Economics Pre-test Chapters 1-4
Quiz for slavin chapters 1-4. Something to prepare me for my exam.
Questions and Answers
- 1.
Why is savings good for the economy?
- A.
The more we save the less we spend
- B.
Keeps inflation from increasing
- C.
It keeps intrest rates low
- D.
The FDIC has more money
Correct Answer
C. It keeps intrest rates lowExplanation
Saving is good for the economy because it keeps interest rates low. When individuals save money, banks have more funds to lend out to businesses and individuals. This increased supply of loanable funds leads to lower interest rates, making borrowing more affordable. Lower interest rates encourage investment and consumption, stimulating economic growth. Additionally, low interest rates make it easier for businesses to borrow money for expansion and job creation. Overall, saving helps to maintain a healthy economy by promoting investment, consumption, and economic stability.Rate this question:
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- 2.
When supply price intrest rates .
- A.
Increase,decrease
- B.
Increase,increase
- C.
Decrease,increase
- D.
Decrease,decrease
Correct Answer
A. Increase,decreaseExplanation
The correct answer is "increase, decrease" because when the supply price increases, it means that the cost of producing goods or services has increased. This can lead to a decrease in supply because producers may not be willing or able to produce as much at a higher cost. On the other hand, when interest rates decrease, it becomes cheaper for businesses to borrow money for investment and expansion. This can lead to an increase in supply as businesses are more willing to invest and produce more goods or services.Rate this question:
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- 3.
What are the 4 means of production?
Correct Answer
land,labor,capital,entrepeneurial abilityExplanation
The four means of production are land, labor, capital, and entrepreneurial ability. Land refers to natural resources and physical space used in production. Labor refers to the human effort put into production. Capital refers to the tools, machinery, and equipment used in production. Entrepreneurial ability refers to the skills and innovation of individuals who organize and manage the other three factors of production. These four factors are essential in the production of goods and services in an economy.Rate this question:
- 4.
What is the reason why we produce more?
- A.
Demand
- B.
Capital goods
- C.
Supply
- D.
Profit motive
Correct Answer
B. Capital goodsExplanation
The reason why we produce more is because of capital goods. Capital goods are the tools, machinery, and equipment used in the production process. By investing in capital goods, businesses are able to increase their productivity and efficiency, leading to higher levels of production. This allows them to meet the demand for goods and services in the market and generate more profit.Rate this question:
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- 5.
Adam smith believed that the government should be involved in...
Correct Answer
court,police/military,some public goodsExplanation
Adam Smith believed that the government should be involved in providing essential services such as the court system, police and military, and some public goods. He argued that these functions were necessary for maintaining law and order, protecting citizens from external threats, and ensuring the provision of certain goods and services that the market alone may not adequately provide. Smith believed that the government's role should be limited to these areas and that excessive government intervention in the economy could hinder economic growth and individual freedom.Rate this question:
- 6.
Which economic system provides cradle to the grave security?
- A.
Socialism
- B.
Capitalism
- C.
Communism
Correct Answer
A. SocialismExplanation
Socialism provides cradle to the grave security because it is an economic system where the government plays a significant role in providing social welfare programs and services to its citizens. These programs include healthcare, education, unemployment benefits, and retirement pensions, among others. The aim of socialism is to ensure that all individuals have access to basic necessities and are protected from economic hardships throughout their lives.Rate this question:
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- 7.
A price floor represents a _______________?
Correct Answer
surplusExplanation
A price floor represents a surplus because it sets a minimum price that is higher than the equilibrium price in the market. This leads to an excess supply of goods or services, as suppliers are willing to sell more at the higher price, but consumers are not willing to purchase as much at the elevated price. Consequently, there is an imbalance where the quantity supplied exceeds the quantity demanded, resulting in a surplus.Rate this question:
- 8.
A price celing represents a ?
Correct Answer
shortageExplanation
A price ceiling represents a shortage because it is a government-imposed maximum price set below the equilibrium price in a market. When the price ceiling is below the equilibrium price, it creates excess demand or shortage, as the quantity demanded by consumers exceeds the quantity supplied by producers at that artificially low price. This shortage occurs because the price ceiling prevents the market from reaching equilibrium and adjusting to match supply and demand.Rate this question:
- 9.
Gas prices is an example of ?
Correct Answer
price ceilingExplanation
Gas prices can be seen as an example of a price ceiling because governments often set a maximum price that can be charged for gasoline. This is done to protect consumers from high prices and ensure affordability. By implementing a price ceiling, the government limits the amount that suppliers can charge, preventing them from increasing prices beyond a certain level. This helps to control inflation and ensure that essential goods like gasoline remain accessible to the general public.Rate this question:
- 10.
Minimum wage is an example of ?
Correct Answer
price floorExplanation
Minimum wage is an example of a price floor. A price floor is a government-imposed minimum price that is set above the equilibrium price in a market. In the case of minimum wage, the government sets a minimum hourly wage that employers must pay to their employees. This ensures that workers are paid a fair wage and prevents employers from paying wages below a certain level. However, it can also lead to unintended consequences such as job losses or reduced working hours, as employers may not be able to afford to pay the higher wages.Rate this question:
- 11.
This the product each person is know for producing during the age of Industrial Capitalist.
- Rockefeller:
- McCormick:
- Carnegie:
- Du Pont:
- Swift:
Correct Answer
oil farm equipment steel chemicals meat packingExplanation
Rockefeller is known for producing oil, McCormick is known for producing farm equipment, Carnegie is known for producing steel, Du Pont is known for producing chemicals, and Swift is known for meat packing.Rate this question:
- 12.
Which President believed in supply side economics?
- A.
Esienhower
- B.
Reagan
- C.
Johnson
- D.
Rosevelt
Correct Answer
B. ReaganExplanation
Reagan is the correct answer because he was a strong advocate for supply side economics, also known as Reaganomics. This economic theory emphasizes reducing taxes and regulations to stimulate economic growth and increase investment. Reagan implemented several policies based on this theory during his presidency, including significant tax cuts for both individuals and corporations. His belief in supply side economics was a key aspect of his economic agenda and played a major role in shaping economic policy during his time in office.Rate this question:
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- 13.
Which President Implemented the New Deal?
- A.
Esienhower
- B.
Reagan
- C.
Johnson
- D.
Rosevelt
Correct Answer
D. RoseveltExplanation
The correct answer is Roosevelt because he is widely known for implementing the New Deal. The New Deal was a series of programs and policies implemented by President Franklin D. Roosevelt in response to the Great Depression. It aimed to provide relief, recovery, and reform to the American people and the economy. Roosevelt's New Deal initiatives included the creation of jobs, financial reforms, and social welfare programs, which had a significant impact on the country and helped to alleviate the effects of the economic crisis.Rate this question:
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- 14.
Each of the following were elements of the New Deal except______________
- A.
Relief,recovery,reform
- B.
A massive employment program
- C.
Unemployment insurance and bank deposit insurance
- D.
A balanced budget
Correct Answer
D. A balanced budgetExplanation
The New Deal was a series of economic and social programs implemented by President Franklin D. Roosevelt to combat the Great Depression. It aimed to provide relief to the unemployed and poor, stimulate economic recovery, and introduce reforms to prevent future economic crises. One of the key elements of the New Deal was the implementation of various employment programs to create jobs for the unemployed. Additionally, the New Deal introduced unemployment insurance and bank deposit insurance to provide financial security to individuals and protect the banking system. However, a balanced budget was not a priority during the New Deal era as the government focused on spending to stimulate the economy.Rate this question:
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- 15.
The longest economic expansion began in ______________
- A.
1961
- B.
1982
- C.
1991
- D.
1993
Correct Answer
C. 1991Explanation
The correct answer is 1991. This is because the question is asking for the year in which the longest economic expansion began. Economic expansion refers to a period of sustained economic growth, characterized by increasing production, employment, and income. The expansion that began in 1991 is considered the longest because it lasted for 10 years, until 2001. During this period, the United States experienced significant economic growth and a decrease in unemployment rates.Rate this question:
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- 16.
Medicare & Medicaid were inaugurated under the administration of .
- A.
Johnson
- B.
Kennedy
- C.
Eisenhower
- D.
Roosevelt
Correct Answer
A. JohnsonExplanation
Medicare and Medicaid were inaugurated under the administration of Johnson.Rate this question:
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- 17.
The word that is central to the definition of economics is .
- A.
Resource
- B.
Wants
- C.
Scarcity
- D.
Capital
Correct Answer
C. ScarcityExplanation
Scarcity is the central concept in economics as it refers to the limited availability of resources in relation to unlimited wants and needs. It is the fundamental problem that drives economic decision-making, as individuals and societies must make choices about how to allocate scarce resources to fulfill their various needs and wants. Without scarcity, there would be no need for economics as there would be an abundance of resources to satisfy all desires.Rate this question:
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- 18.
Each of the following is an example of capital except .
- A.
Land
- B.
An office building
- C.
A computer system
- D.
A factory
Correct Answer
A. LandExplanation
Land is not considered a form of capital because it is a natural resource that is not man-made. Capital refers to man-made resources that are used in the production of goods and services, such as buildings, machinery, and technology. Land, on the other hand, is a natural resource that is used in production but is not created by human effort.Rate this question:
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- 19.
An economy operating its plant and equiptment at full capacity implies a capacity utilization rate of .
- A.
40%
- B.
70%
- C.
85%
- D.
100%
Correct Answer
C. 85%Explanation
An economy operating its plant and equipment at full capacity implies that it is utilizing 100% of its capacity. Therefore, the correct answer of 85% is incorrect and does not align with the given information.Rate this question:
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- 20.
The full-production level of our economy implies .
- A.
An efficent allocation of our resources
- B.
Zero unemployment
- C.
Our plant and equiptment being operated at 100% capacity
- D.
A high unemployment rate
Correct Answer
A. An efficent allocation of our resourcesExplanation
The full-production level of our economy implies an efficient allocation of our resources. This means that all resources are being used in the most effective and productive way possible, with no wastage or inefficiencies. It indicates that the economy is operating at its maximum potential, utilizing all available resources to their fullest extent. This efficient allocation leads to optimal output and productivity, ensuring that the economy is functioning at its highest level of efficiency.Rate this question:
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- 21.
If we are operating inside our production possibilities curve .
- A.
There is a recession going on
- B.
There is NOT a recession going on
- C.
There is less than full employment
- D.
There is inflation
Correct Answer
C. There is less than full employmentExplanation
If we are operating inside our production possibilities curve, it means that we are not utilizing all of our available resources efficiently. This suggests that there is less than full employment, as there are still unused resources that could be utilized to increase production.Rate this question:
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- 22.
To attain a higher rate of economic growth, we need to devote .
- A.
A higher proportion of our production to capital goods and a lower proportion to consumer goods.
- B.
A higher proportion of our production to consumer goods and a lower proportion to capital goods.
- C.
A higher proportion of our production to both capital goods and consumer goods.
- D.
A lower proportion of both capital goods consumer goods.
Correct Answer
A. A higher proportion of our production to capital goods and a lower proportion to consumer goods.Explanation
To attain a higher rate of economic growth, it is necessary to allocate a higher proportion of our production to capital goods and a lower proportion to consumer goods. This is because capital goods, such as machinery and equipment, are essential for increasing productivity and expanding production capacity. By investing more in capital goods, we can enhance efficiency and innovation, leading to higher economic growth. On the other hand, allocating a lower proportion to consumer goods means that resources are directed towards investment and production rather than immediate consumption, which can further stimulate economic growth in the long run.Rate this question:
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- 23.
As we produce increasing amounts of a particular good, the resources used in its production .
- A.
Become more suitable
- B.
Become less suitable
- C.
Continue to have the same suitability
Correct Answer
B. Become less suitableExplanation
As we produce increasing amounts of a particular good, the resources used in its production become less suitable. This is because as production increases, the demand for resources also increases. This leads to the utilization of resources that may not be as efficient or suitable for production. As a result, the suitability of the resources decreases as more of them are utilized to meet the growing demand.Rate this question:
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- 24.
The law of increasing costs is explained by each of the following except .
- A.
The law of dimishing returns
- B.
Diseconomics of scale
- C.
Factor suitability
- D.
Overspecialization
Correct Answer
D. OverspecializationExplanation
The law of increasing costs states that as production increases, the opportunity cost of producing an additional unit also increases. This is because resources become less suited for alternative uses and need to be reallocated. The other options listed in the question all contribute to the explanation of the law of increasing costs. The law of diminishing returns refers to the decrease in additional output that is gained when one input is increased while keeping other inputs constant. Diseconomies of scale occur when a company grows too large and experiences inefficiencies that lead to increased costs. Factor suitability refers to the idea that certain resources are better suited for specific industries or activities. However, overspecialization does not directly explain the law of increasing costs.Rate this question:
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- 25.
As a firm grows larger, .
- A.
Economics of scale set in, then diseconomics of scale
- B.
Diseconomics of scale set in, then economics of scale
- C.
Economics of scale and diseconomics of scale set in at the same time
- D.
Neither economics of scale and diseconomics of scale set in
Correct Answer
A. Economics of scale set in, then diseconomics of scaleExplanation
As a firm grows larger, the economics of scale set in, which means that the firm experiences cost advantages and efficiency improvements due to increased production and economies of scale. However, as the firm continues to grow even larger, the diseconomics of scale may start to occur. Diseconomics of scale refers to the point at which the firm becomes too large and experiences inefficiencies, such as coordination problems, communication breakdowns, and bureaucratic red tape. Therefore, the correct answer is "economics of scale set in, then diseconomics of scale".Rate this question:
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- 26.
The law of increasing costs states that, as .
- A.
Output rises, cost per unit rises as well
- B.
The output of one good expands, the opportunity cost of producing additionaal units of this good increases
- C.
Economics of scale set in, costs increase
- D.
Output rises,diminishinmg returen set in
Correct Answer
B. The output of one good expands, the opportunity cost of producing additionaal units of this good increasesExplanation
The law of increasing costs states that as the output of one good expands, the opportunity cost of producing additional units of this good increases. This means that as a company produces more of a particular good, it must give up more and more of other goods that it could have produced instead. This is because resources are limited and not equally efficient in producing different goods. Therefore, the more a company focuses on producing one good, the less efficient it becomes in producing other goods, leading to an increase in opportunity cost.Rate this question:
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- 27.
The price system is based on .
- A.
Government regulation
- B.
The supplier who sets the price
- C.
The feeling of the individual buyer
- D.
Supply and demand
Correct Answer
D. Supply and demandExplanation
The price system is based on supply and demand. This means that prices are determined by the interaction between the quantity of a good or service that is available (supply) and the quantity that consumers are willing and able to buy (demand). When supply is high and demand is low, prices tend to decrease. Conversely, when supply is low and demand is high, prices tend to increase. The price system allows for the efficient allocation of resources and helps to coordinate the production and consumption decisions of individuals and businesses in the economy.Rate this question:
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- 28.
The strongest indictment of the capitalist system was written by .
- A.
Adam smith
- B.
John keynes
- C.
Rose cohen
- D.
Karl marx
Correct Answer
D. Karl marxExplanation
The strongest indictment of the capitalist system was written by Karl Marx. Marx was a philosopher, economist, and sociologist who co-authored "The Communist Manifesto" and wrote "Das Kapital." In these works, Marx criticized capitalism for its inherent inequalities, exploitation of the working class, and concentration of wealth and power in the hands of a few. He argued for the overthrow of capitalism and the establishment of a socialist society. Marx's writings have had a profound influence on the development of socialist and communist movements worldwide.Rate this question:
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- 29.
Capital comes from .
- A.
Gold
- B.
Savings
- C.
High consumption
- D.
The government
Correct Answer
B. SavingsExplanation
Capital refers to the financial resources that are used to produce goods and services. In this context, savings can be seen as a potential source of capital. When individuals save their money instead of spending it, they are able to accumulate funds that can be invested in businesses or other productive activities. These savings can then be used to purchase machinery, hire employees, or finance research and development, all of which contribute to economic growth and development. Therefore, savings can be considered a source of capital.Rate this question:
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- 30.
When demand rises and supply stays the same, .
- A.
Equilibrium quantity rises
- B.
Equilibrium quantity falls
- C.
Equilibrium quantity stays the same
Correct Answer
A. Equilibrium quantity risesExplanation
When demand rises and supply stays the same, it means that there is an increase in the quantity of a good or service that consumers are willing to buy at a given price, while the quantity of the good or service that producers are willing to sell remains constant. This leads to a situation where the quantity demanded exceeds the quantity supplied, creating a shortage in the market. In order to restore equilibrium, the price of the good or service will increase, which in turn incentivizes producers to increase their supply. As a result, the equilibrium quantity of the good or service will rise.Rate this question:
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- 31.
At equilibrium price,quantity demanded is .
- A.
Greater than quantity supplied
- B.
Equal to quantity supplied
- C.
Smaller than quantity supplied
Correct Answer
B. Equal to quantity suppliedExplanation
At equilibrium price, quantity demanded is equal to quantity supplied. This means that the quantity of a good or service that consumers are willing and able to buy at a specific price is exactly equal to the quantity that producers are willing and able to sell at that same price. This balance between supply and demand ensures that there is no shortage or surplus in the market, resulting in a stable equilibrium price.Rate this question:
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- 32.
When quantity demanded is greater than quantity supplied, .
- A.
Market price will rise
- B.
Market price will fall
- C.
Market price will stay the same
Correct Answer
A. Market price will riseExplanation
When quantity demanded is greater than quantity supplied, it indicates that there is high demand for a product but limited supply. This creates a shortage in the market, as there are not enough goods to meet the demand. In such a situation, sellers can increase the price of the product because they have the advantage of scarcity. As a result, the market price will rise to balance the demand and supply forces.Rate this question:
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- 33.
What happens to quantity demanded when price is raised?
- A.
It rises
- B.
It falls
- C.
It stays the same
Correct Answer
B. It fallsExplanation
When the price of a product is raised, the quantity demanded by consumers tends to decrease. This is because as the price increases, consumers are less willing or able to purchase the product, resulting in a decrease in demand. This relationship between price and quantity demanded is known as the law of demand, which states that as price increases, quantity demanded decreases, and vice versa. Hence, the correct answer is "it falls."Rate this question:
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- 34.
Market price equilibrium price
- A.
Must always be equal to
- B.
Must always be above
- C.
May be equal to
Correct Answer
C. May be equal toExplanation
The market price and the equilibrium price may be equal to each other. This means that in a perfectly competitive market, where supply and demand are in balance, the price at which goods or services are bought and sold can be the same as the price at which supply and demand meet. However, it is also possible for the market price to be above or below the equilibrium price, depending on factors such as market conditions, competition, and government regulations.Rate this question:
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- 35.
Market price may not reach equilibrium if there are .
- A.
Both price ceilings and price floors
- B.
Neither price ceilings nor price floors
- C.
Only price ceilings
- D.
Only price floors
Correct Answer
A. Both price ceilings and price floorsExplanation
When both price ceilings and price floors are present, it creates conflicting forces in the market. A price ceiling sets a maximum price that can be charged for a good or service, while a price floor sets a minimum price. These policies are implemented to control market prices, but they can disrupt the natural equilibrium of supply and demand. In this case, the presence of both price ceilings and price floors can prevent the market price from reaching equilibrium because they impose restrictions on both the upper and lower limits of prices.Rate this question:
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- 36.
An increase in supply while demand remains unchanged will lead to ___________________.
- A.
An increase in equilibrium price and a decrease in equilibrium quantity
- B.
An decrease in equilibrium price and a decrease in equilibrium quantity
- C.
An increase in equilibrium price and a increase in equilibrium quantity
- D.
An decrease in equilibrium price and a increase in equilibrium quantity
Correct Answer
D. An decrease in equilibrium price and a increase in equilibrium quantityExplanation
When there is an increase in supply while demand remains unchanged, there will be a surplus of goods in the market. This surplus will put pressure on the price, causing it to decrease. At the same time, with more goods available, the quantity supplied will increase. Therefore, the correct answer is "a decrease in equilibrium price and an increase in equilibrium quantity."Rate this question:
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- 37.
A decrease in demand while supply remains unchanced will lead to .
- A.
An increase in equilibrium price and quantity
- B.
An decrease in equilibrium price and quantity
- C.
An increase in equilibrium price and decrease equilibrium quantity
- D.
An decrease in equilibrium price and an increase equilibrium quantity
Correct Answer
B. An decrease in equilibrium price and quantityExplanation
A decrease in demand while supply remains unchanged will lead to a decrease in equilibrium price and quantity. This is because when demand decreases, there is less competition among buyers for the available supply, causing sellers to lower their prices in order to attract buyers. As a result, the equilibrium price and quantity both decrease.Rate this question:
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- 38.
As price rises, .
- A.
Quantity demanded and quantity supplied both rise
- B.
Quantity demanded and quantity supplied both fall
- C.
Quantity demanded rises and quantity supplied falls
- D.
Quantity demanded fallsand quantity supplied rises
Correct Answer
D. Quantity demanded fallsand quantity supplied risesExplanation
As price rises, quantity demanded falls because consumers are less willing to purchase a product at a higher price. On the other hand, quantity supplied rises because producers are motivated to supply more of the product at a higher price, as it leads to higher profits. This is known as the law of demand and the law of supply, which state that as price increases, quantity demanded decreases and quantity supplied increases.Rate this question:
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- 39.
When quantity demanded is greater than quantity supplied, there .
- A.
Is a shortage
- B.
Is a surplus
- C.
May be a shortage or surplus
Correct Answer
A. Is a shortageExplanation
When the quantity demanded is greater than the quantity supplied, it results in a shortage. This means that there is an insufficient amount of the good or service available to meet the demand from consumers. This can lead to higher prices as consumers compete for the limited supply, and it may also create an opportunity for sellers to increase their profits.Rate this question:
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- 40.
When quantity supplied is greater than quantity demanded, .
- A.
Price will fall to its equilibrium level
- B.
Price will rise to its equilibrium level
- C.
Price may rise, fall or stay the same, depending on a variety of factors
Correct Answer
A. Price will fall to its equilibrium levelExplanation
When the quantity supplied is greater than the quantity demanded, it indicates an excess supply or surplus in the market. In order to eliminate this surplus, sellers will need to lower the price in order to encourage more buyers to purchase the product. As a result, the price will fall to its equilibrium level where the quantity supplied and quantity demanded are equal. This is because a lower price will attract more buyers and reduce the excess supply in the market.Rate this question:
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- 41.
Usury laws and rent control are examples of .
- A.
Price floors
- B.
Price celilings
- C.
Rationing
- D.
Supply and demand
Correct Answer
B. Price celilingsExplanation
Usury laws and rent control are examples of price ceilings. Price ceilings are government-imposed limits on the maximum price that can be charged for a good or service. Usury laws set a maximum interest rate that can be charged on loans, while rent control sets a maximum allowable rent for residential properties. These measures are put in place to protect consumers from excessive prices and ensure affordability, but they can also have unintended consequences such as shortages or reduced quality of goods and services.Rate this question:
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- 42.
The best way to eliminate gas lines would be to .
- A.
Impose government price ceilings
- B.
Impose government price floors
- C.
Allow the forces of supply and demand to function
- D.
Put price gougers in jail
Correct Answer
C. Allow the forces of supply and demand to functionExplanation
Allowing the forces of supply and demand to function is the best way to eliminate gas lines. This means letting the market determine the price of gas based on the balance between supply and demand. By doing so, the market can efficiently allocate resources and ensure that gas is distributed to those who are willing to pay the market price. Imposing government price ceilings or floors may distort the market and lead to shortages or surpluses. Putting price gougers in jail may not address the root cause of the problem and may not effectively eliminate gas lines.Rate this question:
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