some rural regions of the United States, residents harvest much of their food supplies directly from nature by hunting, fishing, and gathering. With regard to these subsistence activities:

		GDP will overestimate the true value of the nation's production of final goods and services.
		GDP will underestimate the true value of the nation's production of final goods and services only when the income approach is used.
		GDP will correctly estimate the true value of the nation's production of final goods and services.
		GDP will underestimate the true value of the nation's production of final goods and services.

1,000 points

Question 33

1. A cash budget should help you to

		achieve your short-term financial goals.
		implement disciplined spending.
		eliminate impulse spending.
		allocate funds to savings and investments.
		do all of these

1,000 points

Question 34

1. Which of the following is an example of an intermediate good?

		a pair of jeans sold by a clothing retailer
		cloth sold to a suit manufacturer
		a share of Wal-Mart stock
		a used Ford Mustang sold from one neighbor to another

1,000 points

Question 35

1. Government purchases, under the expenditure approach to GDP accounting, includes all of the following except:

		welfare payments.
		salaries of senators.
		fighter jets purchased by the government.
		the military payroll.

1,000 points

Question 36

1. GDP equals $5 trillion. If consumption equals $3.5 trillion, investment equals $1 trillion, and government spending equals $1.5 trillion, then:

		exports exceed imports by $1 trillion.
		imports exceed exports by $1 trillion.
		net exports equal zero.
		exports exceed imports by $1.5 trillion.

1,000 points

Question 37

1. Elena purchased a stamp collection for $5,000 thirty years ago. If it appreciated 8% annually, what is it worth today?

		$ 17,000
		$ 36,400
		$ 50,313
		$123,023
		$150,000

1,000 points

Question 38

1. Assume that Germany can produce 10 million bottles of beer or 4 million bottles of vodka. Further assume that Russia can produce 7 million bottles of beer or 3 million bottles of vodka. As a result, which of the following is true with regard to absolute and comparative advantage?

		Germany has the absolute advantage in beer and the comparative advantage in beer.
		Germany has the absolute advantage in beer and the comparative advantage in vodka.
		Russia has the absolute advantage in beer and the comparative advantage in beer.
		Russia has the absolute advantage in beer and the comparative advantage in vodka.

1,000 points

Question 39

1. Which of the following would be an appropriate savings vehicle if you expected interest rates to fall over the next few months?

		money market deposit account
		money market mutual fund
		certificate of deposit
		Series EE US savings bond
		a and b

1,000 points

Question 40

1. If interest on a savings account is compounded semiannually, the effective rate of interest will be

		higher than the nominal rate.
		lower than the nominal rate.
		the same as the simple rate.
		equal to the nominal rate.
		lower than the simple rate.

1,000 points

Question 41

1. Higher interest rates on certificates of deposit are associated with

		higher account balances.
		shorter maturities.
		longer maturities.
		a and b
		a and c

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