Font size
WorksheetsInterest Rates and Economic Theories
Total questions: 78
Worksheet time: 42mins
What is economics?
Study of supply and demand
Study of microeconomics and macroeconomics
Study of allocating scarce resources among unlimited wants
Study of extracting resources from citizens
What is scarcity?
Not enough to go around
Must be wanted, have value, and be scarce
Demand is greater than supply
Supply is greater than demand
What is opportunity cost?
The cost of producing a good or service
The value of the next best alternative that was lost
The value of all alternatives
The cost of consuming a good or service
What are factors of production?
Resources used to produce goods and services: land, labor, capital, entrepreneurship
Resources used to consume goods and services: land, labor, capital, entrepreneurship
Resources used to produce or consume goods and services
Resources used to maximize the amount of goods produced
What is an economic system?
The way a society organizes to decide production, methods, and distribution of goods and services.
A group of economically connected countries or regions.
The 'invisible hand' that sets price and quantity for goods and services.
None of the above
What defines a traditional economic system?
Political leaders organize production and distribution.
Everyone is involved in organizing production and distribution.
Cultural customs are used to organize production and distribution.
None of the above.
What defines a command economic system?
Political leaders organize production and distribution.
Everyone is involved in organizing production and distribution.
What defines a market economic system?
Political leaders organize production and distribution.
Everyone is involved in organizing production and distribution.
Cultural customs are used to organize production and distribution
None of the above
Who plays an important role in a market economy?
Entrepreneurs
Workers
Consumers
All of the above
The main goal in a market economy is: (two answers)
Competition
Profit
Winning
Economic equality
What is a "market"?
A. A situation which brings willing buyers and sellers together
B. A place to buy consumer goods
C. A place to sell one’s production
D. A competition
A market with many sellers, each differentiating similar products to gain market share is called:
Monopoly
Oligopoly
Pure competition
Mercantilism
A market in which one seller provide most of the goods and services is known as a/an:
Monopoly
Oligopoly
Pure competition
Mercantilism
What defines the demand curve?
The amount consumers are willing and able to buy at a given price
The amount businesses are willing and able to produce at a given price
A graph showing how demand changes with price
A graph showing how supply changes with price
What defines the supply curve?
The amount consumers are willing to buy at a given price
The amount businesses are willing to produce at a given price
A graph showing demand changes with price
A graph showing supply changes with price
What is quantity demanded?
The amount consumers are willing and able to buy at a given price
The amount businesses are willing and able to produce at a given price
A graph showing how demand changes with price
A graph showing how supply changes with price
What is quantity supplied?
The amount of good or service consumers are willing and able to buy at a given price
The amount of a good or service businesses are willing and able to produce at a given price
A graph showing how the amount of a good or service demanded changes with a change in price
A graph showing how the amount of a good or service supplied changes with a change in price
What is the law of supply?
A. As price increases, quantity supplied decreases
B. As price increases, quantity supplied increases
C. Change in price affects quantity demanded
D. Change in price affects quantity supplied
What is the law of demand?
A. As price increases, quantity demanded decreases
B. As price increases, quantity demand increases
C. How a change in price affects the quantity demanded
D. How a change in price affects the quantity supplied
In a market economy, supply and demand determine:
Balance
Interest rates
Price
Quantity
What is a shortage?
The price at which the quantity supplied equals the quantity demanded
The quantity which the price offered by firms equals the price consumers are willing to pay
When the quantity supplied is greater than quantity demanded
When the quantity demanded is greater than quantity supplied
What is surplus?
The price at which the quantity supplied equals the quantity demanded
The quantity which the price offered by firms equals the price consumers are willing to pay
When the quantity supplied is greater than quantity demanded
When the quantity demanded is greater than quantity supplied
What defines a change in demand?
A movement of the entire demand curve to the right or left
A movement along the demand curve
A changing of the slope of the demand curve
A changing of the curvature of the demand curve
What are determinants of demand?
Price factors affecting demand
Non-price factors affecting supply
Non-price factors affecting demand
Price factors affecting supply
Which does NOT shift the demand curve?
Income
Substitutes
Complements
Price
Which does NOT increase product demand?
Increase in population
Change in tastes
Increase in the price substitutes
Implementation of additional federal regulations
What defines substitutes?
Good or service used with another
Good or service that replaces another
What defines complements?
Good or service used with another
Good or service that can replace another
Good or service not influenced by another
Nice things you say to people
What defines a change in supply?
A movement of the entire supply curve to the right or left
A movement along the supply curve
A changing of the slope of the supply curve
A changing of the curvature of the supply curve
Which of the following would NOT increase product supply?
Decrease in input prices
Decrease in market price
More efficient workforce
Increase in consumer income
Which does NOT shift the supply curve?
Costs of production
technology
number of producers
necessities & luxuries
What best defines elastic?
Perfectly horizontal; any change in price reduces quantity to zero; at the correct price, quantity is infinite
A small change in price causes a large change in quantity
Perfectly vertical; a change in price does not change quantity
A small change in price causes a small change in quantity
What is elasticity of demand?
The quantity demanded for a good or service varies inversely with price
The quantity supplied of a good or service varies positively with price
How a change in price affects the quantity demanded for a good or service
How a change in price affects the quantity supplied for a good or service
Which does NOT affect demand elasticity?
Presence of substitutes
Cost of production
Price of the good
Importance to consumer
What defines elasticity of supply?
The quantity demanded varies inversely with price
The quantity supplied varies positively with price
How price change affects quantity demanded
How price change affects quantity supplied
Which is an example of inelastic supply?
Kites
Candy
Apple orchard
Hair cuts
A shortage of hamburgers would occur if the market price is
$2.00 per hamburger
Above $2.00 per hamburger
Below $2.00 per hamburger
Below $2.50 per hamburger
A surplus of hamburgers would result if the market price is
$2.00 per hamburger
Above $2.00 per hamburger
Below $2.00 per hamburger
Below $2.50 per hamburger
If the price of a good is mistakenly set by the producer above the equilibrium price but is free to move, we can expect
Which change would cause a movement along the demand curve for Ford trucks, but not shift the demand curve?
Consumer income
Chevy prices
Ford prices
Consumer tastes
The economic goals of the United States do NOT include:
Economic growth
Full employment
Equal opportunity
Stable prices
What is gross domestic product?
The total of all goods and services purchased in the U.S. in one year
The total of all goods and services produced in the U.S. in one year
The total of all goods and services sold in the U.S. in one year
None of the above
Real GDP differs from GDP because it considers which of the following?
The rate of inflation
The quality of goods
The balance of trade
The absolute advantage
By studying GDP figures, economists can do all of the following EXCEPT:
Evaluate the economy's performance
Compare different countries' economies
Understand business cycles
Determine a company’s optimal output
What is frictional unemployment?
A. When people take time to find a job
B. Due to harvest schedules, vacations, or industry slowdowns
What is cyclical unemployment?
When people take time to find a job
Due to harvest schedules, vacations, or industry slowdowns
When workers’ skills don't match available jobs
Rises during downturns and falls when the economy improves
What is seasonal unemployment?
Occurs when people take time to find a job
Occurs due to harvest schedules, vacations, or industry slowdowns
Occurs when workers’ skills do not match available jobs
Unemployment that rises during downturns and falls when the economy improves
What is structural development?
When people take time to find a job
Due to harvest schedules, vacations, or industry slowdowns
When workers’ skills don't match available jobs
Unemployment during economic downturns
Inflation can be described as:
Increase in prices
Increase in demand
Increase in supply
All of the above
If inflation was being caused by having too much money in the economy, which theory would explain the inflation?
Quantity theory
Demand-pull theory
Cost-push theory
Wage price spiral
If inflation was being caused by producers raising prices in order to meet increased costs, which theory would explain the inflation?
Quantity theory
Demand-pull theory
Cost-push theory
Wage price spiral
If inflation were being caused by the demand for goods and services exceeding existing supplies, which theory would explain the inflation?
Quantity theory
Demand-pull theory
Cost-push theory
Wage price spiral
If inflation were being caused by rising wages causing high prices which cause higher wages, which theory would explain the inflation?
Quantity theory
Demand-pull theory
Cost-push theory
Wage price spiral
The Federal Reserve influences the money supply with which of the following?
Monetary
Fiscal policy
Trade policy
None of the above
Congress influences the money supply with which of the following?
Monetary policy
Fiscal policy
Trade policy
None of the above
Which of the following best describes reserve requirements?
The interest rates charged to banks for borrowing money from the Fed
The % of deposits which banks must hold and not loan out to other people
The buying and selling of United States bond
The amount of gas needed to make it to the next gas station
Which of the following best describes open market operations?
The interest rates charged to banks for borrowing money from the Fed
The % of deposits which banks must hold and not loan out to other people
The buying and selling of United States bond
The amount of gas needed to make it to the next gas station
Which of the following best describes discount rates?
The interest rates charged to banks for borrowing money from the Fed
The % of deposits which banks must hold and not loan out to other people
The buying and selling of United States bond
The amount of gas needed to make it to the next gas station
If the Federal Reserve wanted to increase the money supply using reserve requirements it would?
Lower the rate
Increase the rate
Leave the rate unchanged
None of the above
If the Federal Reserve wanted to increase money supply using discount rates it would?
Lower the rate
Increase the rate
Leave the rate unchanged
None of the above
If the Federal Reserve wanted to increase the money supply using open market operations it would?
Buy bonds
Sell bonds
Neither sell nor buy bonds
None of the above
Which of the following situations would signal the need for expansionary (easy) monetary policy?
Rising inflation, extremely low unemployment, economic recovery
Falling GDP, rising unemployment, economic recession
Rising inflation, rising unemployment, economic recovery
Increasing GDP extremely low unemployment, economic recession
Which of the following situations would signal the need for restrictive (tight) monetary policy?
Rising inflation, extremely low unemployment, economic recovery
Falling GDP, rising unemployment, economic recession
Rising inflation, rising unemployment, economic recovery
GDP extremely low unemployment, economic recession
Which of the following would be an example of fiscal policy?
An increase in the reserve requirement
An increase in federal spending
The selling of bonds on the open market
A decrease in the discount rate
Which of the following is NOT subject to control by the Federal Reserve?
Taxes
Money supply
Reserves in banks
Why will $1,000 deposited in a bank “create” money through the multiplier effect?
The $1,000 earns interest for the depositor
The Federal Reserve will match it with $1,000 of reserves
The bank will earn interest on the money it loans
Some of the deposit will be loaned, spent, and then redeposited
India can produce 100 million tons of cotton and China can produce 150 million tons of cotton. China has:
A. A trade surplus
B. An absolute advantage
C. A comparative advantage
D. A surplus
According to the theory of comparative advantage, a good should be produced in a nation where:
A. The opportunity costs of production are lower than that of another country
B. The absolute advantage is greatest
C. The production possibilities curve shows a greater slope
D. None of the above
This is the macroeconomic(s) approach that asserts fiscal policies can use tax income & borrowing to increase aggregate demand as a means of stabilizing market economic growth, inflation, & unemployment.
laissez-faire economics
demand-side economy theory
supply-side economic theory
central planning
This is the macroeconomic approach that asserts federal regulations, spending, and taxes should be reduced to stimulate economic growth and aggregate demand by lowering the cost of production & therefore market price for goods. Furthermore, it held that full employment contributed to inflation, and that a monetary authority should be charged with regulating the money supply to stabilize inflation, employment, and growth.
laissez-faire economics
demand-side economy theory
supply-side economic theory
central planning
This was the Nobel-prize winning American economist who, in the 1970s, helped develop the contemporary monetary and fiscal approaches used by most world central banks.
John Keynes
Adam Smith
Milton Friedman
This was a term used to describe the return of pro-laissez-faire economic policies in the 1970s and 1980s following the period of high unemployment and high inflation known as stagflation of the 1970s.
neo-conservatism
socialism
globalization
neo-liberalism
This is the term used to describe the entity or person that dictates an economy’s monetary policy.
federal bank
monetary authority
money supply
central bank
Which of the following makes the primary monetary policy decisions for the Federal Resource System?
A. Board of Governors
B. Chamber of Commerce
C. Bank of America
D. U.S. Treasury
This an economy centered around information-based jobs rather than traditional industrial production.
manufacturing economy
agricultural economy
commercial economy
knowledge economy
The development of free-trade policies & organizations following World War II contributed most-significantly to which of the following:
globalization
the Cold War
stagflation
the Great Recession
This is the term used to describe the relocation of domestic production to foreign countries.
outsourcing
exporting
importing
insourcing
Which of the following U.S. monetary practices was ended by President Richard M. Nixon in 1971?
the Federal Reserve System
the gold standard
the petrodollar
free trade policies
