EOCT REVIEW

1.Which of the following is a

microeconomic calculation?

• A. Calculating GDP• B. Calculating the unemployment

rate• C. Calculating the interest rate on a

loan• D. Calculating the Consumer Price

Index

C

2.Which of the following benefits from the declining

value of money during a period of high inflation?

• A. a person with a savings account• B. A person with investments• C. a person who has borrowed money• D. A bank that has lent money

C

3.Which of these is the MOST likely effect of a

weak US Dollar?• A. Travel abroad will become more

affordable for Americans• B. Goods imported from other

countries will become more expensive• C. Foreigners will buy fewer US exports• D. Foreign investment in US businesses

will decline

B

4.If the government’s fiscal policy is designed to end a

recession, which action would congress MOST

likely take?• A. lower income taxes• B. raise income taxes• C. reduce government spending• D. raise the discount rate

A

1. In a market economy, the allocation of goods and services is determined

MOSTLY by• A. regulations of the federal government• B. decisions of advertisers• C. the needs of individuals• D. the incomes of individuals

D

2. When people use their resources so that marginal benefits exceed marginal

costs, they • A. make rational economic decisions• B. make irrational economic decisions• C. Eliminate the opportunity costs of

decisions• D. Fail to use resources efficiently

A

3. The main function of the Federal Reserve System in

the US economy is to • A. establish monetary policy• B. establish fiscal policy• C. establish trade policy• D. balance the federal budget

A

4. A major problem that both producers and

consumers face in market economies is

• A. lack of freedom• B. lack of efficiency• C. lack of profit motive• D. lack of economic security

D

1. Which sentence describes the MOST likely

effect of a US quota on Japanese imports?

• A. reduced trade barriers for American exports to Japan

• B. increased trade barriers for American exports to Japan

• C. a positive trade balance• D. more choices and lower prices for

American consumers.

B

2. Which of the following is an example of a capital investment for a retail

store?

• A. hiring sales clerks and managers• B. renting retail space at a mall• C. Buying ads in a local newspaper• D. buying cash registers and displays

D

3. In which of the following situations are two nations NOT

likely to trade?• A. each nation has an absolute advantage in

producing one of the two products both want• B. Each nation has a comparative advantage

in producing one of the two products both want

• C. Neither nation has an absolute advantage in producing the product

• D. Neither nation has a comparative advantage in producing either product

D

4. When a product is selling at its equilibrium price

• A. producers cannot supply enough of it

• B. consumers want more of it than is available

• C. producers supply as much as consumers demand

• D. the price changes from day to day

C

1.What is one advantage of choosing an insurance

policy with a higher deductible, rather than a

lower deductible?• A. Lower premiums• B. lower out-of-pocket costs for

claims• C. higher coverage limit• D. lower coverage limit

A

2. When a society invests in education, it improves its

standard of living by improving its

• A. Labor• B. Capital Goods• C. Human Capital• D. Entrepreneurship

C

3. Which of the following is a total ban on the import of

items from a particular country?

• A. Quota• B. Embargo• C. Tariff• D. Standard

B

4. In which situation might the Federal Reserve buy

gov’t securities and lower the discount rate?

• A. In a recession• B. When the inflation rate is too high• C. When aggregate demand is too

high• D. When the economy is expanding

A

1. When is it a benefit for workers to have a contract

with a cost of living adjustment?

• A. During a recession• B. During a depression• C. During an inflationary period• D. During a strike, or work

stoppage

C

2. Which type of business organization has the

advantage of specialization but the disadvantage of unlimited

liability?• A. Sole Proprietorship• B. Partnership• C. Corporation• D. Oligopoly

B

3. Which form of credit has the disadvantages of

variable interest rates and finance charges

compounded monthly?• A. Bank Loans• B. Credit Union Loans• C. Installment Plans• D. Credit Cards

D

4. If aggregate demand begins decreasing, followed by a

decrease in aggregate supply, which stage of the business

cycle is the economy entering?• A. A period of expansion• B. A period of slowdown• C. An inflationary period• D. A period of equilibrium

B

1. Why does every economic

decision involve an opportunity

cost?• A. Because resources are scarce and

wants are unlimited• B. Because few decisions have a marginal

benefit• C. Because prices in a market economy

are always too high• D. Because trade-offs are impossible to

make in rational decisions

A

2.When people invest in stocks, rather than bonds,

what trade-off are they making?

• A. Lower risks for lower returns• B. Higher risks for higher returns• C. Lower risks for higher returns• D. Higher risks for lower returns

B

3. The shampoo market has a

structure of monopolistic

competition. What is one

important feature of this market

structure?• A. One large firms controls prices in the market• B. A few large firms fix prices and control the

market• C. A few large firms are interdependent and

engage in frequent price wars• D. Firms with many similar products depend on

product differentiation, or branding

D

4. Keisha deposited $400 in a

savings account that pays a simple

interest of 3.5%/year. If she made

no other deposits or withdrawals,

how much interest had she earned

at the end of the 3 years.

• A. $14• B. $28• C. $42• D. $50

C

1. If a nation’s imports for one year are worth $8.6 billion and

its exports are worth $8.5 billion the same year, that

nation definitely has • A. A trade deficit• B. A trade surplus• C. A negative balance of payments• D. A positive balance of payments

A

2. Among the Native Americans, beads were once used as a

medium of exchange. The main reason why this type of money served its function was that it

was • A. Easy to carry• B. Accepted as payment• C. Easily divisible into units• D. A precious metal in its community

B

3. In a command economy, the means of

production are owned by• A. Individuals• B. Family groups, or clans• C. Religious leaders• D. The government

D

4. If in one year, the federal government takes in $100 billion in taxes and spends

$99 billion, the nation definitely has

• A. A budget deficit for that year• B. A budget surplus for that year• C. No national debt• D. A positive balance of payments

B

1. An example of a technological monopoly

• A. A public utility that serves everyone in a large city

• B. A drug company with a patent for a new life-saving medicine

• C. A software company that drives competitors out of business in a price war

• D. A steel company that receives government subsidies.

B

2. Which of these is NOT one of the major roles that the US gov’t plays in the

economy• A. Providing private goods and

services• B. Redistributing income through

transfer payments• C. Protecting property rights• D. Resolving market failures

A

3. The most important factor that determines a

nation’s economic growth is• A. How fast its labor force increases• B. How quickly it can discover new

resources• C. How much it can improve productive

efficiency• D. How much its government improves its

fiscal policy

C

4. What kind of insurance pays you a monthly income if you are NOT able to work for an extended period of time?

• A. Term life insurance• B. Whole life insurance• C. Disability insurance• D. Health insurance

C

1. If inflation rates are sharply increasing, which

fiscal policy would make the MOST sense?

• A. Reduce government spending• B. Reduce income taxes• C. Reduce sales tax• D. Reduce the discount rate

A

2. What kind of economy do MOST nations in the world

have today?

• A. Market• B. Command• C. Traditional• D. Mixed

D

3. The best solution to problem of cyclical unemployment is

• A. Using fiscal policy to expand the economy and create more jobs

• B. Raising the minimum wage so that untrained workers earn as much as trained workers

• C. Encouraging workers who have lost high-paying jobs to take lower-paying jobs

• D. Retraining those whose skills are no longer marketable

A

4. The automobile industry is controlled by a few companies

whose pricing are interdependent. This market

is an example of

• A. Monopoly• B. Oligopoly• C. Monopolistic Competition• D. Perfect Competition

B

1. The minimum wage is an example of a

• A. Market failure• B. Market equilibrium price• C. Price floor• D. Price ceiling

C

2. The Federal Deposit Insurance Company (FDIC)

is a government agency that

• A. Provides health insurance for low-income people

• B. Provides mortgage insurance for homeowners

• C. Protects banks from the risks of bankruptcy

• D. Protects the savings of people who deposit their money in banks

D

3. Payments for the use of land and capital are

called

• A. Rent and interest• B. Rent and wages• C. Interest and wages• D. Interest and profits

A

4. If a bank pays 3% interest on saving accounts,

how much interest will it charge for loans?

• A. 3%• B. Less than 3%• C. More than 3%• D. The discount rate

C

1. A division of labor improves efficiency on the

job because it involves

• A. Specialization• B. Voluntary exchange• C. Job security• D. Diversification

A

2. In a market economy, how do people obtain

MOST of the things they want and need?

• A. Government transfer payments• B. Public goods and services• C. Voluntary exchange• D. Bartering and communal sharing

C

3. What choice describes a macroeconomic

calculation?

• A. Calculating a families monthly budget

• B. Calculating a firm’s annual profits• C. Calculating the unemployment

rate• D. Calculating the interest on a

personal loan

C

4. When the US gov’t buys airplanes from an aircraft

company, it makes a transaction in the

• A. Factor Market• B. Product Market• C. Property Market• D. Public Market

B

1. An increase in the demand for US exports will

usually result in• A. An increase in the international

value of the dollar• B. A decrease in the international

value of the dollar• C. An increase in the value of foreign

currency in the US• D. An increase in the price of

imported goods in the US

A

2. The BEST way to improve your credit rating

is to

• A. Never get a credit card• B. Never borrow money from a bank• C. Never forget to pay your bills on

time• D. Never accumulate assets or

collateral

C

3. If the unemployment rate is slowly beginning to fall and the GDP is slowly beginning to rise,

which phase of the business cycle are you in?

• A. Recovery or expansion• B. Downturn, or contraction• C. Recession• D. An inflationary spiral

A

4.Which gov’t institution regulates the money supply

of the US economy?• A. The United States Treasury• B. The United States Mint• C. The Federal Reserve System• D. The Securities and Exchange

Commission

C

1. A tax on an imported good

• A. Tariff• B. Quota• C. Embargo• D. Subsidy

A

1. If the price of milk increases slightly, the demand for milk will NOT change very much. This market situation is an

example of

• A. Demand elasticity• B. Demand inelasticity• C. Supply elasticity• D. Supply inelasticity

B

2. Janice decides to spend $20 on a ticket to a concert instead of buying a new blouse. What is the opportunity cost of her

decision?• A. $20• B. The benefit of having a new blouse• C. The enjoyment of the concert• D. The opportunity to go out with

friends.

B

3. How is NAFTA similar to the EU?

• A. Each increases trade barriers among neighboring nations

• B. Each aims to eliminate trade barriers among neighboring nations

• C. Each promotes free trade with all nations of the world

• D. Each promotes protectionist policies against nations around the world

B