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Practice Exam Answers

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1
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In which of these ways do governments spend money to meet public needs? Choose four correct answers.

A
by protecting the public
B
by building roads and bridges
C
by arming the public
D
by providing health care
E
by supporting education
2
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The government of Country C has passed a law protecting the physical safety of factory workers. This is an example of

A
supply and demand.
B
monetary policy.
C
fiscal policy.
D
regulatory policy.
3

In a republic, elected officials create laws to regulate the economy.

A
T
B
F
4

Which is the best solution for her dilemma? Tamara has a hard time remembering pin numbers for her credit cards, but she wants to keep the information secure.

A
typing them into an e-mail and sending it to her personal e-mail account
B
writing them down on one list and keeping them in her wallet
C
typing them into her smartphone so they are easily accessible
D
writing them down on one list and keeping them in a safe place at home
7

What term is used in macroeconomics to describe the total supply and the total demand?

A
aggregate
B
inflation
C
equilibrium
D
capital
8

A business owner would most likely create a cooperative instead of buying a franchise because

A
cooperatives allow all owners to share profits, while franchises are required to share profits with a parent company.
B
cooperatives give majority owners the most control, while franchises make decisions with a parent company.
C
cooperatives are well financed by members, while franchises must raise large sums of money to launch a business.
D
cooperatives make it easy to accumulate supplies, while franchises come with supplier relationships already in place.
9

To create the proper tone for an argumentative essay, a writer should

A
incorporate unusual stories.
B
use a straightforward approach.
C
add complicated language.
D
include opinionated words.
10

Why is compound interest preferable to simple interest when investing?

A
Compound interest pays interest both on the principal and the interest earned in each period.
B
Compound interest is based on the entire principal, not just a percentage of the principal.
C
Compound interest pays at least double the interest on the principal during each month.
D
Compound interest is paid by the week or by the month, not only once during a year.
11

US federal income tax is progressive by law, but which best explains why wealthy individuals can often pay far less in taxes than the top tax rate?

A
High-income earners can fight in court for the right to a reduced rate.
B
High-income earners reduce their tax rates through numerous deductions.
C
High-income earners use tax laws to their advantage to reduce their tax rates.
D
High-income earners always place their assets overseas to lower their tax rates.
12

Which of these qualify as variable expenses? Choose three correct answers.

A
apartment rent
B
medical bills
C
monthly groceries
D
clothing purchases
E
loan payment
13

John has a large apple orchard. He has decided to bake pies and sell them at the local farmer’s market. Which best describes John’s use of economics?

A
John is assuming consumers will have limited need for his product.
B
John is relying on inexpensive labor costs to improve profits.
C
John is using available and renewable resources.
D
John is using resources to produce both goods and services.
14

What happens when a bank is required to hold more money in reserve?

A
It has less money for loans.
B
It has less money for withdrawals.
C
It has less money for interest payments.
D
It has less money for operations.
15

When prices drop the point where supply and demand meet, it results in

A
disequilibrium.
B
equilibrium.
C
coordination.
D
production.
16

The highest amount a landlord can charge for rent is an example of

A
a price ceiling.
B
an incentive.
C
a price floor.
D
an elastic service.
18

Which of these statements about opportunity cost are true? Choose three correct answers.

A
It influences consumers.
B
It assists in anticipating profits.
C
It encourages people to spread their resources around.
D
It exists because resources are scarce.
E
It influences producers.
19

At what point should consumers stop researching a product?

A
when they know they have waited long enough to buy
B
when the government does the research for them
C
when they want to make an immediate purchase
D
when the research costs more than the potential savings
20

Motherboards, Inc., manufactures computer parts. The company’s total revenue is

A
the money the company earns after paying all of its production costs.
B
the amount the company receives from the sale of all of its computer parts.
C
the total wages the company pays workers in its factories and stores.
D
the amount of money the company earns from selling an individual part.
21

In some cases, it is safe to avoid insurance because

A
it may not be needed.
B
only one person is at risk.
C
it is too expensive.
D
one is already in debt.
22

Which describes the difference between a trade surplus and a trade deficit?

A
A trade surplus is when a country produces more than it consumes, while a trade deficit happens when consumption exceeds production.
B
A trade surplus is when a country exports more than it imports, while a trade deficit happens when imports exceed exports.
C
A trade deficit is when a country loses money on products it makes, while a trade surplus happens when production leads to profits.
D
A trade surplus is when a country imports more than it exports, while a trade deficit happens when exports exceed imports.
23

What is one difference between a vocational school and on-the-job training?

A
A vocational school is usually paid for by the worker. On-the-job training is usually paid for by the employer.
B
A vocational school degree takes weeks or months to earn. On-the-job training takes two years or fewer.
C
A vocational school degree takes one year to earn. On-the-job training takes two or more years.
D
A vocational school is usually paid for by the employer. On-the-job training is usually paid for by the worker.

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