Unit Test — Unit test Answers

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1
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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.
2
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A business owner would most likely create a cooperative instead of buying a franchise because

A
cooperatives give majority owners the most control, while franchises make decisions with a parent company.
B
cooperatives make it easy to accumulate supplies, while franchises come with supplier relationships already in place.
C
cooperatives are well financed by members, while franchises must raise large sums of money to launch a business.
D
cooperatives allow all owners to share profits, while franchises are required to share profits with a parent company.
4

Which best describes a regressive tax?

A
a tax that charges low-income earners a lower percentage than high-income earners
B
a tax that charges an equal percentage to all
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
5

Many classical economists such as Adam Smith believed that government should

A
intervene often in the economy.
B
intervene little in the economy.
C
always intervene in the economy.
D
totally control the economy.
7

Which best describes why governments collect taxes?

A
to control the value of currency
B
to keep the government running
C
to ensure surplus funds
D
to fund government programs
8

[BLANK]

A
spending
B
profit
C
debt
D
saving
9

Which describes an example of the economic system known as free enterprise?

A
People are free to shop around for products, but manufacturers dictate what is available.
B
People are free to shop for the best price on products because there is open competition.
C
Government oversight of business gives people freedom to shop for the best deals.
D
Government regulations ensure that everyone has the freedom to shop for the best deals.
10

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.
11

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

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

Which best describes a difference between the views of Milton Friedman and John Maynard Keynes on the economy?

A
Friedman said that monetary policy should be used to influence aggregate demand, while Keynes believed the best approach was fiscal policy.
B
Friedman said that fiscal policy should be used to influence aggregate demand, while Keynes believed the best approach was monetary policy.
C
Keynes believed in little government intervention in the economy, while Friedman said government should play an active role.
D
Keynes believed the economy was too complicated to think of aggregates, while Friedman said higher aggregate demand could solve issues.
13

[BLANK]

A
producers
B
consumers
C
government
D
prices
14

What part does interest play in deficit spending?

A
Governments must pay interest on money they borrow when they take on debt.
B
Citizens must pay interest when their governments borrow money.
C
Governments may charge foreign countries interest when they borrow money.
D
Interest is not a factor when a government’s budget is in deficit.
15

Which of these are goals of an expansionary policy? Check all that apply.

A
increased available credit
B
decreased available credit
C
increased money supply
D
increased inflation
E
increased interest rates
F
decreased interest rates

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