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Midterm - Summer 2013

1. (Points: 5)
	The worst recession since World War II started in which year? a. 1953 b. 1957 c. 1973 d. 1981 e. 2007
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2. (Points: 5)
	Each of the following was an effect of cheap or free land during the 19th century except a. a high marriage rate. b. a high birth rate. c. a high rate of immigration. d. a rapid rate of technological development. e. a high rate of migration from the farms to the cities.
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3. (Points: 5)
	The mechanical reaper was invented by a. Eli Whitney. b. The Marsh brothers. c. John Deere. d. Cyrus McCormick.
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4. (Points: 5)
	The New Deal was the economic program of a. Herbert Hoover. b. Franklin D. Roosevelt. c. Dwight D. Eisenhower. d. Lyndon B. Johnson. e. Ronald Reagan.
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5. (Points: 5)
	Comparing the United States economy in 1900 with our economy today, all of the following are still present EXCEPT a. large agricultural surpluses. b. an abundance of entrepreneurial ability. c. "cutting edge" technological progress. d. a positive balance of trade with the rest of the world.
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6. (Points: 5)
	Who promised "two cars in every garage and a chicken in every pot?" a. Herbert Hoover b. Franklin D. Roosevelt c. Dwight D. Eisenhower d. John F. Kennedy e. Ronald Reagan
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7. (Points: 5)
	The most accurate appraisal of the American economy early in the 21st century would be that we a. had the largest economy in the world with no major economic problems. b. had the largest economy in the world, but were faced with some major economic problems. c. did not have the largest economy in the world, and had no major economic problems. d. did not have the largest economy in the world and did face some major economic problems.
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8. (Points: 5)
	Under President Eisenhower the problem of inflation a. got a lot worse. b. got a little worse. c. stayed about the same. d. got a little better. e. got a lot better.
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9. (Points: 5)
	Statement I. President Ronald Reagan said that if we cut tax rates, people would have more incentive to work, output would rise, and inflation would subside. Statement II. President Reagan presided over the worst recession we have had since World War II. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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10. (Points: 5)
	The transcontinental railroads were completed in the 25 years a. before the Civil War. b. after the Civil War. c. after 1890. d. after the 20th century began.
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11. (Points: 5)
	Cyrus McCormick and Eli Whitney were important in the technology of a. steel. b. automobiles. c. agriculture. d. oil. e. chemicals.
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12. (Points: 5)
	The Great Depression began in a. the second half of 1929. b. the middle of 1930. c. early 1932. d. march 1933. e. may 1937.
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13. (Points: 5)
	Each of the following is an example of an economic resource except a. land. b. money. c. capital. d. labor.
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14. (Points: 5)
	Which statement is true? a. Productive efficiency has never been achieved. b. The U.S. economy achieved productive efficiency from mid-1997 through mid-2001. c. The U.S. economy achieved productive efficiency from 1980 to 1997. d. Our economy generally attains productive efficiency.
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15. (Points: 5)
	The central fact of economics is a. production. b. distribution. c. equilibrium. d. efficiency. e. scarcity.
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16. (Points: 5)
	Statement I. Resources are often referred to as "the means of production." Statement II. Capital is a resource. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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17. (Points: 5)
	Referring to a production possibilities curve and the goods being compared, depict the economic event. The bubonic plague (Black Death) in the 1300s killed one-third of Europe's population (capital goods vs. consumer goods). a. A movement from a point inside the curve to a point on or near the curve b. A movement from a point on or near the curve to a point inside the curve c. A shift in the entire curve to the right (outward) d. A shift in the entire curve to the left (inward) e. A movement along the curve
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18. (Points: 5)
	"The value of the next best alternative" defines a. the Law of Increasing Costs. b. the economic problem. c. allocative efficiency. d. opportunity cost.
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19. (Points: 5)
	John Maynard Keynes noted that a. we could print all the money we want and still have scarcity. b. "to secure the greatest amount of pleasure with the least possible outlay should be the aim of all economic effort." c. the general notion that scarcity is due to not having enough money is an illusion. d. we could print all the money we want and still have scarcity AND the general notion that scarcity is due to not having enough money is an illusion. e. we could print all the money we want and still have scarcity AND "to secure the greatest amount of pleasure with the least possible outlay should be the aim of all economic effort."
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20. (Points: 5)
	Statement I. Entrepreneurial ability is not a resource. Statement II. Virtually all of our resources are buried under the ground. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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21. (Points: 5)
	Assuming that a society always operates on its production possibilities curve, an outward shift of the curve implies a. economic growth has occurred. b. the society is making more efficient use of its available resources. c. consumer demand has increased. d. the present value of capital resources has increased.
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22. (Points: 5)
	Economic growth can be shown by ____________________ production possibilities curve. a. an outward shift of the b. an inward shift of the c. a movement from one point to another along the d. a movement to a point inside the
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23. (Points: 5)
	Which of the following is an example of opportunity cost? a. The income that could have been earned by working full-time instead of going to college. b. The decline in the grades of a student athlete that occurs because she decides to spend more time practicing sports than on her academic work. c. The value of other things you could have done with the same time and money it cost you to go to the movies. d. The value of the next-best bundle of goods and services that could have been produced instead of using those resources to put astronauts on the moon. e. All of the choices are examples of opportunity cost.
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24. (Points: 5)
	A small economy produces only pizzas and jeans. If resources are used inefficiently in the economy, a. it will be possible to produce more pizzas without decreasing the production of jeans. b. the economy will be operating at a point on its production possibilities curve. c. the economy will be operating at a point outside its production possibilities curve. d. it will not be possible to produce more jeans or pizzas.
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25. (Points: 5)
	Private ownership of most of the means of production is common to a. capitalism and communism. b. capitalism and fascism. c. capitalism and socialism. d. fascism and communism.
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26. (Points: 5)
	Which of the following is NOT a characteristic of the capitalist form of economic organization? a. Central planning. b. A reliance on decentralized market processes for resource allocation purposes. c. Private ownership of productive resources. d. All of the choices are true.
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27. (Points: 5)
	What is a mixed economy? a. An economy in which production and distribution is done by both a private sector and a public sector. b. An economy that has a mixture of resources. c. An economy run by representatives of different political parties. d. An economy that produces a blend of various products rather than concentrating on a single product.
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28. (Points: 5)
	Which statement is true? a. Our economic system leads to an equitable distribution of income. b. One of the basic functions of our government is to transfer some income from the rich and the middle class to the poor. c. The price mechanism and the definition of economics are incompatible. d. None of the statements are true.
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29. (Points: 5)
	Mao Tse-tung was responsible for a. both the Great Leap Forward and the Cultural Revolution. b. neither the Great Leap Forward nor the Cultural Revolution. c. the Great Leap Forward, but not the Cultural Revolution. d. the Cultural Revolution, but not the Great Leap Forward.
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30. (Points: 5)
	When our resources are NOT allocated efficiently, we have _______________. a. answered the basic economic questions b. a market failure c. a government failure d. market equity
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31. (Points: 5)
	Externalities consist of ___________________. a. only external costs b. only external benefits c. both external costs and external benefits
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32. (Points: 5)
	Which statement was coined by Adam Smith? a. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. b. The factory owner, by paying his workers meager wages, is able to use this surplus to buy more capital goods. c. The foundation of our economic system is socialist ownership of the means of production in the form of state property and collective farm and cooperative property. d. None of these statements were coined by Adam Smith.
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33. (Points: 5)
	A person will do more good pursuing his own self-interest than if he consciously set out to promote the public good was the view of a. Karl Marx. b. John Maynard Keynes. c. Mikhail Gorbachev. d. Adam Smith.
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34. (Points: 5)
	A socialist economy is characterized by a. an extensive reliance on markets to allocate final goods and services. b. an extensive reliance on the profit motive to govern resource allocation decisions. c. elimination of the problem of scarcity since all basic necessities are available to all citizens. d. public ownership of productive resources. e. high levels of unemployment and inflation.
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35. (Points: 5)
	"From each according to his ability; to each according to his needs" is from a. The Communist Manifesto. b. The Capitalist Manifesto. c. The Socialist Manifesto. d. The Fascist Manifesto.
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36. (Points: 5)
	When the market price is lower than the equilibrium price, there is a. a surplus. b. a shortage. c. both a shortage and a surplus. d. neither a shortage nor a surplus.
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37. (Points: 5)
	According to the law of demand, the a. quantity demanded of a good does not vary with price. b. quantity demanded of a good varies directly with price. c. quantity demanded of a good is negatively related to its price. d. quantity demanded depends on the quantity supplied.
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38. (Points: 5)
	Shortages are associated with price _______; surpluses are associated with price _______. a. floors; ceilings b. ceilings; floors c. equilibrium; equilibrium d. None of these choices are correct.
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39. (Points: 5)
	If a price ceiling is set above the equilibrium price, then a. prices will fall as soon as the ceiling price is abolished. b. prices will remain the same (not rise) when the price ceiling is lifted. c. equilibrium price and ceiling prices are two totally different concepts and hence do not affect each other. d. prices will begin to rise rapidly when the price ceiling is lifted.
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40. (Points: 5)
	Which statement is true? a. Rent control is a price floor. b. A usury law is a price floor. c. The minimum wage law is a price floor. d. None of these statements are true.
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41. (Points: 5)
	Rent control is a form of price _____ and is responsible for housing _____. a. floor, shortages b. floor, surpluses c. ceiling, shortages d. ceiling, surpluses
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42. (Points: 5)
	If the price system is allowed to function without interference and a surplus occurs, quantity demanded will _____________ and quantity supplied will _____________ until the price falls to its equilibrium. a. rise, rise b. fall, fall c. rise, fall d. fall, rise
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43. (Points: 5)
	At equilibrium, each of these is true except a. quantity demanded equals quantity supplied. b. the price has no tendency to change. c. market price equals equilibrium price. d. there may be a shortage or a surplus.
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44. (Points: 5)
	At equilibrium, if quantity supplied is 16, quantity demanded a. is less than 16. b. is 16. c. s more than 16. d. cannot be found without more information.
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45. (Points: 5)
	If market price is above equilibrium price, a. quantity demanded is greater than quantity supplied. b. quantity supplied is greater than quantity demanded. c. quantity supplied is equal to quantity demanded.
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46. (Points: 5)
	If the government set a price ceiling of 25 cents for a loaf of bread, the most likely consequence would be a. a surplus of bread. b. no one would go hungry. c. most Americans would put on weight. d. a shortage of bread.
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47. (Points: 5)
	Which of these relations is correct? a. APC - APS = 1 b. MPC + MPS = 1 c. APC + MPC = 1 d. 1 + MPC = MPS
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48. (Points: 5)
	When the C line is above the 45-degree line, a. there is dissaving and consumption is greater than disposable income. b. there is dissaving and consumption is less than disposable income. c. there is positive saving and consumption is greater than disposable income. d. there is positive saving and consumption is less than disposable income.
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49. (Points: 5)
	If disposable income and consumption in an economy are equal, a. consumers must be incurring debt. b. consumption must also be equal to saving. c. household saving must be zero. d. None are true.
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50. (Points: 5)
	Statement I. APC + APS = 1. Statement II. MPC + MPS = 1. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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51. (Points: 5)
	According to the permanent income hypothesis, households will tend to react to a temporary tax cut by a. assuming the new tax level will be permanent. b. saving most of the additional disposable income. c. increasing consumption sharply in response to the higher disposable income. d. temporarily increasing their marginal propensity to consume.
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52. (Points: 5)
	If the APC is .7, we save a. 3 percent of our income. b. 7 percent of our income. c. 30 percent of our income. d. 70 percent of our income.
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53. (Points: 5)
	An increase in interest rates results in a. increased consumption and decreased savings. b. increased savings and decreased consumption. c. an increase in autonomous consumption. d. an increase in the durable goods expenditures.
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54. (Points: 5)
	At very low levels of disposable income, a. consumption is greater than disposable income. b. disposable income is greater than consumption. c. people save most of their incomes. d. consumption is negative.
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55. (Points: 5)
	At the point where C line crosses the 45-degree line, saving is a. positive. b. negative. c. zero. d. there is not enough information to know this.
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56. (Points: 5)
	The consumption function is associated with a. John Maynard Keynes. b. Karl Marx. c. Milton Friedman. d. Adam Smith. e. Thorstein Veblen.
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57. (Points: 5)
	Autonomous consumption is always a. positive. b. zero. c. negative.
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58. (Points: 5)
	A corporation is owned by its a. board of directors b. stockholders c. officers d. bondholders
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59. (Points: 5)
	Statement I. Inventory investment can be negative. Statement II. Inventory investment in the U.S. fluctuates a great deal from one year to the next. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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60. (Points: 5)
	In the U.S., gross investment is ___________ larger than net investment. a. always b. usually c. sometimes d. never
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61. (Points: 5)
	Statement I. The purchase of 100 shares of Apple Corporation stock adds directly to plant and equipment. Statement II. The purchase of 100 shares of Apple Corporation stock is not an investment, but merely a financial transaction. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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62. (Points: 5)
	During a recession, inventory investment a. goes up. b. is steady. c. goes down. d. is negative.
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63. (Points: 5)
	Each of these is a determinant of the level of I except the a. capacity utilization rate. b. margin rate. c. sales outlook. d. interest rate. e. expected profit rate.
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64. (Points: 5)
	Which of the following might be used to acquire capital? a. working less b. consuming more c. borrowing d. all the choices
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65. (Points: 5)
	The marginal efficiency of capital is another term for a. the expected profit rate. b. the expected interest rate. c. the expected efficiency of plant and equipment. d. the expected return on government investment projects.
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66. (Points: 5)
	If the going rate of interest were 10 percent and the expected profit rate were 18 percent, then the opportunity cost of a firm carrying out a $100,000 project for one year with its own funds would be a. 0. b. $8,000. c. $10,000. d. $18,000.
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67. (Points: 5)
	Economists define investment to include a. any increase in business inventories. b. the addition of cash to a savings account. c. the purchase of common or preferred stock. d. the purchase of any durable good, e.g., an automobile or a refrigerator.
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68. (Points: 5)
	Limited liability means that a. creditors have no legal claim on the personal assets of a proprietor. b. corporations cannot be sued. c. creditors have no legal claims. d. creditors have no legal claim on the personal assets of a corporate stockholder. e. corporations have a legal life independent of their owners and managers.
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69. (Points: 5)
	Each of the following is a basic economic role of the government except a. tax collection. b. spending money. c. regulation of the economy. d. owning most of the means of production.
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70. (Points: 5)
	In modern free enterprise economies, which of the following is not an economic role of government? a. Stabilization of national income, employment, and the price level b. Promotion and maintenance of competitive markets c. Altering the allocation of resources to provide for public demands efficiently d. Providing a reasonably certain legal, social, and business environment for stable economic growth e. Planning the production and distribution of most economic goods
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71. (Points: 5)
	Which of the following is a transfer payment? a. The president's salary b. Veterans' benefits c. The NASA budget d. Schoolteachers' salaries e. Provision of national parks
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72. (Points: 5)
	The money that pays Social Security benefits is raised by a. taxes that workers pay. b. taxes that employers pay. c. taxes that both workers and employers pay. d. the personal income tax.
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73. (Points: 5)
	The essential difference between sales and excise taxes is that a. sales taxes apply to a wide range of products, while excise taxes apply only to a select group of products. b. excise taxes apply to a wide range of products, while sales taxes apply only to a select group of products. c. sales taxes are consumption taxes, while excise are not. d. excise taxes are consumption taxes, while sales are not.
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74. (Points: 5)
	If your taxable income rises from $35,000 to $45,000, and the taxes you pay rise from $12,000 to $15,000, your marginal tax rate is a. 10 percent. b. 20 percent. c. 30 percent. d. 40 percent. e. Impossible to determine.
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75. (Points: 5)
	Statement I: Most Americans pay more in Social Security tax than in personal income tax. Statement II: A tax on cigarettes is more regressive than a tax on long distance phone calls. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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76. (Points: 5)
	The federal budget is prepared and passed by a. the president. b. Congress. c. the president and Congress. d. neither the president nor Congress.
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77. (Points: 5)
	Which statement is true? a. State and local governments are expected to provide more and more services while their tax bases are limited. b. State and local governments are expected to provide less and less services while their tax bases are relatively unlimited. c. Public education has traditionally been the role of the federal government. d. None of these statements is true.
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78. (Points: 5)
	In 2010, a person earning $300,000 would pay Social Security tax on a. none of her income. b. all of her income. c. nearly all of her income. d. less than half of her income.
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79. (Points: 5)
	The most important source of state tax revenue is the _____ tax. a. property b. income c. excise d. sales
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80. (Points: 5)
	Until 2004, the largest exporter in the world was? a. Japan b. Germany c. United States d. China
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81. (Points: 5)
	Statement I: The International Monetary Fund (IMF) was set up as a lender of last resort to discourage member nations from devaluating their currency. Statement II: The World Bank was created in the same year as the IMF for the purpose of making long-term, low-interest loans to developing countries, mainly to build highways, bridges, dams, power generators, and water supply systems. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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82. (Points: 5)
	Modern, highly productive economies a. have virtually no specialization. b. have a small degree of specialization. c. have a substantial degree of specialization. d. have a high degree of specialization.
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83. (Points: 5)
	Statement I: In modern economies, virtually everyone specializes. Statement II: A family that tries to be self-sufficient will have a relatively low standard of living. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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84. (Points: 5)
	Statement I: The most potent argument against globalization is that workers in poorer countries are exploited to produce goods that are shipped to relatively rich countries. Statement II: Most economists are against globalization. a. Statement I is true and statement II is false. b. Statement II is true and statement I is false. c. Both statements are true. d. Both statements are false.
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85. (Points: 5)
	According to Nobel Prize winning economist Joseph Stiglitz a. over the years the IMF has markedly changed. b. the IMF was founded on the belief that markets often worked badly. c. the IMF now champions the free market as the best way to run an economy. d. All of the choices are true.
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86. (Points: 5)
	GDP = C + I + G + Xn. From the outbreak of World War I (1914) until the 1970s, if Xn were not included our GDP would be a. higher. b. about the same. c. lower.
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87. (Points: 5)
	We run a trade ________ on goods and a trade _________ on services. a. deficit, deficit b. surplus, surplus c. surplus, deficit d. deficit, surplus
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88. (Points: 5)
	Net exports is a negative figure whenever a. a nation's exports of goods and services exceed its imports. b. a nation's imports of goods and services exceed its exports. c. inventories dwindle. d. gross savings is greater than net investment.
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89. (Points: 5)
	The NAFTA agreement affects our trade with a. Asia. b. North America. c. Africa. d. The OPEC nations. e. The European Common Market.
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90. (Points: 5)
	The basis for international trade is a. self-sufficiency. b. specialization. c. amassing national wealth at the expense of trading partners. d. maximizing your exports and minimizing your imports.

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