FSOT : Practice Quiz On Economics! Trivia
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Economic models are
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Infallible.
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Never right.
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A helpful guide.
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An illusion.
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Are you ready for this FSOT practice quiz on economics? This quiz may be of assistance. You will be responsible for grasping the supply/demand economic theory. Who is South America’s only OPEC member, what is the communist manifesto, what does laissez-faire mean, what book did Adam Smith write, what economic style are you most influenced by, and which currency is See moreno longer traded? See how you are with money matters and take the quiz.
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- 2.
Adam Smith wrote his landmark book in 1776, called the
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Declaration of Independence.
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The Wealth of Nations.
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Das Kapital.
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The Creation of Wealth.
Correct Answer
A. The Wealth of Nations.Explanation
Written the same year as the Declaration of Independence, Adam Smith's economic opus (much referred to but little read) is called The Wealth of Nations.Rate this question:
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- 3.
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?
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Lack of legislation governing royalties.
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A decline in quality and low market prices.
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A lack of local capital.
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Political instability and government corruption.
Correct Answer
A. Political instability and government corruption.Explanation
Political instability and government corruption have prevented most of Africa's countries from making use of abundant natural resources. The lack of local capital does not play a significant role, because sizable investors do exist in Africa. International investors tend to avoid placing their money where there is political instability and bad governance.Rate this question:
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- 4.
If the economy is growing too quickly or too slowly, the _________ will adjust monetary policy by changing the discount rate.
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Federal Reserve
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U.S. Treasury
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Commercial banks
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President's economic advisor
Correct Answer
A. Federal ReserveExplanation
The Federal Reserve will adjust monetary policy by increasing or decreasing the discount rate or the interest rate the Federal Reserve charges on loans it makes to banks. By increasing or decreasing this rate, the Fed can discourage or encourage banks to borrow the funds it creates and, therefore, make more loans to the public.Rate this question:
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- 5.
If you favor governmental spending to reduce the down portion of an economic cycle, you are most influenced by
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Keynes.
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Smith.
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Mark.
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Ricardo.
Correct Answer
A. Keynes.Explanation
Keynes advocated government spending to flatten out the business cycle.Rate this question:
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- 6.
During the Middle Ages, international trade flourished as
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Traders from Venice traded gold for Chinese spices and silks.
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Arab traders traded salt for gold from Mali.
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Europeans traded gold for products such as sugar and cloth from the Middle East.
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All of the above.
Correct Answer
A. All of the above.Explanation
Although many people think of international trade as being a modern phenomena, it in fact has existed as long as mankind itself.Rate this question:
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- 7.
Importing $10 billion of Chinese goods in 2003, this U.S. company would be Chinas's fifth-largest partner if it were a country.
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IBM.
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P&G.
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Target.
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Wal-Mart.
Correct Answer
A. Wal-Mart.Explanation
Wal-Mart continues to be the largest American importer.Rate this question:
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- 8.
An economist who advocates that governments take a laissez-faire approach to the economy is advocating
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That the government intervene in markets to protect the vulnerable.
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That the economy should regulate itself without government intervention.
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That the government intervene only in regulating the money supply.
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None of the above.
Correct Answer
A. That the economy should regulate itself without government intervention.Explanation
Laissez-faire policies mean a policy of (governmental) non-intervention. In the field of economics, laissez-faire policies such as free trade were persuasively advocated by Adam Smith in his book The Wealth of Nations (1776).Rate this question:
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- 9.
This important sector of the U.S. economy has caused much concern because of its perceived decline.
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Manufacturing.
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Mining.
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IT.
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Ranching.
Correct Answer
A. Manufacturing.Explanation
The United States' manufacturing sector's decline has continued to grab headlines. As of January, 2004, the number of such jobs stood at 14.3 million, down by 3.0 million jobs, or 17.5 percent, since July 2000 and about 5.2 million since the historical peak in 1979. Employment in manufacturing was its lowest since July 1950.Rate this question:
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- 10.
The Foreign Corrupt Practices Act makes corrupt payments to foreign officials illegal and extends to
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Large U.S. corporations working outside the United States.
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U.S. citizens working for foreign companies.
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Foreign citizens working for U.S. companies.
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All of the above.
Correct Answer
A. All of the above.Explanation
The Foreign Corrupts Practices Act is an important sharper of U.S. business practices overseas. All U.S. citizens, companies, and employees (even if they are not U.S. citizens) fall under the auspices of this act; however, the act applies only to corrupt transactions with foreign government officials.Rate this question:
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- 11.
U.S. producers have requested trade protection in the following trade sectors:
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Automobiles.
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Steel.
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Textiles.
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All of the above.
Correct Answer
A. All of the above.Explanation
U.S. producers from the automobile, steel, and textile industries have all requested trade protection from foreign imports.Rate this question:
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- 12.
South America's only OPEC member is
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Mexico.
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Brazil.
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Bolivia.
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Venezuela.
Correct Answer
A. Venezuela.Explanation
Venezuela is South America's only member of OPEC.Rate this question:
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- 13.
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.
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Valued
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Pegged
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Correlated
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Rigged
Correct Answer
A. PeggedExplanation
Pegged is the economic term used to indicate that a country has established its exchange rate by legislation or market operations.Rate this question:
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- 14.
Studies of Americans clearly indicate that an overwhelming number
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See themselves as working-class.
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Do not believe in social classes.
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See themselves as middle-class.
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Resent the domination of middle-class values.
Correct Answer
A. See themselves as middle-class.Explanation
Study after study indicates that Americans see themselves overwhelmingly as middle-class.Rate this question:
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- 15.
Despite its advanced economy, which of the following countries is not a member of the European Union?
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Hungary.
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Finland.
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Luxembourg.
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Switzerland.
Correct Answer
A. Switzerland.Explanation
Despite Switzerland's advanced economy, it continues to remain outside of the European Union.Rate this question:
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- 16.
Which of the following is consistent with a favorable trade balance?
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More goods and services are available for domestic use than are able to be consumed.
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Gold reserves increase.
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Net foreign investment is negative.
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Domestic exports of merchandise exceeds imports of merchandise.
Correct Answer
A. Domestic exports of merchandise exceeds imports of merchandise.Explanation
A favorable trade balance indicates that a country exports more than its imports from another country.Rate this question:
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- 17.
Many critics claimed that China's policy of keeping an artificially low Yan
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Helped China purchase exports to fuel its export sector at lower than usual prices.
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Hurt other Asian countries by introducing inflation into the region.
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Created an economic nirvana by introducing low-cost goods to the poor.
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Kept Chinese products underpriced, thus undercutting fair competition.
Correct Answer
A. Kept Chinese products underpriced, thus undercutting fair competition.Explanation
Critics of China's policies usually claim that its policy of keeping its currency undervalued underprices goods, making products from more freely traded currencies less competitive.Rate this question:
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- 18.
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
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World Trade Organization.
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North Atlantic Treaty Organization.
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European Union.
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NATO.
Correct Answer
A. European Union.Explanation
The European Union originated from the European Coal and Steel Community (ECSC), and organization meant to organize the free movement of coal and steel and free access to sources of production. In addition, a common central authority supervised the market, oversaw respect for competition, and ensured price transparency.Rate this question:
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- 19.
Since World War II, the agriculture sector's contribution to GDP among first-world nations has generally
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Stayed the same.
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Fallen.
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Increased.
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Remained immeasurable.
Correct Answer
A. Fallen.Explanation
As agriculture's importance in the first world has diminished, its percentage of the GDP has steadily diminished as well.Rate this question:
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- 20.
Tariffs on ______ imports have raised U.S. prices many times higher than the world average, while helping impoverish many Caribbean nations.
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Car.
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Sugar.
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Chocolate.
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Coffee
Correct Answer
A. Sugar.Explanation
U.S. tariffs on sugar imports from the Caribbean have kept U.S. sugar prices many times higher than the world average and have helped impoverish many Caribbean nations.Rate this question:
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- 21.
Which of the following statements about comparative advantage is true?
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Comparative advantage usually translates into absolute economic and trade advantages.
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When a nation holding a comparative advantage opens itself to international trade, domestic wages usually fall.
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Countries gain the most when they specialize in producing products for which they have the greatest relative efficiency.
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Protecting domestic production will often increase real wages as inexpensive domestic goods replace imported products.
Correct Answer
A. Countries gain the most when they specialize in producing products for which they have the greatest relative efficiency.Explanation
Comparative advantage is the idea that countries gain when they produce those items that they are most efficient at producing. In other words, Saudi Arabia has an advantage in producing high quality oil cheaply, therefore, it should use its export earnings to buy items such as wheat, which it has little ability to produce in comparison with Australia or Argentina.Rate this question:
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- 22.
The economist John Maynard Keynes was born in 1883 and advocated
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That nations let the invisible hand of the market guide economies.
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A more interventionist government policy, by which the government would use fiscal and monetary measures to mitigate the adverse of economic downturns.
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A return to communal living.
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For global trade as a means of alleviating the suffering in poorer nations.
Correct Answer
A. A more interventionist government policy, by which the government would use fiscal and monetary measures to mitigate the adverse of economic downturns.Explanation
Keynes is known for advocating that government practice a more interventionist economic policy.Rate this question:
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- 23.
The traditional informal channel for transferring funds between various Middle East cities is called
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Wholesale banking.
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The Arab Street.
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The Hawala system.
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Western Union.
Correct Answer
A. The Hawala system.Explanation
The Hawala system has come under much scrutiny by international money laundering watchdogs, because it is an informal channel for transferring funds between different parts of the Middle East, thus avoiding traditional bank-oversight institutions.Rate this question:
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- 24.
If you are a member of Mercosur, you must be a country located in
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Asia.
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Australia.
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South America.
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Europe.
Correct Answer
A. South America.Explanation
Mercosur is the name of a South American free trade association. Members include Argentina, Uruguay, Brazil, and other South American nations.Rate this question:
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- 25.
Despite relatively low unemployment between 1999 and 2004, inflationary pressures have not been evident. Why not?
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Historically low energy prices.
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Increased efficiencies from high technology investments.
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Downward pricing pressures brought on by cheap offshore manufacturing centers.
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All of the above.
Correct Answer
A. All of the above.Explanation
Many factors, including historically low energy prices, increased efficiencies due to advantages in high technology, and downward pricing pressures from cheap offshore manufacturing centers all have contributed to keeping inflation at bay.Rate this question:
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- 26.
Which currency is no longer traded?
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Baht.
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Forint.
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Mark.
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Ruble.
Correct Answer
A. Mark.Explanation
The German Mark is no longer a currency, because it was replaced by the Euro in 2002.Rate this question:
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- 27.
The consumer price index (CPI) is
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A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
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A cost of living index.
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An exact measure of inflation.
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None of the above.
Correct Answer
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.Explanation
The consumer price index is the measure of change over time in prices paid by urban consumers for a market of goods and services.Rate this question:
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- 28.
President Bush's economic advisor can
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Set interest rates.
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Assist in regulating the stock market.
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Provide official economic statistics to the GAO.
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Do none of the above.
Correct Answer
A. Do none of the above.Explanation
The president's economic advisor has no official role in the economy, although his or her comments and view can have a powerful effect.Rate this question:
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- 29.
Conventional wisdom suggests that as stock values increase, bond yields
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Increase.
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Stay the same.
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Decline.
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None of the above.
Correct Answer
A. Decline.Explanation
Bond yields typically decrease as stock yields increase. AS the economy improves (and stock prices rise), companies have an easier time raising money on the stock market; thus, bond issues decline. As the economy declines, bond yields rise as companies look to bond issues to raise capital.Rate this question:
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- 30.
This disease (or diseases) significantly dampened economic growth in some countries.
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Bird flu.
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Mad cow.
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AIDS.
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All of the above.
Correct Answer
A. All of the above.Explanation
Bird flu had a significant impact on economies in Southeastern Asia, while mad cow has had a significant impact on the U.K., Canadian, and other economies. AIDS has had a devastating effect on many economies in the world, particularly Africa.Rate this question:
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- 31.
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.
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Mutual fund.
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Bond fund.
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Hedge fund.
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Betting pool.
Correct Answer
A. Hedge fund.Explanation
Long-Term Capital Management was a hedge fund. A hedge fund uses futures to offset investment risk and is usually only available to the very wealthy.Rate this question:
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- 32.
Consumption + investment + government spending + exports - imports =
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Inflation.
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Net national product.
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Gross national product.
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Balance of payments.
Correct Answer
A. Gross national product.Explanation
Gross national product.Rate this question:
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- 33.
In a weak economy, bond yields generally
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Rise.
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Fall.
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Remain flat.
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None of the above.
Correct Answer
A. Rise.Explanation
In general, in a weak economy, bond yields rise, because the cost of borrowing increases as corporations issue more bonds rather than sell stock to raise capital. Conversely, as the economy improves, borrowing becomes easier, and bond yields fall.Rate this question:
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- 34.
Hyper inflation is relatively rare, but was experienced during
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The United States' Great Depression.
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Weimar Germany.
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Post-World War II England.
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Mao's China.
Correct Answer
A. Weimar Germany.Explanation
At one point, Weimar Germany's inflation rate was 4 trillion percent (November 15, 1923). In contrast, the United States actually suffered from deflation during the Great Depression, as agricultural prices dropped 51 percent (1929-1933).Rate this question:
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- 35.
Russia has generally maintained a trade surplus with Europe because of
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Arm sales.
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Russia's refusal to buy European goods.
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Import restrictions.
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Increasing revenues from energy sales.
Correct Answer
A. Increasing revenues from energy sales.Explanation
Russia maintains an overall trade surplus with Europe because of high revenues from energy sales.Rate this question:
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- 36.
The German capitalistic model is typified by
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Cronyism.
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State-corporate consensus.
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Laissez-faire relationship between the government and the corporate sector.
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Short-term planning.
Correct Answer
A. State-corporate consensus.Explanation
German capitalism is characterized by a consensus between its large corporations and the state.Rate this question:
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- 37.
Classical economic theory has long argued that low unemployment will result in _______ as workers demand higher wages.
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Deficits.
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Increased money supply.
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Wage inflation.
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Inflation.
Correct Answer
A. Wage inflation.Explanation
The Phillips curve represents the relationship between employment and wage inflation and indicates that wages tend to rise as unemployment falls.Rate this question:
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- 38.
Gold frequently increases in value during political or economic instability because
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Gold is intrinsically valuable.
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As a respective currency weakens, speculators know that governments will purchase gold to prop up their currency.
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It is seen as a reliable store of value.
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None of the above.
Correct Answer
A. It is seen as a reliable store of value.Explanation
Gold is no longer used to back currency and has little intrinsic value, but in times of crisis, investors tend to gravitate toward gold as a reliable store of value.Rate this question:
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- 39.
The 1999 _______ meeting in Seattle is best known for the violent anti-globalization protests that occurred.
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IMF.
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WTO.
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NAFTA.
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G-7.
Correct Answer
A. WTO.Explanation
The 1999 WTO meeting in Seattle became a lightning rod for anti-globalism protesters.Rate this question:
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- 40.
_____________ 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.
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Sarbanes-Oxley Act of 2002.
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The Taft Act.
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The Kennedy-Oxely.
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The Public Accounting Act of 2002.
Correct Answer
A. Sarbanes-Oxley Act of 2002.Explanation
Congress enacted the 2002 Sarbanes-Oxley Act to better protect shareholders and the general public from accounting errors and fraudulent company accounting practices such as occurred at Enron and WorldCom.Rate this question:
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- 41.
Based on supply/demand economic theory, price controls on the supply of wheat during a famine would result in
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An increased supply of low-cost wheat.
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Social unrest.
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No supply of low-cost wheat.
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A scarcity of low-cost wheat.
Correct Answer
A. A scarcity of low-cost wheat.Explanation
According to supply/demand economics, price controls on the supply of wheat during a famine will almost always result in a scarcity of low-cost wheat. Supply/demand economics define price as the single most important factor. Accordingly, few suppliers will be willing to supply low-cost wheat if consumers are willing to pay higher costs on the black market. Further, if the price does not match the seller's perception of risk and actual expenses, sellers will withhold the product from the market, thus aggravating the already dire situation.Rate this question:
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- 42.
The largest category included in gross domestic product (GDP) is
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Military.
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Government.
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Consumption.
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Imports.
Correct Answer
A. Consumption.Explanation
Personal consumption consistently represents 75 percent of gross national product (GNP), by far the largest category included in calculating a country's GDP.Rate this question:
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- 43.
Which of these works first introduced Marxism?
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The Invisible Hand.
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Das Kapital.
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Mein Kampf.
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The Communist Manifesto.
Correct Answer
A. The Communist Manifesto.Explanation
Karl Marx wrote The Communist Manifesto in 1848 and then followed it up with Das Kapital, written in 1867, thus setting the stage for Marxism as an ideology. Adolf Hitler wrote Mein Kampf.Rate this question:
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- 44.
Which is most true?
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Economic experts are good at predicting recessions.
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Economic experts can usually indicate only that a recession is in progress when firms and consumers suddenly change behavior.
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Economic experts often can indicate only that a recession has occurred when firms and consumers resume normal consumption patterns.
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None of the above.
Correct Answer
A. Economic experts can usually indicate only that a recession is in progress when firms and consumers suddenly change behavior.Explanation
Despite many years of study, economists can usually indicate only that a recession is in progress when firms and consumers suddenly change behaviors.Rate this question:
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- 45.
In 2001, Russia implemented this type of tax system on personal income.
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Progressive tax.
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Fair tax.
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Flat tax.
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Vice tax.
Correct Answer
A. Flat tax.Explanation
In 2001, Russia implemented a flat tax of 13 percent on personal income.Rate this question:
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- 46.
For which of the following products would demand be inelastic?
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Iceberg lettuce.
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Vegetables.
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A Ford Explorer.
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Movie tickets.
Correct Answer
A. Vegetables.Explanation
In the event of a large price increase, it would be relatively easy for customers to avoid the price increase by purchasing alternative products, for example, buying carrots rather than lettuce, choosing a Honda Accord rather than a Ford Explorer SUV, or renting a DVD rather than purchasing movie tickets. However, because vegetables comprise an entire category, it would be more difficult for consumers to change their buying habits to avoid the price increases associated with vegetables. Demand (or supply) is elastic if a small change in price results in a large change in demand. Conversely, is a small change in price does not result in a large change in demand, the demand is said to be inelastic.Rate this question:
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- 47.
It was the dramatic 1911 breakup of this American monopoly that helped set the stage for the modern American economy.
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US Steel.
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Edison Power.
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AT&T.
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Standard Oil.
Correct Answer
A. Standard Oil.Explanation
The breakup of Standard Oil, led by President Theodore Roosevelt, helped set the stage for the modern American economy, because it allowed smaller private companies to pursue oil production. The remnants of Standard Oil became dynamic separate entities, such as Exxon and Mobil.Rate this question:
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- 48.
Which U.S. city has historically been associated with commodity trading?
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Los Angeles.
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New York.
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Des Moines.
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Chicago.
Correct Answer
A. Chicago.Explanation
The Chicago Board of Trade (CBOT) was established in 1848 to conduct commodity trading on agricultural commodities such as corn or wheat.Rate this question:
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- 49.
The G8 was known as the G7 until the introduction of this country:
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Russia
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Hungary
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China
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Italy
Correct Answer
A. RussiaExplanation
Russia was added to the G7 in 1997 at the behest of President Clinton. The heads of state of the G8 nations meet to discuss political and economic matters.Rate this question:
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Current Version
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Mar 21, 2023Quiz Edited by
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Sep 23, 2009Quiz Created by
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