WorksheetsEconomics and Personal Finance Pretest
Total questions: 45
Worksheet time: 23mins
Name
Class
Date
1.
Suppose you put $1,000 in an account that earns 5% interest per year, every year. You never invest additional money and you never withdraw money or interest payments. So in the first year, you earn $50 in interest. In Year 4, how much will this account earn?
a)
less than $50
b)
$50
c)
More than $50
d)
Don't know
2.
Consider the following scenario: Jack and Jill are twins. At the age of 20, Jack started contributing $20 a month to a savings account. After 20 years, at the age of 40, he stopped adding to his savings, but he left the money in the account. Jill didn’t start to save until she was 40. Then, she saved $20 a month until she retired 20 years later at age 60. Suppose both Jack and Jill earned 6% interest per year on their savings. When they both retired at age 60, who had more money?
a)
Jack
b)
Jill
c)
They had the same account
d)
Don't know
3.
Pam is deciding between 2 options: Option A: Invest $1,000 in a certificate of deposit that earns 5% interest. Pam would not add or remove any money from this investment for the next 30 years. Option B: Invest $1,000 in a savings account that earns 5% interest. Move the interest earned on this account every year into a safe at home. Pam would not add or remove any other money from the savings account or the safe for the next 30 years. At the end of 30 years, which of these options would provide the most money?
a)
Option A
b)
Option B
c)
Pam will have the same amount of money at the end of 30 years regardless of whether she chooses Option A or Option B.
4.
Suppose that by the year 2020 your income has doubled and prices of all goods have doubled too. In 2020, how much will you be able to buy with your 2020 income?
a)
More than today
b)
The same amount as today
c)
Less than today
5.
In general, investments that are riskier tend to provide higher returns over time than investments with less risk.
a)
True
b)
False
6.
Which of the following is an accurate statement about investment returns?
a)
Usually, investing $5,000 in shares of a single company is safer than investing $5,000 in a fund which invests in shares of many companies in multiple industries.
b)
Usually, investing $5,000 in shares of a single company is less safe than investing $5,000 in a fund which invests in shares of many companies in different industries.
c)
Usually, investing $5,000 in shares of a single company is equally as safe as investing $5,000 in a fund which invests in shares of many companies in different industries.
7.
Both Irene and her employer contribute every year to her employer-‐sponsored 401(k) plan. Irene has worked at the company for twenty years, and is fully vested in her plan. Suppose Irene leaves her job or gets fired. Which of the following statements is true?
a)
If she is no longer working for the company, the whole plan balance is forfeited, because her benefits are tied to her job.
b)
If she gets fired, the company has the right to decide how much of her total plan balance she will get.
c)
If she voluntarily leaves her job, she forfeits all of her employer's contributions.
d)
Even if she leaves her job or gets fired, she is still entitled to the entire plan balance.
8.
Which of the following is a true statement?
a)
You will lose money that you personally invested in your 401(k) if you switch jobs.
b)
You will be charged income tax as well as tax on dividends and increases in the value of your stock if you invest through a 401(k).
c)
Unless you are undergoing significant hardship, you cannot withdraw money from a 401(k) without penalty until you reach a certain age.
d)
All of the above
9.
David’s new job offers a 401(k). His employer provides a 50% match up to $2,000. How much should David invest at least in order to obtain the maximum amount of money from the employer match?
a)
$0
b)
$500
c)
$1,000
d)
$2,000
e)
$4,000
10.
The opportunity cost of a new city park is the
a)
cost of staff and maintenance for the park
b)
increased congestion from traffic around the park
c)
best alternative use of resources given up for the park.
d)
lack of personal incentive for people to take care of a public park.
11.
Which do economists consider to be a productive resource (factor of production)?
a)
Labor
b)
Profit
c)
Money
d)
Interest
12.
In every economic system, people must choose how to
a)
satisfy all of the wants society
b)
make the best use of scarce resources
c)
create an equal distribution of income
d)
save money to reduce the national debt.
13.
A small business would like to hire more workers. Each additional worker hired costs the business $100 a day. The additional revenue the business receives from having more workers is $150 per day for the first worker, $130 per day for the second worker, $110 per day for the third worker, and $90 for the fourth worker. How many workers in total should the business hire to maximize its profits?
a)
One worker.
b)
Two workers.
c)
Three workers
d)
Four workers
14.
The essential difference between a command economy and a market economy is that in a market economy
a)
shortages occur more often than surpluses
b)
buyers and sellers determine resource allocation
c)
central planning creates an effective incentive system for consumers and producers.
d)
the prices of products and resources are largely determined by government regulation of business.
15.
Which is a basic economic question that must be answered by all economic systems?
a)
How will corporations be organized?
b)
Which goods and services will be produced?
c)
How can markets be kept competitive?
16.
Profits are equal to total
a)
revenue plus total cost.
b)
assets minus total liabilities
c)
sales minus wages and salaries
d)
sales minus taxes and depreciation
17.
A high school student buys a dinner at a restaurant. The restaurant offers a special price that takes 20 percent off the regular price of the dinner. In this exchange,
a)
the student and the restaurant benefit
b)
the student benefits, but the restaurant does not.
c)
the restaurant benefits, but the student does not.
d)
neither the student nor the restaurant benefit.
18.
Some members of Congress want to increase the general level of tariffs. If this increase occurs, then we should expect
a)
a decrease in U.S. inflation.
b)
a decrease in U.S. import quotas.
c)
a decrease in imports into the U.S.
d)
an increase in U.S. exports to other nations.
19.
Which best describes what the law of comparative advantage means for trading nations? Each trading nation can benefit by exporting goods that
a)
it produces at low opportunity costs and importing goods it produces at high opportunity costs.
b)
it produces at high opportunity costs and importing goods it produces at low opportunity costs.
c)
people enjoy least and importing goods that they enjoy most.
d)
people enjoy most and importing goods that they enjoy least.
20.
When there is a surplus of a product in a competitive market, it is usually the case that the
a)
market price of the product will eventually decrease.
b)
market price of the product will eventually increase.
c)
quantity of the product exchanged in the market will eventually decrease.
d)
quantity of the product exchanged in the market will not change, but supply will increase.
21.
The exchange rate between the U.S. dollar and the Japanese yen changes from $1=100 yen to $1=125 yen. This change means that
a)
there will be an increase in U.S. exports to Japan.
b)
there will be a decrease in U.S. exports to Japan.
c)
Japanese goods will be more expensive for Americans.
d)
U.S. goods will be less expensive for Japanese.
22.
If the government charges a new tax of $1 on every pair of blue jeans sold, which would most likely result?
a)
Consumers would pay a higher price for blue jeans and buy fewer pairs of blue jeans.
b)
Consumers would pay a higher price for blue jeans and blue jeans sellers would make larger profts.
c)
Consumers would pay a higher price and blue jeans sellers would limit the number blue jeans consumers could buy.
d)
Blue jeans sellers would increase the quantity sold in order to make up for the taxes paid to the government.
23.
Which would most likely decrease the quantity of corn sold in a competitive market?
a)
An increase in the price of fertilizer.
b)
An increase in the incomes of consumers.
c)
A decrease in the price of farm equipment.
d)
An improvement in the technology of growing corn.
24.
A newspaper reports that the price of oranges increased and the quantity sold decreased. In a competitive market, this situation would most likely be the result of
a)
a decrease in demand.
b)
an increase in demand.
c)
an increase in supply.
d)
a decrease in supply.
25.
Business firms wish to sell their products at high prices. Households wish to buy products at low prices. In a market economy this conflict of interest is resolved by
a)
lawsuits.
b)
competition
c)
collective bargaining.
d)
government regulation.
26.
A newspaper reports, "COFFEE GROWERS' MONOPOLY BROKEN INTO SEVERAL COMPETING FIRMS." If this is true, we would expect the coffee-growing industry to
a)
decrease output and decrease prices.
b)
increase output and increase prices.
c)
decrease output and increase prices.
d)
increase output and decrease prices.
27.
Which is most essential for an efficient market economy?
a)
Efective labor unions.
b)
Strong government regulation.
c)
Active competition in the marketplace.
d)
Responsible decisions by business leaders.
28.
When workers join unions and elect representatives to negotiate with their employers, this is referred to as
a)
a closed shop.
b)
the seniority system.
c)
collective bargaining.
d)
right to work legislation.
29.
Which item is included in the basic money supply in the U.S.?
a)
Gold
b)
Silver
c)
Corporate bonds
d)
Checking account deposits
30.
When commercial banks increase their loans to businesses and consumers, this usually results in
a)
a decrease in the spending power of consumers and businesses.
b)
an increase in government control over the economy.
c)
an increase in the banks' excess reserves.
d)
an increase in the nation's money supply.
31.
Inflation is a
a)
sharp rise in the price of a major product.
b)
substantial decline in the consumer price index.
c)
sustained increase in the general level of prices.
d)
rapid movement of the economy toward full-employment.
32.
A decrease in real interest rates provides an incentive for people to save
a)
more and borrow more.
b)
less and borrow less.
c)
more and borrow less.
d)
less and borrow more.
33.
Which best describes the general relationship between the risk that a business will default on a loan and the interest rate charged for the loan?
a)
A lower interest rate is charged on loans with more risk of default.
b)
A higher interest rate is charged on loans with less risk of default.
c)
A lower interest rate is charged on loans with less risk of default.
d)
The interest rate charged on loans is the same regardless of the risk of default.
34.
Why do medical doctors generally earn more than farmers?
a)
Medical doctors are more efficient than farmers.
b)
Medical doctors provide a service rather than make a product.
c)
There are fewer medical doctors than farmers in our economy.
d)
Medical doctors are scarcer, given the demand for their services.
35.
People who take the risks of organizing productive resources to produce goods and services in the expectation of making profits are
a)
economists.
b)
stockbrokers.
c)
entrepreneurs.
d)
business managers.
36.
Which would most likely decrease the productivity of labor?
a)
A rise in the pay of workers.
b)
A fall in the rate of interest.
c)
A reduction in the tax rates on income.
d)
A decline in the amount of capital goods.
37.
The tax described in the table below is a
a)
fat tax rate income.
b)
progressive income tax.
c)
proportional income tax.
d)
regressive income tax.
38.
Suppose that the U.S. Congress sets up a program to provide financial assistance to banks to prevent them from failing. This action will likely create a moral hazard problem because it may:
a)
restrict bank investments in real estate.
b)
encourage bank officials to make riskier loans.
c)
reduce the amount of deposits made by bank customers.
d)
increase the screening by banks of deposits from bank customers.
39.
Gross domestic product (GDP) is a measure of
a)
the price level of goods and services sold.
b)
total spending by federal, state, and local governments.
c)
the quantity of goods and services produced by private businesses.
d)
the market value of the nation's output of final goods and services.
40.
A nation has an international trade surplus when
a)
its exports are greater than its imports.
b)
its imports are greater than its exports.
c)
its tax revenues are greater than its government expenditures.
d)
its gold reserves are greater than gold reserves of its trading partners.
41.
Which best measures a nation's standard of living over time?
a)
Rate of inflation
b)
Rate of unemployment
c)
Real income per capita
d)
Money income per capita
42.
Which would usually increase total spending in the economy?
a)
An increase in tax rates.
b)
An increase in interest rates.
c)
An increase in the savings rate.
d)
An increase in business investment.
43.
During a recession in an economy, there will be an increase in
a)
imports.
b)
unemployment.
c)
economic growth.
d)
business spending.
44.
One reason the federal government might reduce taxes is to
a)
slow the rate of inflation.
b)
slow a rapid rise in interest rates.
c)
decrease business spending on plant and equipment.
d)
increase consumer spending and stimulate the economy.
45.
A government budget surplus exists when
a)
tax revenues are greater than government spending.
b)
government spending is decreased.
c)
the national debt is increasing.
d)
taxes are increased.
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