AnswersPersonal Finance and EconomicsMacroeconomics

Practice Test Answers

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1
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Which would be the best label for the circle in the center?

A
Ineffective Economic Policies
B
The Best Economic Policies
C
Government Economic Policies
D
The Free Enterprise System
2
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How do consumers’ feelings about the economy help contribute to growth?

A
Positive consumer attitudes inspire increased production.
B
Positive consumer attitudes influence spending habits.
C
Positive consumer attitudes can end a depression.
D
Positive consumer attitudes increase job prospects.
3

Which best describes why governments collect taxes?

A
to ensure surplus funds
B
to keep the government running
C
to control the value of currency
D
to fund government programs
4

What are the signs of low inflation? Choose three correct answers.

A
The economy stagnates and struggles.
B
Demand steadily falls.
C
The economy grows in a healthy way.
D
Prices continue to increase.
E
Demand steadily rises.
F
Prices continue to decrease.
5

Articles of partnership establish

A
how businesses can raise capital.
B
what business taxes are paid.
C
how profits and losses are divided.
D
what is included in a charter.
6

Which best describes the circular flow model?

A
The model represents the interactions within sectors.
B
The model represents the movement of money throughout the economy.
C
The model represents the flow of goods and services between sectors.
D
The model represents the changing relationships between actors.
7

Which best explains why a sole proprietor would want a partner?

A
to reduce the number of responsibilities.
B
to move into a more favorable tax bracket.
C
to take advantage of little government oversight.
D
to make it easier to raise funds for expansion.
8

What is the difference between inflation and deflation?

A
Inflation can result from falling demand and reduces the value of money. Deflation can result from rising demand and boosts the value of money.
B
Inflation can result from rising demand and boosts the value of money. Deflation can result from falling demand and reduces the value of money.
C
Inflation can result from rising demand and reduces the value of money. Deflation can result from falling demand and boosts the value of money.
D
Inflation can result from falling demand and boosts the value of money. Deflation can result from rising demand and reduces the value of money.
9

Which best describes a regressive tax?

A
a tax that charges an equal percentage to all
B
a tax that charges low-income earners a lower percentage than high-income earners
C
a tax that charges earners based on their professions
D
a tax that charges high-income earners a lower percentage than low-income earners
10

Which body manages the Fed?

A
the Economic Policy Subcommittee
B
the Federal Open Markets Committee
C
the Federal Reserve Board
D
the Appropriations Committee
11

When a government decides to limit the number of goods that can be sold to another nation, that government is creating

A
fiscal policy.
B
regulatory policy.
C
trade policy.
D
monetary policy.
12

What are the signs of low inflation? Choose three correct answers.

A
The economy grows in a healthy way.
B
Demand steadily falls.
C
The economy stagnates and struggles.
D
Prices continue to decrease.
E
Prices continue to increase.
F
Demand steadily rises.
13

Does a depression always follow a recession?

A
No, a depression is indicated when the recession is exceptionally long.
B
Yes, the trough is always considered a depression.
C
No, the economy could decline quickly and bypass recession.
D
Yes, for recovery to occur, the trough must be reached.
14

Read the paragraph. Government officials in Country M have determined that they need to take action to encourage the growth of their economy. To do this, they have introduced an incentive policy that offers citizens free education. This is extended to all individuals who sign a contract agreeing to work within their specific industry for the next ten years. Country M hopes to encourage economic growth by investing in

A
education to reduce unemployment and increase production.
B
resources that can be traded with other nations.
C
research to develop goods that can be sold on a global scale.
D
new technologies to produce goods that are in great demand.
15

In the circular flow model, factors of production flow to firms. Which are the primary factors of production? Choose three correct answers.

A
land
B
services
C
goods
D
labor
E
capital
16

Expansionary spending takes place when a government makes the decision to

A
raise taxes to run a budget surplus.
B
raise taxes to balance its budget.
C
raise spending to stimulate the economy.
D
put a freeze on the number of its employees.
17

What part does interest play in deficit spending?

A
Interest is not a factor when a government’s budget is in deficit.
B
Citizens must pay interest when their governments borrow money.
C
Governments may charge foreign countries interest when they borrow money.
D
Governments must pay interest on money they borrow when they take on debt.
18

Which statement most accurately describes the trends shown on this graph?

A
When GDP falls, unemployment rises.
B
GDP and unemployment rise at times of world crises.
C
When GDP rises, unemployment rises as well.
D
GDP and unemployment have little to do with each other.

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