Glencoe - Economics - Principles and Practices - Chapters 1 to 10 - True/False

True/False
Indicate whether the sentence or statement is true or false.

__T__  1.  Economic growth occurs when a nation's total output of goods and services increases over time.

__T__  2.  In economics, land refers to the natural resources needed for production, such as forests, minerals, and
climate.

__T__  3.  Economic products consist of both goods and services that are useful, relatively scarce, and transferable to
others.

__F__  4.  A nation's wealth refers to a worth that can be expressed in dollars and cents.

__F__  5.  The production possibilities frontier can be reached even if certain resources remain idle.

__F__  6.  Voluntary exchange is a characteristic of command economies.

__T__  7.  Preferred stock represents the nonvoting ownership of a corporation.

__F__  8.  One advantage of a corporation is the ease of obtaining a charter.

__T__  9.  Many schools, medical care facilities, and churches operate as nonprofit organizations.

__T__  10.  Labor unions use collective bargaining to negotiate job-related issues with management.

__F__  11.  Sole proprietorships must request a charter from the state in which they are organized.

__T__  12.  People form partnerships because it often improves a business's management and can usually attract capital
more easily than proprietorships.

__F__  13.  Investors in corporations have unlimited liability for the company's debts.

__T__  14.  A professional association tries to improve the working conditions, skill levels, and public perceptions of the
profession.

__F__  15.  The government is a nonprofit organization that plays a direct role in the economy by, for example, regulating
public utilities that would operate with few or no competitors.

__T__  16.  Productivity will decrease if workers are unmotivated.

__F__  17.  When more suppliers enter the market, the market supply will typically decline.

__T__  18.  The theory of production deals with the relationship between the factors of production and the output of
goods and services.

__T__  19.  The production function describes the relationship of changes in output to different amounts of a single input
while other inputs are held constant.

__T__  20.  An increase in output as each new input is added, as in the addition of a worker, describes Stage I of the
stages of production.

__T__  21.  The number of items sold multiplied by the average price of each item yields the total revenue of a business.

__T__  22.  The mix of variable costs and fixed costs that a business faces affects the way the business operates.

__F__  23.  Marginal cost is the change in total revenue when one more unit of output is sold.

__T__  24.  The four important measures of cost are: total cost, fixed cost, variable cost, and marginal cost.

__F__  25.  Economists often use an academic model to help analyze behavior and predict outcomes.

__T__  26.  Market equilibrium is the situation in which the quantity of output supplied is equal to the quantity demanded.

__F__  27.  If the price of an item is too high in a competitive market, a shortage appears until the price goes down.

__F__  28.  A private agency usually approves prices for water and electric utilities.

__T__  29.  “Truth in advertising laws” are designed to prevent market failures caused by inadequate information.

__F__  30.  The Clayton Antitrust Act was the first significant law against monopolies in the United States.

__T__  31.  The government can “internalize an externality” by using the tax system.

__F__  32.  The Sherman Antitrust Act prohibits monopolistic competition.

__T__  33.  When striking workers picket, they parade in front of the employer's business carrying signs about the
dispute.

__T__  34.  Most Americans favored unions in the 1930s but shifted to favoring management after World War II.

__F__  35.  The agency shop requires that an employee join the union shortly after being hired.

__F__  36.  If an agreement cannot be reached during collective bargaining, workers use the boycott—refusing to work
until their demands are met.

__T__  37.  Historically, unions were considered to be conspiracies against businesses and were prosecuted in the courts.

__F__  38.  During arbitration, a third party makes a non-binding compromise to resolve a dispute between labor and
management.

__T__  39.  The traditional theory of wage determination states that wages are set according to the laws of supply and
demand.

__T__  40.  Supply and demand are used to predict the incidence of a tax.

__T__  41.  Taxes on most personal property are seldom collected because of the problem of valuation.

__T__  42.  Distribution of income explains the way in which income is allocated to individuals, families, or other
designated groups.

__T__  43.  When the government produces goods and services, it often competes with producers in the private sector.

__T__  44.  Interstate highway construction programs are examples of grants-in -aid.

__F__  45.  Approximately two -thirds of the federal budget consists of discretionary spending.

__T__  46.  Payments to aged and disabled Americans through the Social Security program make up the largest category
of federal spending.

__T__  47.  Government spending can directly affect both the allocation of resources and the distribution of income.

__F__  48.  The fastest growing category of federal expenditures since 1980 has been defense.

__F__  49.  One of the major concerns about the national debt is that more than 50 percent of it is owed to investors
outside of the United States.

__T__  50.  Consequences of the national debt include the redistribution of income and diminishing incentives to work,
save, and invest

Glencoe - Economics - Principles and Practices - Chapters 11 to 20 - Multiple Choice 3

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

__A__  201.  A persistent trade deficit causes

a.  unemployment to increase in import industries.

b.  unemployment to increase in export industries.

c.  the dollar to grow stronger.

d.  lower prices on imported goods.

__A__  202.  A protective tariff is used to

a.  give inefficient domestic industries an advantage.

b. expand trade.

c. increase revenue.

d.  gain a comparative advantage.

__B__  203.  The Reciprocal Trade Agreements Act

a.  allowed the United States to increase tariffs.

b.  allowed the United States to reduce tariffs up to 50 percent if other nations agreed to do

the same.

c.  stated that tariffs on imports could not be higher than tariffs on exports.

d.  provided for a balance of payments.

__D__  204.  The North American Free Trade Agreement proposed free trade between the United States and

a.  Central American countries.  c.  the European Union.

b.  Brazil and Mexico.  d.  Canada and Mexico.

__A__  205.  Under the fixed exchange rate, the value of a country's currency is determined by the

a.  amount of its gold reserves.  c.  forces of supply and demand.

b.  Federal Reserve System.  d.  World Trade Organization.

__B__  206.  The United States trade deficit causes

a.  the value of the dollar to strengthen in foreign exchange markets.

b.  the value of the dollar to fall in foreign exchange markets.

c.  increased employment opportunities  for Americans in import industries.

d. worldwide recessions.

__B__ 207.  

If the price of buying a car starts rising in the United States, consumers may need to look no further than the dollar’s recent slide against major foreign currencies.

On the other hand, economically depressed Midwestern farmers may find it easier to sell

surplus grain overseas if a weak dollar makes it cheaper for foreigners to buy U.S. goods.

The dollar spent much of last week on the skid s, flirting with its lowest level of the year

against the Japanese yen.... It also has lost ground to the euro.

Source: The Columbus Dispatch, September 7, 1999.

 According to the passage, why might the price of buying a car start rising in the United States?

a.  The dollar is becoming more expensive on the foreign exchange market.

b.  The dollar is becoming less expensive on the foreign exchange market.

c.  Foreign car manufacturers might raise their prices to make up for the weak dollar.

d.  Foreign car manufacturers might raise their prices to take advantage of greater demand in

the U.S.

__D__ 208.  

The World Trade Organization yesterday authorized the US to impose trade sanctions on

European Union goods in retaliation for the EU’s ban on hormone-treated beef.

From July 29, the US will impose punitive 100 percent duties on imports from the EU,

including delicacies such as foie gras, truffl es, and Roquefort cheese as well as beef, pork, canned tomatoes and mustard.

US officials said last week the sanctions, worth a total of $116.8 [million] would target goods from France, Germany, Italy and Denmark as these were the countries most influential in preserving the 10-year-old beef hormone ban.

Source: “US Gets Go-Ahead for European Sanctions,” The Financial Times,  July 27, 1999.

 According to this passage, the U.S. imposed import duties on the European Union to

a. raise revenue.

b.  protect the U.S. beef industry from foreign competition.

c.  keep prices high for the U.S. beef industry.

d.  punish the EU for its import ban on a U.S. product.

__D__ 209.  

 The drawback of tariffs that this cartoon illustrates is that the target country might

a.  cut off relations with the U.S.

b.  ban the import of American goods.

c.  start providing inferior products.

d. retaliate.

__C__  210.  Advantages of socialism include

a.  a marketplace governed by supply and demand.

b.  flexibility in day-to-day changes.

c.  equitable distribution of benefits.

d. low taxes.

__A__  211.  Joseph Stalin demonstrated the main advantage of a command system by

a. increasing industrial output.  c. introducing the New Economic Policy.

b.  eliminating shortages.  d.  increasing the standard of living.

__B__  212.  Countries trying to change from a command to a market economy face all of the following problems EXCEPT the

a.  need for people to adapt to new economic incentives.

b.  forming of agricultural collectives.

c.  privatization of industry.

d.  instability and uncertainties of capitalism.

__D__  213.  The keiretsu of Japan are

a.  organized employee programs.  c.  industrial plants.

b.  export and import quota systems.  d.  made up of competing firms.

__D__  214.  Before reunification with China in 1997, the economy of Hong Kong

a.  had the smallest per capita GNP of the Asian Tigers.

b.  managed competition through tightly knit groups of firms.

c.  was dominated by a small number of powerful business families.

d.  was recognized as the freest market economy in the world.

__B__  215.  Socialism is characterized by

a.  limited benefits for non-productive members of society.

b.  government ownership of most productive resources.

c.  a marketplace governed by supply and demand.

d. low taxes.

__A__  216.  In 1917, the existing government of Russia was overthrown by

a.  Vladimir Ilyich Lenin.  c.  Karl Marx.

b. Joseph Stalin.  d. Mikhail Gorbachev.

__C__  217.  The main reason for the economic failure of the Soviet Union was

a.  that industrial expansion was limited by labor shortages.

b.  that perestroika alienated the workers.

c.  that the economy was too complex to be managed by central planning.

d.  overproduction of consumer goods.

__A__  218.  Japan's industries are capital-intensive, which means

a.  a great amount of capital is invested for every person employed.

b.  many workers are needed to operate equipment.

c.  technological advances are increasing.

d.  technological advances are on the decline.

__B__  219.  Taiwan's economic growth was aided by

a.  the People's Republic of China.

b.  low interest rates to targeted industries.

c.  a hands-off approach from the government.

d.  an emphasis on research and development.

__C__ 220.  

The distinguishing feature of communism is not the abolition of property generally, but the abolition of bourgeois property. But modern bourgeois private property is the final and most complete expression of the system of producing and appropriating products that is based on class antagonisms, on the exploitation of the many by the few.

In this sense, the theory of the Communists may be summed up in the single sentence:

Abolition of private property.

...It has been objected that upon the abolition of private property, all work will cease, and

universal laziness will overtake us. According  to this, bourgeois society ought long ago to have gone to the dogs through sheer idleness; for those of its members who work, acquire nothing, and those who acquire anything, do not work.

Source: Karl Marx,  The Communist Manifesto, 1848.

 According to Karl Marx in the passage, who were the “bourgeois”?

a. the working class  c. property owners

b. government officials  d. communists

__C__ 221.  

In general, the Russian economy is a mess: Industrial production is half what it was in 1991, the transition to a market economy has gone badly, the ruble has collapsed, and many giant enterprises are in desperate straits, unemployment and poverty are [common].

And yet, some Russian businesses are actually making money, some are thriving....

Although criminals and corrupt government officials frustrate entrepreneurs all over the

country, some manage to evade or ignore them. The experiences of the few who are

succeeding provide some powerful lessons in why that hope remains so remote.

Source: “Rubles From the Ruins: A Russian Success,” International Herald Tribune, July 20, 1999.

 Based on the passage, a sign of hope in the Russian economy is that

a.  some entrepreneurs have been able to evade corrupt government officials.

b.  the ruble is getting stronger.

c.  some businesses are thriving.

d.  industrial production is increasing.

__A__  222.  Of the 1.2 billion people with the lowest per capita income, most live in

a.  Africa and Asia.

b.  South America and Asia.

c.  South America and Africa.

d.  Eastern Europe and Southeastern Asia.

__D__  223.  Developing nations tend to have larger familie s because their economies are primarily agricultural and

a. food is abundant.

b.  children provide large tax deductions.

c.  children are needed for industrial expansion.

d.  children can begin work at an early age.

__B__  224.  During the second stage of economic development, a country

a.  experiences an income that grows faster than population and per capita income increases.

b.  breaks with primitive equilibrium and moves toward economic changes.

c.  overcomes the barriers of primitive equilibrium.

d.  is still tied to traditional culture with no formal economic organization.

__D__  225.  An example of expropriation is

a.  refusing to pay back loans.

b.  China's policy of forcing people from the city to work on farms.

c.  accepting loans without expecting to pay them back.

d.  Iran's takeover of American oil facilities in that country.

__D__  226.  Despite the enormous wealth generated by oil, OPEC nations have failed to reach substantial growth rates

because of all the following reasons EXCEPT that

a.  they failed to invest in industry.

b.  they principally bought products for consumption.

c.  they did not create incentives for people to work.

d.  their oil reserves were used up.

__A__  227.  Developing nations are important to the United States as

a.  trading partners.  c.  sources of skilled labor.

b.  sources of technology.  d.  Cold War allies.

__D__  228.  The third stage of economic development is a period of

a. transition.  c. semidevelopment.

b. primitive equilibrium.  d. takeoff.

__D__  229.  More than 50 percent of indirect military aid supplied by the United States has gone to

a.  the Dominican Republic, Uganda, and Israel.

b.  Mexico, Argentina, and India.

c.  Algeria, Sudan, and Japan.

d.  Israel, Pakistan, and Egypt.

__C__  230.  The European Union grew out of

a.  a multicountry cartel.  c.  a customs union.

b. a free-trade area.  d. the OPEC nations.

__A__  231.  South Korea is an example of a nation that

a.  rebuilt a war-torn economy.

b.  was able to develop without foreign assistance.

c.  could maintain its wealth through years of war.

d.  never recovered from war damages.

__C__ 232.  

Two Developing Nations

 Madagascar Mexico  Percent employed in agriculture  90%  28%

Average per capita GDP  $780  $8,500

Telephones per 100 population  0.46  11.62

Life expectancy at birth  54.9 years  71.5 years

 The table enables you to compare the two countries in terms of

a.  form of government.  c.  level of development.

b.  type of economic system.  d.  level of economic potential.

__D__ 233.  

 This graph compares countries in terms of

a. inflation.  c. total income.

b. economic stability.  d. productivity.

There are two radically different ways for...a society to satisfy all their needs: by producing a lot, as in Western societies, or by not wanting a lot, as in those...anthropologist Marshall Sahlins has called “Zen” societies. The “Zen” way chosen by hunter-gatherer soci eties is to stop producing food as soon as...the quantity in hand has reached a level sufficient for their needs.

...[Hunter-gatherers] do not live in utter privation, nor ar e they constantly in search of permanently inadequate food. On the contrary, they may be said to have created “the first affluent society,” spending only a few hours a day on meeting their material needs and keeping the rest of their time free for recreational and social activities.

Source: Marie Roué, “An Economy of Sharing,”  UNSECO Courier,  January 1998. 

__C__ 234.   Based on the passage, if you were to adopt a “Zen” lifestyle here in the United States, you would

a. grow your own food.

   27

b.  gather as much food as you could and store some for lean times.

c.  work only as long as required  to meet your survival needs.

d.  not work at all.

__D__ 235.  

Population and Gross National Product

of Selected Countries, 1999

Country

Population

(in millions)

Gross National Product (in

billions)

Australia 19  $380.6

Botswana 2  $5.6

Canada 31  $612.2

China 1,239 $928.9

Honduras 6  $4.5

Nepal 23 $4.8

United States  270  $7,921.3

Source: World Development Report 1999/2000, The World Bank.

 Which of the following countries shown on the table has the largest economy?

a. Honduras  c. Canada

b. Botswana  d. China

__B__  236.  If the world population continues to grow at its present pace, by 2050 the world's population will reach

a.  20 billion.  c.  eight billion.

b. 12 billion.  d. six billion.

__C__  237.  Nearly two-thirds of the world's known coal reserves are in the United States,

a.  Japan, and China.  c.  Russia, and China.

b.  Russia, and Poland.  d.  Poland, and Canada.

__C__  238.  Cost-benefit analysis would be useful in all of the following situations EXCEPT for

a.  firms about to purchase capital goods.

b.  government employees evaluating welfare programs.

c.  local fire departments responding to a three-alarm blaze.

d.  individuals about to purchase a new vehicle.

__A__  239.  Under a system of pollution permits, the amount of pollution can be reduced by

a.  issuing fewer permits as time goes on.

b.  issuing more permits as time goes on.

c.  taxing the pollution permits.

d.  giving tax breaks for the pollution permits.

__B__  240.  Today the dominant economic force in the world is

a. socialism.  c. communism.

b. capitalism.  d. military strength.

__A__  241.  Malthus's predictions were not entirely accurate for

a.  industrialized nations.  c.  developing nations.

b.  capitalist nations.  d.  much of the African continent.

__C__  242.  The largest category of nonrenewabl e energy in use in the United States is

a. coal.  c. petroleum.

b. natural gas.  d. hydroelectric power.

__A__ 243.  The Ogallala Aquifer

a.  may be pumped dry within the next 40 years.

b.  underlies much of Southern California.

c.  is no longer useable due to pollution.

d.  is the largest oil reserve in North America.

__C__ 244.  Pollution permits

a.  are in the theoretical stage and have not been used.

b.  are just a way to let companies legally pollute at no cost to the companies.

c.  can be made scarce, forcing companies to reduce pollution.

d.  take the place of pollution-control equipment.

__A__  245.  All of the following are advantages of the market economy EXCEPT

a.  buyers have all of their wants satisfied.

b.  prices efficiently allocate resources.

c.  supply and demand interact to establish prices.

d.  incremental adjustments lead to gradual changes.

__C__ 246.  

...the [9/11] terrorist attacks forced the shutdown of the financial markets [and] the temporary closure of U.S. businesses.... With the U.S. already near zero growth, these impacts themselves are almost certain to tip the country into negative growth.

A U.S. downturn will have repercussions [consequences] all around the world. With Japan imploding economically, Asia in trouble, and Europe struggling, a recession in the U.S. would remove the last remaining source of demand from the global economy.

...Further terrorist attacks and military retaliation could st art a cycle of turmoil, forcing dramatically tightened security and new barriers to travel and trade. Those restrictions would strike the heart of the global economy, which depends on open borders and open markets.

Source: “Worldwide, Hope for Recovery Dims,” reprinted from September 24, 2001 issue of Business Week by special permission, copyright © 2001 by The McGraw-Hill Companies, Inc.

 According to the passage, the 9/11 terrorist  attacks might affect the global economy by

a.  increasing military spending.

b.  forcing multinational companies out of business.

c.  reducing travel and trade.

d.  sparking a world war.

__D__ 247.  

 What does each person in the cartoon represent?

a.  a government  c.  a political leader

b. a multinational corporation  d. an economy

__C__ 248.  

Source: Samuel F. Baldwin, “Renewable Energy: Progress and Prospects,” Physics Today,  April, 2002.

 Which source of renewable energy supplied the greatest amount of energy in the U.S. in 2000?

a. oil  c. biomass

b. nuclear  d. hydroelectric

__A__ 249.  

 Consumer

Price

Forecast

2003

Consumer

Price

Forecast

2004

GDP

Forecast

2003

GDP

Forecast

2004

Australia 2.70% 2.30% 2.80% 3.60%

Belgium 1.50% 1.40% 1.00% 1.90%

Canada 2.70% 1.60% 1.70% 3.10%

France 2.10% 1.70% 0.20% 1.90%

Italy 2.80% 2.30% 0.50% 1.70%

Japan -0.20% -0.20% 2.40% 2.10%

Spain 2.90% 2.60% 2.40% 3.00%

United States  2.30%  1.50%  3.10%  4.50%

Source: “Economic and Financial Indicators,” Economist, January, 2004.

 Which country is forecasted to have the smallest  growth in gross domestic product (GDP) in 2004?

a. Italy  c. France 

b. Japan  d. Belgium

__C__ 250.  

...Already, capitalism is flourishing in regions as  diverse as communist Asia and the former dictatorships of Latin America. Affluence is lif ting millions out of poverty, giving many the chance to purchase their first Fiats and Toyota s as well as their first Apple computers and Panasonic VCRs. And inflation is brought to heel in even the most wayward economies.

The implications are huge for rich and poor  alike. Hundreds of millions of peasants are

leaving ancient ways of life for the factory.  Cities such as Guangzhou and Bangalore teem with new inhabitants. Many are living poorly, of course, but just as many are thriving.

Source: Business Week, December 14, 1998.

 Which of the following best describes the effect of new capitalistic economies on cities?

a.  Cities are decreasing in size as people use computers to telecommute to work.

b.  Cities are growing richer as the newly rich  build new houses and the poor move to the

countryside to find work.

c.  Cities are increasing in size  as new factories create jobs for people who once lived in the

countryside.

d.  Cities in Asia are increasing in size, while  cities in Latin America  are decreasing in size.