FSOT Economics

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Economics Quizzes & Trivia

FSOT Economics preparation quiz. Beware of the typos! They're there to keep you on your toes. OK, not really. Just keep an eye out and let me know.


Questions and Answers
  • 1. 
    Based on supply/demand economic theory, price controls on the supply of wheat during a famine would result in
    • A. 

      An increased supply of low-cost wheat.

    • B. 

      Social unrest.

    • C. 

      No supply of low-cost wheat.

    • D. 

      A scarcity of low-cost wheat.

  • 2. 
    South America's only OPEC member is
    • A. 

      Mexico.

    • B. 

      Brazil.

    • C. 

      Bolivia.

    • D. 

      Venezuela.

  • 3. 
    In 1898, President _____________ launched the trust-busting era, when he appointed the U.S. Industrial Commission on Trusts, which interrogated Carnegie, Rockefeller, Schwab, and other industrial titans.
    • A. 

      William McKinley.

    • B. 

      Theodore Roosevelt.

    • C. 

      Franklin D. Roosevelt.

    • D. 

      William Taft.

  • 4. 
    Since World War II, the agriculture sector's contribution to GDP among first-world nations has generally 
    • A. 

      Stayed the same.

    • B. 

      Fallen.

    • C. 

      Increased.

    • D. 

      Remained immeasurable.

  • 5. 
    Which of these works first introduced Marxism?
    • A. 

      The Invisible Hand.

    • B. 

      Das Kapital.

    • C. 

      Mein Kampf.

    • D. 

      The Communist Manifesto.

  • 6. 
    An economist who advocates that governments take a laissez-faire approach to the economy is advocating
    • A. 

      That the government intervene in markets to protect the vulnerable.

    • B. 

      That the economy should regulate itself without government intervention.

    • C. 

      That the government intervene only in regulating the money supply.

    • D. 

      None of the above.

  • 7. 
    Adam Smith wrote his landmark book in 1776, called the
    • A. 

      Declaration of Independence.

    • B. 

      The Wealth of Nations.

    • C. 

      Das Kapital.

    • D. 

      The Creation of Wealth.

  • 8. 
    In July 1944, even as World War II still raged, delegates met to sign the Bretton-Woods Agreement, which did not result in the following:
    • A. 

      Member countries agreed to combat currency fluctuations by pegging their currency to gold and a reserve currency.

    • B. 

      Member countries created the IMF.

    • C. 

      Member countries created the International Bank for Reconstruction.

    • D. 

      Member countries created the Marshall Plan.

  • 9. 
    In the 17th century, an increased supply of South American gold in Europe caused prices to rise (inflation).  In the 21st century, countries experiencing large net inflows of currency must __________ in order to avoid inflationary pressures.
    • A. 

      Sterilize the inflows by soaking up the currency and purchasing international bonds.

    • B. 

      Sterilize the inflows by issuing domestic bonds.

    • C. 

      Peg their currency to the dominate export market's currency.

    • D. 

      Peg their currency to the dollar.

  • 10. 
    If you favor governmental spending to reduce the down portion of an economic cycle, you are most influenced by
    • A. 

      Keynes.

    • B. 

      Smith.

    • C. 

      Mark.

    • D. 

      Ricardo.

  • 11. 
    Conventional wisdom suggests that as stock values increase, bond yields
    • A. 

      Increase.

    • B. 

      Stay the same.

    • C. 

      Decline.

    • D. 

      None of the above.

  • 12. 
    It was the dramatic 1911 breakup of this American monopoly that helped set the stage for the modern American economy.
    • A. 

      US Steel.

    • B. 

      Edison Power.

    • C. 

      AT&T.

    • D. 

      Standard Oil.

  • 13. 
    Gold frequently increases in value during political or economic instability because
    • A. 

      Gold is intrinsically valuable.

    • B. 

      As a respective currency weakens, speculators know that governments will purchase gold to prop up their currency.

    • C. 

      It is seen as a reliable store of value.

    • D. 

      None of the above.

  • 14. 
    Which currency is no longer traded?
    • A. 

      Baht.

    • B. 

      Forint.

    • C. 

      Mark.

    • D. 

      Ruble.

  • 15. 
    In recent years, farmers have plowed under their corn or wheat, rather than harvest it for market.  This decision is best explained by
    • A. 

      Mass irrational behavior.

    • B. 

      Farmers avoiding the variable cost of taking their products to market.

    • C. 

      Farmers attempting to recover their base cost.

    • D. 

      The rising marginal cost of producing corn or wheat.

  • 16. 
    In 2003 and 2004, the largest exporter in the world (in dollar terms) was
    • A. 

      Germany.

    • B. 

      China.

    • C. 

      United States.

    • D. 

      Japan.

  • 17. 
    The consumer price index (CPI) is
    • A. 

      A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

    • B. 

      A cost of living index.

    • C. 

      An exact measure of inflation.

    • D. 

      None of the above.

  • 18. 
    This disease (or diseases) significantly dampened economic growth in some countries.
    • A. 

      Bird flu.

    • B. 

      Mad cow.

    • C. 

      AIDS.

    • D. 

      All of the above.

  • 19. 
    When demand dramatically increases for a little-known fashion name because of positive media exposure, this will cause a(n) _________ shift in the demand curve.
    • A. 

      Upward.

    • B. 

      Downward.

    • C. 

      Leftward.

    • D. 

      Rightward.

  • 20. 
    Which of the following would not be counted as a part of India's gross domestic product (GDP)?
    • A. 

      An expatriate Indian engineer's wages in New York.

    • B. 

      A U.S. Embassy employee whose wages are deposited in a local New Delhi bank.

    • C. 

      A thief's ill-gotten goods from a tourist visiting the Taj Mahal.

    • D. 

      An Indian peasant trading chicken for rice.

  • 21. 
    Studies of Americans clearly indicate that an overwhelming number
    • A. 

      See themselves as working-class.

    • B. 

      Do not believe in social classes.

    • C. 

      See themselves as middle-class.

    • D. 

      Resent the domination of middle-class values.

  • 22. 
    Despite having sizable natural resources, only a few countries in Africa have been able to make use of mining as a launching pad for sustained economic development.  Which of the following explains this?
    • A. 

      Lack of legislation governing royalties.

    • B. 

      A decline in quality and low market prices.

    • C. 

      A lack of local capital.

    • D. 

      Political instability and government corruption.

  • 23. 
    Which of the following is consistent with a favorable trade balance?
    • A. 

      More goods and services are available for domestic use than are able to be consumed.

    • B. 

      Gold reserves increase.

    • C. 

      Net foreign investment is negative.

    • D. 

      Domestic exports of merchandise exceeds imports of merchandise.

  • 24. 
    During the Middle Ages, international trade flourished as
    • A. 

      Traders from Venice traded gold for Chinese spices and silks.

    • B. 

      Arab traders traded salt for gold from Mali.

    • C. 

      Europeans traded gold for products such as sugar and cloth from the Middle East.

    • D. 

      All of the above.

  • 25. 
    Tariffs on ______ imports have raised U.S. prices many times higher than the world average, while helping impoverish many Caribbean nations.
    • A. 

      Car.

    • B. 

      Sugar.

    • C. 

      Chocolate.

    • D. 

      Coffee

  • 26. 
    Despite decades of foreign aid to the third world, many economists are searching for new economic models to explain why most of these economies have failed to improve markedly.  The noted Peruvian economist Hernando de Soto argues that the third-world nations have done poorly because of
    • A. 

      Oppression by the West.

    • B. 

      Lack of capital.

    • C. 

      Lack of property right protection.

    • D. 

      Failures inherent to capitalism.

  • 27. 
    The German capitalistic model is typified by
    • A. 

      Cronyism.

    • B. 

      State-corporate consensus.

    • C. 

      Laissez-faire relationship between the government and the corporate sector.

    • D. 

      Short-term planning.

  • 28. 
    The 1998 collapse of the Long-Term Capital Management, a ________, almost led to the collapse of capital markets around the world, and led to a $3.4 billion bail out.
    • A. 

      Mutual fund.

    • B. 

      Bond fund.

    • C. 

      Hedge fund.

    • D. 

      Betting pool.

  • 29. 
    Which is most true?
    • A. 

      Economic experts are good at predicting recessions.

    • B. 

      Economic experts can usually indicate only that a recession is in progress when firms and consumers suddenly change behavior.

    • C. 

      Economic experts often can indicate only that a recession has occurred when firms and consumers resume normal consumption patterns.

    • D. 

      None of the above.

  • 30. 
    Economic models are
    • A. 

      Infallible.

    • B. 

      Never right.

    • C. 

      A helpful guide.

    • D. 

      An illusion.

  • 31. 
    Which U.S. city has historically been associated with commodity trading?
    • A. 

      Los Angeles.

    • B. 

      New York.

    • C. 

      Des Moines.

    • D. 

      Chicago.

  • 32. 
    The traditional informal channel for transferring funds between various Middle East cities is called
    • A. 

      Wholesale banking.

    • B. 

      The Arab Street.

    • C. 

      The Hawala system.

    • D. 

      Western Union.

  • 33. 
    Hyper inflation is relatively rare, but was experienced during
    • A. 

      The United States' Great Depression.

    • B. 

      Weimar Germany.

    • C. 

      Post-World War II England.

    • D. 

      Mao's China.

  • 34. 
    Which of the following statements about comparative advantage is true?
    • A. 

      Comparative advantage usually translates into absolute economic and trade advantages.

    • B. 

      When a nation holding a comparative advantage opens itself to international trade, domestic wages usually fall.

    • C. 

      Countries gain the most when they specialize in producing products for which they have the greatest relative efficiency.

    • D. 

      Protecting domestic production will often increase real wages as inexpensive domestic goods replace imported products.

  • 35. 
    Which of the following is contractionary fiscal policy?
    • A. 

      The Federal Reserve sells securities.

    • B. 

      Reductions in personal taxes.

    • C. 

      Decreasing the federal deficit.

    • D. 

      Increasing the federal deficit.

  • 36. 
    Classical economic theory has long argued that low unemployment will result in _______ as workers demand higher wages.
    • A. 

      Deficits.

    • B. 

      Increased money supply.

    • C. 

      Wage inflation.

    • D. 

      Inflation.

  • 37. 
    Despite relatively low unemployment between 1999 and 2004, inflationary pressures have not been evident.  Why not?
    • A. 

      Historically low energy prices.

    • B. 

      Increased efficiencies from high technology investments.

    • C. 

      Downward pricing pressures brought on by cheap offshore manufacturing centers.

    • D. 

      All of the above.

  • 38. 
    If Country A can produce Commodity X and Y while using two output units, and neighboring Country B can produce Commodity X and Y while using three output units, it is most likely that
    • A. 

      One country would gain from trade, while the other would not.

    • B. 

      Each country would gain by trading with each other.

    • C. 

      Country A would produce both commodities, while Country B would produce neither.

    • D. 

      Country B would produce both commodities, while Country A would produce neither.

  • 39. 
    Which of the following would have the same effect as an export on the U.S. balance of payments?
    • A. 

      An American buys a computer built in a Chinese factory that was financed by American funds.

    • B. 

      An American flies to Brazil via Varig Airlines (a Brazilian carrier).

    • C. 

      An American buys preferred stock in Nokia.

    • D. 

      An American receives a $25 wire-transfer birthday gift from a relative in Australia.

  • 40. 
    Importing $10 billion of Chinese goods in 2003, this U.S. company would be Chinas's fifth-largest partner if it were a country.
    • A. 

      IBM.

    • B. 

      P&G.

    • C. 

      Target.

    • D. 

      Wal-Mart.

  • 41. 
    The Foreign Corrupt Practices Act makes corrupt payments to foreign officials illegal and extends to 
    • A. 

      Large U.S. corporations working outside the United States.

    • B. 

      U.S. citizens working for foreign companies.

    • C. 

      Foreign citizens working for U.S. companies.

    • D. 

      All of the above.

  • 42. 
    President Bush's economic advisor can
    • A. 

      Set interest rates.

    • B. 

      Assist in regulating the stock market.

    • C. 

      Provide official economic statistics to the GAO.

    • D. 

      Do none of the above.

  • 43. 
    This important sector of the U.S. economy has caused much concern because of its perceived decline.
    • A. 

      Manufacturing.

    • B. 

      Mining.

    • C. 

      IT.

    • D. 

      Ranching.

  • 44. 
    It was Francis Cabot Lowe's introduction of this machine that helped launch the United States' industrial revolution.
    • A. 

      Steam engine.

    • B. 

      Thresher.

    • C. 

      Locomotive.

    • D. 

      Power loom.

  • 45. 
    After World War II, many economists argued that the developing world should move to
    • A. 

      The gold standard.

    • B. 

      Import substitution policies.

    • C. 

      A tight money supply.

    • D. 

      Inflationary policies.

  • 46. 
    U.S. producers have requested trade protection in the following trade sectors:
    • A. 

      Automobiles.

    • B. 

      Steel.

    • C. 

      Textiles.

    • D. 

      All of the above.

  • 47. 
    If the economy is growing too quickly or too slowly, the _________ will adjust monetary policy by changing the discount rate.
    • A. 

      Federal Reserve

    • B. 

      U.S. Treasury

    • C. 

      Commercial banks

    • D. 

      President's economic advisor

  • 48. 
    Which of the following is not true about dumping in the trade context.
    • A. 

      Dumping is defined as selling a foreign product on the U.S. market at a below-market rate.

    • B. 

      Dumping is remedied by adding a tariff to the foreign product so that its price equals its true value.

    • C. 

      While successful dumping claims benefit some companies, they cal also raise consumer prices, thus hurting consumers.

    • D. 

      U.S. trade law recognizes a difference between competitive pricing and predatory pricing.

  • 49. 
    Consumption + investment + government spending + exports - imports =
    • A. 

      Inflation.

    • B. 

      Net national product.

    • C. 

      Gross national product.

    • D. 

      Balance of payments.

  • 50. 
    The largest category included in gross domestic product (GDP) is
    • A. 

      Military.

    • B. 

      Government.

    • C. 

      Consumption.

    • D. 

      Imports.

  • 51. 
    The 1999 _______ meeting in Seattle is best known for the violent anti-globalization protests that occurred.
    • A. 

      IMF.

    • B. 

      WTO.

    • C. 

      NAFTA.

    • D. 

      G-7.

  • 52. 
    Which of the following would not be considered a non-tariff barrier to trade?
    • A. 

      Increasing the phytosanitary standards for meat imports.

    • B. 

      Limiting Japanese car imports to 10,000 units per year.

    • C. 

      Subsidizing sugar beet production.

    • D. 

      None of the above.

  • 53. 
    In a weak economy, bond yields generally 
    • A. 

      Rise.

    • B. 

      Fall.

    • C. 

      Remain flat.

    • D. 

      None of the above.

  • 54. 
    An astute foreign observer will often look to this indicator as the first (but not the strongest) indicator of the U.S. economy's strength or weakness.
    • A. 

      Car sales.

    • B. 

      GDP growth.

    • C. 

      Nielson ratings.

    • D. 

      Bankruptcies.

  • 55. 
    An important early measure of U.S. business investment plans is this statistic:
    • A. 

      Bankruptcies.

    • B. 

      Unemployment rates.

    • C. 

      Order of durable goods.

    • D. 

      Consumer price index.

  • 56. 
    Canada, the United States, and Mexico approved the North American Free Trade Agreement (NAFTA) in December 1992.  The agreement provided for
    • A. 

      The immediate elimination of all tariffs.

    • B. 

      Opening the Mexican oil industry to foreign investors.

    • C. 

      The immediate removal of all immigration barriers.

    • D. 

      None of the above.

  • 57. 
    If you are a member of Mercosur, you must be a country located in
    • A. 

      Asia.

    • B. 

      Australia.

    • C. 

      South America.

    • D. 

      Europe.

  • 58. 
    Despite the general decline of the dollar in 2004 vis-a-vis the euro and the yen, China's currency, the Yuan, closely followed the dollar in its valuation.  Many economist said that China had _________ the Yuan to the dollar.
    • A. 

      Valued

    • B. 

      Pegged

    • C. 

      Correlated

    • D. 

      Rigged

  • 59. 
    Many critics claimed that China's policy of keeping an artificially low Yan
    • A. 

      Helped China purchase exports to fuel its export sector at lower than usual prices.

    • B. 

      Hurt other Asian countries by introducing inflation into the region.

    • C. 

      Created an economic nirvana by introducing low-cost goods to the poor.

    • D. 

      Kept Chinese products underpriced, thus undercutting fair competition.

  • 60. 
    The G8 was known as the G7 until the introduction of this country:
    • A. 

      Russia

    • B. 

      Hungary

    • C. 

      China

    • D. 

      Italy

  • 61. 
    The 1995 conclusion to the General Agreement on Tariffs and Trade (GATT) negotiations, also called the Uruguay Round, resulted in the founding of the 
    • A. 

      World Trade Organization.

    • B. 

      North American Free Trade Association.

    • C. 

      United Nations.

    • D. 

      South American Free Trade Association.

  • 62. 
    Which of these Federal Agencies combats money laundering?
    • A. 

      Federal Reserve.

    • B. 

      Department of Justice.

    • C. 

      Treasury Department.

    • D. 

      All of the above.

  • 63. 
    The economist John Maynard Keynes was born in 1883 and advocated
    • A. 

      That nations let the invisible hand of the market guide economies.

    • B. 

      A more interventionist government policy, by which the government would use fiscal and monetary measures to mitigate the adverse of economic downturns.

    • C. 

      A return to communal living.

    • D. 

      For global trade as a means of alleviating the suffering in poorer nations.

  • 64. 
    This modern world leader introduced the world to the concept of privatization: the state selling off loss-making state companies.
    • A. 

      Margaret Thatcher.

    • B. 

      Ronald Reagan.

    • C. 

      Franklin Roosevelt.

    • D. 

      Mikhail Gorbachev.

  • 65. 
    Russia has generally maintained a trade surplus with Europe because of
    • A. 

      Arm sales.

    • B. 

      Russia's refusal to buy European goods.

    • C. 

      Import restrictions.

    • D. 

      Increasing revenues from energy sales.

  • 66. 
    _____________ was legislation enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent accounting practices.
    • A. 

      Sarbanes-Oxley Act of 2002.

    • B. 

      The Taft Act.

    • C. 

      The Kennedy-Oxely.

    • D. 

      The Public Accounting Act of 2002.

  • 67. 
    The 1951 creation of the European Coal and Steel Community (ECSC) with six members -- Belgium, West Germany, Luxembourg, France, Italy, and the Netherlands -- is commonly accepted as being the forerunner to the 
    • A. 

      World Trade Organization.

    • B. 

      North Atlantic Treaty Organization.

    • C. 

      European Union.

    • D. 

      NATO.

  • 68. 
    Despite its advanced economy, which of the following countries is not a member of the European Union?
    • A. 

      Hungary.

    • B. 

      Finland.

    • C. 

      Luxembourg.

    • D. 

      Switzerland.

  • 69. 
    At a price of $5, consumers wish to buy 100 widgets per month, but producers are willing to produce only 50 widgets per month.  What best describes what will happen to the price?
    • A. 

      The price will double to make up for the deficit of 50 widgets.

    • B. 

      The price will reach an equilibrium between supply and demand.

    • C. 

      The price will rise upward indefinitely, reflecting the economics of scarcity.

    • D. 

      All of the above.

  • 70. 
    A decline in the dollar's value would benefit
    • A. 

      Exporters.

    • B. 

      Tourists.

    • C. 

      Truck drivers.

    • D. 

      Importers.

  • 71. 
    Which of the following is True?
    • A. 

      A core responsibility of the IMF is to provide loans to countries experiencing payment difficulties.

    • B. 

      The International Monetary Fund was created in 1965 to help promote the health of the world economy.

    • C. 

      After countries deposit funds in the IMF, they cannot be withdrawn for fear of upsetting the world economy.

    • D. 

      All of the above.

  • 72. 
    During much of the 19th century, the United States had _____________ as European financed the building of canals and railroads.
    • A. 

      An unfavorable balance of payments

    • B. 

      A favorable balance of payments

    • C. 

      A recession

    • D. 

      None of the above.

  • 73. 
    In 2001, Russia implemented this type of tax system on personal income.
    • A. 

      Progressive tax.

    • B. 

      Fair tax.

    • C. 

      Flat tax.

    • D. 

      Vice tax.

  • 74. 
    The Federal Reserve System was created by Congress in ___________ to provide for a safer, more flexible, banking and monetary system.
    • A. 

      1847

    • B. 

      1897

    • C. 

      1913

    • D. 

      1946

  • 75. 
    For which of the following products would demand be inelastic?
    • A. 

      Iceberg lettuce.

    • B. 

      Vegetables.

    • C. 

      A Ford Explorer.

    • D. 

      Movie tickets.