Deck 9: An Overview of the National and International Economies

Question 1

What are the major sectors that make up the U.S. economy?

A) Businesses and households
B) Governments, households, and the international sector
C) Households, governments, and businesses
D) Consumers, producers, and world trade
E) The international sector, households, businesses, and governments

Answer 1

The international sector, households, businesses, and governments

Question 2

The stereotypical household of husband, wife, and two children accounts for ____ of all households in the United States.

A) less than 15%
B) 16-20%
C) 21-25%
D) 26-40%
E) more than 40%

Answer 2

less than 15%

Question 3

In 2011, U.S. consumption spending was approximately

A) $15 trillion.
B) $10 trillion.
C) $5 trillion.
D) $1 billion.
E) $800 billion.

Answer 3

$10 trillion.

Question 4

The largest percentage of households in the United States consist of

A) four persons.
B) two persons.
C) three persons.
D) one person.
E) seven or more persons.

Question 5

For clarity, economists usually group individual buyers and sellers into sectors. Which is not a component in the model?

A) Households
B) Government
C) Firms
D) Foreign Countries
E) Homeland Security

Question 6

In economics, one or more persons who occupy the same unit of housing are considered a(n)

A) household.
B) family.
C) business firm.
D) enterprise.
E) organization.

Question 7

A householder is defined as:

A) The group of individuals occupying a unit of housing
B) The oldest person in a family
C) The person in whose name the house or apartment is owned or rented.
D) Only owners of the property
E) The head of a household

Question 8

Macroeconomists tend to focus on

A) the operations of a particular producer.
B) international trade.
C) individual consumer behavior.
D) the national economy.
E) some regional economic segment of the United States.

Question 9

A household is defined as

A) families of two or more people.
B) employed people and their dependents.
C) one or more persons who occupy a unit of housing.
D) individuals who live in single-family homes.
E) families that include single people.

Question 10

A household may consist of

A) Related family members occupying a unit of housing
B) Unrelated individuals occupying a unit of housing
C) Two college students sharing an apartment
D) A family of three living in a two bedroom house
E) All of these

Question 11

Which of the following best characterizes a household?

A) A married couple holding joint title to their house
B) A child living with her parents
C) A college student leasing an apartment in her father's name
D) A worker living in his employer's home
E) A retired man living in his daughter's home

Question 12

What is a median?

A) An average
B) The most frequently occurring value in a set of data
C) A value above and below which an equal number of observations can be found
D) A mean value
E) A value occupying the central position between two extremes

Question 13

Which of the following constitutes a household?

A) A divorced woman living alone and supporting herself
B) A husband and wife and their two children sharing a condo
C) An unmarried couple who live together, sharing both income and expenses
D) A single woman renting an apartment
E) All of these

Question 14

The largest component of total spending in the U.S. economy is:

A) National Defense
B) Business Spending
C) Consumer Spending
D) Government Spending
E) War on Terrorism

Question 15

A household is defined as

A) a person, regardless of where he or she lives.
B) an immediate family, regardless of where they live.
C) an extended family, regardless of where they live.
D) one or more individuals living together in the same dwelling unit.
E) unrelated individuals living in the same country.

Question 16

Which of the following would not be considered a household?

A) A family of four living in a three-bedroom house
B) An unoccupied two-bedroom house that is for sale
C) A single male living in a condominium
D) Two college students sharing an apartment
E) A family of three renting a townhouse

Question 17

Which of the following does not constitute a consumption item?

A) A Toyota Prius
B) A calculator
C) An iPad
D) A tractor
E) All of these are consumption items

Question 18

Approximately how many households existed in the United States?

A) 309 million
B) 226 million
C) 120 million
D) 83 million
E) 62 million

Question 19

Consider these annual income figures of seven families: $37,000, $38,000, $37,000, $37,000, $39,000, $65,000, $39,000. What is the median value?

A) $41,714
B) $38,000
C) $37,000
D) $42,000
E) None of these

Question 20

The largest component of total spending in the U.S. economy is

A) consumption spending.
B) government spending.
C) producer spending.
D) business spending.
E) investment spending.

Question 21

The World Bank classifies countries as developing when they have a(n)

A) low rate of savings.
B) lack of infrastructure.
C) low per capita income.
D) low rate of population growth.
E) inequitable distribution of income.

Question 22

A sole proprietorship is a business form in which

A) the owner is protected against failure of the firm to pay its debt.
B) shareholders are the rightful owners of the company.
C) a government-issued charter has established its legal existence.
D) the owner enjoys unlimited liability and unlimited rights to all the profits.
E) the owner is prohibited from selling shares of stock.

Question 23

Which of the following is most characteristic of the corporate form of business?

A) Owners face unlimited liability.
B) Corporate earnings are not taxable.
C) A corporation is created by verbal agreement.
D) Owners are called partners.
E) A corporation is a legal entity.

Question 24

Which nation has the world's largest economy?

A) United States
B) China
C) Japan
D) Germany
E) Canada

Question 25

In economics, investment would include all of the following activities except the purchase of

A) an office.
B) tools.
C) stocks.
D) machinery.
E) a warehouse.

Question 26

Which of the following statements about industrial countries is true?

A) The economies of industrial countries do not depend on one another.
B) Powerful industrial countries can afford to ignore the economic policies of other countries.
C) The flow of funds from one industrial country to another is highly restricted.
D) Economic conditions in an industrial country are unique to that country and cannot spread to others.
E) The economies of industrial countries are interdependent.

Question 27

Which of the following statements is true regarding the term investment as it is used in economics?

A) Investment spending is always greater than consumption.
B) Investment can both rise and fall at different times.
C) Investment is largely unimportant in determining the economic health of a country.
D) Investment includes the purchase of stocks.
E) Investment includes the purchase of bonds.

Question 28

A corporation differs from a partnership because the corporation

A) is owned by people who enjoy limited liability.
B) has a lower debt ratio.
C) is characterized by limited profits.
D) is required to own a seat on a stock exchange.
E) has no tax liability.

Question 29

Multinational firms

A) export products to foreign countries.
B) are engaged in joint ventures with foreign firms.
C) possess production facilities in more than one country.
D) license their products to foreign distributors.
E) employ foreign agents to sell their products abroad.

Question 30

Which industrial country has the highest per capita income?

A) Iceland
B) Norway
C) The United States
D) Saudi Arabia
E) Japan

Question 31

Which of the following would be considered an investment?

A) The purchase of a share of Disney stock
B) The purchase of a new drilling machine by the Schmidt Construction Company
C) The deposit of $2,000 in a retirement account
D) The purchase of U.S. Treasury bills
E) All of these are classified as an investment.

Question 32

The largest corporation in the world is

A) Microsoft
B) Google
C) Apple
D) Walmart
E) Toyota

Question 33

The three basic types of businesses in the United States are

A) enterprises, partnerships, and corporations.
B) corporations, proprietorships, and partnerships.
C) partnerships, firms, and proprietorships.
D) corporations, households, and proprietorships.
E) partnerships, multinationals, and corporations.

Question 34

A partnership is a

A) business owned by shareholders whose liability for the firm's losses includes their personal wealth.
B) one-person operation that has many employees.
C) business owned by two or more partners who share the firm's profits but are not responsible for any losses.
D) business owned by two or more persons who share the firm's profits and losses.
E) business owned by shareholders whose liability for the firm's losses is limited to the value of the stock they own.

Question 35

Investment spending in the U.S. economy

A) is much larger than consumption spending.
B) is determined by government policy.
C) is not a significant part of total economic activity.
D) exceeds household spending for most years.
E) is approximately one-sixth of consumption spending.

Question 36

Of the world's ten largest corporations (measured by sales), ____ are headquartered in the United States

A) all 10
B) 8 or 9
C) between 5 and 7
D) 3 or 4
E) 1 or 2

Question 37

A business firm is

A) equivalent to management ownership.
B) also called an enterprise.
C) a company owned by two or more individuals.
D) an organization run by the government.
E) a business conducted at a single location only.

Question 38

Partnerships differ from proprietorships because partnerships

A) consist of two or more partners sharing the responsibilities of the firm and proprietorships do not.
B) require a written agreement and proprietorships do not.
C) require a state charter and proprietorships do not.
D) are characterized by unlimited liability and proprietorships are not.
E) generate fewer profits than do proprietorships.

Question 39

The World Bank's list of industrial market economies

A) includes some countries that are still developing.
B) does not include some high-income oil-exporting countries.
C) includes Saudi Arabia and Kuwait.
D) includes only countries from North America and western Europe.
E) includes many developing countries from Asia.

Question 40

____ are the main source of U.S. business income and ____ are the most prevalent U.S. business form.

A) corporations; corporations
B) proprietorships; corporations
C) corporations; proprietorships
D) partnerships; corporations
E) corporations; partnerships

Question 41

Macroeconomic policy

A) is an economic function of government that began in the 1960s.
B) attempts to stabilize the market system in the United States.
C) attempts to promote fair trade practices among business firms.
D) consists of monetary and fiscal policies.
E) deals with internalizing externalities.

Question 42

In the United States, fiscal policy is determined by

A) Congress and the Federal Reserve.
B) the Federal Reserve and the president.
C) the Council of Economic Advisers and the president.
D) Congress and the president.
E) the Commerce Department.

Question 43

The most important member of the Federal Reserve's Board of Governors is the

A) president.
B) secretary of the Treasury.
C) chairperson.
D) president's economic adviser.
E) director of the Office of Management and Budget.

Question 44

Which of the following would not be an example of a product that the United States would import from a developing country?

A) Coffee
B) Nuclear missiles
C) Cell phones
D) Bananas
E) Gold

Question 45

Scenario 9.1
In a given year, country A exported $12 million worth of goods to country B and $6 million worth of goods to country C, country B exported $4 million worth of goods to country A and $7 million worth of goods to country C, and country C exported $5 million worth of goods to country A and $2 million worth of goods to country B.

-According to Scenario 9.1, country C has net exports of

A) zero.
B) $13 million.
C) $21 million.
D) $6 million.
E) -$6 million.

Question 46

The Federal Reserve

A) prepares and analyzes the federal budget.
B) investigates unfair international trade practices.
C) administers federal policy regulating industry.
D) administers the financial affairs of the federal government.
E) regulates the U.S. money supply.

Question 47

When the value of imports exceeds the value of exports for a given economy, the economy

A) is experiencing unemployment.
B) has an international trade surplus.
C) is in macroeconomic disequilibrium.
D) has an international trade deficit.
E) is unstable.

Question 48

If there is a surplus in a country's international trade, then

A) net exports exceed transfer payments.
B) macroeconomic equilibrium does not exist.
C) the value of net exports is positive.
D) the value of net exports is zero.
E) the value of net exports is negative.

Question 49

Monetary policy would not include

A) increasing interest rates to control the money supply.
B) a policy directed toward controlling credit.
C) reducing the money supply in an effort to control inflation.
D) increasing tax rates in an effort to control inflation.
E) a Federal Reserve intervention in the economy.

Question 50

Developing countries are generally located in which regions of the world?

A) Africa and the Middle East
B) Latin America and eastern Europe
C) Africa, Asia, and Latin America
D) North America and western Europe
E) Asia, North America, and Africa

Question 51

The three most important trade partners of the United States are

A) China, Russia, and Canada.
B) Brazil, China, and Indonesia.
C) Canada, China, and Japan.
D) Canada, Mexico, and China.
E) Mexico, Canada, and Japan.

Question 52

Collecting and spending federal tax revenue is an example of

A) the government exercising its powers over public goods.
B) fiscal policy.
C) the market process.
D) monetary policy.
E) monopoly power.

Question 53

The main trading partners of the United States are

A) developing countries.
B) industrial countries.
C) Saudi Arabia and Venezuela.
D) Communist countries.
E) Latin American countries.

Question 54

The Federal Reserve is run by

A) a seven-member Board of Governors.
B) the chairperson of the Fed, the president, and the secretary of the Treasury.
C) 12 high-level Fed officials appointed by Congress.
D) the U.S. Treasury.
E) the Council of Economic Advisers.

Question 55

The central bank of the United States is the

A) U.S. Treasury Department.
B) Office of Management and Budget.
C) Federal Reserve System.
D) U.S. Federal Bank.
E) Bank of America.

Question 56

Scenario 9.1
In a given year, country A exported $12 million worth of goods to country B and $6 million worth of goods to country C, country B exported $4 million worth of goods to country A and $7 million worth of goods to country C, and country C exported $5 million worth of goods to country A and $2 million worth of goods to country B.
According to Scenario 9.1, country A has net exports of

A) $18 million.
B) $14 million.
C) $13 million.
D) $9 million.
E) $6 million.

Question 57

A U.S. export occurs when

A) Kuwait sells oil to a U.S. oil company.
B) Gateway purchases computer parts from Intel.
C) Germany buys trucks from Ford Motor Company.
D) Pepsi-Cola sells soft drinks to a local retailer.
E) France imports leather shoes from Italy.

Question 58

Scenario 9.1
In a given year, country A exported $12 million worth of goods to country B and $6 million worth of goods to country C, country B exported $4 million worth of goods to country A and $7 million worth of goods to country C, and country C exported $5 million worth of goods to country A and $2 million worth of goods to country B.
According to Scenario 9.1, country B is running a ____ with country A and a ____ with country C.

A) trade deficit; trade surplus
B) trade surplus; trade surplus
C) trade surplus; trade deficit
D) trade deficit; trade deficit
E) balanced trade; trade deficit

Question 59

When the value of net exports is positive,

A) there is a trade deficit.
B) imports exceed exports.
C) imports are less than exports.
D) exports equal imports.
E) none of these.

Question 60

An import constitutes a

A) purchase of goods and services from another country.
B) business transaction between domestic firms.
C) sale of goods and services to another country.
D) tariff on foreign merchandise.
E) trade agreement between two industrial countries.

Question 61

The circular flow model for the private sector shows that

A) business firms are the revenue source for consumers.
B) financial intermediaries use the deposits from households to make loans to businesses.
C) factors of production are demanded only by the government.
D) net exports are always equal to zero.
E) the goods and services produced by business firms are sold through resource markets.

Question 62

Households interact with business firms by

A) buying resources from business firms.
B) paying business firms for capital.
C) selling commodities to business firms.
D) providing their services or resources in exchange for money payments.
E) paying business firms for land.

Question 63

____ is policy directed toward government spending and taxation.

A) Monetary policy
B) Fiscal policy
C) Microeconomic policy
D) Public choice policy
E) Urban policy

Question 64

Government spending and taxation is the focus of

A) public policy.
B) monetary policy.
C) political policy.
D) fiscal policy.
E) foreign policy.

Question 65

The fact that income to one economic group constitutes expenditures for another economic group is characteristic of

A) a planned economy.
B) the scarcity of resources.
C) barter transactions.
D) the circular flow of income model.
E) private production.

Question 66

Who formulates fiscal policy in the United States?

A) The Federal Reserve
B) Congress and the president
C) The president and the Council of Economic Advisers
D) The secretary of the Treasury and Congress
E) The director of the Office of Management and Budget and the secretary of state

Question 67

When net exports are negative,

A) there is a net flow of goods from firms in foreign countries to the domestic country.
B) there is a net flow of money from foreign countries to the firms of the domestic country.
C) there is a net flow of goods from the firms of the domestic country to foreign countries.
D) there is a trade surplus.
E) exports exceed imports.

Question 68

Which of the following is true of the circular flow model for the private sector?

A) Total output is equal to government spending.
B) Financial services are supplied only to consumers.
C) Total output is equal to household income, business revenues, and net exports.
D) The flow of imports and exports is controlled by the government.
E) Business firms supply factors of production and demand government services.

Question 69

Which of the following statements is true?

A) Transfer payments are not part of total government expenditures.
B) Transfer payments refer to the transfer of money internationally.
C) Transfer payments are the transfer of money by the Federal Reserve to people with low incomes.
D) Transfer payments are income transferred from a citizen who is earning income to another citizen, who may not be.
E) In 2009, transfer payments paid by all levels of government were less than $3 billion.

Question 70

The money that businesses pay for resources constitutes

A) the supply of resources.
B) income to households.
C) part of the money market.
D) the resource market.
E) the market for goods and services.

Question 71

The factors of production owned by households are

A) resources.
B) commodities and income.
C) goods and services.
D) consumer products.
E) land, labor, capital, and entrepreneurial ability.

Question 72

The U.S. federal government had a budget surplus

A) briefly from 1998 to 2001.
B) through the 1960s and 1970s.
C) only in the eighteenth century.
D) through the 1970s.
E) not since the 1950s.

Question 73

A budget surplus is

A) the excess that results when government revenue is less than spending.
B) the shortage that results when government spending is greater than revenue.
C) the excess that results when government spending is less than revenue.
D) the excess that results when tax revenue is greater than anticipated in the budget proposal.
E) A and B.

Question 74

The circular flow model

A) describes microeconomic activity within a capitalist system.
B) explains the effect of government-imposed price controls.
C) focuses on aggregate economic activity.
D) illustrates the consequences of minimum-wage legislation.
E) ignores the role of international trade.

Question 75

The resource market does not incorporate the market for

A) land.
B) money.
C) labor.
D) entrepreneurial talent.
E) capital.

Question 76

In the circular flow model, businesses

A) own resources.
B) hire resources.
C) provide public services.
D) receive revenue from the government.
E) sell capital goods in the financial market.

Question 77

The circular flow model

A) shows the flow of output and income within one sector of the economy.
B) illustrates how different sectors of the economy are linked together.
C) shows that income is rarely equal to output.
D) illustrates how business firms interact with one another.
E) shows how businesses sell their resource services to households.

Question 78

____ in all circular flow diagrams.

A) Foreign net output is included
B) The trade deficit always equals payments for resource services
C) The value of output is equal to income
D) The value of private production always equals the value of household income
E) Net exports must be positive

Question 79

The circular flow of income model shows that

A) consumers supply resources and demand products.
B) producers demand products and supply resources.
C) payments for resources and payments for goods and services flow in the same direction.
D) businesses are only demanders and households are only suppliers.
E) revenue flows to households when they buy goods and services.

Question 80

Financial intermediaries are best described as

A) institutions that accept deposits from savers.
B) people who make loans to households.
C) institutions that accept deposits and make loans.
D) institutions that invest in various business ventures.
E) people who are very skilled at making profits on the stock exchange.