UNIT 1: Fundamentals
Define scarcity:
Which economic situation is characterized by unlimited wants
exceeding limited resources?
A. surplus B. specialization
C. scarcity
D. shortage
Define the factors of
production:
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
A. entrepreneurship
B. land
C. labor
D. capitol
Give examples of each
factor of production:
Mr. Green is opening a new bakery. He has purchased an
industrial oven which can accommodate twenty loaves of bread
at a time. This oven represents which factor of production?
A) land
B) labor
C) capital
D) entrepreneurship
Which is a human resource that Ms. Johnson could use for her
art gallery?
A. Light fixtures to help display the artwork
B. Knowledge of trends in modern art
C. A series of paintings by a prominent local artist
D. A security system to protect the artwork
Which BEST describes entrepreneurship?
A. a person who uses land, labor, and capital in their job
B. a person willing to take a financial risk by combining
resources to produce a good or service
C. the ability of a person to work more efficiently than another
person
D. the physical and mental talents of workers
What does efficiency
mean and why is it
important?
In regards to resources, which is most important for a nation?
A. Getting more resources
B. The efficient use of resources
C. Trading with other nations to get the best resources
D. Making sure you don’t have too many resources
Specialization increases efficiency by
A. Increasing amount of labor
B. Allowing Workers to become experts at one task
C. Giving workers more breaks
D. Working employees longer hours
Define opportunity
cost:
give an example of
opportunity cost:
The next best alternative when making a decision is known as:
A. Scarcity
B. Utility
C. Opportunity cost
D. Trade off
You are in the clothing store. You see a pair
of pants and a T-shirt that you like. However,
you have only enough money for one item
of clothing. You decide to buy the pants.
What is the opportunity cost of your choice?
A. the T-shirt
B. the cost of both items of clothing
C. the price of the pants
D. difference between price of pants and T-shirt
What is the
production
possibilities curve?
Based on the PPF, which is true about countries A and B?
A.Country A has fewer resources to make fish, but more
resources to make coconuts
B. Country B has fewer resources to make fish, but more
resources to make coconuts
C. Country B has more resources in general
D. Country A has more resources in general.
what 2 things cause
the production
possibilities curve to
shift?
Which headline describes a situation that will MOST LIKELY
lead to future economic growth?
A. “Population increases for 4th straight year!”
B. “Government to pay for more people to attend college!”
C. “New natural resources discovered!”
D. “Study shows a shift in the production possibilities curve to
the left!”
what does it mean
when the PPC
moves to the right?
Which statement is true about this production possibilities
curve?
A.
B.
C.
D.
Moving from point X to point Y incurs and opportunity
cost of butter.
Moving from point X to point Y incurs an opportunity
cost of guns.
At point X, this country is producing more butter than
guns.
This country does not have to give up any guns to
produce more butter.
In this production possibilities graph, what might cause the line
(frontier) to move to the left?
A) a shortage of needed raw materials
B) an increase in the number of workers
C) increased efficiency because of new whoopee cushion
technology
D) increased demand for basketballs
What is the point
inside the PPC
called? What does it
mean?
Point A on the PPF
A. is producing more butter than guns
B. is producing more guns than butter
C. is producing and equal amount of guns and butter
D. is inefficient
You have to make a
choice between a $1
Snickers and a
$1.05 Reese’s.
Which do you
choose?
Why?
Is it worth the
money?
Give an example of
how someone could
use specialization
when working at
McDonalds.
A consumer wants to buy a new computer. Although the
computer will be more expensive, it will be faster and more
efficient than using the computer at the library. Which term
describes such an economic choice?
A. productivity
B scarcity
C underutilization
D opportunity cost
Alex and Dylan both wash cars and change oil. Currently, each
man washes and changes oil by himself, but the process takes
a long time. They would MOST LIKELY improve their efficiency
if
A.
B.
C.
D.
Alex washes cars while Dylan changes oil
Alex and Dylan reduce the number of cars they wash.
Alex and Dylan wash a car and change the oil
together.
Alex washes Dylans car while Dylan washes Alex's
car.
Why would you want
to trade goods with
someone else?
Susan offers to trade her old iPod for Claudia’s cell phone and
Claudia accepts. Assuming both products work perfectly, we
can conclude that
A. both people have gained because the exchange was
voluntary and non-fraudulent.
B. Susan places the same value on cell phones as she does for
iPods.
C. neither party has gained because the exchange was
fraudulent.
D. Claudia is now happier than Susan.
Define the
command, market,
and mixed economic
systems with
regards to what,
how, and for whom
to produce.
Scarcity is the basic economic condition that results from
society not having enough resources to produce all the things
people would like to have. A society's economic system
determines
A) the way a society allocates its scarce resources to produce
goods and services.
B) the way a society organizes its political system.
C) the way a society aligns technology with scientific goals.
D) the way a society uses religious resources to supplement
economic goods and services.
Define private
ownership, profit
motive, consumer
sovereignty,
competition, and
government
regulation.
. Which is most likely the result of healthy competition in
the market?
A. higher prices, lower quality, less choice of products
B. lower prices, better quality, greater choice of products
C. higher prices, better quality, less choice of products
D. lower prices, lower quality, greater choice of products
Define the economic
goals of freedom,
security, equity,
growth, efficiency,
and stability.
The use of new technology in the production of goods and
services by a country will MOST likely result in which of the
following?
A
B
C
D
Which goals (b1) do
each system follow?
Command
Mixed
Market
Production
Possibilities Curve
Shift inward
Shift inward
Shift outward
Shift outward
Economic Growth
Negative growth
Positive growth
Negative growth
Positive growth
In a typical market economy, producers are allowed to choose
which products they wish to make and the amount of those
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
A. security
B. equity
C. freedom
D. stability
Equity of results and security are characteristics more often
seen in which type of economic system?
A. market
B. monopolies
C. oligopolies
D. command
Why does the
government
provides public
goods and services,
redistribute income,
protect property
rights, and resolves
market failures?
Give an example of
government
regulation and
deregulation.
Why does the U.S. government provide public goods?
A. because we have a command economy
B. because all people pay taxes
C. because they cannot limit public goods to those who pay
taxes
D. because it is too expensive
Government regulation often causes
A. prices to increase.
B. aggregate supply to decline.
C. costs of production to rise.
D. all of the above
Which is true about the effects of regulation and
deregulation on producers and consumers?
Regulation
Deregulation
Benefits consumers
Benefits producers
Benefits producers
Benefits consumers
Benefits both consumers &
producers
Benefits both consumers &
producers
Hurts only producers
Costs both consumers and
producers
How does regulation
and deregulation
affect consumers
and producers?
Government agencies inspect restaurants on a regular basis to
insure the restaurants are obeying health and food safety
regulations. What economic effect does this have on the
restaurants?
A. The price of food is typically lower because the regulations
force restaurants to use cheaper ingredients.
B. Restaurants cannot serve food if they do not meet all of the
regulations.
C. They charge higher prices to cover the costs of the time and
resources used in meeting the regulations.
D. More food is produced because the regulations make the
restaurant more productive.
Define productivity:
An assembly line can increase a factory's productivity because
it allows workers to
A. focus on a specific task
B. diversify their skills
C. use a wide range of knowledge
D. put in overtime hours
How can a new
piece of machinery
(technology) or tools
help a business?
What does this do to
the PPC?
A shift from curve ST to curve YZ could occur if
A. consumer demand for consumer & investment goods
increased
B. advances in technology resulted in greater productivity
C. effective government price ceilings were imposed
D. trade barriers reduced imports and exports
Define standard of
living:
If the numbers of workers in the population
grows faster than the average production
of each worker, the standard of living will
A. rise
B. fall
C. remain stable
D. fluctuate slightly
Which statement correctly describes the relationship between
investment in personal education and standard of living?
A. The higher the education level a person has, the
higher the salary they are likely to make
B. The higher the education level a person has, the
more likely they are to be unemployed
C. The higher the education level a person has, the
lower the salary they are likely to make
D. The higher the education level a person has, the
less likely they are to increase productivity
when a company
invests in education
leading to a high
standard of living,
what factor of
production is it
investing in?
Unit 2: Microeconomics
Draw the circular
flow diagram.
Include: Resource
(factor) and Product
markets and the flow
of goods & $
Which transaction below will take place in the product market on
a circular flow diagram?
A. Smithville Farm's purchase of 3 new tractors.
B. The Pencil Company's paying yearly taxes.
C. Jenny's posting of her resume on a website.
D. Chris' purchase of a new video game.
Arrows 1 and 2 demonstrate
Define medium of
exchange:
A. prices
B. taxes
C. money flow
D. goods and services
Bart is able to buy 50 water balloons with the $5 bill he received
for his allowance. This is an example of money as:
A) a store of value
B) a medium of exchange
C) fiat money
D) an investment
Why is having a
medium of exchange
important?
In the United States economy, the role of money is to
A. control inflation.
B. set prices on goods and services.
C. facilitate exchange between buyers and sellers.
D. create jobs in the factor market.
Define the Law of
Demand
If the price of a product falls, which is true regarding demand?
A. quantity demanded decreases
C.
quantity demanded increases
B. supply increases
D. supply
decreases
What factors cause
demand to shift?
When the income in households increases, what is the likely
result?
A. The supply curve will shift to the left.
B. The demand curve shifts to the left.
C. The supply curve becomes vertical.
D. The demand curve shifts to the right
Draw a shift in
demand (increase
and decrease).
Define the Law of
Supply
What factors cause
a shift in supply?
What would most likely cause the movement from D0
to D1?
A. an increase in unemployment
B. an increase in the price of related goods
C. an increase in consumer preference for this
product
D. an decrease in price in substitute goods for this
product
The Law of Supply states that
A. as prices increase, supply increases
B. as prices increase, quantity demanded decreases.
C. as prices decrease, quantity supplied decreases
D. as prices decrease, demand decreases
If the government pays a business a subsidy, what is MOST
likely to happen in that market?
A. There will be a decrease in demand for the good.
B. The market will see an increase in supply of the good.
C. The market will see an increase in demand for the good.
D. There will be in decrease in the quantity supplied.
Draw a shift in supply
(both increase and
decrease).
Which would cause the supply of wheat to shift to the right?
A. A decrease in producer subsidies.
B. Wheat producing companies leaving the market.
C. An increase in household incomes.
D. A new, faster wheat harvesting machine.
A. Price Rises and Quantity Rises
B. Price Drops and Quantity Rises
C. Price Rises and Quantity Drops
D. Price Drops and Quantity Drops
Define price elasticity
of demand and
supply.
Demand for gasoline is said to be fairly inelastic for most
people. This is probably because
A. it has few substitutes and is necessary for most
transportation.
B. it is difficult to make cheaply.
C. it has many substitutes and is easily attained.
D. it has few substitutes and is in large supply.
What will happen when a firm raises the price of a
product with an inelastic demand?
A.
quantity demanded will increase
B.
quantity demanded will decrease
C. quantity demanded will not be affected
D. the demand for substitutes will decrease
What is
equilibrium/market
clearing price?
If supply and demand both increase by the same amount in a
market, which statement will DEFINITELY be true?
A. Equilibrium price will increase
B. quantity supplied will decrease
C. quantity demanded will decrease
D. equilibrium quantity will increase
Sellers enter a market looking to make as much money as
possible by offering a good or service. Buyers enter a market
looking to spend as little as possible for a good or service. This
interaction determines the
A. market clearing price of a good.
B. production possibilities curve.
C. Productivity of a business.
D. economic system of a country.
Draw on a graph how
price floors create
surpluses and price
ceilings create
shortages.
The government sets a price ceiling in a market. This is MOST
LIKELY to cause
A. efficiency.
B. a surplus.
C. a shortage.
D. equilibrium.
Illustrate on a graph
how supply and
demand determine
equilibrium price and
quantity.
According to the graph above, what has occurred from
P2Q2 to P1Q1
A. price increased, quantity increased
B. price decreased, quantity increased
C. price increased, quantity decreased
D. price decreased, quantity decreased
Define the 3 forms of
business
organizations: sole
proprietorship,
partnership, and
corporation.
A key advantage of a partnership is
A. ease of raising capital through stockholders
B. specialization of the partners
C. the life expectancy of the business
D. unlimited liability of the partners
Name an advantage
and disadvantage for
each type of business
organization.
How does a corporation benefit from selling stock?
A. It gives them limited liability
B.
they can raise larger amounts of capital
C.
it eliminates the potential for conflict
D.
they get larger profits
In which type of business organization does the owner have the
MOST liability?
A. monopoly
B. corporation
C. partnership
D. sole proprietorship
Explain the role of
profit as an incentive
for entrepreneurs.
What incentive do manufacturers have to sell their products in a
market economy?
A. making profits on sales
B. pleasing the consumer
C. putting others out of business
D. popularity of product
Explain the different
market structures:
monopoly, oligopoly,
monopolistic
competition, and pure
competition.
Company X sells a good where there is a lot of competition.
Companies enter and leave the market often. Company X stays
in business because they constantly use advertising to make
their product seem different. In which market structure does
Company X operate?
A. Monopolistic Competition
B. Perfect Competition
C. Monopoly
D. Oligopoly
Which market structure is typically characterized by a large
number of producers selling similar, but differentiated products?
A. monopolistic competition
B. pure competition
C. oligopoly
D. monopoly
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?
A. pure competition
B. monopolistic competition
C. oligopoly
D. monopoly
Which statement is true regarding monopolistic competition?
A. Advertising plays a key role in the market.
B. There is only one seller in the market.
C. All the sellers are selling identical products.
D. Businesses have great control over the price of their product.
Assume Coke and Pepsi operate as an oligopoly. Which
statement BEST represents this?
A. Coke and Pepsi are major corporations with stockholders
B. Coke and Pepsi sell to over 75% of the market
C. Coke and Pepsi taste different, but are marketed the same
way
D. Coke and Pepsi own many different "brands"
Unit 3: Personal Finance
You have the choice
between bread that
can feed your family
for 2 days or a Twix
which will only feed
you for a short period
of time. Which do you
choose? Why?
Compare services
offered by different
financial institutions.
An economics rational decisions occur when
A. marginal benefits equal or exceed marginal costs.
B. a budget is used for spending and saving decisions.
C. command economies answer the three basic economic
questions.
D. suppliers lower their prices to increase demand.
Why do people have to decide between items? Why can’t we
have everything we want?
When you want to buy something, but don’t have all the money
right now, what can you do?
Blue Financial is a financial institution owned by its members. It
offers lower loan rates and easier application processes for it’s
members. Based SOLELY on this information, Blue Financial is
MOST LIKELY a
A. credit union.
B. bank.
C. savings and loan.
D. credit card agency.
Explain reasons for
the spread between
interest charged and
interest earned.
Banks pay depositors interest to put money in the bank. When
someone takes a loan from a bank they must pay interest back
to the bank. Which statement about these two interest rates is
correct?
A. Rate banks charge is higher than the rate banks pay.
B. Rate banks pay is regulated by the government and the rate
they charge is not.
C. Rate banks charge is lower than the rate banks pay.
D. Rate banks pay is equal to the rate they charge.
Give examples of the
direct relationship
between risk and
return.
When dealing with investments, as risk of losing money
increases
A.more people take that risk.
B. it is more likely the investment is short term.
C. more insurance is needed to protect the investment.
D. the rate of return is usually higher.
Evaluate a variety of
savings and
investment options;
include stocks, bonds,
and mutual funds.
Shondelle has a large sum of money to invest. She is not
concerned with a large return, but is very sensitive to risk.
Which would be the best investment for her?
A. real estate
B. stock market
C. a savings account
D. checking account
Which factor will have the LEAST impact on whether a person
gets credit or not?
A. character, how willing the person is to pay back the loan
B. compatibility, how much the loan officer likes the person
C. capacity, how able the person is to pay back the loan
D. collateral, how much the person's assets are worth
Interest is:
a. fee to complete a loan application
b. a fee for getting a credit check
c. money paid to a lender for borrowing money
d. money paid for getting insurance coverage
What factors affect
credit worthiness?
What is the difference
between the interest
charged on loans and
the interest charged
on credit cards?
What is the difference
between simple and
compound interest
rates?
Bill is choosing between two different savings accounts. One
has simple interest and the other has compound interest. If Bill
is planning on saving money for a long period of time and he
wants the most return on his savings he should choose the
account with
A. compound interest because it will pay interest on the original
deposit plus interest earned over time.
B. simple interest because it is easier to calculate.
C. simple interest because that account will pay interest on the
total amount in the account at all times.
D. compound interest because it will pay an increasing amount
of interest based on the amount of the original deposit.
Describe the different
types of insurance:
automobile, health,
life, disability, and
property.
Which type of insurance does a person need if they wish to
continue to receive a paycheck while they are out of work due to
an injury?
A. health
B. disability
C. life
D. property
Describe the following
costs and benefits
associated with
insurance:
deductibles
premiums
shared liability
asset protection
What skills are
required to be
successful in the
workplace?
Which is a primary benefit of all types of insurance?
A. People can be more careless.
B. It helps people share risk.
C. Lawsuits are easier to settle.
D. Insurance keeps prices low in a market
7) Which of the following pairs show the same relationship of
quantity and annual wages as the graphs?
A) Graph A: Computer repairperson, Graph B: Toll booth
operator
B) Graph A: House cleaner, Graph B: Retail Clerk
C) Graph A: Landscape maintenance person, B: Aerospace
engineer
D) Graph A: Pharmacist, Graph B: Registered Nurse
How does the
investment in
education, training,
and skill development
help someone in the
workplace?
A good example of the effect of education on income would be
that
A. employees who learn to perform high risk jobs always get
paid more.
B. people with college degrees usually earn more than those
with less education.
C. workers who learn to make high demand products are well
paid.
D. only job applicants with high school diplomas get job
interviews
Unit 4: Macroeconomics
Define Gross
Domestic Product
(GDP)
Gross Domestic Product is a method for calculating how much a
country produces by adding which four spending categories?
A. Consumption, Investment, Government, Net Exports
B. Consumption, Investment, Government, Business
expenditures
C. Consumption, Interest Rates, Government, Net Exports
D. Wages, Rent, Interest, Dividends
define economic
growth
Country X has decided that economic growth will be their primary
goal for the next several years. The best way to achieve this
would be to
A. reduce the amount of government spending
B. invest heavily in the stock market.
C. decrease trade with other countries and focus on more
domestic production.
D. invest in capital and education of workers.
How is economic
growth measured?
By comparing the real GDP of two time periods a person can
measure the
A. unemployment rate.
B. consumer price index
C. economic growth rate
D. inflation rate.
define unemployment
Identify and give an
example of structural,
cyclical, and frictional
unemployment.
Unemployment characterized by large numbers of workers who
have recently been replaced by machines or laid-off due to
technological improvements is considered to be which kind of
unemployment?
A. structural
B. seasonal
C. cyclical
D. frictional
Help Wanted! Sales Position: Self-Motivated individual needed to
sell new homes being built in the Lakefront area. Salary based on
commission and experience.
Kris applies for the sales position and does well. However, she is
laid off in late October due to slow sales.
This is an example of ____________ unemployment.
A) structural
B) cyclical
C) frictional
D) seasonal
How is unemployment
measured?
A person trying to find the unemployment rate in a country needs
which two pieces of information?
A. The total number of jobs and the number of people without
jobs
B. The number of unemployed people and the population
C. The number of unemployed people and the number of
discouraged workers
D. The number of unemployed people and the number in the
labor force
define inflation
define stagflation
define Consumer
Price Index (CPI)
How is inflation
measured?
Which of the following would be a result of stagflation?
A. Economy would go into an expansion
B. GDP decrease but Aggregate demand would increase
C. The economy would go into a contraction
D. GDP increase but Aggregate demand would decrease
CPI is calculated by comparing the cost of a market basket of
goods purchased during a base year with
A. Cost of the market basket at current prices
B. Cost of a new market basket at current prices
C. Cost of the growth of a nations resources
D. Cost of trade with other nations and its impact on GDP
A market basket is generally used for
A. comparing prices of standard goods between years to
determine inflation.
B. putting things in while you walk around the store.
C. determining how much GDP is produced every year.
D. advertising new products for companies.
Give examples of who
benefits and who
loses from inflation.
Which person would be hurt the MOST by sudden inflation?
A. Jim, who’s company gives raises every year.
B. Sally, who has a fixed payment on a mortgage.
C. Pedro, who receives income from his stock portfolio.
D. Marie, who is retired and lives on a fixed income.
define aggregate
demand
Aggregate demand differs from regular demand in that aggregate
demand
A. is inelastic while regular demand is elastic.
B. measures demand for the entire economy, rather than one
market.
C. only used when trying to measure money
D. includes supply as well as demand
define aggregate
supply
A shift from AS2 to AS1 results in
A.
an increase in price level
B.
an increase in Real GDP
C.
an increase in aggregate demand
D.
a decrease in inflation
Label and Define the
business cycle: peak,
contraction, trough,
recovery, expansion,
recession and
depression.
If an economy experiences the following: 12% inflation (very
high), 2.5% unemployment (very low), and high investment, they
are MOST LIKELY on which part of the business cycle?
A. Trough
B. Expansion
C. Recession
D. Contraction
If an economy is in a trough on the business cycle
A. unemployment is high, real GDP growth is high, and inflation is
low
B. unemployment is low, real GDP growth is low, and inflation is
low
C. unemployment is low, real GDP growth is high, and inflation is
high
D. unemployment is high, real GDP growth is low, and inflation is
low
How is the Federal
Reserve System
organized?
Which component of the Federal Reserve system holds the most
power in regards to day to day monetary policy?
A. The Federal Open Market Committee
B. The Board of governors
C. The 12 District banks
D. Congress and the President
Define monetary
policy.
The monetary policy is actions taken by _______ to influence the
economy.
A. The Government
B. The Federal Reserve
C. The Treasury
D. The Governor
What tools does the
Federal Reserve use
to promote price
stability, full
employment, and
economic growth?
What are the 2 types
of policies and when
are they used?
At point Y on the business cycle, what action does the federal
reserve take?
A. increase the Required Reserve Ratio
B. increase the credit requirement
C. buy government securities
D. raise taxes
Which statement is MOST LIKELY true if the Fed increases the
reserve requirement and the discount rate?
A. they are trying to limit inflationary pressures
B. loans are difficult to get because little money is circulating
C. there has been a recent increase in taxes
D. the economy is in a trough
Define fiscal policy.
The fiscal policy are actions taken by _________ to influence the
economy.
A. The Government
B. The Federal Reserve
C. The Treasury
D. The Governor
Explain the tools the
government uses to
influence the
economy.
Assume the U.S. Government’s most recent fiscal policy slowly
caused the economy to speed up and enter an expansion. Most
likely, the Government
A. decreased taxes.
B. increased the reserve requirement.
C. increased taxes.
D. decreased the discount rate.
The federal government uses government spending and tax rates
to help control recessions and encourage economic activity. This
is called
A) fiscal policy.
B) monetary policy.
C) supply-side economics.
D) open market operations.
What are the 2 types
of policies and when
are they used?
If the U.S. economy was in a recession, which fiscal policy would
be most appropriate to get out of the recession?
A. decrease government spending, the citizens will have more
money to spend
B. raise the reserve requirement, banks will have more money to
loan
C. buy bonds on the open market, the money supply will increase
D. decrease taxes, people have more disposable income
The United States government has decided to issue federal
income tax rebates to taxpayers. What is the likely goal of these
rebates?
A) increased consumer spending
B) reduction in the employment rate
C) increased transfer payments
D) reduction in the military budget
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?
A. There is not enough information to determine the outcome.
B. Expansion, because both of the policies are expansionary.
C. Contraction, because both of the policies are restrictive.
D. Stability, because the policies cancel each other
What is the difference
between the national
debt and deficit
A budget surplus means that
A. the Government has taken in more money than it spent.
B. the Government has spent more money than the Fed.
C. the Government has spent more money than it took in.
D. the Fed has spent more money than the government.
Adding everything the U.S. Government owes calculates the
A. national deficit.
B. unemployment rate.
C. national debt.
D. balance of payments.
Define and give an
example of
Progressive tax.
Regressive tax
Proportional tax
Bailey makes $20,000 a year and pays 5% in taxes. Felicia
makes $85,000 a year and pays 2.6% in taxes. This type of tax
system is
A. progressive
B. regressive
C.
proportional
D. sales
Which type of tax structure taxes people with higher incomes at
higher percentages?
A. regressive
B. flat
C.
proportional
D. progressive
How does an increase
in sales tax affect
different income
groups? (ex. Rich /
poor?)
Unit 5: International
Absolute Advantage:
Comparative
Advantage:
Kristen
Trevor
Dolls
14
17
Gum
16
12
Who as the absolute advantage in the production of dolls?
Who has the absolute advantage in the production of gum?
Who has the comparative advantage in dolls?
What will Kristen specialize in?
What will Trevor specialize in?
Will they trade?
The following table shows how many cars or computers can be
produced by Japan and the United States in a month (in millions).
Use this table to answer the question that follows
JAPAN U.S.A.
Cars
25
60
Computers
100
45
Which statement is true concerning absolute advantage?
A. Japan has absolute advantage in the production of
computers.
B. Japan has no absolute advantage in this scenario.
C. Japan has absolute advantage in the production of cars.
D. Japan has absolute advantage in the production of both
goods.
When does most
trade take place …
when there is
absolute or
comparative
advantage?
Assume the United States has absolute advantage over
Singapore in the production of all goods. Which statement about
trade possibilities between the two countries is correct?
A. The terms of trade will be based on the United States’
absolute advantage.
B. Singapore could benefit from a trade with the United States,
but the United States would not benefit.
C. They can still arrange a beneficial trade if each one focuses
on a good in which they have comparative advantage.
D. Since the United States has absolute advantage in all goods,
it is impossible to reach a trade agreement.
What is the difference
between balance of
trade and balance of
payments?
The balance of payments for the economy tracks all foreign
financial transactions, whereas the balance of trade only tracks
A. foreign exchange rates.
B. purely financial transactions.
C. imports and exports.
D. opportunity costs in other countries.
Define and give
examples of:
Tariffs
Quotas
A US tariff is placed on all imported MP3 players. Which
statement is true?
A. Domestic producers of MP3 players will be hurt because they
will now have more competition.
Embargoes
Standards
Subsidies
B. Foreign producers of MP3 players will be helped because the
domestic goods are more expensive now.
C. Foreign producers of MP3 players will be hurt because their
goods are more expensive now.
D. Domestic consumers will be helped because there will be
fewer goods to choose from.
Which trade barrier is associated with laws that require certain
shipping methods and proper handling of food or equipment?
A. standards
B. embargoes
C. subsidies
D. quotas
What are the costs
and benefits of trade
barriers?
If a country wanted to implement a barrier to trade that would
help its producers AND consumers, which option would be best?
A. quota
B. subsidy
C. tariff
D. embargo
Why do domestic producers of a good benefit from trade barriers
like embargos or quotas?
A. The number of goods imported is lower.
B. They decrease the desire for other countries goods.
C. Domestic producers get money from the government.
D. They tax the foreign competition.
One argument in favor of a tariff would be that it would
A. help foreign producers by allowing them to ship goods to the
U.S.
B. reduce competition for domestic producers.
C. force foreign companies to ship goods that meet certain
quality standards in the U.S.
D. help domestic consumers by allowing them to pay a lower
price.
What is:
EU
How are NAFTA, the EU, and ASEAN similar?
A Each increases trade barriers among neighboring nations
B Each decreases trade barriers among neighboring nations
C Each promotes free trade with all nations of the world
D Each promotes protectionist policies against all nations of the
world.
NAFTA
Which statement is correct concerning NAFTA’s role in trade.
A. The countries that agreed to NAFTA were anti-trade before the
agreement.
B. NAFTA establishes many trade barriers between the US and
Mexico.
C. NAFTA was replaced by the EU and is no longer relevant.
D. It is an agreement that promotes more free trade.
ASEAN.
Which headline would ASEAN be MOST LIKELY to support?
A. “Vietnam to remove quotas on Malaysia”
B. “Germany increasing tariffs on French goods”
C. “Australia considering tariffs on fishing industry”
D. “Canada favors trade with Mexico over the US”
Why is free trade
good? Bad?
Suppose the EU removes ALL tariffs, embargoes, subsidies, and
quotas. What is MOST LIKELY to happen to the international
value of the Euro?
A. No change because trade barriers do not affect exchange
rates
B. Depreciate, because Europeans will buy more goods from
other countries
C. Appreciate, because Europeans will buy more goods from
other countries
D. Depreciate, because Americans will want more European
goods
National defense, protecting emerging industries, protecting
domestic jobs, and keep money at home are MOST LIKELY
arguments in favor of
A) protectionism.
B) free trade.
C) balance of payments.
D) NAFTA.
Difference between imports
and exports
Define exchange rate
How do you convert
US dollars into foreign
currency?
Foreign currency to USD?
According to the information, one U.K. pound is worth
approximately
A) one-half of one U.S. dollar.
B) one U.S. dollar.
C) two U.S. dollars.
D) four U.S. dollars.
8) Misha traveled to India and took $200 in U.S.
currency. When Misha exchanged the $200 in India, she
received about
A) 2,480 Indian rupee.
B) 4,040 Indian rupee.
C) 4,960 Indian rupee.
D) 8,079 Indian rupee.
Explain why, when exchange
rates change, some groups
benefit and others lose.
Which group is MOST LIKELY to benefit if the US Dollar
appreciates against the Yen?
A. United States banks holding Japanese currency.
B. Tourists traveling from Japan to the United States.
C. Japanese businesses buy US goods.
D. United States investors buying Japanese stock.
Explain what happens when
a nation’s currency is strong.
What is MOST LIKELY to happen if the dollar becomes
stronger relative to other currencies?
A.both imports and exports will decrease
B. imports will decrease, exports will increase
C. Imports will increase, exports will decrease
D. both imports and exports will increase
Explain what happens when
a nation’s currency is weak.
Which of these choices is a likely effect of a weak
dollar?
A. travel abroad becomes more affordable for
B. US imports rise & become more affordable
C. Europeans stop investing in American businesses
D. US exports increase