Economic Questions

Question 1 (Multiple Choice Worth 4 points)

(04.01 MC)

If a series of events results in a decrease in investments in U.S. businesses, what is the result on the U.S. economy?

Contraction

Expansion

Peak

Trough

Question 2 (Multiple Choice Worth 4 points)

(04.04 MC)

If the economy is in decline, and the Federal Reserve wants to encourage banks to lend to consumers, which step will the Fed likely take?

Encourage the sale of government securities.

Decrease the discount rate.

Increase the federal funds rate.

Raise the prime rate.

Question 3 (Multiple Choice Worth 4 points)

(04.01 MC)

The Great Depression was a period of high unemployment, poverty, and deflation. When the United States entered World War II, the government increased spending, resulting in inflation and decreased unemployment. Which of these characterizes the period of increased government spending?

Contraction

Expansion

Peak

Trough

Question 4 (Multiple Choice Worth 4 points)

(04.05 MC)


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Creative Commons Attribution-Share Alike 3.0 Unported

Which of the following statements best explains why the red bar goes up when the blue goes up?

Equivalent spending and taxing does not allow for debt reduction.

Higher spending than taxing results in a deficit, which contributes to more debt.

Higher taxing than spending results in a deficit, which contributes to more debt.

Higher taxing and higher spending result in more debt.

Question 5 (Multiple Choice Worth 4 points)

(04.02 MC)

Which of these is a natural monopoly?

Cell phone service

Computer repair

Package delivery service

Sewage treatment

Question 6 (Multiple Choice Worth 4 points)

(06.03 MC)

A free-trade agreement lowers restrictions on trucking across international borders. Which of the following would be a negative externality for the local environment?

Higher costs for domestic goods

Fewer imports of renewable resources

More water consumption

An increase in air pollution

Question 7 (Multiple Choice Worth 4 points)

(02.04 MC)

Why might a younger person invest in a more aggressive investment portfolio?

Because aggressive portfolios include a lot of healthy start-up companies

Because experts recommend starting an investment portfolio with riskier investments

Because there is a better chance to recuperate any losses over the course of her life

Because young people are generally less willing to take risks than older people

Question 8 (Multiple Choice Worth 4 points)

(04.05 MC)

Unemployment is rising, and the federal government wants to encourage job growth. Which of the following actions would be an appropriate fiscal policy?

Expand open-market operations

Increase spending on infrastructure projects

Lower discount rates

Raise taxes on small businesses

Question 9 (Multiple Choice Worth 4 points)

(06.02 LC)

A factory lays off workers during a recession. Which of the following would most likely feel a negative externality?

Competing businesses

Factory workers

Factory owners

Neighboring businesses

Question 10 (Multiple Choice Worth 4 points)

(06.01 MC)


© 2013 FLVS

Cardinal Comics produces graphic historical novels and retails them through local shops throughout the United States. The publisher maintains an in-house staff of editors and illustrators but contracts out writing, printing, and distribution. Its printer uses domestically recycled paper but imports ink and much of its printing equipment from overseas. Segment D of the circular flow diagram above reflects which part of this scenario?

Cardinal Comics retails novels through local shops.

Publisher maintains an in-house staff of editors.

Printer imports ink and printing equipment.

Consumers pay sales tax on purchase of novels.

Question 11 (Multiple Choice Worth 4 points)

(02.06 HC)


© 2013 FLVS

After creating the 2013 budget for her hamburger restaurant, Holly finds business is down. She decides to increase advertising to 15 percent of her budget. Which of these could reflect the change in Holly's new budget?

Misc 0%; Rent 25%

Supplies 20%; Rent 25%

Misc 0%; Supplies 20%

Utilities 5%; Repairs 0%

Question 12 (Multiple Choice Worth 4 points)

(04.02 LC)

Which of these keeps prices below equilibrium?

Minimum price

Price floor

Minimum-wage laws

Rent-control laws

Question 13 (Multiple Choice Worth 4 points)

(01.07 MC)

Which of these illustrate the divisibility of money?

Carlos uses five dollars in cash and $10.45 in credit to pay for dinner.

Esperanza exchanges a one dollar bill for four quarters.

Jose carries coins and bills in his wallet.

The one dollar bill in Mia's pocket stayed intact in the laundry.

Question 14 (Multiple Choice Worth 4 points)

(06.02 MC)

Tennessee Valley Authority (TVA) Sites
Red = water dams
Purple = nuclear power plants
Orange = fossil fuel power plants


Public Domain

Study the map above. Who would object to negative externalities related to the use of renewable and nonrenewable resources in the map?

Business owners forced to relocate when property is seized

Families who lose power during a storm

Local officials who collect taxes for energy usage

Workers who undergo training for new high-wage positions

Question 15 (Multiple Choice Worth 4 points)

(02.05 MC)

James wants to go on a trip to Italy this month. The trip will cost five thousand dollars. He has saved three thousand dollars. Which of these actions is least financially risky?

Put the rest of his expenses on a credit card

Take out a bank loan to finance the trip

Delay travel until he has saved the rest of the money

Use money from his retirement account

Question 16 (Multiple Choice Worth 4 points)

(04.04 MC)

Economic forecasters predict a long period of job growth and consumer spending. The Federal Reserve is most likely to do which of the following to encourage this expansion?

Increase federal funds rate

Keep the discount rate low

Sell government securities

Maintain high reserve requirements

Question 17 (Multiple Choice Worth 4 points)

(04.03 LC)

What is the main function of the Federal Open Market Committee?

Extend loans to consumers.

Oversee administration of financial regulations.

Set monetary policy to promote economic growth.

Write laws governing finance and trade.

Question 18 (Multiple Choice Worth 4 points)

(06.03 MC)

The federal government approves additional funding for food resources in Africa. Which of the following would be a potential negative externality for the global environment?

Demands on food resources in Africa increase.

Incidents of starvation-related illnesses decrease.

Local economies benefit from increasing number of aid workers.

Other countries follow suit and shift funds from conservation to food.

Question 19 (Multiple Choice Worth 4 points)

(04.02 MC)


Public Domain

What may happen if the line "Artificial Price" were above the intersection of the supply and demand lines?

Artificial monopoly

Natural monopoly

Shortage

Surplus

Question 20 (Multiple Choice Worth 4 points)

(04.05 MC)

Imagine the federal government has a national debt of $10.2 trillion. Congress's budget for the coming year includes a spending projection of $4.2 billion. Tax revenue projects $3.8 billion. Which fiscal policy should Congress adopt to avoid increasing the national debt?

Cut interest rates

Decrease spending

Lower taxes

Raise reserve requirements

Question 21 (Multiple Choice Worth 4 points)

(02.04 MC)

As an eighth grader, Marliss wins an art competition, and her prize is one thousand dollars. She wants to invest the money for her college fund. Which of these would be a good option?

A savings bond

An IRA

Futures

Stocks

Question 22 (Essay Worth 4 points)

(06.05 HC)


© 2013 FLVS

Look at the circular flow diagram. Choose and define an environmental issue. Using the diagram as a guide, explain how the environmental issue you chose affects the relationship between household and government.