Intro to Econ Concepts – Unit 1 Test
Honors Economics
Name: _________________________
Economics - True/False: Mark A for True and B for False
1. The three factors of production are land, labor and capital.
2. The basic economic problem is known as surplus.
3. On the PPF, opportunity cost is always greatest at the extremes.
4. Opportunity cost always has a monetary value.
5. Economists would disagree with politicians who say, “we can lower taxes & increase spending on programs.”
6. Weddings typically have a negative effect on the overall economy.
7. If the value of the U.S. dollar decreases, citizens travelling overseas can purchase more with their money.
8. The Federal Reserve System controls monetary policy and the money supply of the United States.
9. The two results of competition are higher quality products and higher prices.
10. If revenues exceed expenditures for a year this results in a surplus.
11. Economics is defined as:
A. The study of an entire economy.
B. The study of government policy and the economy.
C. The study of how people buy stocks.
D. The study of how people make choices.
12. Law that allows government to seize property for a greater good
A. Capitalism
B. Eminent Domain
C. Ceteris Paribus
D. Socialism
13. All of the following are indicators of the overall health of the economy EXCEPT:
A. Unemployment rates
B. Consumer Price Index
C. Gross Domestic Product
D. Securities & Exchange Commission
14. A recession is defined by _______________ and a depression is __________ __________.
A. 3 consecutive months of Decreasing GDP; 9 consecutive months Increasing CPI
B. 9 consecutive months Increasing CPI; 3 consecutive months Decreasing GDP
C. 9 consecutive months Decreasing CPI; 9 consecutive months Decreasing CPI
D. 3 consecutive months Decreasing GDP; 9 consecutive months Decreasing GDP
15. GDP is calculated by:
A. Consumer Spending + Investing Spending + Government Spending +(Exports-Imports)
B. Imports + Exports + Consumer Spending +Investing Spending - Government Spending
C. Inflation + Investing Spending + Government Spending + (Exports-Imports)
D. Consumer Spending +Investing Spending - Government Spending +(Exports-Imports)
16. Ceteris Paribus is a Latin term in economics which means:
A. Supply & Demand
B. Needs & Wants
C. All things equal
17. Which of the following best summarizes the NASDAQ?
A. Computer trading of mostly newer companies.
B. Auction trading of mostly newer companies.
C. Auction trading of mostly older and bigger companies.
D. Computer trading of mostly older and bigger companies.
D. All things present
18. Which of the following is not true of the Dow Jones?
A. Once listed on the Dow, companies are there permanently
B. Is an index of 30 industry leading companies
C. Stocks listed are considered blue-chip stocks
D. Is an indicator of the overall direction of the stock market
19. Which of the following statements about stocks and bonds is FALSE?
A. In the event of bankruptcy bondholders are paid first, then stockholders.
B. Bonds are typically riskier than stocks.
C. One represents ownership one does not.
D. One pays off in dividends, the other pays coupons.
20. Which of the following is a company you should probably avoid buying?
A. One with a Dividend Yield around 2%.
B. One with a P/E Ratio of 95.
C. One that is trading at 22.50 with a 52 Week H/L of 26/18.
D. One with an analyst rating of “hold”.
Stock Market Matching
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Dividends
Bonds
Stock
Primary Market
Secondary Market
Yield
P/E Ratio
Bulls
Bears
Volume
A. Believe the market is headed downward.
B. Percentage return of the dividend.
C. Stock selling between people.
D. A share of a company’s profits.
E. Equity financing.
AB. Believe the market is headed upward.
AC. IPO’s are introduced here.
AD. Debt financing.
AE. Number of shares traded
BC. Stock price divided by earnings per share.
Economic Terms Matching
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
The price of borrowing money.
Currency increasing in value.
A rising general price level.
Measured by a bundle of household goods.
Total of all past deficits.
Foreign goods bought in the US.
Money a business spends to make its products.
The best measure of a countries wealth.
A nation’s production adjusted for inflation.
There are limits to the amount of every resource.
The value of the next best alternative not chosen.
Decision makers always act to their own benefit.
Choices are often made in small ways, not large ones.
A. Inflation
B. Scarcity
C. The Margins
D. Interest Rates
E. Investment Spending
AB. Rational Decisions
AC. National Debt
AD. Strong Dollar
AE. Per Capita GDP
BC. Opportunity Costs
BD. CPI
BE. Imports
CD.
Real GDP
For questions 44-48 indicate if each topic is A - MicroEconomics or B - MacroEconomics
44. Government Spending and its effect on employment
45. How Steak gets to New York
46. Is Life getting better or worse?
47. Poverty and school choice
48. Rent Controls in Manhatten
49. Economic systems in Hong Kong, U.S. & India
ABC News Video Questions – can answer more than one
50. Which of the following was a fact from the MacroEconomic videos?
a. Greed and making money is good
b. Stadiums cost far more money than the revenues they return
c. Broken windows creates a multiplier effect that helps create sustainable jobs
d. Installing seat belts on all school busses is a good use of financial resources
51. Which of the following is NOT true of the MacroEconomics videos?
a. The richest 1% of Americans pay 34% of all taxes and the top 5% pay 53% of all taxes
b. Workers in places like Kenya, India & Honduras disagree with those who protest the sweatshops in their country
c. Laying off steelworkers in Youngstown, OH led to better, more efficient and safer jobs
d. Gas prices, inflation adjusted, are higher now than ever before
52. Which of the following was a fact from the MicroEconomic videos?
a. Farm subsidies provide a disincentive for farmers to make a profit
b. Most new drugs are not created in the U.S. because U.S. drug companies spend millions in R &D
c. Wal-Mart provides a wage decrease for those who shop at the store
d. Public ownership of property is better taken care of than private property
53. Which of the following is NOT true of the MicroEconomics videos?
a. Women make less money than men because of gender discrimination
b. When creating a new business or product you must remember it is not a zero-sum game in our economy
c. Capitalism can be the great equalizer for those trying to rise out of poverty
d. An unintended consequence of providing flood insurance is that more homes are built in flood zones
PPF Multiple Choice –can answer more than one
54. Which statement(s) about the Production Possibilities Frontier are true?
A. The frontier reflects constant costs of production.
B. It is a measure of a product’s price levels
C. Opportunity costs are always the greatest at the extremes
D. Points inside the curve illustrate inefficiency
55. What statement(s) about the PPF is not true?
A. The PPF shows the trade-off between two alternative uses of resources.
B. The PPF is an example of an economic model.
C. The PPF is usually shown by a straight line indicating constant costs of production.
D. The PPF is based on the premise of scarcity.
56. A PPF would be most useful in:
A. determining the price of scarce resources.
B. evaluating the constraints that apply to land-use decisions.
C. analyzing the trade-off between unemployment and inflation.
D. analyzing the trade-off between resources of a tech company allocated to producing tablets or smart phones
57. A PPF with constant costs of production would most resemble:
a. A curved line
b. A straight line
c. A parallel-o-gram
d. SOHCAHTOA
Graph: Use the graph below to answer the following questions.
58. Between what two points is the opportunity cost per unit the greatest in terms of giving up butter for arms?
a. Point E to D
b. Point D to C
c. Point C to B
d. Point B to A
e. All Points
59. Between what two points is the opportunity cost per unit
the least in terms of giving up arms for butter?
a. Point A to B
b. Point B to C
c. Point C to D
d. Point D to E
e. All points
60. At what point on the graph is the economy producing the
greatest amount of output possible?
a. Point A
b. Point B
c. Point C
d. Point E
e. All Points
Extra Credit Question
61. In the summer of 2008, eighteen whales beached themselves on Cape Cod resulting in a limited chance of
survival and a major cost to save. Throngs of animal rights activists came out to the beach to help the whales,
and many lobbied the Massachusetts state government to provide resources to help the whales. But not
covered by the news media, there were just as many animal rights activists against helping the whales. Can you
figure out why people who have devoted their lives to helping animals would argue that we should just let those
eighteen whales just die? (use blank part of answer sheet to write out your response)