46) If there is a national debt, we can conclude that the federal government has
A) borrowed in the past.
B) purchased more goods and services than were needed.
C) spent money foolishly.
D) loaned funds to U.S. taxpayers in the past.
E) loaned funds to other nations in the past.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
47) State and local governments inance expenditures mainly from
A) tax revenue.
B) funds provided by the federal government.
C) government bonds issued at the state level.
D) private bank loans.
E) lottery funds.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
48) Of the following, the largest source of tax revenue collected by state and local
governments comes from
A) individual income taxes.
B) corporate income taxes.
C) death taxes.
D) sales taxes.
E) lottery revenues.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
51
49) Which of the following are sources of revenue for state and local governments?
i. property taxes
ii. sales taxes
iii. transfers from the federal government
A) i and ii
B) ii and iii
C) i and iii
D) i, ii and iii
E) i only
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
50) Property taxes are a major source of revenue for
A) state and local governments.
B) the federal governments.
C) the federal, state, and local governments.
D) irms wanting to relocate their operations.
E) consumers.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
51) The largest category of state and local government expenditures is
A) public welfare.
B) highways.
C) education.
D) interest on their debt.
E) social security.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
52
52) State and local governments spend about ________ of their expenditures on education.
A) 14 percent
B) 19 percent
C) 34 percent
D) 59 percent
E) 74 percent
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
53) Households and irms in the U.S. economy interact with those in the rest of the world in
the ________ market and in the ________ market.
A) goods; factor
B) goods; inancial
C) government; goods
D) inancial; factor
E) irm; government
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
54) An example of a U.S. export is
A) a TV made in China sold to a buyer in Azerbaijan.
B) matchbooks made in Mexico sold to a buyer in New Jersey.
C) pasta made in Italy sold to buyers in Spain.
D) diamonds mined in Africa sold to buyers in South America.
E) a washing machine made in Indiana sold to a buyer in France.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
53
55) Within the circular low model, economists deine households as
A) families with at least 2 children.
B) families living in their own houses.
C) individuals or groups living together.
D) married or engaged couples.
E) individuals or groups within the same legally deined family.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
56) A market is deined as
A) the physical place where goods (but not services) are sold.
B) the physical place where goods and services are sold.
C) any arrangement that brings buyers and sellers together.
D) a place where money is exchanged for goods.
E) another name for a store.
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
57) In the circular low model,
A) only irms sell in markets.
B) only households buy from markets.
C) some irms only sell and some irms only buy.
D) the money used to buy goods and the goods themselves travel in the same direction.
E) both irms and households buy or sell in diferent markets.
Skill: Level 3: Using models
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
54
58) ________ choose(s) the quantities of goods and services to produce, while ________
choose(s) the quantities of goods and services to buy
A) Households; irms
B) Firms; households and the government
C) The government; irms
D) Firms; only households
E) Households; the government
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
59) ________ choose the quantities of factors of production to hire and ________ choose the
quantities of goods and services to produce.
A) Entrepreneurs; irms
B) Firms; irms
C) Markets; markets
D) Factor markets; goods markets
E) Firms; households
Skill: Level 1: Deinition
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
60) In the circular low model, rent, wages, interest, and proit paid low from ________
through ________ to ________.
A) households; goods markets; irms as payment for goods
B) irms; factor markets; households
C) irms; goods markets; households
D) households; factor markets; irms
E) irms; goods markets; irms
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
55
61) A circular low model shows the interrelationship between the ________ markets and the
________ markets.
A) household; goods
B) household; factor
C) business; household
D) expenditure; income
E) goods; factor
Skill: Level 3: Using models
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
62) In the circular low model, the expenditures on goods and services low in the
A) same direction as goods and services in all cases.
B) same direction as goods and services only if they both low through the goods market.
C) same direction as goods and services only if they both low through the factor market.
D) opposite direction as goods and services.
E) same direction as factor markets.
Skill: Level 3: Using models
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
63) Households receive transfers from ________, and irms receive transfers from ________.
A) government; government
B) irms; households
C) government; government and households
D) irms and government; government
E) government; no one
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
56
64) Of the following, the largest source of revenue for the federal government is
A) personal income taxes.
B) sales taxes.
C) corporate income taxes.
D) property taxes.
E) lottery revenue.
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
65) ________ are the largest components of state and local government revenue.
A) Transfers from federal government and corporate income taxes
B) Transfers from federal government and sales taxes
C) Individual income taxes and corporate income taxes
D) Individual income taxes and sales taxes
E) Corporate income taxes and lottery income
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
66) U.S. exports of goods and services low to households and irms in ________, and U.S.
inancial inlows of capital low to households and irms in ________.
A) the United States; the United States
B) the United States; the rest of the world
C) the rest of the world; the United States
D) the rest of the world; the rest of the world
E) the United States; the rest of the world and the United States
Skill: Level 2: Using deinitions
Section: Checkpoint 2.3
Status: Old
AACSB: Relective thinking
57
2.4 Integrative Questions
1) If a product becomes more popular and consumers want more produced, which of the
following best describes what happens to move more factors of production into that
industry?
A) An agency of the Federal government directs the movement of factors.
B) The chief executive oicers or presidents of corporations require that factors leave one
industry and move to the other industry.
C) Factor owners voluntarily move their factors because they want to satisfy the interests
of consumers.
D) Wages, rent, interest, and proit increase in that industry, thereby giving factors the
incentive to move to that industry.
E) Consumers increase their demand for the products and, as a result, the taxes the
producers must pay decrease enabling the producers to hire more factors of production.
Skill: Level 3: Using models
Section: Integrative
Status: Old
AACSB: Analytical thinking
2) What determines the income lows that households receive?
A) an agency of the Federal government
B) what they choose to produce, how much is sold, and the price received when sold
C) their ownership of factors of production, how much they sell in the factor markets, and
the prices received when sold
D) inancial institutions such as banks
E) what they choose to consume
Skill: Level 3: Using models
Section: Integrative
Status: Old
AACSB: Relective thinking
3) What determines the revenue lows received by businesses?
A) an agency of the Federal government
B) what they choose to produce, how much is sold, and the price received when sold
C) their ownership of factors of production, how much they sell in the factor markets, and
the prices received when sold
D) inancial institutions such as banks
E) what they pay the factors of production they employ
Skill: Level 3: Using models
Section: Integrative
Status: Old
AACSB: Relective thinking
58
2.5 Chapter Figures
The igure above shows the circular low model.
1) In the igure above, which of the following represents a real low of a factor of
production?
A) labor
B) wages
C) goods bought
D) services sold
E) irms’ expenditures on factors of production
Skill: Level 3: Using models
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
59
2) In the igure above, which of the following represents a money low?
A) goods purchased
B) interest
C) capital
D) services sold
E) goods supplied
Skill: Level 3: Using models
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
3) In the igure above, which of the following represents a real low?
A) expenditures on real estate services
B) proit
C) capital
D) wages
E) both B and D
Skill: Level 3: Using models
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
4) In the igure above, which of the following transactions take place in the factor markets?
i. Michael, a student, orders a computer from Dell online.
ii. Peter gets a job at a Wal-Mart store.
iii. Apple Computer opens a new store in Georgia.
A) ii and iii
B) only i
C) only ii
D) only iii
E) i and ii
Skill: Level 3: Using models
Section: Checkpoint 2.2
Status: Old
AACSB: Relective thinking
60