Chapter 2 The U.S. and Global Economies – Test Bank 9th

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Foundations of Microeconomics, 9e (Bade)

Chapter 2 The U.S. and Global Economies

2.1 What, How, and For Whom?

1) Items that are purchased by individuals for their own enjoyment are called

A) consumption goods and services.

B) capital goods.

C) government goods and services.

D) exports of goods and services.

E) private goods.

Topic: Consumption goods and services

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

2) Items bought by individuals to provide personal enjoyment are termed

A) consumption goods.

B) personal goods.

C) consumption or investment goods.

D) standard goods.

E) pleasure goods.

Topic: Consumption goods and services

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

3) What would be an example of a consumption good?

A) Antonio, the manager of the local Taco Hut, purchases a new deep fryer.

B) The local driver's license office purchases a new digital camera and printer.

C) Rhianna gets a haircut.

D) Jake buys an iPhone.

E) Donald Trump purchases furniture for his office.

Topic: What we produce

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

4) Which of the following is a consumption good or service?

A) a personal computer purchased in order to play games at home

B) a United Airline ticket counter

C) the Starship, SpaceX's proposed human-carrying rocket

D) a United Parcel Service truck delivering Christmas gifts

E) a satellite dish installed by Cox Cable to download programs that are then distributed through its cable system

Topic: Consumption goods and services

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

5) What would be an example of a consumption service?

A) Rhianna gets a haircut.

B) Jake buys an iPhone.

C) Antonio, the manager of the local Taco Hut, purchases a new deep fryer.

D) The local driver's license office purchases a new digital camera and printer.

E) Donald Trump purchases furniture for his office.

Topic: Consumption goods and services

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

6) The largest share of total production in the United States is

A) consumption goods and services.

B) capital goods.

C) government goods and services.

D) exported goods and services.

E) imported goods and services.

Topic: Consumption goods and services

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

7) Items bought by businesses to help produce other goods and services are called

A) consumption goods and services.

B) capital goods.

C) government goods and services.

D) exports of goods and services.

E) productive goods.

Topic: Capital goods

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

8) Which of the following is NOT a consumption good?

A) Nike swimming trunks

B) marriage counseling services

C) a UPS truck

D) a Subway sandwich

E) a U.S. government bond

Topic: Capital goods

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Application of knowledge

9) An item that is purchased to increase businesses' productive resources is

A) an export.

B) a government good.

C) a capital good.

D) a consumption good.

E) a productive good.

Topic: Capital goods

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

10) What would be an example of capital good?

A) Jeanette buys a new dress.

B) The local driver's license office purchases a new digital camera and printer.

C) Antonio, the manager of the local Taco Hut, purchases a new deep fryer.

D) Apple sells computers to Japan.

E) Rhianna gets a haircut.

Topic: Capital goods

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

11) The difference between consumption and capital goods is that

A) only big corporations can afford capital goods.

B) capital goods are used to produce additional goods while consumption goods are not.

C) capital goods are provided by the government.

D) consumption goods can be enjoyed by many people at the same time.

E) it is illegal to export capital goods.

Topic: Consumption and capital goods

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

12) Which of the following is NOT an example of a capital good?

A) a miner's cap

B) a GPS tracking device

C) an airport kiosk

D) a U.S. government bond

E) a stethoscope

Topic: Capital goods

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Application of knowledge

13) Which of the following is NOT considered one of the factors of production?

A) land

B) labor

C) capital

D) technology

E) entrepreneurship

Topic: Factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

14) Which of the following correctly lists the categories of factors of production?

A) land, labor, capital, and entrepreneurship

B) land, buildings, capital, and entrepreneurship

C) labor, machines, buildings, capital, and entrepreneurship

D) forests, fish, buildings, capital, and entrepreneurship

E) labor, money, stocks, and bonds

Topic: Factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

15) Which of the following is NOT a factor of production?

A) money

B) capital

C) land

D) entrepreneurial ideas

E) labor

Topic: Factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

16) Goods and services are produced by using four factors of production

A) land, labor, capital, and entrepreneurship.

B) land, labor, money, and equipment.

C) natural resources, human resources, financial assets, and entrepreneurial resources.

D) labor, human capital, physical capital, and financial capital.

E) land, labor, capital, and money.

Topic: Factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

17) Factors of production are the

A) goods that are bought by individuals and used to provide personal enjoyment.

B) goods that are bought by businesses to produce productive resources.

C) productive resources used to produce goods and services.

D) productive resources used by government to increase the productivity of consumption.

E) goods and services produced by the economy.

Topic: Factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

18) The productive resource that includes all the "gifts of nature" is called

A) land.

B) labor.

C) capital.

D) entrepreneurship.

E) land if undeveloped and capital if developed.

Topic: Land

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

19) Economists classify energy and water as part of which factor of production?

A) land

B) labor

C) capital

D) entrepreneurship

E) land if undeveloped and capital if developed

Topic: Land

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

20) As a factor of production, oil reserves are counted as

A) land.

B) labor.

C) capital.

D) entrepreneurship.

E) financial capital.

Topic: Land

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

21) Which of the following has been the largest contributor to increases in the quantity of labor in the United States during the past 50 years?

A) The proportion of men taking paid jobs has increased.

B) The proportion of women taking paid jobs has increased.

C) The proportion of young adults entering college has decreased.

D) The proportion of seniors taking early retirement has decreased.

E) None of the above because the quantity of labor has actually decreased.

Topic: Labor

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

22) The concept of human capital describes

A) human skills, that is, the quality of labor.

B) human population, that is, the quantity of labor.

C) the number of machines per employed worker.

D) the number of workers per operating machine.

E) the number of machines (capital) that have been produced by people (humans).

Topic: Human capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

23) Which factor of production does human capital enhance?

i. land

ii. labor

iii. capital

A) i only

B) ii only

C) iii only

D) i and ii

E) i, ii, and iii

Topic: Labor, human capital

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

24) Human capital can be increased through

A) investment in new technology.

B) education, on-the-job training, and work experience.

C) investment in new machinery.

D) decreases in population.

E) increasing the nation's production of consumption goods.

Topic: Human capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

25) The United States possesses a large amount of human capital. As a result of this fact, in the United States there is a

A) large amount of machinery and equipment.

B) large number of people and a great deal of land.

C) highly skilled and educated labor force.

D) large number of kind and generous humans.

E) large amount of machinery (capital) that is run by people (humans).

Topic: Labor, human capital

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

26) Jan is attending college and studying to be an investment broker. To improve her chances of employment following college, she has interned at a top brokerage firm during the last two summers. Jan's internship has increased her

A) natural labor.

B) human capital.

C) consumption services.

D) natural resources.

E) entrepreneurship capital.

Topic: Labor, human capital

Skill: Level 4: Applying models

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

27) Which of the following is NOT directly related to human capital?

A) a college education

B) a summer internship

C) knowledge of computer programing

D) an MRI machine

E) an understanding of real estate markets

Topic: Human capital

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Application of knowledge

28) Human capital ________ as you work. As a result, the ________ of goods and services ________.

A) increases; quantity; increases

B) declines; quality; increases

C) improves; quality; does not change

D) does not change; quality; does not change

E) decreases; quantity; decreases

Topic: Human capital

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

29) Capital, as a factor of production, refers to

A) money, stocks, and bonds.

B) the production technology used by firms.

C) the tools and instruments used to produce other goods and services.

D) the production factors imported from abroad.

E) stocks and bonds, but not money.

Topic: Capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

30) The total value of capital in the United States is around

A) $60 trillion.

B) $10 trillion.

C) $79 trillion.

D) $100 trillion.

E) $145 trillion.

Topic: Capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

31) Capital is a factor of production. Which of the following is an example of capital?

i. $1,000 in money

ii. 100 shares of Microsoft stock

iii. $10,000 in bonds issued by General Motors

iv. a drill press in your local machine shop

A) i and ii

B) ii only

C) iii only

D) iv only

E) ii and iii

Topic: Capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

32) Capital is a factor of production. An example of capital as a factor of production is

A) money.

B) stocks.

C) bonds.

D) machines.

E) education.

Topic: Capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

33) One of the productive resources is capital. Capital includes

A) money borrowed from a bank.

B) a company's stocks and bonds.

C) tools, buildings, and machine tools.

D) toys, t-shirts, CD players, and pencils.

E) money in a savings account at a bank.

Topic: Capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

34) A newspaper printing press is an example of

A) a capital good.

B) a factor of production.

C) something that influences labor productivity.

D) a good that was once an output of the production process.

E) All of the above are correct.

Topic: Capital

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Application of knowledge

35) Which of the following is NOT considered capital?

A) an assembly line at a General Motors plant

B) a computer used by your instructor for presentations in class

C) stocks and bonds that are sold by Pepsico

D) the furniture in the President's office

E) a nail gun used for building houses

Topic: How do we produce?

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

36) Entrepreneurship, as a factor of production, refers to

A) the technology used by firms.

B) the human capital accumulated by workers.

C) the value of the firm's stock.

D) the human resource that organizes labor, land, and capital.

E) the capital the firm uses.

Topic: Entrepreneurship

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

37) The productive resource that organizes labor, land, and capital is

A) human capital.

B) financial capital.

C) entrepreneurship.

D) government.

E) capital.

Topic: Entrepreneurship

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

38) Payments to the factors of production are

A) rent, mortgage, interest, and bonds.

B) rent, interest, bonds, and profit or loss.

C) rent, wages, interest, and profit or loss.

D) rent, wages, profit or loss, and bonus.

E) land, labor, capital, and entrepreneurship.

Topic: Resource payments

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

39) ________ paid for the use of land; ________ paid for the services of labor; and ________ paid for the use of capital.

A) Rent is; wages are; interest is

B) Rent is; interest is; wages are

C) Interest is; wages are; profit is

D) Mortgages are; interest is; wages are

E) Rent is; wages are; profit is

Topic: Resource payments

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

40) The income paid for the use of land is called

A) rent.

B) wages.

C) interest.

D) profit.

E) land capital.

Topic: Resource payments

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

41) The income paid to labor is called

A) rent.

B) wages.

C) interest.

D) profit.

E) human capital.

Topic: Resource payments

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

42) Which factor of production is paid "interest"?

A) land

B) labor

C) capital

D) entrepreneurship

E) human capital

Topic: Resource payments

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

43) The owners of the resource ________ are paid ________.

A) land; wages

B) labor; profit

C) capital; rent

D) capital; interest

E) entrepreneurship; wages

Topic: Resource payments

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

44) Which factor of production is paid "profit"?

A) land

B) labor

C) capital

D) entrepreneurship

E) human capital

Topic: Resource payments

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

45) The functional distribution of income measures which of the following?

A) how federal tax revenues are related to the business function that employs taxpayers

B) the distribution of earnings by the factors of production

C) the proportion of income generated by the four types of expenditures on goods and services

D) the distribution of income among households

E) the distribution of income among nations

Topic: Functional distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

46) In the United States, the productive factor that, as a group, receives the largest fraction of the nation's total income is

A) labor.

B) capital.

C) consumption goods and services.

D) entrepreneurship.

E) land.

Topic: Functional distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

47) According to the functional distribution of income, in the United States

A) capital earns most of the income.

B) labor earns most of the income.

C) land earns most of the income.

D) entrepreneurs earn most of the income.

E) the income earned by capital and labor are approximately equal.

Topic: Functional distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

48) The data show that more than 60 percent of the total income earned in the United States goes to

A) labor.

B) land.

C) capital.

D) entrepreneurship.

E) profit.

Topic: Functional distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

49) The majority of the income earned in the United States is paid in

A) rent.

B) wages.

C) interest.

D) profit.

E) dividends.

Topic: Functional distribution of income

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

50) The personal distribution of income measures which of the following?

A) how federal tax revenues are related to the type of businesses that employs the taxpayers

B) the distribution of earnings by the factors of production

C) proportion of income generated by the four types of expenditures on goods and services

D) the distribution of income among households

E) the distribution of income among nations

Topic: Personal distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

51) In the United States, the poorest 20 percent of households earn roughly ________ percent of total income.

A) 20

B) 10

C) 15

D) 3

E) 0.5

Topic: Personal distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

52) The personal distribution of income in the United States shows that

A) income is equally distributed.

B) the poorest 20 percent of individuals receive approximately 20 percent of total income.

C) the richest 20 percent of individuals receive approximately 50 percent of total income.

D) the poorest 60 percent of individuals receive approximately 50 percent of total income.

E) the richest 20 percent of individuals receive approximately 25 percent of total income.

Topic: Personal distribution of income

Skill: Level 3: Using models

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

53) The richest 20 percent of individuals in the United States receive about ________ of the nation's total income.

A) 21 percent

B) 51 percent

C) 91 percent

D) 99 percent

E) 23 percent

Topic: Personal distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

54) When the total U.S. production of goods and services is divided into consumption goods and services, capital goods, government goods and services, and export goods and services, the largest component is

A) consumption goods and services.

B) capital goods.

C) government goods and services.

D) export goods and services.

E) capital goods and government goods and services tie for the largest component.

Topic: What we produce

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

55) An example of a capital good is

A) a fiber optic cable TV system.

B) an insurance policy.

C) a haircut.

D) an iPod.

E) a slice of pizza.

Topic: What we produce

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

56) Which of the following correctly lists the categories of factors of production?

A) machines, buildings, land, and money

B) hardware, software, land, and money

C) capital, money, and labor

D) owners, workers, and consumers

E) land, labor, capital, and entrepreneurship

Topic: Factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

57) In economics, the factor of production "land" includes all of the following EXCEPT

A) energy.

B) plastics.

C) wild plants.

D) animals, birds, and fish.

E) oil.

Topic: Land

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

58) Human capital is

A) solely the innate ability we are born with.

B) the money humans have saved.

C) the knowledge humans accumulate through education and experience.

D) machinery that needs human supervision.

E) any type of machinery.

Topic: Human capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

59) When Ethan continues his education beyond high school, he is increasing his

A) capital.

B) wage rate.

C) human capital.

D) quantity of labor.

E) rent.

Topic: Human capital

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

60) ________ is the human resource that organizes labor, land, and capital.

A) Human capital

B) Human skill

C) A gift of nature

D) Entrepreneurship

E) Profit

Topic: Entrepreneurship

Skill: Level 2: Using definitions

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

61) Wages are paid to ________ and interest is paid to ________.

A) entrepreneurs; capital

B) labor; capital

C) labor; land

D) entrepreneurs; land

E) labor; entrepreneurs

Topic: Payments for the factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

62) The income earned by entrepreneurs is

A) interest.

B) wages.

C) profit or loss.

D) rent, wages, and interest.

E) a mixture of rent, wages, interest, and profit.

Topic: Profit

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

63) Dividing the nation's income among the factors of production, the largest percentage is paid to

A) labor.

B) land.

C) capital.

D) entrepreneurship.

E) labor and capital, with each receiving about 41 percent of the total income.

Topic: Functional distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

64) ________ earned the highest amount of income among the factors of production in the United States.

A) Labor

B) Capital

C) Land

D) Entrepreneurship

E) Investment

Topic: Functional distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

65) In the United States, the richest 20 percent of households receive about ________ percent of total income.

A) 4

B) 15

C) 23

D) 50

E) 33

Topic: Personal distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

66) In the United States, the poorest 20 percent of households receive about ________ percent of total income.

A) 3

B) 15

C) 23

D) 49

E) 20

Topic: Personal distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

67) The personal distribution of income shows

A) that labor receives the largest percentage of total income.

B) how profit accounts for the largest fraction of total income.

C) that the richest 20 percent of households receive 23 percent of total income.

D) that interest accounts for most of the income of the richest 20 percent of households.

E) that the poorest 20 percent of households receive less than 4 percent of total income.

Topic: Personal distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

2.2 The Global Economy

1) Compared to the world, the rate of U.S. population growth is

A) slower than in the world as a whole.

B) about the same as in the world as a whole.

C) much faster than in the world as a whole.

D) incomparable because U.S. residents are born with a much greater chance of accumulating a lot of human capital.

E) incomparable because we do not have accurate world population statistics.

Topic: World population

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

2) Approximately ________ people live in the United States and ________ people live in the world.

A) 430 million; 8.6 billion

B) 330 million; 7.6 billion

C) 230 million; 5.6 billion

D) 330 million; 3.6 billion

E) 230 million; 6.6 billion

Topic: The people

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

3) The most people live in ________ economies and the fewest people live in ________ economies.

A) developing; emerging market

B) advanced; emerging market

C) advanced; developing

D) emerging market; developing

E) developing; advanced

Topic: The countries

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

4) When describing the IMF broad country classification, the most accurate statement is that

A) the category with the greatest number of countries is the advanced economies.

B) the emerging market economies are countries that were, until the early 1990s, part of the Soviet Union or its satellites in Central and Eastern Europe and Asia.

C) most of the nations in Western Europe are considered emerging market economies.

D) most of the world's population lives in advanced economies.

E) about 50 percent of the world's population live in the advanced economies and the other 50 percent live in the emerging market and developing economies.

Topic: Classification of economies

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

5) Which of the following is NOT classified as an advanced economy?

A) South Korea

B) Australia

C) Russia

D) Hong Kong

E) the United Kingdom

Topic: Advanced economies

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

6) Canada is classified by the International Monetary Fund as

A) an advanced economy.

B) a developing economy.

C) a transition economy.

D) an emerging market economy.

E) a natural-resource based economy.

Topic: Advanced economies

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

7) ________ economies include ________.

A) Advanced; France, Australia and South Korea

B) Advanced; the United States, Taiwan and Russia

C) Advanced; Russia, Canada and Singapore

D) Emerging; Taiwan, Russia and Singapore

E) Emerging; Saudi Arabia, Poland and Taiwan

Topic: Advanced economies

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

8) Most countries in the world are classified as

A) advanced.

B) in transition.

C) developing.

D) industrialized.

E) emerging market.

Topic: Developing economies

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

9) Most of the world's population lives in

A) advanced economies.

B) developing economies.

C) transition economies.

D) emerging market economies.

E) island nations.

Topic: Developing economies

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

10) Which of the following is TRUE?

i. The advanced economies account for more than half of global production.

ii. Almost four out of every five people in the world live in the developing economies.

iii. In the advanced economies, agriculture accounts for a larger part of total production than in the developing economies.

A) only i and ii

B) only ii and iii

C) only i and iii

D) only i

E) i, ii, and iii

Topic: Developing economies

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

11) Nigeria would be classified by the International Monetary Fund as

A) an advanced economy.

B) a developing economy.

C) a transition economy.

D) an emerging market economy.

E) a resource-based economy.

Topic: Developing economies

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

12) ________ economies include ________.

A) Developing; Saudi Arabia and South Africa

B) Developing; Poland and Russia

C) Developing; China and Poland

D) Emerging; Poland and Brazil

E) Emerging; China and Canada

Topic: Developing economies

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

13) Poland is classified as

A) an advanced economy.

B) a developing economy.

C) a transition economy.

D) an emerging market economy.

E) private economy.

Topic: Emerging market economies

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

14) The majority of the value of production in the world economy is produced in

A) all of the developing economies taken together.

B) all of Africa and the Middle East taken together.

C) China and other Asian developing economies.

D) all of the advanced economies taken together.

E) all of the emerging market economies taken together.

Topic: What in the global economy

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

15) Which of the following correctly describes how the "global pie is baked"?

A) Advanced economies account for about 40 percent of the value of the world's production.

B) The United States' share of economic pie is increasing while China's share is decreasing.

C) The increase in manufacturing has taken place in mainly the advanced economies.

D) Asia accounts for about 40 percent of the global pie.

E) Emerging economies account for about 25 percent of the global pie.

Topic: What in the global economy

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

16) Physical capital differences across countries can be seen in the fact that

A) more advanced economies typically have more sophisticated technology.

B) furniture factories in China use machines like those in North Carolina.

C) students in India study the same subjects as those in the United States.

D) advanced economies produce 53 percent of the world's income.

E) the iPhone's components are produced in 30 countries.

Topic: How in the global economy

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

17) The charitable organization Creating Hope International trains women in Afghanistan to become tailors. This effort reduces

A) physical capital differences between advanced and developing economies.

B) entrepreneurship differences between advanced and developing economies.

C) agricultural differences between advanced and developing economies.

D) manufacturing differences between advanced and developing economies.

E) human capital differences between advanced and developing economies.

Topic: How in the global economy

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

18) Which of the following is an example of an effort to decrease physical capital differences between an advanced and a developing economy?

A) American troops build roads in Afghanistan.

B) Through World Vision, women and children in Africa receive education.

C) Peace Corps volunteers teach English around the world.

D) Creating Hope International trains women in Afghanistan to become tailors.

E) Habitat for Humanity builds houses for low income families in the United States.

Topic: How in the global economy

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

19) Of the following, the country with the highest average income per day in the world is

A) Russia.

B) the United States.

C) Brazil.

D) India.

E) China.

Topic: Income in the global economy

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

20) Income equality has

A) increased within countries but has narrowed across countries.

B) not changed in the advanced economies over the past 50 years.

C) narrowed within countries but increased across countries.

D) increased in developing economies as manufacturing has decreased.

E) decreased in the United States as manufacturing has increased.

Topic: Income in the global economy

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

21) The world population is approximately ________ people.

A) 7.6 million

B) 2 trillion

C) 7.6 billion

D) 7.6 trillion

E) 760 million

Topic: Population

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

22) Which of the following statements is TRUE?

A) Income inequality within most countries has increased during the past 20 years.

B) Income inequality across the entire world has decreased during the past 20 years.

C) Income inequality within most countries and across the entire world has not changed much during the past 20 years.

D) Both A and B are correct.

E) None of the above is correct.

Topic: Income in the global economy

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

23) The percentage of the world's population that lives in the advanced economies is

A) more than 71 percent.

B) between 51 percent and 70 percent.

C) between 31 percent and 50 percent.

D) between 20 percent and 30 percent.

E) less than 20 percent.

Topic: Population

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

24) The emerging market economies are

A) the largest grouping including the nations of China and India.

B) in transition from state-owned production to free markets.

C) most of the nations of Western Europe.

D) the nations that are currently agricultural in nature.

E) the nations with the highest standards of living.

Topic: Emerging market economies

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

25) Compared to the developing economies, the advanced economies have ________ human capital and ________ physical capital.

A) more; more

B) more; less

C) the same; the same

D) less; more

E) less; less

Topic: Advanced economies

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

26) In the advanced economies, ________ of the factories use advanced capital equipment, and in the developing economies, ________ of the factories use advanced capital equipment.

A) virtually all; virtually all

B) some; some

C) virtually all; none

D) some; none of

E) virtually all; some

Topic: Advanced economies

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

2.3 The Circular Flows

1) ________ the owners of the factors of production, while ________ what amounts of those factors to hire.

A) Households are; firms determine

B) Households are; the government determines

C) The government is; firms determine

D) Firms are; households determine

E) Firms are; the government determines

Topic: Households vs. firms

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

2) What two groups of decision makers are represented in the basic circular flow model?

A) governments and financial institutions

B) lenders and borrowers

C) wholesalers and retailers

D) bankers and regulators

E) households and firms

Topic: Circular flow

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

3) Dan missed class the day the professor covered the circular flow model. Dan asked his friend Joan to explain markets to him. Joan correctly stated that a market

A) requires a physical location for buyers and sellers to get together.

B) is any arrangement that brings buyers and sellers together.

C) must include a written contract between buyers and sellers.

D) is only a place to purchase groceries.

E) must have many buyers and only one seller, who is willing to sell to all the buyers.

Topic: Markets

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

4) The decisions of firms and households are

A) coordinated by markets.

B) made independently of one another.

C) controlled by but not totally coordinated by the government.

D) unexplainable by the circular flow model.

E) coordinated by but not totally controlled by the government.

Topic: Markets

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

5) The circular flow model is used to show the

A) flow of renewable natural resources.

B) recycling process of production materials.

C) expansions and contractions of economic activity.

D) flow of expenditures and incomes in the economy.

E) flow of supply and the flow of demand.

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

6) The circular flow model shows the

A) distribution of income and consumption goods across income levels.

B) combinations of the factors of production needed to produce goods and services.

C) flow of expenditure and incomes that arise from the households', firms', and governments' decisions.

D) flow of natural resources from firms to the private market to government and back to firms.

E) distribution of income to the different factors of production.

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

7) The circular flow model shows the flow of

A) expenditure and income throughout the economy.

B) only money throughout the economy.

C) only funds in stock and bond markets.

D) only tax payments and government expenditures.

E) goods markets and factor markets as they move through the economy.

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

8) In the circular flow model, there are generally two types of markets: the ________ market and the ________ market.

A) producers; consumers

B) households; firms

C) service; goods

D) goods; factor

E) supply; demand

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

9) In the circular flow model, consumption goods are bought and sold in the

A) goods market.

B) financial market.

C) factor markets.

D) government market.

E) monetary flows.

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

10) In the circular flow model, which of the following is on the buying side in the goods market?

i. firms

ii. households

iii. federal, state, and local governments

A) i only

B) ii only

C) iii only

D) i and ii

E) ii and iii

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

11) In the circular flow model, which of the following is on the selling side in the goods market?

A) federal, state, and local governments

B) only households

C) exporters

D) only firms

E) both firms and households

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

12) The circular flow model shows that goods and services flow from

A) businesses to households.

B) households to business.

C) the factor market to businesses.

D) the goods market to businesses.

E) the factor markets to the goods markets.

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

13) As the circular flow model points out, a choice that households make is how

A) many resources a firm will hire.

B) many goods and services are produced.

C) many goods and services are purchased.

D) much labor is hired.

E) much the government will collect in taxes and how much the government will spend on transfer payments.

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

14) In the circular flow model, which of the following owns the factors of production?

A) only federal, state, and local governments

B) only households

C) only firms

D) both firms and households

E) firms, households, and all levels of government

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

15) In the circular flow model, the factor markets are the markets in which

A) consumption goods and services are bought and sold.

B) government goods and services are provided.

C) land, labor, capital, and entrepreneurship are bought and sold.

D) investment goods and services are bought and sold.

E) governments impose all their taxes.

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

16) A money flow in the circular flow diagram is

i. the government's collection of taxes.

ii. Chevrolet's production of SUVs.

iii. Nike's payment of wages to its workers.

A) i and iii

B) i, ii and iii

C) i only

D) ii only

E) ii and iii

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

17) A real flow in the circular flow diagram is

i. a firm's payments of wages to its workers.

ii. a household's purchase of a new car.

iii. a farmer's use of land to grow corn.

A) ii and iii

B) i only

C) i and iii

D) ii only

E) i, ii and iii

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

18) An example of a real flow in the circular flow diagram is

A) a household's supply of work effort at its new business.

B) the government's payment of wages to a soldier.

C) Nike's payment of wages to workers in China.

D) your county's collection of property taxes.

E) a teacher's salary at the local high school.

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

19) An example of a money flow in the circular flow diagram is

A) a student's payment of tuition to her university.

B) the government's operation of the court system.

C) the government's financing of the national debt.

D) a firm's production of goods to sell to a foreign country.

E) a farmer's use of land to grow wheat.

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

20) As the circular flow model shows, the factors of production flow from

A) firms to households through the factor market.

B) households to firms through the factor market.

C) firms to households through the goods market.

D) households to firms through the goods market.

E) the goods market through firms to the factor markets.

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

21) In the circular flow model, the factors of production flow in the

A) same direction as do the rents, wages, interest, and profits.

B) opposite direction as do the rents, wages, interest, and profits.

C) opposite direction as does the government.

D) same direction as does the goods market.

E) opposite direction as does the goods market.

Topic: Circular flow model

Skill: Level 4: Applying models

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

22) In the goods market, firms ________ and households ________.

A) purchase goods and services; supply goods and services

B) supply land, labor, capital, and entrepreneurship services; hire land, labor, capital, and entrepreneurship services

C) pay rent, wages, interest, and profit; earn rent, wages, interest, and profit

D) supply goods and services; purchase goods and services

E) hire land, labor, capital, and entrepreneurship services; supply goods and services

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

23) In the factor market, firms ________ and households ________.

A) hire land, labor, capital, and entrepreneurship services; purchase goods and services

B) supply land, labor, capital, and entrepreneurship services; hire land, labor, capital, and entrepreneurship services

C) pay rent, wages, interest, and profit; earn rent, wages, interest, and profit

D) purchase goods and services; supply goods and services

E) supply goods and services; purchase goods and services

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

24) Which of the following transactions takes place in factor markets?

A) Henry receives a commission from his employer for selling a new automobile.

B) Jake purchases 1,000 shares of stock in the Walmart Corporation through his online trading account.

C) Sam enters the winning bid on a grand piano at a local auction.

D) Justin receives $30 in exchange for mowing his neighbor's lawn.

E) Lucille receives a $500 check from the U.S. Social Security Administration.

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Application of knowledge

25) Which markets are depicted in the basic circular flow model?

A) the goods market and the stock market

B) the factor market and the bond market

C) the goods market and the factor market

D) the money market and the foreign exchange market

E) the stock market and the bond market

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

26) In the circular flow model, which of the following flows in the opposite direction from the flow of factors of production?

A) finished goods and services

B) wages, rent, interest, and profit

C) interests payments of Federal, state, and local governments

D) firm's profit incentives

E) the goods market

Topic: Circular flow model

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

27) Terri is enrolled in her first economics course. She is required to give a presentation about the circular flow. Which of the following statements should she include in her presentation?

A) Households choose the amount of the factors of production to provide the firms.

B) Firms choose the amount of the factors of production to provide households.

C) Households receive wages for the amount of entrepreneurship they provide firms.

D) Firms pay wages for the amount of entrepreneurship they provide households.

E) The flows of goods and services and payments for the goods and services flow in the same direction.

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

28) Aaron locked himself out of his house and had to pay $40 to Brianna, who works for Lucky Locksmith, to open his door. Based on this transaction in the economy and using concepts from the circular flow model, which of the following is TRUE?

A) Brianna earned income from supplying her labor services.

B) Aaron earned income from supplying his labor services.

C) Brianna purchased goods and services.

D) Aaron acted as a firm in this transaction.

E) Aaron supplied goods and services.

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

29) In the circular flow model

A) the government is represented as a separate market.

B) the government buys goods and services from firms.

C) goods and services are sold by households and purchased by firms.

D) factor markets are where goods rather than services are bought and sold.

E) the government has no direct interaction with either households or firms.

Topic: Circular flow and the government

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

30) In the circular flow model with the government sector, transfers

A) flow in the same direction as do taxes.

B) flow in the opposite direction as do taxes.

C) to households flow in the same direction as do expenditures on goods and services.

D) to firms flow in the same direction as do rent, wages, interest, and profits.

E) flow only through the goods market.

Topic: Circular flow and the government

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

31) What would be an example of a government good?

A) Jake buys an iPhone.

B) The local driver's license office purchases a new digital camera and printer.

C) Antonio, the manager of the local Taco Hut, purchases a new deep fryer.

D) Donald Trump purchases furniture for his office.

E) Rhianna gets a haircut.

Topic: Government goods and services

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

32) In the circular flow model with the government sector, taxes

A) flow in the opposite direction as do transfers.

B) flow in the same direction as do transfers.

C) on households flow in the same direction as do the goods and services.

D) on firms flow in the same direction as do factors of production.

E) flow from the goods market to the factor markets.

Topic: Circular flow and the government

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

33) Which of the following is NOT shown explicitly in the circular flow model?

A) the government's purchases in the goods market

B) the taxes the government collects from households

C) the government's interaction with firms

D) the legal system

E) the transfers the government makes to households

Topic: Circular flow and the government

Skill: Level 3: Using models

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

34) Which of the following is a function of the U.S. federal government?

A) providing the legal and social framework for economic activity

B) distributing private goods and services

C) deciding for whom firms should produce goods and services

D) deciding how much to produce of private goods and services

E) determining what wages firms will pay their workers

Topic: Federal government

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

35) Which of the following is NOT a function of the federal government?

A) collecting property taxes

B) making social security and welfare payments

C) making transfers to state and local governments

D) providing public goods and services

E) imposing a personal income tax

Topic: Functions of the federal government

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

36) Households and firms in the U.S. economy interact with those in the rest of the world in the ________ market and in the ________ market.

A) goods; factor

B) goods; financial

C) government; goods

D) financial; factor

E) firm; government

Topic: Circular flow model, international flows

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

37) An example of a U.S. export is

A) a TV made in China sold to a buyer in Azerbaijan.

B) matchbooks made in Mexico sold to a buyer in New Jersey.

C) pasta made in Italy sold to buyers in Spain.

D) diamonds mined in Africa sold to buyers in South America.

E) a washing machine made in Indiana sold to a buyer in France.

Topic: Circular flow model, international flows

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

38) Goods produced in the United States and sold in other countries are called

A) exports.

B) imports.

C) foreign goods.

D) capital goods.

E) capital account goods.

Topic: Exports

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

39) An export good is a good produced

A) in the United States and sold to foreigners living in the United States.

B) by foreigners in the United States and purchased by U.S. households.

C) in another country and purchased by U.S. residents.

D) in the United States and sold in other countries.

E) in another country and purchased by foreigners not residing in the United States.

Topic: Exports

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

40) Computers and insurance coverage produced in the United States and sold to people in other nations are categorized as

A) U.S. consumption goods and services.

B) foreign capital goods.

C) U.S. government goods and services.

D) U.S. exports of goods and services.

E) U.S. imports of goods and services.

Topic: Exports

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

41) The Colorado Ski Shop sold 60 ski jackets to a Belgian company's headquarters located in Paris, France. The ski jackets are a

A) U.S. export good.

B) capital good.

C) government good.

D) U.S. consumption service.

E) U.S. import.

Topic: Exports

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

42) A market is defined as

A) the physical place where goods (but not services) are sold.

B) the physical place where goods and services are sold.

C) any arrangement that brings buyers and sellers together.

D) a place where money is exchanged for goods.

E) another name for a store.

Topic: Markets

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

43) In the circular flow model

A) only firms sell in markets.

B) only households buy from markets.

C) some firms only sell and some firms only buy.

D) the money used to buy goods and the goods themselves travel in the same direction.

E) both firms and households buy or sell in different markets.

Topic: Markets

Skill: Level 3: Using models

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

44) ________ choose(s) the quantities of goods and services to produce, while ________ choose(s) the quantities of goods and services to buy

A) Households; firms

B) Firms; households and the government

C) The government; firms

D) Firms; only households

E) Households; the government

Topic: Households vs. firms

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

45) ________ choose the quantities of factors of production to hire and ________ choose the quantities of goods and services to produce.

A) Entrepreneurs; firms

B) Firms; firms

C) Markets; markets

D) Factor markets; goods markets

E) Firms; households

Topic: Households vs. firms

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

46) In the circular flow model, rent, wages, interest, and profit paid flow from ________ through ________ to ________.

A) households; goods markets; firms as payment for goods

B) firms; factor markets; households

C) firms; goods markets; households

D) households; factor markets; firms

E) firms; goods markets; firms

Topic: Households vs. firms

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

47) A circular flow model shows the interrelationship between the ________ markets and the ________ markets.

A) household; goods

B) household; factor

C) business; household

D) expenditure; income

E) goods; factor

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

48) In the circular flow model, the expenditures on goods and services flow in the

A) same direction as goods and services in all cases.

B) same direction as goods and services only if they both flow through the goods market.

C) same direction as goods and services only if they both flow through the factor market.

D) opposite direction as goods and services.

E) same direction as factor markets.

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

49) Households receive transfers from ________, and firms receive transfers from ________.

A) government; government

B) firms; households

C) government; government and households

D) firms and government; government

E) government; no one

Topic: Circular flow and the government

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

50) U.S. exports of goods and services flow to households and firms in ________, and U.S. financial inflows of capital flow to households and firms in ________.

A) the United States; the United States

B) the United States; the rest of the world

C) the rest of the world; the United States

D) the rest of the world; the rest of the world

E) the United States; the rest of the world and the United States

Topic: Circular flow model, international flows

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

2.4 Integrative Questions

1) If a product becomes more popular and consumers want more produced, which of the following best describes what happens to move more factors of production into that industry?

A) An agency of the Federal government directs the movement of factors.

B) The chief executive officers or presidents of corporations require that factors leave one industry and move to the other industry.

C) Factor owners voluntarily move their factors because they want to satisfy the interests of consumers.

D) Wages, rent, interest, and profit increase in that industry, thereby giving factors the incentive to move to that industry.

E) Consumers increase their demand for the products and, as a result, the taxes the producers must pay decrease enabling the producers to hire more factors of production.

Topic: Integrative

Skill: Level 3: Using models

Section: Integrative

Status: Old

AACSB: Analytic skills

2) What determines the income flows that households receive?

A) an agency of the Federal government

B) what they choose to produce, how much is sold, and the price received when sold

C) their ownership of factors of production, how much they sell in the factor markets, and the prices received when sold

D) financial institutions such as banks

E) what they choose to consume

Topic: Integrative

Skill: Level 3: Using models

Section: Integrative

Status: Old

AACSB: Reflective thinking

3) What determines the revenue flows received by businesses?

A) an agency of the Federal government

B) what they choose to produce, how much is sold, and the price received when sold

C) their ownership of factors of production, how much they sell in the factor markets, and the prices received when sold

D) financial institutions such as banks

E) what they pay the factors of production they employ

Topic: Integrative

Skill: Level 3: Using models

Section: Integrative

Status: Old

AACSB: Reflective thinking

2.5 Chapter Figures

The figure above shows the circular flow model.

1) In the figure above, which of the following represents a real flow of a factor of production?

A) labor

B) wages

C) goods bought

D) services sold

E) firms' expenditures on factors of production

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

2) In the figure above, which of the following represents a money flow?

A) goods purchased

B) interest

C) capital

D) services sold

E) goods supplied

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

3) In the figure above, which of the following represents a real flow?

A) expenditures on real estate services

B) profit

C) capital

D) wages

E) both B and D

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

4) In the figure above, which of the following transactions take place in the factor markets?

i. Michael, a student, orders a computer from Dell online.

ii. Peter gets a job at a Walmart store.

iii. Apple Computer opens a new store in Georgia.

A) ii and iii

B) only i

C) only ii

D) only iii

E) i and ii

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

5) Margo orders a MacBook Pro computer from The Apple Store online to use it in her graphic design business. How will this be reflected in the figure above?

A) as a flow of a factor of production

B) as a flow of goods and services bought

C) as expenditures on goods and services

D) as goods and services supplied

E) It won't be shown in the figure because this transaction takes place neither in goods markets nor in factor markets.

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

The figure above shows governments in the circular flow.

6) In the figure above, households

A) receive transfers directly from governments.

B) buy goods and services from governments in goods markets.

C) receive transfers from governments through factor markets.

D) sell factors of production to governments.

E) pay taxes to governments through factor markets.

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

7) In the figure above, firms

A) pay taxes directly to governments.

B) sell goods and services to governments in goods markets.

C) receive transfers from governments through factor markets.

D) own factors of production.

E) do all of the above.

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

8) In the figure above, governments

A) collect taxes.

B) coordinate economic activities of households and firms.

C) hire factors of production.

D) own factors of production.

E) sell goods and services to household.

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

9) In the figure above, which of the following is TRUE?

i. Governments coordinate economic activities of households and firms.

ii. Governments buy goods and services in goods markets.

iii. Households pay taxes directly to firms.

A) only ii

B) only i

C) only iii

D) i and ii

E) ii and iii

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

10) Social Security tax is deducted from your paycheck. In the figure above, this will be shown as

A) taxes flowing from households to governments.

B) taxes flowing from firms to governments.

C) taxes flowing from households to firms.

D) wages flowing from firms to households.

E) wages flowing from firms to governments.

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

2.6 Essay: What, How, and For Whom?

1) Explain the difference between consumption and capital goods.

Topic: Consumption and capital goods

Skill: Level 3: Using models

Section: Checkpoint 2.1

Status: Old

AACSB: Written and oral communication

2) Identify the four factors of production, and tell what type of income is earned by each factor.

Topic: Factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

3) What are the payments each factor of production receives?

Topic: Factors of production

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

4) What is meant by the term "human capital"?

Topic: Human capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

5) What effect, if any, will a good college education have on your human capital? Explain your answer.

Topic: Human capital

Skill: Level 3: Using models

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

6) Explain the differences between "human capital," "financial capital," and "capital."

Topic: Capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

7) What is the difference between "capital" and "financial capital"? Which is a factor of production?

Topic: Capital

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

8) What is the difference between the functional and the personal distribution of income?

Topic: Distributions of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

9) In the United States, which factor of production earns the largest share of the nation's total income?

Topic: Functional distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

10) In the United States, how does the income received by the richest 20 percent of individuals compare with the income received by the other 80 percent?

Topic: Personal distribution of income

Skill: Level 1: Definition

Section: Checkpoint 2.1

Status: Old

AACSB: Reflective thinking

2.7 Essay: The Global Economy

1) Compare and contrast the world population with that of the United States. Is the United States becoming a larger or a smaller part of the world's population?

Topic: Population

Skill: Level 2: Using definitions

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

2) How many and what fraction of the world's people live in advanced economies? In emerging market and developing economies?

Topic: Population

Skill: Level 1: Definition

Section: Checkpoint 2.2

Status: Old

AACSB: Reflective thinking

3) The International Monetary Fund divides nations into three groups. What are the three groups and what are the characteristics of each group?

Topic: Classification of countries

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Written and oral communication

4) Discuss the distribution of income around the world. Which countries have the highest average incomes? Which countries have the lowest average incomes? How has the distribution of income changed in recent years?

Topic: Distributions of income

Skill: Level 3: Using models

Section: Checkpoint 2.2

Status: Old

AACSB: Written and oral communication

5) Discuss the differences between developing and emerging market economies.

Topic: Developing and emerging market economies

Skill: Level 5: Critical thinking

Section: Checkpoint 2.2

Status: Old

AACSB: Written and oral communication

2.8 Essay: The Circular Flows

1) What is a market? Must a market have a single physical location?

Topic: Markets

Skill: Level 1: Definition

Section: Checkpoint 2.3

Status: Old

AACSB: Written and oral communication

2) Explain the structure of the circular flow model.

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Written and oral communication

3) How are the roles of the household different in the goods market and in the factor markets?

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Written and oral communication

4) Describe the circular flow of the economy by discussing the two markets where households and firms meet.

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.3

Status: Old

AACSB: Written and oral communication

5) Describe the government's flows in the circular flow model of the economy.

Topic: Circular flow and the government

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Written and oral communication

6) Label the flows in the simplified circular flow diagram that ignores the government.

The figure above shows the labeled flows.

Topic: Circular flow model

Skill: Level 2: Using definitions

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking

7) Draw a circular flow diagram with households and firms and without government. Label the markets and the flows in the circular flow diagram.

A circular flow diagram with the markets and flows labeled is in the figure above.

Topic: Circular flow model

Skill: Level 3: Using models

Section: Checkpoint 2.3

Status: Old

AACSB: Reflective thinking