Deck 14: (AP) Economics: Economics

Question 1

In the United States, which of the following forms of taxation currently represents the largest source of tax revenue for the federal government?

A)Property tax
B)Sales tax
C)Corporate income tax
D)Personal income tax

Answer 1

Personal income tax

Question 2

Which of the following is a policy tool of the Federal Reserve?

A)Raising or lowering income taxes
B)Increasing or decreasing unemployment benefits
C)Buying or selling government securities
D)Increasing or decreasing government spending

Answer 2

Buying or selling government securities

Question 3

Which of the following defines the equilibrium price for a product in a competitive market?

A)The price that most consumers are willing to pay for the product
B)The price at which business makes the maximum revenue
C)The price that is equal to the total cost of producing and marketing the product
D)The price at which the quantity supplied is the same as the quantity demanded

Answer 3

The price at which the quantity supplied is the same as the quantity demanded

Question 4

Which of the following best describes the primary role of an economic system?

A)To respond to market failure
B)To address equity concerns to improve fairness
C)To determine the allocation of limited resources
D)To protect domestic producers from foreign competition

Question 5

Which of the following actions does the United States federal government commonly take to finance a budget deficit?

A)Printing more money
B)Imposing import quotas
C)Borrowing from the public
D)Expanding public-works projects

Question 6

Country X and Country Y have similar populations and natural resources. Which of the following best explains why Country X would have a higher rate of economic growth than Country Y?

A)Country X invests more in education.
B)Country X imports more consumer goods.
C)Country X places higher taxes on businesses.
D)Country X pays larger salaries to government officials.

Question 7

How do federal income taxes and transfer payments, such as unemployment compensation, affect the distribution of personal income in the United States after taxes and transfers?

A)Federal income taxes make the distribution of income more equal, but transfers make it less equal.
B)Federal income taxes make the distribution of income less equal, but transfers make it more equal.
C)Both federal income taxes and transfers make the distribution of income less equal.
D)Both federal income taxes and transfers make the distribution of income more equal.

Question 8

Which of the following actions is an example of an improvement in human capital?

A)Carlos hires three workers for his business.
B)Frank's Furniture trains employees to use computers.
C)Tasha applies for a job as an engineer.
D)The city of Upland builds a new nursing home.

Question 9

Which of the following best explains why domestic industries are often successful in convincing Congress to place tariffs on certain imported products?

A)The revenue generated from the tariffs is less than the revenue from taxes on products produced by the industry.
B)The revenue generated from the tariffs is greater than the benefits of the tariffs to the industry.
C)The cost to any one consumer is small, and the benefits to the industry are large.
D)The benefit to any one consumer is large, and the cost to the industry is small.

Question 10

An increase in the rate of inflation will result in a decrease in which of the following?

A)Federal and state income taxes
B)The purchasing power of money
C)The level of prices
D)Interest rates

Question 11

Two countries are currently trading with each other. The countries agree to remove all trade restrictions on products traded between them. Which of the following is most likely to decrease?

A)The variety of goods available
B)The prices of imported goods
C)The quality of goods available
D)The amount of imported goods

Question 12

The owners of Grass Cutters, a lawn-mowing service, decide to purchase four additional mowers because demand for their services is increasing. The owners make this decision projecting that the output, total costs, and total revenues of their business will change in which of the following ways?Output Total Costs Total Revenues

A)Increase Increase Increase
B)Increase Increase Decrease
C)Increase Decrease Increase
D)Decrease Decrease Increase

Question 13

An entrepreneur is considering spending money on research to develop a more efficient way to produce a product. What is the most important factor in the decision on whether or not to spend this money?

A)The size of the plant needed to produce the product
B)The number of competitors producing a similar product
C)The increase in profit expected from producing the product
D)The degree to which consumers consider the product a necessity

Question 14

Which of the following best describes the amount of a product that people will continue to buy at a given price?

A)People will buy as many units as they can afford.
B)People will buy another unit unless its benefit is zero.
C)People will buy another unit as long as its benefit is positive.
D)People will buy another unit as long as its benefit is greater than its cost.

Question 15

If consumers from Country X greatly increase their purchases of products from Country Y, the value of these two countries' currencies relative to one another will change in which of the following ways?

A)The values of both countries' currencies will increase.
B)The value of Country X's currency will increase; the value of Country Y's currency will decrease.
C)The value of Country X's currency will decrease; the value of Country Y's currency will increase.
D)The values of both countries' currencies will decrease.

Question 16

Willie loves ice-cream cones. He has found a store that sells ice-cream cones at a bargain price of $0.50 each. He has just eaten two of these cones but has decided not to buy a third one. Which of the following statements best explains the zconomic principle at work in Willie's decision not to buy a third cone?

A)Consumers weigh the additional costs and benefits before buying more goods.
B)Consumers spend freely to increase business activity so that the price of goods will drop.
C)Consumers save more by buying larger quantities.
D)Consumers buy more at lower prices.

Question 17

Which of the following has been most important in reducing poverty over time?

A)Taxes
B)Economic growth
C)International trade
D)Government regulations

Question 18

Which of the following fiscal policy combinations would a government most likely follow to stimulate economic activity when the economy is in a severe recession?

A)Increasing both taxes and spending
B)Increasing taxes and decreasing spending
C)Decreasing taxes and increasing spending
D)Decreasing both taxes and spending

Question 19

Jennifer receives a 2 percent increase in wages this year. The inflation rate is 4 percent. Which of the following is most likely to happen to Jennifer's financial situation?

A)She will have more income to spend and greater purchasing power.
B)She will have more income to spend and less purchasing power.
C)Her cost of living and her purchasing power will decrease.
D)Her cost of living and her purchasing power will increase.

Question 20

The most basic measure of the money supply in the United States consists of which of the following?

A)Gold certificates, silver certificates, and precious metals
B)Treasury bills, Treasury notes, and Treasury bonds
C)Credit card accounts, charge accounts, and savings accounts
D)Checking account deposits, paper currency, and coins

Question 21

What happens to most of the money deposited in checking accounts at a commercial bank?

A)It is used to pay the bank's expenses.
B)It is loaned to other bank customers.
C)It is kept in the bank's vault until depositors withdraw the funds.
D)It is paid to owners of the bank as return on their investment.

Question 22

Which of the following groups would most likely be hurt financially by unexpected inflation?

A)People who are borrowing money at fixed rates of interest
B)Purchasers of land who are speculating on price increases
C)Retirees who are living on a fixed income
D)Workers with a cost-of-living adjustment clause in their contracts

Question 23

Which of the following is the best measure for comparing the material standard of living among people in different nations?

A)Imports and exports per capita
B)Real gross domestic product per capita
C)Consumer price index
D)Real interest rates

Question 24

Suppose that the federal government initially has a balanced budget. Which of the following changes in government tax revenues and expenditures over time will definitely lead to an increase in the national debt?Tax Revenue Expenditures

A)Increase No change
B)Increase Decrease
C)Decrease Increase
D)No change Decrease

Question 25

International trade and specialization most often lead to which of the following?

A)An increase in a nation's productivity
B)A decrease in a nation's economic growth in the long term
C)An increase in a nation's import tariffs
D)A decrease in a nation's standard of living

Question 26

Which of the following is an example of capital for a firm that produces wind?powered electricity?

A)The wind that sets the windmill in motion
B)The businessperson who established the firm
C)The windmill that produces the electrical power
D)The workers who build and repair windmills

Question 27

Barter requires that each of two parties want the good or service that the other party is offering. Which of the following reduces the need for barter?

A)Money
B)Insurance
C)Employment
D)Manufacturing

Question 28

If there were a decrease in the worldwide production of oil, which of the following would most likely occur?

A)Global consumption of oil would increase.
B)Economic growth in oil-importing countries would decrease.
C)International spending on research into alternative energy sources would decrease.
D)Global exploration for new oil reserves would decrease.

Question 29

What is most likely to happen when consumers increase their purchases of goods and services?

A)Businesses will increase production, and workers will receive more income.
B)Businesses will increase production, and workers will receive less income.
C)Businesses will decrease production, and workers will receive more income.
D)Businesses will decrease production, and workers will receive less income.

Question 30

Which of the following best describes why the price of wheat might rise following a poor wheat harvest?

A)The demand for wheat has decreased.
B)The demand for wheat has increased.
C)The supply of wheat has decreased.
D)The supply of wheat has increased.

Question 31

Which of the following is the most likely economic explanation for why a local restaurant that is busy and has many loyal customers could go out of business?

A)The restaurant is spending too little on advertising.
B)The restaurant is paying too little for rent and food.
C)The restaurant has more customers than it needs.
D)The restaurant's costs are higher than its revenues.

Question 32

Auto dealers begin to offer new cars for sale with no down payment required and an interest rate of 0 percent. Which of the following is most likely to occur?

A)Sales of new cars will decrease.
B)More consumers will buy new cars.
C)More people will use public transportation.
D)Prices of used cars will increase.

Question 33

A profit-maximizing company that manufactures sports clothing wants to spend $25 million to have a professional athlete appear in commercials for its clothing. Which of the following is the best economic reason for the company to spend the money?

A)The company sells $25 million worth of clothing per year.
B)The company could cover the cost of the athlete's contract with profits from previous years.
C)The additional revenue generated by the commercials would be greater than the additional costs of producing the clothing.
D)The additional revenue generated by the commercials would be greater than $25 million plus the costs of producing the additional clothing.

Question 34

Because Country A has no domestic sources of wood, it imports all its wood from wood-producing countries. If the price of wood in wood-producing countries rises substantially, which of the following is most likely to occur?

A)Country A will import more wood to meet rising demand.
B)Country A will impose a tariff on wood imports.
C)Housing prices in Country A will increase as wood imports become more expensive.
D)Profits in other wood-producing countries will increase because of increased exports to Country A.

Question 35

Other than wages, what are two issues commonly addressed by collective bargaining between labor unions and employers?

A)Amount of stock to issue and selection of union leaders
B)Corporate image and company location
C)Fringe benefits and work rules
D)Selection of corporate leaders and advertising

Question 36

Which of the following is true of people with poor credit histories?

A)They will earn higher rates of interest on savings accounts than people with good credit histories.
B)They will earn lower rates of interest on savings accounts than people with good credit histories.
C)They will be charged higher rates of interest on loans than people with good credit histories.
D)They will be charged lower rates of interest on loans than people with good credit histories.

Question 37

Recently, the hourly wage that parents are willing to pay babysitters increased dramatically. Higher pay will most likely cause which of the following changes in how babysitters divide their out-of-school time between babysitting and other activities?Time Spent Time SpentBabysitting on Other Activities

A)No change Decrease
B)Increase Decrease
C)Decrease No change
D)Increase Increase

Question 38

James borrows $10,000 from the bank. By the time the loan is repaid, James has paid the bank $10,400. What does the additional $400 represent?

A)Inflation rate
B)Purchasing power of money
C)Interest
D)Investment

Question 39

When people's incomes increase, the demand for roses and the price of roses are most likely to change in which of the following ways?Demand for Roses Price

A)Decrease Decrease
B)Decrease Increase
C)Increase Decrease
D)Increase Increase