CSE 1000 Part 4 Test Study Guide

What best describes the relationship between economic freedom and the growth rate of real per capita Gross Domestic Product (GDP)?

• Countries with less economic freedom tend to grow more rapidly than those that are more free.

• Rich countries that are economically free generally grow rapidly, but there is no evidence that economic freedom helps low-income countries.

• Countries with more economic freedom tend to grow more rapidly than those that are less free.

• There are too many extraneous factors involved to discern any relationship between the two.

When the inflation rate is high and volatile, _____________.

• real output and real wages will grow rapidly

• investment is less risky and gains from trade are reduced

• employment will expand and the unemployment rate will decline

• Investment is more risky and gaiins from trade are reduced

Between 2001 and 2005, sub-prime and poorly documented loans ____________ as a share of the total.

• fell from 30% to less than 10%

• Rose from 10% to more than 30%

• rose from 5% to 10%

• fell from more than 20% to less than 10%

In 1820, the average life expectancy at birth for the world was 26 years. By 2003, the average life expectancy worldwide at birth was ____________.

• less than 40

• 50

• 64

• almost 80

In the Western states, local, state, and federal governments have created publicly owned parks, forests, and monuments. This vast land area can no longer be privately developed. What will be the effect of this policy?

• The land will be used less productively than under private ownership
• More nonrenewable resources will be preserved for the future

• The governments will use the resources of the parks, forests, and monuments to create the most value for the people

• The governments will correct any negative externalities

What best describes the system of social coordination called “the invisible hand,” which was first described by Adam Smith?

• Prices direct suppliers toward production of goods that generate profits and consumers to purchase goods that improve their well being
• Consumers decide how to produce the most important goods and services.

• Producers control the price, output, and quality of goods and services.

• Central planners direct both the output of producers and the consumption of purchasers.

In order to be successful in a market economy, entrepreneurs must ____________.

• use only personal financial capital so they can avoid interest payments on borrowed funds

• produce anything that consumers value, regardless of cost

• produce a good that consumers value less than the resources used to produce it

• combine resources in a manner that increases their value

What is happening to the price of a good if inventories are being depleted and the producer has to increase production and raise prices?

• It is below the supply price

• It is below the equilibrium price

• It is above the supply price

• It is above the equilibrium price

It’s a Sunday, and Mason is ranking his choice of activities in the following order: study for an economics exam on Monday, play video games, swim at the pool with friends, or listen to music. If Mason chooses to study for his economics exam, what is the opportunity cost of this choice?

• Play video games
• listen to music

• swim with friends

• all the above

What is the best example of an item that a real-world savings account is designed to cover?

• funds you are setting aside for your retirement years

• the monthly payment for the lease of your apartment

• the purchase of the gasoline you use driving back and forth to work

• An unexpected expenditure to repair the transmission of your car