EPF Midterm Review

What is a major advantage of free enterprise economies compared with centrally planned economies?

• Lack of competition and innovation

• Government control and regulation

• Greater variety of consumer choice

• Equal distribution of resources

How will a storm that destroys the wheat crop of a country most likely affect the price of bread?

• The price of bread will be unaffected by the storm.
• The price of bread will most likely increase, but demand will stay the same

• The price of bread will remain the same.
• The price of bread will most likely decrease.

Available resources will never be enough to satisfy all human needs and wants. This basic problem of economics leads to which outcome?

• Abundance
• Surplus
• inflation expands purchasing power

• Scarcity requires people to make choices

A restaurant purchased new kitchen equipment. This investment meant that any hiring of employees would have to be put on hold temporarily. This scenario is an example of

• opportunity cost
• sunk cost
• marginal cost
• fixed cost

How will increased supply and decreased demand for a product affect the equilibrium price?

• The equilibrium price will decrease.
• The equilibrium price will fluctuate wildly.
• The equilibrium price will remain the same.
• The equilibrium price will increase.

Based on this graph, which phrase describes the result of a shift in demand from D1 to D2?

• A decrease in price, since the point of intersection with the supply curve shifts to the right

• An increase in price, since the point of intersection with the supply curve shifts to the left

• An decrease in the quantity sold, since the point of intersection with the supply curve shifts to the left

• No change in demand

Recently country X has seen a gradual increase in the unemployment rate, the stock market has shifted from a bull to a bear market, and the gross domestic product has shrunk form the last two quarters. Based on the information, what best describes the position of country X in the business cycle?

• Contraction

• Boom
• Expansion
• peak

How can the Federal Reserve influence consumers to borrow money to purchase a home during an economic downturn?

• Reducing the amount of money in circulation
• Implementing stricter lending requirements
• Raising interest rates
• By reducing interest rates on home loans

All of the following are tools of Federal Fiscal policy EXCEPT

• Taxation policy
• lowering interest rates

• Government spending

• public transfer payments

The Federal reserve system regulating the flow of currency into the economy is indicative of which of the following economic policies?

• Monetary policy
• Agricultural policy
• Trade policy
• Fiscal policy