Question 1

The Council of Economic Advisors generally advocates that the government pursue goals in line with Keynesian economic theory, which advocates all of the following except:

Accepted Answer

Neither the Council of Economic Advisors nor Keynesian economic theory encourage allowing a faltering market time to correct course naturally. Keynesian economic theory strongly advocates that government get involved in the marketplace to soften the blow of a recession or depression, as well as to encourage productivity. The CEA often promotes proactive government intervention to stave off similar disasters.

Question 2

When the tax rate increases as the taxable amount increases, the tax is a:

Accepted Answer

A progressive tax rate increases in accordance with the value of the taxed amount. The U.S. income tax is considered a progressive tax because people who earn more pay a higher tax rate than those who earn less. A proportional tax is a "flat tax," which requires everyone to pay the same rate regardless of income level. A regressive tax is one in which the rate decreases as the taxable amount increases. A capital gains tax is paid on the profit one earns from an investment like stock or real estate.

Question 3

What is the difference between the GDP (gross domestic product) and GNP (gross national product)?

Accepted Answer

The gross domestic product includes the net value of the final goods and services rendered by a country in one year, strictly within its own borders, regardless of whether or not the factors of production (materials, machines and people) belong to that country. For example, the value of a British company physically located in the United States would contribute to the American GDP, not the British. The gross national product includes the net value of the final goods and services rendered by a country in one year, based on its factors of production, whether they are physically within the nation's borders or abroad. For example, the value of an American company located in the United Kingdom would contribute to the American GNP but the British GDP.

Question 4

Which committee in the U.S. House of Representatives is responsible for legislation related to revenue, raising taxes, trade agreements, tariffs, and the bonded debt of the nation?

Accepted Answer

The House Committee on Ways and Means is chiefly responsible for generating revenue for the nation, and does so by writing tax laws, overseeing trade agreements and tariffs and controlling the bonded debt of the nation. Financial Services handles the public financial sector of the economy, including banking and the Federal Reserve. The Budget Committee is largely responsible for the Congressional role in the national budget and authors the budget resolution each year. The Appropriations Committee determines the government's expenditures and authorizes spending.

Question 5

The practice of consolidating debts to be traded in financial markets is termed:

Accepted Answer

Securitization is the practice of bundling individual contractual debts into securities or bonds that can be traded in financial markets. This practice was one of the contributing factors to the financial crises in the United States and European Union in the late 2000s. The complexity of securitization often masks the reliability of each individual component, making it difficult to monitor a security or bond's inherent level of risk.

Question 6

The organization chiefly responsible for the promotion and supervision of international trade is:

Accepted Answer

The World Trade Organization is an international body that promotes and supervises global trade. It works extensively to encourage trade between superpowers and poorer nations, which often have large populations and limited resources. The organization oversees trade negotiations, enforces the terms of trade agreements, and resolves disputes between trading partners.

Question 7

Which economic theory describes how many European empires expanded through colonization in the 16th to mid-18th centuries because founding colonies ultimately increased a state's access to raw natural resources and expanded their marketplace?

Accepted Answer

Mercantilism is an economic theory that advocated trade as a society's chief wealth-building mechanism. It encouraged colonization because colonies were generally less developed regions in which there were one or more abundant natural resources that could be used in manufacturing. A state's own colonies often became their biggest customers since they were not industrially well developed and their trade policy was largely dictated by the colonizing power.

Question 8

The primary goal of the World Bank is to:

Accepted Answer

The World Bank's primary goal is to reduce poverty by providing loans to developing countries so that they can build the physical and institutional mechanisms that allow a nation to operate. While there are many participating nations, the organization is traditionally led by an American and based in Washington, D.C.

Question 9

The exchange rate of currency is primarily monitored by:

Accepted Answer

The International Monetary Fund is the body that monitors the exchange rate of currency. It also monitors global financial developments, lends money to member nations who are experiencing payment problems, and promotes international trade. It is aligned with the World Bank and is headquartered in Washington, D.C.

Question 10

NAFTA created a trade bloc that consists of which nations?

Accepted Answer

The North American Free Trade Agreement (NAFTA) created a trade bloc consisting of the United States, Canada and Mexico. Trade blocs are intergovernmental agreements, typically between neighboring nations. NAFTA is the largest trade bloc in the world. The United States' interest in the agreement was shepherded by President George H.W. Bush, but he lost his bid for re-election before he could sign it into law. President Bill Clinton ultimately signed the agreement almost a year after taking office.

Question 11

What is the official currency of Morocco?

Accepted Answer

The dirham is the currency of Morocco, an African nation that was once under a French protectorate. The fractional unit of the dirham (the cent to their dollar) is the centime. They have coin currency for both fractions of a dirham, as well as one and five dirhams.

Question 12

What is the official currency of Ukraine?

Accepted Answer

The hryvnia is the currency of Ukraine, an Eastern European nation that is also the second largest country in Europe. The fractional unit of the hryvnia (the cent to their dollar) is the shahy.

Question 13

In which decade did the United States become the world's most productive economy?

Accepted Answer

The United States became the world's biggest economy in the 1890s, thanks in large part to the discovery of natural resources like oil and gold and the mass production of steel and new means of transportation. By this time, the United States was producing twice as much as the United Kingdom per year.

Question 14

What is the official currency of Australia?

Accepted Answer

The Australian dollar is the currency of Australia. It is linked with the kina, the official currency of Papua New Guinea. The fractional unit of the Australian dollar is also the cent. They do not have a penny and do use $1 and $2 coins.

Question 15

What are the biggest domestic industries in Egypt?

Accepted Answer

Textiles and food processing are the most prosperous domestic industries in Egypt. These manufacturing establishments are largely owned by the public, in contrast with the nation's privately owned farms.

Question 16

Which of the following states is not one of the top four leaders in volume spending in the United States?

Accepted Answer

Illinois is not one of the four largest-spending states in the U.S. California, Texas, Florida, and New York are, thanks to their large populations, numerous urban centers and the high cost of living the accompanies each urban center.

Question 17

Which country has a long history of developing its domestic supplier and distributor relationships, thus making it difficult for foreign companies to enter their marketplace?

Accepted Answer

The degree to which Japan fosters its domestic business relationships is greater than that of most other nations. Subsequently, foreign companies that want to enter the profitable Japanese marketplace must commit more time and effort to building relationships within the country so they may earn the business of Japanese distributors.

Question 18

The banks of which of the following nations are open on Thursdays for only a few hours in the morning?

Accepted Answer

Iran and many other nations with a predominantly Muslim population do not conduct business on Fridays or on Thursday afternoons. Friday is the day of weekly religious observance in Islam. A similar observance is made by most nations according to the predominant faith of its people; U.S. banks are generally open on Saturday morning and closed on Sundays because the Christian Sabbath is on Sunday. This means that most business and economic communication between the United States and Muslim nations occurs Monday thru Wednesday, when all parties have full working days.

Question 19

The informal and undocumented trade that dominates domestic trade in India is referred to as:

Accepted Answer

"Black money" is the term applied in India to informal and undocumented trade, which corrupts the nation's landscape of domestic trade. The forum for these sales is known by the universal term "black market." Black market transactions are damaging to India's economy not only because they take revenue away from lawful, regulated businesses, but because the income derived from these transactions goes untaxed. It is estimated that the rupee equivalent of roughly $1.5 billion dollars from black market trafficking is stashed in banks outside of the country.

Question 20

Which United States economic sector has the most establishments or physical locations in which work of this nature is performed?

Accepted Answer

The retail trade sector has the most establishments in which laborers perform related tasks. There are over 1.1 million retail trade establishments in the country, far more than the sectors with the second and third highest number of establishments, namely health care and construction, each of which has just over 700,000.

Quiz 21: Economics