84. Susan Montgomery works at an institutional bakery and is paid a wage dictated by the government. She does not
like her job but is not allowed other options. Susan must purchase necessities for her family at fixed prices. The
country Susan lives in can be described as a economy.
a. demand
b. command
c. market
d. free-enterprise
e. capitalist
85. In a socialist economy, key industries owned by the government include all except
a. utilities.
b. communications.
c. food production.
d. banking.
e. transportation.
86. Tim Garner owns and operates his own small automobile repair shop. However, the prices he can charge are fixed,
and he rents his land and building from the government. Most of his friends work for industries owned by the
government. Tim’s country is most likely a(n) economy.
a. market
b. communist
c. socialist
d. industrialized
e. capitalist
87. Which of the following is uncharacteristic of a socialist economy?
a. All capital and capital goods are privately owned.
b. The government owns and controls key industries.
c. Land and raw materials may be the property of the state.
d. What to produce and how to produce it are based on national goals.
e. Distribution of goods and services is controlled by the state.
88. France, a socialist economy, does not have which of the following goals?
a. Equitable distribution of income
b. Elimination of poverty
c. Reduction of government regulations
d. Elimination of economic waste
e. Distribution of social services to all who need them
89. An example of a command economy is
a. capitalism.
b. laissez-faire.
c. oligopoly.
d. communism.
e. mixed economy.
90. The nationalization of key industries in countries such as Sweden and India is indicative of a(n) economy.
a. socialist
b. communist
c. capitalist
d. nationalist
e. industrialized
91. Which economist has been called the father of communism?
a. Adam Smith
b. Fidel Castro
c. Mark Cuban
d. Karl Marx
e. Alan Greenspan
92. In a communist country such as Cuba, emphasis is placed on producing what type of goods?
a. Goods needed by the government
b. Consumer goods
c. Goods for export
d. Perishable goods such as food
e. Durable goods such as machinery
93. Although changes have occurred over the years, is historically considered to have a communist economy.
a. Germany
b. Sweden
c. Norway
d. North Korea
e. Britain
94. All of the following are characteristics of communist countries such as Cuba except
a. intensive production of goods the government needs.
b. all workers contribute to society according to their ability.
c. frequent shortages of consumer goods.
d. government ownership of almost all economic resources.
e. an adequate supply of consumer goods.
95. Productivity can best be described as
a. a country’s total output.
b. the efficiency of a company’s operations.
c. economic growth in a country.
d. the average level of output per worker per hour.
e. the average level of output per worker per year.
96. The production and operations manager at a large shoe factory in Fall River, Massachusetts, notices that the total
number of hours worked by production employees has increased 12 percent, while the number of pairs of shoes
ready for shipping has dropped 6 percent this year over last year. This means
a. the inflation rate is unchanged.
b. the demand for shoes is decreasing.
c. the manager’s calculations cannot be correct.
d. productivity has decreased.
e. the gross national product has increased by 6 percent.
97. All of the following except are effects felt by individuals in regard to the health of a nation’s economy.
a. the amount of interest paid for a home
b. acquiring a job
c. obtaining financing for your education
d. increases in productivity
e. the interest paid on credit card purchases
98. Which of the following statements is false?
a. One way to reduce costs is to increase productivity.
b. Increased productivity can lead to higher manufacturing costs.
c. Increased productivity is a concern for nations throughout the world.
d. Productivity is expected to improve as more economic activity is transferred to the Internet.
e. Productivity growth enables American business firms to compete more effectively with other nations in a
competitive world.
99. To compare the productivity of the United States to that of Japan, one should examine their respective
a. defense budgets.
b. trade deficits.
c. gross domestic products.
d. stock markets’ performance.
e. consumer price indices.
100. The total dollar value of all goods and services produced by all people within the boundaries of a country is called
a. productivity.
b. gross domestic product.
c. gross national product.
d. inflation factor.
e. standard of living.
101. Which of the following would not be included in the gross domestic product of the United States?
a. Value of tax return services performed by H&R Block, U.S. locations
b. Value of BMW automobiles manufactured in Alabama
c. Total value of Procter & Gamble products produced in Michigan
d. Value of medical care services rendered in the United States
e. Value of McDonald’s sales for their Tokyo locations
102. Which of the following economic terms describes the total value of a nation’s goods or services that have been
adjusted for inflation?
a. Altered gross domestic product
b. Gross domestic product
c. Real gross domestic product
d. Altered gross national product
e. Gross national product
103. According to economists, inflation is
a. a general decrease in the level of prices.
b. a general rise in the level of prices.
c. unavoidable, and therefore something beyond the control of government.
d. eliminated by the government.
e. a general problem for countries with command economies.
104. Deflation
a. is a typical economic event in the U.S. economy.
b. is scheduled by the nation‘s economists to make economic corrections.
c. occurs only in command economies.
d. is a general decrease in the level of prices.
e. is characteristic of a mixed economy.
105. An executive at a U.S. steel company uses growth in gross domestic product as one way to develop trends in
industry steel use, so he records GDP change for each year on a graph. However, the executive’s figures are
considerably higher than those of the staff economist, who also has drawn a graph. This difference is most likely
the result of
a. measurement errors by the U.S. Bureau of the Census.
b. a decline in gross domestic product.
c. an increase in gross domestic product.
d. the economist adjusting the figures for the inflation rate.
e. a change in productivity.
106. The consumer price index (CPI)
a. is a quarterly index that producers receive for their finished goods.
b. measures increases or decreases in the level of worker performance.
c. is the price of metals, lumber, and raw materials.
d. measures prices paid during periods of deflation.
e. is a monthly index that tracks the prices paid by consumers.
107. Which of the following is false in regard to the unemployment rate?
a. According to Bureau of Labor Statistics, the country loses goods and services that could have been
produced.
b. A nation benefits from unemployment due to a lower level of wages required to be paid by employers.
c. According to the Bureau of Labor Statistics, families lose wages due to unemployment.
d. The unemployment rates is the percentage of a nation’s labor force that are not working at any one time.
e. The purchasing power of unemployed workers is lost.
108. A furniture manufacturer like Thomasville would be concerned with the producer price index because it
a. is related to the real gross domestic product.
b. measures prices that manufacturers must pay for lumber and other raw materials used in the manufacturing
process.
c. tracks the cost of housing and transportation.
d. is published daily.
e. measures the effect of interest rates on the economy.
109. The producer price index is an accurate predictor of
a. future changes in the consumer price index.
b. the level of unemployment.
c. prime interest rates.
d. Internet business activity.
e. an individual’s standard of living.
110. Fluctuations in a nation’s economy are referred to as its
a. economic upheaval.
b. inflation problem.
c. depression cycle.
d. business cycle.
e. recession period.
111. All except was a part of the U.S. federal government’s stimulus plan.
a. Shore up the country’s banks
b. Create a more extensive physical infrastructure
c. Shore up Wall Street firms
d. Reduce the number of home foreclosures
e. Free up credit for individuals and businesses
112. Which of the following is not one of the four states included in a typical business cycle?
a. Repression
b. Peak
c. Recession
d. Trough
e. Recovery
113. During which phase of the business cycle would a company like General Electric introduce new products?
a. Repression
b. Peak
c. Recession
d. Depression
e. Recovery
114. Which of the following is not a characterization of a depression?
a. High unemployment rates
b. Lower stock values
c. two or more consecutive three-month periods of GDP decline
d. General decrease in business activity
e. General lack of confidence in the economy by members of the population
115. As Rachel Smith and her friends prepare to graduate from college, they are faced with numerous job offers with
starting salaries better than they could have imagined when they began college four years ago. Based on this
information, which stage of the business cycle would the economy be in?
a. Depression
b. Peak
c. Recession
d. Trough
e. Recovery
116. During which stage of the business cycle would a company such as 3M begin to focus on being more value
conscious in its production decisions?
a. Depression
b. Peak
c. Recession
d. Trough
e. Recovery
117. Economists define a as two consecutive three-month periods of decline in a country’s gross domestic product.
a. repression
b. prosperity
c. recession
d. trough
e. recovery
118. The economic term used to describe the Federal Reserve’s actions to determine the size of the supply of money in
the nation and the level of interest rates is
a. monetary policy.
b. fiscal policy.
c. debt policy.
d. recovery technique.
e. recovery guideline.
119. The Federal Reserve uses when it lowers the interest rate charged to banks on short-term loans.
a. monetary policy
b. national debt
c. inflation
d. fiscal policy
e. competition
120. The economic term used to describe the government’s influence on savings and changing the levels of government
spending is
a. monetary policy.
b. fiscal policy.
c. debt policy.
d. recovery technique.
e. recovery guideline.
121. In France, income taxes are reduced so that individuals will have more income to spend, which in turn will stimulate
the economy. This is an example of
a. the business cycle.
b. economic stimulation.
c. monetary policy.
d. recession.
e. fiscal policy.
122. When the U.S. government spends more than it receives within a fiscal year, this is called the
a. economic debt.
b. federal deficit.
c. fiscal debt.
d. national debt.
e. consumer debt.
123. The total of all federal deficits in the United States is called the
a. economic debt.
b. federal deficit.
c. fiscal debt.
d. national debt.
e. consumer debt.