CPM - Spring 2015 – Study Guide
1. If an economy is in a trough on the business cycle, what happens to unemployment, real GDP, and
inflation?
2. Use the following list to answer the question: *There are only a few large sellers. *All the products sold
are very similar. *There is a high degree of interdependent pricing. THIS LIST MOST LIKELY
DESCRIBES WHICH KIND OF MARKET STRUCTURE?
3. In which market structure to firms have the greatest control over their own prices?
4. What provides the greatest incentive for entrepreneurs to take risks?
5. Mr. Jones has a large sum of money he wishes to invest. He wants the largest return possible and is
not very concerned with high risk. Based solely on this information, what would the best type of
investment for Mr. Jones be?
6. A US tariff is placed on all imported MP3 players. What will happen to foreign producers of imported
MP3 players?
7. In the production of chocolate chip cookies sold in the commercial market, what represents the factor
of capital?
8. If the CPI for the last three months has been 100, 101, 104, then what DEFINITE conclusion can you
make about the economy?
9. What is MOST LIKELY to happen to imports and exports if the dollar becomes stronger relative to
other currencies?
10. A headline reads: "High Tech Firms Begin Producing New Generation of Computers." What basic
economic question is being addressed in this headline? (as in what to produce, how to produce, for
whom to produce)
11. If the US economy was in a recession, which fiscal policy would be most appropriate to get out of the
recession?
12. What is the typical relationship between education and income?
13. Opportunity cost is best described as what?
14. Assume the Fed has recently made large purchases on the open market and Congress has passed
legislation that includes large tax cuts. If this is true then apparently economic leaders believe what about
the economy?
15. Using similar resources, Japan can produce 25 cars or 100 computers. The U.S. can produce 40
cars or 90 computers. What is true concerning absolute advantage?
16. If the price of a product falls, what is true regarding demand?
17. A good example of the effect of education on income would be that people with college degrees
usually earn _____ than those with less education.
18. Susan offers to trade her old iPod for Claudia's cell phone and Claudia accepts. Assuming both
products work perfectly, we can conclude that both people have gained because the trade was
_________ and ______________________.
19. When buyers and sellers interact in a market, what is the result?
20. Gross Domestic Product is a method for calculating how much a country produces by adding which
four spending categories?
21. Sherry runs a business with her sister. They are trying to decide whether to incorporate or not. If they
decide to incorporate, what's one major disadvantage they will face?
22. What is true concerning profits for firms that operate in purely competitive markets?
23. What is MOST LIKELY to happen to the economy if the Federal Reserve Bank sells treasury
securities at the same time that Congress passes a law increasing taxes?
24. What is a primary benefit of all types of insurance?
25. When the Fed is conducting open market operations, they are doing what?
26. In a typical market economy, producers are allowed to choose which products they wish to make and
the amount of these products they will produce. Consumers are allowed to choose which producer they
will purchase from and how many they will buy. This MOST DIRECTLY supports the broad economic goal
of what?
27. In order to build a skyscraper, Builders Inc. purchases land, rents out several cement trucks, and
hires 400 construction workers and 50 managers. Builders Inc. represents which factor of production?
28. What is MOST LIKELY to happen to U.S. imports and exports if the U.S. dollar appreciates relative to
other currencies?
29. National deficits are different than the national debt because?