15) Which of the following correctly describes how the “global pie is baked”?
A) Advanced economies account for about 50 percent of the value of the world’s
production.
B) The United States’ share of economic pie is increasing while China’s share is decreasing.
C) The increase in manufacturing has taken place in mainly the advanced economies.
D) Asia accounts for about 40 percent of the global pie.
E) Emerging economies account for about 25 percent of the global pie.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
16) Physical capital diferences across countries can be seen in the fact that
A) more advanced economies typically have more sophisticated technology.
B) furniture factories in China use machines like those in North Carolina.
C) students in India study the same subjects as those in the United States.
D) advanced economies produce 53 percent of the world’s income.
E) the iPhone’s components are produced in 30 countries.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
17) The charitable organization Creating Hope International trains women in Afghanistan
to become tailors. This efort reduces
A) physical capital diferences between advanced and developing economies.
B) entrepreneurship diferences between advanced and developing economies.
C) agricultural diferences between advanced and developing economies.
D) manufacturing diferences between advanced and developing economies.
E) human capital diferences between advanced and developing economies.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
31
18) Which of the following is an example of an efort to decrease physical capital
diferences between an advanced and a developing economy?
A) American troops build roads in Afghanistan.
B) Through World Vision, women and children in Africa receive education.
C) Peace Corps volunteers teach English around the world.
D) Creating Hope International trains women in Afghanistan to become tailors.
E) Habitat for Humanity builds houses for low income families in the United States.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
19) Of the following, the country with the highest average income per day in the world is
A) Japan.
B) the United States.
C) France.
D) Germany.
E) China.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
20) Income equality has
A) increased within countries but has narrowed across countries.
B) not changed in the advanced economies over the past 50 years.
C) narrowed within countries but increased across countries.
D) increased in developing economies as manufacturing has decreased.
E) decreased in the United States as manufacturing has increased.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
32
21) The world population is approximately ________ people.
A) 6.8 million
B) 2 trillion
C) 6.8 billion
D) 6.8 trillion
E) 680 million
Skill: Level 1: Deinition
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
22) Which of the following statements is true?
A) Income inequality within most countries has increased during the past 20 years.
B) Income inequality across the entire world has decreased during the past 20 years.
C) Income inequality within most countries and across the entire world has not changed
much during the past 20 years.
D) Both A and B are correct.
E) None of the above is correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.2
Status: New
AACSB: Relective thinking
23) The percentage of the world’s population that lives in the advanced economies is
A) more than 71 percent.
B) between 51 percent and 70 percent.
C) between 31 percent and 50 percent.
D) between 20 percent and 30 percent.
E) less than 20 percent.
Skill: Level 1: Deinition
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
33
24) Which of following groups of countries are all advanced economies?
A) Australia, Brazil, and the United States
B) Hong Kong, Japan, France, and the United Kingdom
C) Italy, the United States, China, and Russia
D) Singapore, Russia, France, and Chad
E) Mexico, Canada, Germany, and Egypt
Skill: Level 1: Deinition
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
25) The emerging market economies are
A) the largest grouping including the nations of China and India.
B) in transition from state-owned production to free markets.
C) most of the nations of Western Europe.
D) the nations that are currently agricultural in nature.
E) the nations with the highest standards of living.
Skill: Level 1: Deinition
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
26) As a percentage of total world production, production in the 29 advanced economies is
about ________ percent of total world production and in the 118 developing economies is
about ________ percent of total world production.
A) 53; 39
B) 23; 62
C) 53; 12
D) 30; 46
E) 19; 73
Skill: Level 1: Deinition
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
34
27) Compared to the developing economies, the advanced economies have ________ human
capital and ________ physical capital.
A) more; more
B) more; less
C) the same; the same
D) less; more
E) less; less
Skill: Level 1: Deinition
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
28) In the advanced economies, ________ of the factories use advanced capital equipment,
and in the developing economies, ________ of the factories use advanced capital equipment.
A) virtually all; virtually all
B) some; some
C) virtually all; none
D) some; none of
E) virtually all; some
Skill: Level 1: Deinition
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
29) Among the United States, Canada, Russia, India, and the United Kingdom, the country
with the highest average income per person is
A) the United States.
B) Russia.
C) India.
D) Canada.
E) the United Kingdom.
Skill: Level 1: Deinition
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
35
2.3 The Circular Flows
1) ________ the owners of the factors of production, while ________ what amounts of those
factors to hire.
A) Households are; irms determine
B) Households are; the government determines
C) The government is; irms determine
D) Firms are; households determine
E) Firms are; the government determines
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
2) What two groups of decision makers are represented in the basic circular low model?
A) governments and inancial institutions
B) lenders and borrowers
C) wholesalers and retailers
D) bankers and regulators
E) households and irms
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: New
AACSB: Relective thinking
3) Dan missed class the day the professor covered the circular low model. Dan asked his
friend Joan to explain markets to him. Joan correctly stated that a market
A) requires a physical location for buyers and sellers to get together.
B) is any arrangement that brings buyers and sellers together.
C) must include a written contract between buyers and sellers.
D) is only a place to purchase groceries.
E) must have many buyers and only one seller, who is willing to sell to all the buyers.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
36
4) The decisions of irms and households are
A) coordinated by markets.
B) made independently of one another.
C) controlled by but not totally coordinated by the government.
D) unexplainable by the circular low model.
E) coordinated by but not totally controlled by the government.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
5) The circular low model is used to show the
A) low of renewable natural resources.
B) recycling process of production materials.
C) expansions and contractions of economic activity.
D) low of expenditures and incomes in the economy.
E) low of supply and the low of demand.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
6) The circular low model shows the
A) distribution of income and consumption goods across income levels.
B) combinations of the factors of production needed to produce goods and services.
C) low of expenditure and incomes that arise from the households’, irms’, and
governments’ decisions.
D) low of natural resources from irms to the private market to government and back to
irms.
E) distribution of income to the diferent factors of production.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
37
7) The circular low model shows the low of
A) expenditure and income throughout the economy.
B) only money throughout the economy.
C) only funds in stock and bond markets.
D) only tax payments and government expenditures.
E) goods markets and factor markets as they move through the economy.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
8) In the circular low model, there are two types of markets: the ________ market and the
________ market.
A) producers; consumers
B) households; irms
C) service; goods
D) goods; factor
E) supply; demand
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
9) In the circular low model, consumption goods are bought and sold in the
A) goods market.
B) inancial market.
C) factor markets.
D) government market.
E) monetary lows.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
38
10) In the circular low model, which of the following is on the buying side in the goods
market?
i. irms
ii. households
iii. federal, state, and local governments
A) i only
B) ii only
C) iii only
D) i and ii
E) ii and iii
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
11) In the circular low model, which of the following is on the selling side in the goods
market?
A) federal, state, and local governments
B) only households
C) exporters
D) only irms
E) both irms and households
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
12) The circular low model shows that goods and services low from
A) businesses to households.
B) households to business.
C) the factor market to businesses.
D) the goods market to businesses.
E) the factor markets to the goods markets.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
39
13) As the circular low model points out, a choice that households make is how
A) many resources a irm will hire.
B) many goods and services are produced.
C) many goods and services are purchased.
D) much labor is hired.
E) much the government will collect in taxes and how much the government will spend on
transfer payments.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
14) In the circular low model, which of the following owns the factors of production?
A) only federal, state, and local governments
B) only households
C) only irms
D) both irms and households
E) irms, households, and all levels of government
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
15) In the circular low model, the factor markets are the markets in which
A) consumption goods and services are bought and sold.
B) government goods and services are provided.
C) land, labor, capital, and entrepreneurship are bought and sold.
D) investment goods and services are bought and sold.
E) governments impose all their taxes.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
40