Economics Review

Economics Review

Multiple Choice

Why do we have to make choices?

• Resources are scarce

• There are often surplus items

• The government does not have enough control over the economy

• The government has too much control over the economy

Remember:

Resources are scarce (limited) that is why we have to make decisions about how to use them

Multiple Choice

What will the price of this item be?

• $6

• $6 million

• $5

• $5 million

Products will be sold at the equilibrium price

This is the most efficient use of resources

No surplus

Everyone who can pay for a product at the price gets one

Multiple Choice

When government lets businesses and people make economic decisions but sets some rules, taxes, provides subsidies or some businesses, what type of economy is it?

• Market

• Command

• Mixed

• Traditional

Multiple Choice

When government controls all the resources and makes all of the economic decisions:

• Market

• Command

• Mixed

• Traditional

There are different forms of economies

• Market- the people and businesses make all decisions/the government never gets involved

• Mixed- the people and businesses make most decisions but something the government will get involved by making rules, taxing, subsidizing, etc.

• Command- the government controls the entire economy- no freedom for people or businesses

Multiple Choice

What tool do we use to determine the health of the economy?

• Monetary Policy

• Fiscal Policy

• Supply and Demand

• Business Cycle

Multiple Choice

What phase of the business cycle does A represent?

• Expansion

• Contraction

• Peak

• Trough

Multiple Choice

What phase of the business cycle does B represent?

• Expansion

• Contraction

• Peak

• Trough

Multiple Choice

What phase of the business cycle does C represent?

• Expansion

• Contraction

• Peak

• Trough

Multiple Choice

What phase of the business cycle does D represent?

• Expansion

• Contraction

• Peak

• Trough

The business cycle looks kind of like a rollercoaster and measures the health of the economy

• The top of the cycle (like the top of a mountain) is called the peak

• When it is going down it is called contraction

• The bottom is called the trough (like a trench- it is low and bad place to be)

• When it is going up it is called expansion

Multiple Choice

When the economy is doing the BEST- the peak, what is happening with GDP

• Hightest

• Lowest

• Increasing

• Decreasing

There are 4 indicators we use to determine where the business cycle is at

• GDP- how much money we are speding

• CPI- measures inflation and deflation

• Unemployment rate (low is good and high is bad)

• Stock market

Multiple Choice

If there is a bear market, stock prices are

• rising

• falling

Business cycle and indicators

• Peak- highest GDP, lowest unemployment, inflation, bull market

• Contraction- shrinking GDP, increasing unemployment, steady prices (or slight deflation), bear market

• Trough- lowest GDP, highest unemploymen, deflation, bear market

• Expansion- rising GDP, decreasing unemployment, steady prices (or slight inflation), bull market

Multiple Choice

The Federal Reserve, or central bank of the US, is in charge of

• fiscal policy

• monetary policy

Multiple Choice

The Congress, is in charge of

• fiscal policy

• monetary policy

Multiple Choice

If there is a contraction or trough, what will the Fed do to the discount / interest rate?

• lower it

• raise it

• keep it the same

Multiple Choice

If there is a contraction or trough, what will Congress do to the tax rate?

• lower it

• raise it

• keep it the same

Monetary policy

• Controls the supply of money in circulation

• Discount./interest rate

• Reserve rate

• Buy/sell bonds

Fiscal Policy

• Taxing

• Spending

• 
  

• 
  

Multiple Choice

How do subsidies help US businesses?

• The government pays producers so they can sell their product for cheaper in the US and other countries

• The government buys all of the excess products to help producers maintain high profits

Multiple Choice

If the US adds a tariff to Chinese products, what will China most likely do?

• Stop importing US goods (embargo)

• Put a tariff on US goods

• Nothing, continue importing and exporting the same

Multiple Choice

What has made globalization possible?

• Faster travel

• Faster communication

• International agreements

• All of the above