Which of the following results when federal government expenditures are less than the federal government’s total
receipts?
A. a trade surplus
B. a federal budget deficit
C. a negative balance of payments
D. a federal budget surplus
Use the list below to answer the question.
Duties of the Federal Reserve System
 Provides financial services to the government
 Regulates interest rates
 _____________________________________
Which phrase BEST completes this list?
A. Collects taxes from corporations
B. Manages foreign exchange rates
C. Oversees national banking institutions
D. Negotiates international trade agreements
Which action by the government is an expansionary monetary policy?
A. increasing the discount rate
B. decreasing the reserve requirement
C. raising the federal funds target
D. selling more bonds to the general public
Which chain of events will occur if the Federal Reserve buys bonds on the open market?
A.
Increase in the money supply → Decrease in interest rates →
Increase in consumer spending → Increase in aggregate demand
B.
Decrease in the money supply → Increase in interest rates →
Decrease in consumer spending → Decrease in aggregate demand
C.
Decrease in the money supply → Increase in interest rates →
Increase in business investment → Increase in aggregate demand
D.
Increase in the money supply → Decrease in interest rates →
Decrease in business investment → Decrease in aggregate demand
Use the diagram below to answer the question.
How would this diagram MOST likely be affected by taxes that are taken out of workers’ wages and given to the
government?
A. Business services would increase.
B. Labor available to businesses would decrease.
C. Business wages would increase.
D. Money available to businesses would decrease.
Which action would be BEST for a country seeking a comparative advantage in global trade?
A. buy from countries that specialize in needed products
B. develop new technologies to make production more efficient
C. join economic unions with a single currency and reduced tariffs
D. make products with the highest opportunity costs
Ken makes $50,000 per year and Kirby makes $30,000 per year. Ken pays a higher average tax rate on his income than
Kirby. This infers that taxes on income are
A) regressive.
B) proportional.
C) progressive.
D) marginal.
Which reason BEST describes why a government would impose a price floor on agricultural products?
A. to reduce farm waste
B. to reduce the cost of food
C. to influence consumer choices
D. to protect the profits of farmers
If the government’s fiscal policy is designed to expand the economy, which action would Congress be MOST likely to
take?
A. buy government bonds
B. increase income taxes
C. raise the discount rate
D. increase government spending
If the government’s fiscal policy involves stopping high inflation, which choices should Congress consider?
A. either cut taxes or increase government spending
B. either increase taxes or cut government spending
C. either lower the discount rate or sell bonds
D. either raise the discount rate or buy bond
In which situation might the Federal Reserve buy government securities or lower its discount rate?
A. in a recession
B. in the middle of an expansion phase
C. when inflation is too high
D. when aggregate demand is too high
Why does the Federal Reserve require banks to keep a percentage of their funds as reserves?
A. to buy bonds
B. to balance the budget
C. to supply cash withdrawals
D. to ensure business investment
Which answer describes changes in the U.S. money supply BEFORE the establishment of the Federal Reserve?
A. the money supply was constant and unchanging
B. the money supply could change dramatically and unexpectedly
C. Only the president could change the supply of money available
D. there were no importance differences between the supply then and now
In which situation might the Federal Reserve buy government securities or lower its discount rate?
A. in a recession
B. in the middle of an expansion phase
C. when inflation is too high
D. when aggregate demand is too high
The Federal Reserve System is made up of
A. the President, Congress and the Cabinet
B. the Internal Revenue Service and the Office of Management and Budget
C. 12 banks in different regions of the U.S. and the Federal Open Market Committee
D. all banks, savings and loans, and credit unions in the United States
Countries A and B will probably NOT trade power tools and corn if which of the following is true?
A. Country A can produce more power tools and corn than Country B
B. Country B can produce enough power tools and corn to satisfy the demand of its public
C. The opportunity costs of producing power tools and corn are the same in both countries
D. The opportunity cost of producing power tools is greater in Country A than it is in Country B
Corn
Soybeans
U.S.
75
100
Russia
60
40
Imagine that the table above shows how many thousands of bushels of corn and soybeans the U.S. and Russia can
produce in one day. Which conclusion can be drawn?
A. The U.S. has an absolute advantage in corn; Russia has an absolute advantage in soybeans
B. The U.S. has an absolute advantage in soybeans; Russia has an absolute advantage in corn
C. The U.S. has an absolute advantage in both crops.
D. Russia has an absolute advantage in both crops.
The ability of one nation to make something at a lower opportunity cost than another nation can make it is called
A. an absolute advantage
B. a comparative advantage
C. a trade surplus
D. a trade deficit
When regions and nations specialize and trade, the result is
A. an increase in the variety of goods, but a decrease in the supply of goods
B. an increase in the supply of goods, but a decrease in the variety of goods
C. an increase in both the supply and variety of goods
D. a decrease in both the supply and variety of goods
Imagine the table shows how many thousand shoes and phones the U.S. and Brazil can make per day. Use the table to
answer the next three questions.
Shoes
Phones
U.S.
80
150
Brazil
60
20
Which nation has an absolute advantage in making shoes?
A. United States
B. Brazil
C. both
D. neither
Which nation has a comparative advantage in making shoes?
A. United States
B. Brazil
C. Both
D. Neither
Based on the data in the table, which conclusion is MOST likely?
A. the two nations will not trade either shoes or phones
B. U.S. will export both shoes and phones to Brazil
C. U.S. will export shoes to Brazil, and Brazil will export phones to U.S.
D. U.S. will export phones to Brazil, and Brazil will export shoes to U.S.
Use the chart below to answer the question. The chart shows the number of hours it takes to make one unit of each
good.
Cell Phones
Laptops
ABC Electronics
1
2
Smith Electronic Manufacturing
2
6
Based on the chart, which statement is correct?
A. ABC Electronics has an absolute and comparative advantage in laptops
B. Smith Electronic has an absolute and comparative advantage in cell phones
C. Smith Electronic has an absolute and comparative advantage in laptops
D. ABC Electronics has an absolute and comparative advantage in cellphones
Use the chart below to answer the question. The chart shows the number of units produced in one hour.
Country A
Country B
8 pounds of coffee
4 pounds of coffee
4 pounds of sugar
8 pounds of sugar
A. Country A would benefit most from specializing in sugar production.
B. Country A has the absolute advantage in coffee production
C. Country B has the comparative advantage in coffee production
D. Country B would benefit most from specializing in coffee production