EOC Practice Test 1
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by Stephanie Foy
| 25 Questions
Note from the author:
Review of GSE Economics stardards
1
1
Complete the sentence. Stuctural unemployment occurs
over a period of three to five years and is related to changes in technology.
every year and is related to weather or changes in demand for certain products.
when workers are short-term unemployed, or in the process of changing jobs.
when a downturn in the business cycle reduces the demand for workers.
2
1
The federal government is concerned that the Consumer Price Index rose by 6% this year.  The federal government could
use fiscal policies to reduce government expenditures by $40 billion.
use fiscal policies to increase the money supply and cut unemployment rates.
use monetary policies to decrease the money supply and cut unemployment rates.
use monetary policies to spend $40 billion in new projects and grants.
3
1
Fiscal policy includes actions
by the Federal Reserve System to regulate the money supply.
by the judicial branch to determine government expenditures and taxation.
by the federal government on spending and taxation.
by individuals and states to regulate the money supply.
4
1
If the Federal Reserve buys Treasury securities on the open market at the same time that the federal government drastically increases spending, then
the business cycle will invert.
it is obvious both institutions thought the economy was on a peak.
the policies will cancel each other and there will be no change in the economy.
aggregate demand is likely to increase.
5
1
Monetary policy is the Federal Reserve's attempt to
increase aggregate supply by increasing sales and property taxes.
stabilize the economy through controlling the money supply.
stabilize the economy through controlling the money supply.
decrease aggregate demand by increasing government spending.
6
1
Suppose the downward sloping market demand curve for personal computers remains the same but new regulations reduce the ability of companies to efficiently produce and distribute computers.. The MOST likely result of this regulation is that
consumers would buy a greater number of personal computers.
consumers would buy fewer personal computers.
consumers would buy the same number of personal computers as they did before the price decreased.
producers would produce more personal computers.
7
1
When Apple purchased a large production facility in Silicon Valley, the company made a purchase in the
product market.
factor market.
foreign exchange market.
public market.
8
1
James and Kim decided to open a computer repair shop.  They used their own money and went to city hall to get a business license.  James repairs the computers and Kim serves the customers and handles the accounts.  What is the primary benefit of this company as it is structured?
unlimited liability
their ability to specialize
high regulations
double taxation
9
1
In which market structure does a firm have the LEAST control over its product's price?
oligopoly
perfect competition
monopoly
monopolistic competition
10
1
According to the circular flow model shown, the flow of goods and services is illustrated by paths
5 and 7
2 and 5
1 and 3
4 and 2
11
1
According to the production possibilities information, the opportunity cost of moving from point C to point B could be expressed as
60 consumer goods.
15 consumer goods.
50 capital goods.
30 capital goods.
12
1
In which economic system does the government centrally plan the allocation of productive resources?
command
mixed
market
traditional
13
1
One important assumption underlying market economies is that
central planning promotes economic efficiency.
consumer sovereignty guides the use of resources.
society's wealth must be evenly distributed.
government regulation increases economic freedom.
14
1
The main opportunity cost of saving money is
knowing you have more money saved than your friends.
the interest you could have earned.
the risk of the FDIC insurance.
current consumption.
15
1
A local grocery store has decided to charge customers for bags. Which TWO statements describe how customers will MOST LIKELY respond to this change?
Customers will purchase more goods.
Customers will bring reusable bags to the store.
Customers will exclusively use grocery delivery services.
Customers will visit the store more often.
Customers will buy more goods in bulk
Customers will shop at other grocery stores.
16
1
In country A, everyone pays a 10% income tax. This type of tax system is known as
progressive
regressive
proportional
sales
17
1
Eric has $2,000 that he wants to place in a savings account. He has researched two accounts, and both accounts pay 3.5% interest. Account X pays simple interest. Account Y pays compound interest. Eric should choose
account Y because the interest rate would decrease over time.
account X because the interest rate would increase over time.
account Y because interest would accumulate on interest.
account X because it would pay tax free interest.
18
1
Carlton is injured while working at a retail store. Which type of insurance is MOST LIKELY to provide benefits while he is temporarily out of work?
property insurance
automobile insurance
disability insurance
life insurance
19
1
Creditworthiness is MOST AFFECTED by
whether or not one owns a house.
payment history on current loans.
the amount of funds currently available in a savings account.
job history showing many different types of jobs.
20
1
Loans extended for longer periods of time often involve higher interest rates in order to
compensate the lender for greater risk.
encourage savings.
encourage consumers to buy durable goods for extended periods of time.
compensate the buyer for using savings to make a purchase.
21
1
Which group is MOST LIKELY to benefit if the US Dollar appreciates against the Yen?
United States investors buying Japanese stock.
Tourists traveling from Japan to the United States.
United States banks holding Japanese currency.
Japanese businesses with contracts to buy US goods.
22
1
Which trade barrier is associated with laws that require certain shipping methods and proper handling of food or equipment?
standards
embargoes
subsidies
quotas
23
1
Which generalization is the MOST accurate comparison of absolute advantage and comparative advantage?
A nation that has a comparative advantage will automatically have an absolute advantage in production.
A nation that has an absolute advantage will automatically have a comparative advantage in production.
A nation can have an absolute advantage without having a comparative advantage in production.
A nation can have either an absolute advantage or a comparative advantage in production, but not both.
24
1
If the United States has a balance of trade surplus with Belize, it means that
American companies are investing more in their operations in Belize than Belize is investing in the United States.
the U.S. imports more products from Belize than it exports to Belize.
U.S. dollars are more valuable in Belize than the Belizian currency is in the U.S.
the U.S. exports more products to Belize than it imports from Belize.
25
1
When nations specialize in the production of goods in which they possess a comparative advantage, which of the following is a result?
The nations become more self-sufficient and less interdependent.
The nations have an incentive to trade.
Economic efficiency is less likely to be achieved.
Consumers are hurt because prices will increase.
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