Principles Of Economics

Front 1

1. In economics, the pleasure, happiness, or satisfaction received from a product is called:
A. marginal cost.
B. rational outcome.
C. status fulfillment.
D. utility.

Back 1

D. utility.

Front 2

2. When economists say that people act rationally in their self interest, they mean that individuals:
A. look for and pursue opportunities to increase their utility.
B. generally disregard the interests of others.
C. are mainly creatures of habit.
D. are unpredictable.

Back 2

A. look for and pursue opportunities to increase their utility.

Front 3

3. According to economists, economic self-interest:
A. is a reality that underlies economic behavior.
B. has the same meaning as selfishness.
C. is more characteristic of men than of women.
D. is usually self-defeating.

Back 3

A. is a reality that underlies economic behavior.

Front 4

4. When entering a building, Sam diverts his path to go through an open door rather than make the physical effort to open the closed door that is directly in his path. This is an example of:
A. irrational behavior.
B. a lazy person.
C. marginal benefit-marginal cost analysis.
D. programmed learning.

Back 4

C. marginal benefit-marginal cost analysis.

Front 5

5. Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:
A. opportunity costs.
B. marginal benefits that exceed marginal costs.
C. imperfect information.
D. normative economics.

Back 5

A. opportunity costs.

Front 6

6. Economics may best be defined as the:
A. interaction between macro and micro considerations.
B. social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.
C. empirical testing of value judgments through the use of logic.
D. use of policy to refute facts and hypotheses.

Back 6

B. social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

Front 7

7. The economic perspective refers to:
A. macroeconomic phenomena, but not microeconomic phenomena.
B. microeconomic phenomena, but not macroeconomic phenomena.
C. the making of purposeful decisions in a context of marginal costs and marginal benefits.
D. unlimited resources in a context of limited economic wants.

Back 7

C. the making of purposeful decisions in a context of marginal costs and marginal benefits.

Front 8

8. Economics involves marginal analysis because:
A. most decisions involve changes from the present situation.
B. marginal benefits always exceed marginal costs.
C. marginal costs always exceed marginal benefits.
D. much economic behavior is irrational.

Back 8

A. most decisions involve changes from the present situation.

Front 9

9. The assertion that "There is no free lunch" means that:
A. there are always tradeoffs between economic goals.
B. all production involves the use of scarce resources and thus the sacrifice of alternative goods.
C. marginal analysis is not used in economic reasoning.
D. choices need not be made if behavior is rational.

Back 9

B. all production involves the use of scarce resources and thus the sacrifice of alternative goods.

Front 10

10. If someone produced too much of a good, this would suggest that:
A. rational choice cannot be applied to many economic decisions.
B. the good was produced to the point where its marginal cost exceeded its marginal benefit.
C. certain goods and services such as education and health care are inherently desirable and should be produced regardless of costs and benefits.
D. the good was produced to the point where its marginal benefit exceeded its marginal cost.

Back 10

B. the good was produced to the point where its marginal cost exceeded its marginal benefit.

Front 11

11. Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:
A. is an example of irrational behavior.
B. implies that reading should be taught through phonics rather than the whole language method.
C. contradicts the economic perspective.
D. implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

Back 11

D. implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

Front 12

12. Which one of the following expressions best states the idea of opportunity cost?
A. "A penny saved is a penny earned."
B. "He who hesitates is lost."
C. "There is no such thing as a free lunch."
D. "All that glitters is not gold."

Back 12

C. "There is no such thing as a free lunch."

Front 13

13. Which of the following is an economic explanation for why most college-aged movie stars do not attend college.
A. they are too dumb to get into college
B. they would find college life boring
C. the opportunity cost in terms of reduced income is too great
D. they cannot afford the room, board, and tuition fees most colleges charge

Back 13

C. the opportunity cost in terms of reduced income is too great

Front 14

14. Economists contend that most economic decisions are:
A. random
B. chaotic
C. spontaneous
D. purposeful

Back 14

D. purposeful

Front 15

15. An economic hypothesis:
A. has the same meaning as an economic principal or economic law.
B. is usually a normative statement.
C. is a possible explanation of cause and effect.
D. is a stronger generalization than an economic law.

Back 15

C. is a possible explanation of cause and effect.

Front 16

16. The basic purpose of the other-things-equal assumption is to:
A. allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.
B. allow one to focus upon micro variables by ignoring macro variables.
C. allow one to focus upon macro variables by ignoring micro variables.
D. determine whether X causes Y or vice versa.

Back 16

A. allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.

Front 17

17. Which of the following is a macroeconomic statement?
A. The gross profits of all U.S. businesses were $182 billion last year.
B. The price of beef declined by 3 percent last year.
C. General Motors' profits increased last year.
D. The productivity of steelworkers increased by 1 percent last year.

Back 17

A. The gross profits of all U.S. businesses were $182 billion last year.

Front 18

18. Which of the following is a microeconomic statement?
A. The real domestic output increased by 2.5 percent last year.
B. Unemployment was 6.8 percent of the labor force last year.
C. The price of personal computers declined last year.
D. The general price level increased by 4 percent last year.

Back 18

C. The price of personal computers declined last year.

Front 19

19. Which of the following is a normative statement?
A. The temperature is high today.
B. The humidity is high today.
C. It is too hot to play tennis today.
D. It will cool off later this evening.

Back 19

C. It is too hot to play tennis today.

Front 20

20. Which of the following is a positive statement?
A. The humidity is too high today.
B. It is too hot to jog today.
C. The temperature is 92 degrees today.
D. Summer evenings are nice when it cools off.

Back 20

C. The temperature is 92 degrees today.

Front 21

21. Most of the disagreement among economists involves:
A. facts.
B. principles.
C. positive statements.
D. normative statements.

Back 21

D. normative statements.

Front 22

22. The economizing problem is:
A. the need to make choices because economic wants exceed economic means.
B. how to distribute resources equally amongst all members of society.
C. that people's means often exceed their wants.
D. that people do not know how to rationally allocate resources.

Back 22

A. the need to make choices because economic wants exceed economic means.

Front 23

25. In moving along a given budget line:
A. the prices of both products and money income are assumed to be constant.
B. each point on the line will be equally satisfactory to consumers.
C. money income varies, but the prices of the two goods are constant.
D. the prices of both products are assumed to vary, but money income is constant

Back 23

A. the prices of both products and money income are assumed to be constant.

Front 24

26. An increase in money income:
A. shifts the consumer's budget line to the right.
B. shifts the consumer's budget line to the left.
C. increases the slope of the budget line.
D. has no effect on the budget line.

Back 24

A. shifts the consumer's budget line to the right.

Front 25

27. Any combination of goods lying outside of the budget line:
A. implies that the consumer is not spending all his income.
B. yields less utility than any point on the budget line.
C. yields less utility than any point inside the budget line.
D. is unattainable, given the consumer's income.

Back 25

D. is unattainable, given the consumer's income.

Front 26

28. Which of the following is a land resource?
A. a computer programmer
B. a computer
C. silicon (sand) used to make computer chips
D. a piece of software used by a firm

Back 26

C. silicon (sand) used to make computer chips

Front 27

31. Which of the following would not be classified as an economic resource by economists?
A. a professional soccer player
B. water in a town's reservoir
C. money in a business checking account
D. the manager of the local hamburger restaurant

Back 27

C. money in a business checking account

Front 28

32. The production possibilities curve illustrates the basic principle that:
A. the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
B. an economy will automatically obtain full employment of its resources.
C. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
D. an economy's capacity to produce increases in proportion to its population size.

Back 28

C. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

Front 29

33. Which of the following will not produce an outward shift of the production possibilities curve?
A. an upgrading of the quality of a nation's human resources
B. the reduction of unemployment
C. an increase in the quantity of a society's labor force
D. the improvement of a society's technological knowledge

Back 29

B. the reduction of unemployment

Front 30

34. Unemployment:
A. causes the production possibilities curve to shift outward.
B. can exist at any point on a production possibilities curve.
C. is illustrated by a point outside the production possibilities curve.
D. is illustrated by a point inside the production possibilities curve.

Back 30

D. is illustrated by a point inside the production possibilities curve.

Front 31

35. If the production possibilities curve is a straight line:
A. the two products will sell at the same market prices.
B. economic resources are perfectly substitutable between the production of the two products.
C. the two products are equally important to consumers.
D. equal quantities of the two products will be produced at each possible point on the curve.

Back 31

B. economic resources are perfectly substitutable between the production of the two products.

Front 32

39. Any point inside the production possibilities curve indicates:
A. the presence of technological change.
B. that resources are imperfectly substitutable among alternative uses.
C. the presence of inflationary pressures.
D. that more output could be produced with available resources.

Back 32

D. that more output could be produced with available resources.

Front 33

40. The law of increasing opportunity costs states that:
A. if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so.
B. the sum of the costs of producing a particular good cannot rise above the current market price of that good.
C. if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount.
D. if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate.

Back 33

A. if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so.

Front 34

41. The two general types of economic systems that exist today are:
A. market systems and capitalism.
B. socialism and central planning.
C. market systems and command systems.
D. laissez faire systems and pure command systems.

Back 34

C. market systems and command systems.

Front 35

42. Which of the following is a distinguishing feature of a command system?
A. private ownership of all capital.
B. central planning.
C. heavy reliance on markets.
D. wide-spread dispersion of economic power.

Back 35

B. central planning.

Front 36

43. Of the following countries, the one that best exhibits the characteristics of a market economy is:
A. Canada.
B. Cuba.
C. North Korea.
D. China.

Back 36

A. Canada.

Front 37

44. An economic system:
A. requires a grouping of private markets linked to one another.
B. is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
C. requires some sort of centralized authority (such as government) to coordinate economic activity.
D. is a plan or scheme that allows a firm to make money at some other firm's expense.

Back 37

B. is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.

Front 38

45. The term laissez-faire suggests that:
A. land and other natural resources should be privately owned, but capital should be publicly owned.
B. land and other natural resources should be publicly owned, but capital equipment should be privately owned.
C. government should not interfere with the operation of the economy.
D. government action is necessary if the economy is to achieve full employment and full production.

Back 38

C. government should not interfere with the operation of the economy.

Front 39

46. If consumer desire for product X increases, all of the following will occur except:
A. an increase in the profits of industry X.
B. an increase in the quantity of resources employed by industry X.
C. an increase in the output of industry X.
D. a decrease in the quantity of resources employed in industry X.

Back 39

D. a decrease in the quantity of resources employed in industry X.

Front 40

47. If a competitive industry is neither expanding nor contracting, we would expect:
A. total revenue to be zero.
B. economic profits to be zero.
C. total opportunity cost to be zero.
D. more resources to flow to that industry.

Back 40

B. economic profits to be zero.

Front 41

48. The economic function of profits and losses is to:
A. bring about a more equal distribution of income.
B. signal that resources should be reallocated.
C. eliminate small firms and reduce competition.
D. tell government which industries need to be subsidized.

Back 41

B. signal that resources should be reallocated.

Front 42

49. If competitive industry Y is incurring substantial losses, output will:
A. expand as resources move toward industry Y.
B. contract as resources move toward industry Y.
C. contract as resources move away from industry Y.
D. expand as resources move away from industry Y.

Back 42

C. contract as resources move away from industry Y.

Front 43

50. Economic profits in an industry suggest the industry:
A. can earn more profits by increasing product price.
B. should be larger to better satisfy consumers' desire for the product.
C. has excess production capacity.
D. is the size that consumers want it to be.

Back 43

B. should be larger to better satisfy consumers' desire for the product.

Front 44

51. From society's point of view the economic function of profits and losses is to:
A. promote the equal distribution of real assets and wealth.
B. achieve full employment and price level stability.
C. contribute to a more equal distribution of income.
D. reallocate resources from less desired to more desired uses.

Back 44

D. reallocate resources from less desired to more desired uses.

Front 45

52. Which of the following is not an economic cost?
A. wages.
B. rents.
C. economic profits.
D. payments made to the entrepreneur for organizing production.

Back 45

C. economic profits.

Front 46

53. Which of the following characteristics is least unique to a market system?
A. private ownership of property resources
B. competition among buyers and sellers pursuing monetary returns
C. the widespread use of money
D. freedom of enterprise and choice

Back 46

C. the widespread use of money

Front 47

54. The presence of market failures implies that:
A. money is not an effective tool for exchange in a market system.
B. there is an active role for government, even in a market system.
C. individuals and firms should strive to be self-sufficient rather than specialize.
D. command systems are superior to market systems in the allocation of resources.

Back 47

B. there is an active role for government, even in a market system.

Front 48

57. The invisible-hand concept suggests that:
A. market failures imply the need for a national economic plan.
B. big businesses are inherently more efficient than small businesses.
C. the competitiveness of a capitalistic market economy invariably diminishes over time.
D. assuming competition, private and public interests will coincide.

Back 48

D. assuming competition, private and public interests will coincide.

Front 49

58. Economists use the term "demand" to refer to:
A. a particular price-quantity combination on a stable demand curve.
B. the total amount spent on a particular commodity over a stipulated time period.
C. an upsloping line on a graph that relates consumer purchases and product price.
D. a schedule of various combinations of market prices and amounts demanded.

Back 49

D. a schedule of various combinations of market prices and amounts demanded.

Front 50

59. The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.
A. direct, inverse
B. inverse, direct
C. inverse, inverse
D. direct, direct

Back 50

A. direct, inverse

Front 51

60. When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:
A. the cost effect.
B. the inflationary effect.
C. the income effect.
D. the substitution effect.

Back 51

C. the income effect.

Front 52

61. In presenting the idea of a demand curve, economists presume that the most important variable in determining the quantity demanded is:
A. the price of the product itself.
B. consumer income.
C. the prices of related goods.
D. consumer tastes.

Back 52

A. the price of the product itself.

Front 53

62. The income and substitution effects account for:
A. the upward sloping supply curve.
B. the downward sloping demand curve.
C. movements along a given supply curve.
D. the "other things equal" assumption.

Back 53

B. the downward sloping demand curve.

Front 54

63. Which of the following would not shift the demand curve for beef?
A. a widely publicized study that indicates beef increases one's cholesterol
B. a reduction in the price of cattle feed
C. an effective advertising campaign by pork producers
D. a change in the incomes of beef consumers

Back 54

B. a reduction in the price of cattle feed

Front 55

64. A rightward shift in the demand curve for product C might be caused by:
A. an increase in income if C is an inferior good.
B. a decrease in income if C is a normal good.
C. a decrease in the price of a product that is a close substitute for C.
D. a decrease in the price of a product that is complementary to C.

Back 55

D. a decrease in the price of a product that is complementary to C.

Front 56

67. College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:
A. inferior goods.
B. normal goods.
C. complementary goods.
D. substitute goods.

Back 56

A. inferior goods.

Front 57

68. Other things equal, which of the following might shift the demand curve for gasoline to the left?
A. the discovery of vast new oil reserves in Montana
B. the development of a low-cost electric automobile
C. an increase in the price of train and air transportation
D. a large decline in the price of automobiles

Back 57

B. the development of a low-cost electric automobile

Front 58

69. Suppose an excise tax is imposed on product X. We would expect this tax to:
A. increase the demand for complementary good Y and decrease the demand for substitute product Z.
B. decrease the demand for complementary good Y and increase the demand for substitute product Z.
C. increase the demands for both complementary good Y and substitute product Z.
D. decrease the demands for both complementary good Y and substitute product Z.

Back 58

B. decrease the demand for complementary good Y and increase the demand for substitute product Z.

Front 59

70. "In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly?
A. in neither statement.
B. in the second statement.
C. in the first statement.
D. in both statements.

Back 59

B. in the second statement.

Front 60

71. In moving along a stable demand curve which of the following is not held constant?
A. the price of the product for which the demand curve is relevant.
B. price expectations.
C. consumer incomes.
D. the prices of complementary goods.

Back 60

A. the price of the product for which the demand curve is relevant.

Front 61

72. The rationing function of prices refers to the:
A. tendency of supply and demand to shift in opposite directions.
B. fact that ration coupons are needed to alleviate wartime shortages of goods.
C. capacity of a competitive market to equate the quantity demanded and the quantity supplied.
D. ability of the market system to generate an equitable distribution of income.

Back 61

C. capacity of a competitive market to equate the quantity demanded and the quantity supplied.

Front 62

73. In a competitive market the equilibrium price and quantity occur where:
A. the downsloping demand curve intersects the upsloping supply curve.
B. the upsloping demand curve intersects the downsloping supply curve.
C. consumers and suppliers bargain to a mutually acceptable price.
D. quantity demanded exceeds quantity supplied or vice versa.

Back 62

A. the downsloping demand curve intersects the upsloping supply curve.

Front 63

74. Price floors and ceiling prices:
A. both cause shortages.
B. both cause surpluses.
C. cause the supply and demand curves to shift until equilibrium is established.
D. interfere with the rationing function of prices.

Back 63

D. interfere with the rationing function of prices.

Front 64

75. In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand?
A. demand rises and supply rises.
B. supply falls and demand remains constant.
C. demand rises and supply falls.
D. supply rises and demand falls.

Back 64

A. demand rises and supply rises.

Front 65

(Advanced analysis) Answer the next question(s) on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.
89. Refer to the above information. The equilibrium quantity is:
A. 10.
B. 20.
C. 15.
D. 30.

Back 65

B. 20.

Front 66

(Advanced analysis) Answer the next question(s) on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.
90. Refer to the above information. The equilibrium price for X is:
A. $2.
B. $4.
C. $6.
D. $7.

Back 66

C. $6.

Front 67

(Advanced analysis) Answer the next question(s) on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.
91. Refer to the above information. If demand changed from P = 10 - .2Q to P = 7 - .3Q, we can conclude that:
A. demand has increased.
B. demand has decreased.
C. supply will increase.
D. supply will decrease.

Back 67

B. demand has decreased.

Front 68

92. The personal distribution of income refers to the:
A. division of income between personal taxes, consumption expenditures, and saving.
B. division of income on the basis of industry sources, for example, agriculture, transportation, and mining.
C. distribution of income to basic resource classes, that is, wages, rents, interest, and profits.
D. way income is distributed among specific households or spending units.

Back 68

D. way income is distributed among specific households or spending units.

Front 69

93. Income data that show the percentage of total income received by each fifth of all households describe the:
A. functional distribution of income.
B. horizontal distribution of income.
C. personal distribution of income.
D. vertical distribution of income.

Back 69

C. personal distribution of income.

Front 70

94. Households in the aggregate use the largest share of their total income to:
A. pay taxes.
B. consume.
C. save.
D. buy capital goods.

Back 70

B. consume.

Front 71

95. In economics, an organization that employs resources to produce goods and services for profit and operates one or more plants is called a(n):
A. industry.
B. shop.
C. conglomerate.
D. firm.

Back 71

D. firm.

Front 72

96. Eclectic Enterprises is a single firm that sells goods and services in the markets for health food, furniture, electric energy, and toys. Eclectic Enterprises is best described as a(n):
A. conglomerate.
B. horizontally integrated firm.
C. vertically integrated firm.
D. industry.

Back 72

A. conglomerate.

Front 73

97. The division of U.S. businesses into the categories of proprietorships, partnerships, and corporations is based on:
A. generally accepted accounting principles.
B. legal considerations.
C. the judgment of the American Economic Association.
D. an executive order of the President.

Back 73

B. legal considerations.

Front 74

98. The Sherman Act of 1890 is an example of:
A. transfer payments.
B. government attempting to redistribute income.
C. government attempting to maintain competition.
D. government providing public goods.

Back 74

C. government attempting to maintain competition.

Front 75

99. The economic policies and programs of government affect all of the following except:
A. the distribution of income.
B. the allocation of resources.
C. the composition of output.
D. the underlying motives of consumers, workers, and firms.

Back 75

D. the underlying motives of consumers, workers, and firms.

Front 76

100. Government may lessen income inequality by:
A. providing transfer payments to the poor.
B. directly modifying market prices as, for example, by establishing a legal minimum wage.
C. using the tax system to tax the wealthy relatively more heavily than the poor.
D. doing All of these.

Back 76

D. doing All of these.

Front 77

101. When externalities cause substantial positive benefits for third parties, a competitive market:
A. underallocates resources to the production of the good.
B. overallocates resources to the production of the good.
C. is allocatively efficient.
D. compensates people for the value of the benefits that these third parties receive.

Back 77

A. underallocates resources to the production of the good.

Front 78

102. If a market is competitive but externalities are present, the resulting equilibrium output:
A. will also be the most efficient output.
B. will always be less than the most efficient output.
C. will always be greater than the most efficient output.
D. may be either larger or smaller than the most efficient output.

Back 78

D. may be either larger or smaller than the most efficient output.

Front 79

103. As it relates to a public good, nonrivalry means that:
A. the public sector is able to provide the good profitably.
B. there is no need or demand for the good.
C. either the public sector or the public sector can produce the good, but not both.
D. one person's benefit from the good does not reduce the benefit available to others.

Back 79

D. one person's benefit from the good does not reduce the benefit available to others.

Front 80

104. The stabilization function of government involves government's efforts to:
A. alter the output of specific goods when external costs or benefits are present.
B. reduce the after-tax incomes of the rich and increase the after-tax incomes of the poor.
C. deal with the problems of substantial unemployment and rapid inflation.
D. provide the socially desired output of public goods.

Back 80

C. deal with the problems of substantial unemployment and rapid inflation.

Front 81

105. Which of the following is a shortcoming of the market system?
A. It leads to firms that are too large to achieve productive efficiency.
B. Certain goods will not be produced because there is no way of excluding nonpaying ("free-rider") individuals from the associated benefits.
C. The resulting distribution of personal incomes might be too equal to maintain incentives.
D. It is controlled by a handful of multinational corporations.

Back 81

B. Certain goods will not be produced because there is no way of excluding nonpaying ("free-rider") individuals from the associated benefits.

Front 82

106. The free-rider problem is associated with:
A. all market goods.
B. the structure of airline fares.
C. producing goods that have characteristics of public goods.
D. the overallocation of the resources to transportation facilities.

Back 82

C. producing goods that have characteristics of public goods.

Front 83

107. A quasi-public good is:
A. a public good that is produced profitably by private firms, without government subsidy.
B. one characterized by nonrivalry and nonexcludability.
C. one characterized by rivalry but not excludability.
D. a good for which exclusion could take place but that has such large spillover benefits that government provides it to prevent an underallocation of resources.

Back 83

D. a good for which exclusion could take place but that has such large spillover benefits that government provides it to prevent an underallocation of resources.

Front 84

108. Which list provides, in order, examples of a private good, a public good, and a quasi-public good?
A. national defense, a national park, an automobile
B. an automobile, national defense, a national park
C. a national park, an automobile, national defense
D. national defense, an automobile, a national park

Back 84

B. an automobile, national defense, a national park

Front 85

109. In a full-employment economy government can reallocate resources from private to public employment by:
A. reducing taxes and increasing government expenditures.
B. reducing taxes and reducing government expenditures.
C. increasing taxes and reducing government expenditures.
D. increasing taxes and increasing government expenditures.

Back 85

D. increasing taxes and increasing government expenditures.

Front 86

110. Government transfer payments:
A. have been virtually eliminated by Federal revenue sharing.
B. have virtually no effect on the distribution of income.
C. make the distribution of income less equal.
D. make the distribution of income less unequal.

Back 86

D. make the distribution of income less unequal.

Front 87

116. Which of the following would not be appropriate if government were trying to reduce high unemployment?
A. an increase in tax rates
B. an increase in subsidies to businesses
C. an increase in transfer payments to households
D. an increase in government spending

Back 87

A. an increase in tax rates

Front 88

117. In performing its stabilization function, it may be appropriate for the nation's central bank (the Federal Reserve in the United States) to:
A. raise taxes to reduce inflation.
B. increase government spending to reduce unemployment.
C. increase subsidies to businesses to reduce unemployment.
D. lower interest rates to stimulate private spending and reduce unemployment.

Back 88

D. lower interest rates to stimulate private spending and reduce unemployment.

Front 89

118. Fiscal policy:
A. is enacted by the nation's central bank (the Federal Reserve in the U.S.).
B. refers to government spending and taxation policies aimed at promoting price stability and full employment.
C. directly raises or lowers the level of interest rates to promote levels of spending consistent with full employment and price stability.
D. is only used to reduce unemployment rates that are too high.

Back 89

B. refers to government spending and taxation policies aimed at promoting price stability and full employment.

Front 90

119. Which of the following is an example of monetary policy?
A. Raising taxes to reduce inflation.
B. Increasing government spending to reduce unemployment and stimulate production.
C. Lowering interest rates to encourage spending and promote full employment.
D. Cutting food stamps and other transfer payment programs during periods of rapid growth and high inflation.

Back 90

C. Lowering interest rates to encourage spending and promote full employment.

Front 91

120. Which of the following is an exhaustive governmental outlay?
A. a Federal $5,000 subsidy check to an Illinois farmer
B. a Temporary Assistance to Needy Families payment made by the state of New York
C. a NASA payment to Boeing Corporation for space hardware
D. a Federal old age insurance payment to a retired coal miner

Back 91

C. a NASA payment to Boeing Corporation for space hardware