WorksheetsEcon Final Practice Quiz
Total questions: 65
Worksheet time: 43mins
What do taxes collected under the Federal Insurance Contribution Act (FICA) fund?
Social Security and Medicaid
Social Security and Medicare
Medicare and Medicaid
Medicaid and Supplemental Security Income
Social Security taxes also pay for ______.
benefits to federal workers and military personnel
benefits to those who are unemployed
transportation and training expenses for low-income people
benefits to older citizens, surviving family members of wage earners, and people with certain disabilities
What is an entitlement?
a social welfare program providing benefits to people who meet certain eligibility
requirements
a social welfare program paying bills for government spending such as supplies and
utilities
a social welfare program spending funds over which legislators have direct control
a social welfare program providing payments that the government receives for certain
services
All of the following are constitutional limits on the power to tax except that
tax money must not go to individual interests.
federal taxes must be the same in every state.
imports must not be taxed.
exports must not be taxed.
Your department store receipt says that you paid a 5% sales tax on sports equipment. This sales tax is an
example of
proportional tax
progressive tax
regressive tax
income tax
All but which of the following may be claimed as a tax deduction?
interest on a home mortgage
donations to charity
some medical expenses
money spent on household expenses
Which is an example of discretionary spending?
Social Security
Medicare
Medicaid
education
The federal government spends the largest amount of its budget on Social Security, which is an example of
federal aid to state and local governments
discretionary spending
mandatory spending
defense spending
Which of the following is an example of state spending?
the state police who stopped to assist you when you had a flat tire
the state campground where your family vacations
state quality inspection
All of the above
The federal budget is put together
every other year.
by Congress and the White House.
to report to Congress on the preceding years expenditures
in order to reimburse state governments for costs of federally funded programs.
What happens to the money that your employer withholds from your paycheck?
Your employer holds it until you leave your job and then returns it to you.
Your employer returns it to you at the end of the year so that you can pay your federal taxes.
Your employer holds it in case you damage his property.
Your employer sends it to the federal government to help pay your income tax.
An example of expansionary fiscal policy would be ______.
cutting taxes.
cutting government spending.
cutting production of consumer goods.
cutting prices of consumer goods.
All of the following are characteristics of classical economics EXCEPT
a free market economy
the law of supply and demand
the idea of achieving market equilibrium
a significant role for government in the running of the economy
The federal government's Fiscal Year 2007 begins on
January 1, 2006
October 1, 2006
December 31, 2006
January 1, 2007
When revenues exceed expenditures
there is a budget surplus.
there is a budget deficit.
the government must create more money
the government is forced to issue more bonds to raise money
When you buy a United States Savings Bond, you
loan money to the government.
borrow money from a savings and loan association.
borrow money from a savings and loan association.
borrow money from a savings and loan association.
The Office of Management and Budget
is part of the legislative branch of government.
is responsible for deciding how much money each government agency receives in the budget.
is a privately funded agency responsible for overseeing the preparation of the federal budget
is the office that has the final power to approve or disapprove of the federal budget proposed by Congress
An example of contractionary fiscal policy would be
cutting taxes
decreasing government spending
increasing production of consumer goods
expanding the government's role in regulating private industry
What is the purpose of expansionary fiscal policy?
increase output.
prevent hyperinflation.
slow the growth of the GDP.
increase the separation between government and private industry.
What does "lender of last resort" mean with respect to the Federal Reserve?
It will lend money to a bank in a financial emergency.
It makes decisions about who a bank can lend money to.
It decides interest rates for interbank loans.
It has the power to decide how much money a bank can lend out.
Which of the following is one way the Federal Reserve Bank serves the government?
making loans to the government
selling government securities
minting coins for the government
financing state government projects
The Federal Open Market Committee is responsible for ______.
Collecting information about each Federal Reserve District
Composing of seven members appointed by the President
Redrawing the map of the twelve Federal Reserve Districts
Making key decisions about interest rates
What does it mean when an economist says that an area specializes in producing certain products?
They use their resources to produce a limited range of goods.
They produce only certain goods rather than everything they need.
They produce only goods for which they have an export market.
They use the money from their exports to buy food and fuel.
According to the law of comparative advantage, a country should specialize and export goods with the ________.
highest opportunity cost
lowest production cost
lowest opportunity cost
lowest average cost
What is the term for the delay in implementing monetary policy?
inside lag
outside lag
discount rate
money creation
Fill in the blank: The research arm of the Federal Reserve is known as the ________.
Federal Advisory Council
bank holding company
open market operations
monetary policy
Which organization is focused on freer trade and lower tariffs?
World Trade Organization
European Union
NAFTA
Federal Advisory Council
What is the main focus of supply-side economics?
Increasing government spending
Reducing taxes and regulations
Increasing tariffs
Expanding social programs
The Federal Reserve uses the _______ to influence the economy.
Discount rate
Tariff rate
Trade deficit
Export quota
What is the required reserve ratio?
A policy to control inflation
A percentage of deposits that banks must hold in reserve
A tax on imports
A government spending program.
A progressive tax means that as a person's income goes up, the percentage of his or her income paid in taxes ______.
decreases
remains the same
increases
Which of these statements is a fundamental part of Keynesian economics?
The federal government should have a balanced budget every year to protect economic growth
The government should reduce taxes to promote economic growth by increasing
aggregate supply.
The government can use deficit spending to increase aggregate demand and pull the economy out of recession.
The economy will only reach equilibrium and prosperity through the self-regulation of
the free market.
Which of these statements is a fundamental part of supply-side economics?
The federal government should have a balanced budget every year to protect economic growth.
The economy will only reach equilibrium and prosperity through the self-regulation of
the free market
The government can use deficit spending to increase aggregate demand and pull the economy out of recession
The government should reduce taxes to promote economic growth by increasing aggregate supply
Which of these is a contractionary fiscal policy?
The federal government builds a new medical research center at a prestigious state university
The President and Congress pass a new two-cent-per-gallon gasoline tax
the sales tax on clothing is lifted for one week before the school year begins
How could the Federal Reserve encourage banks to lend out more of their reserves?
reduce the discount rate
raise the required amount of reserve
increase the prime rate
reduce the money supply
How many Federal Reserve Districts are there?
6
9
12
20
Which of the following instruments is NOT used by the Fed to change the money supply?
the discount rate
the required reserve ratio
the federal tax code
open market operations
The most-used instrument for controlling week-to-week changes in the money supply is
the required reserve ratio
the money multiplier
open market operations
the discount rate
What is the relationship between interest rates and demand for money?
As interest rates decrease, demand for money increases.
As interest rates increase, demand for money increases.
Interest rates are determined by demand for money.
Interest rates and demand for money are unrelated.
Which of the following resulted in a retaliation by the United States of increased tariffs on cheeses and meats from Europe?
Smoot-Hawley Tariff of 1930
Chicken Tariff of 1963
Beef War of 1999
Steel Tariff of 2002
When a nation imports more than it exports, economists say it has which of the following?
trade surplus
trade deficit
a balance of trade
a national difference
What happens when a nation's currency depreciates?
Its products become more expensive to other nations.
Its trade increases
Its products become cheaper to other nations.
Its trade decreases.
What is a currency system in which each country tries to keep the value of its currency constant against one another other called?
a fixed exchange-rate system
a flexible exchange-rate system
a floating currency exchange
a constant pricing system
What country is the world's largest exporter of services
Japan
Germany
The United States
Great Britain
When the exchange rates are allowed to be determined by supply and demand, they are called which of the following?
flexible
fixed
direct
indirect
What is the European Union?
a union of six countries of the Common Market
a pact between Europe and the United States regarding tariffs
a regional trade organization of European nations
a political amalgam of European and Asian countries
Which of the following is a treaty to eliminate all trade barriers between Canada, Mexico, and the United States?
APEC
MERCOSUR
CARICOM
NAFTA
Ecuador has a comparative advantage in the production of bananas over the United States. Which of the following statements is true?
Ecuador also has an absolute advantage in the production of bananas.
The United States has an absolute advantage in the production of bananas.
Ecuador can produce bananas at a lower opportunity cost than the United States.
The United States cannot produce bananas.
According to the law of comparative advantage, a country should
specialize and export goods with the highest opportunity cost.
specialize and export goods with the lowest production cost.
specialize and export goods with the lowest opportunity cost.
specialize and export goods with the lowest average cost.
monetary policy that increase the money supply
easy money policy
tight money policy
prime rate
net worth
delay in implementing monetary policy
inside lag
discount rate
monetarism
discount rate
the time it rakes for monetary policy to have an effect
outside lag
money creation
monetarism
discount rate
rate the Federal Reserve charges for emergency loans to banks
federal funds rate
discount rate
inside lag
outside lag
the research arm of the Federal Reserve
monetary policy
NAFTA
Federal Advisory Council
EU
the ability of one person or nation to produce a good at an opportunity cost that is lower than that of another person or nation
import
export
absolute advantage
comparative advantage
The use of trade barriers to protect a nation's industries from foreign companies
EU
protectionism
trade war
NAFTA
a worldwide organization whose goal is freer trade and lower tariffs
OPEC
EU
NAFTA
World Trade Organization
a self imposed limitation on the number of products shipped to a particular country
export
import
voluntary export restraint
exchange rate
In 1-3 sentences: What does it mean that the federal income tax is a progressive tax?
In 2-3 sentences: Explain how government spending can trigger a chain of events that helps improve the economy.
In 2-3 sentences: Why is international trade better for all countries than an attempt for each country to produce everything it needs?
In 2-3 sentences: What is the difference between the discount rate and the federal funds rate?
What is the primary goal of monetary policy?
To increase government spending
To reduce the national debt
To control inflation and stabilize the currency
To regulate international trade
Which of the following is a primary function of the Federal Reserve?
Regulating the stock market
Controlling the money supply
Setting tax rates
Issuing government bonds
Which of the following best describes a regressive tax?
A tax that takes a larger percentage of income from high-income earners
A tax that takes a larger percentage of income from low-income earners
A tax that remains constant regardless of income
A tax that is only applied to luxury goods
