EOC Practice Test 4
by Stephanie Foy
| 25 Questions
Note from the author:
Economics GSE practice questions.
Consumers are now able to buy and download music rather than purchasing music directly from a store.

Which of the following BEST describes the impact this has had on the music industry?
The download of music has become less efficient.
Consumers have decreased demand for compact discs.
There are more music stores than ever before.
Consumers have increased demand for compact discs.
Why is it more efficient to use prices rather than authority (as in a command economy) when allocating scarce resource?
Prices and the ability to determine supply will ensure that government is less capable of disrupting the factors of production.
Prices and the ability to make a profit will communicate to suppliers which goods are most desired by consumers.
The price system is not an efficient way to allocate resources, as government more equitably distributes resources.
The prices system ensures that the needs of the richest are taken care of at the expense of the poor.
After graduating from high school, Lori took out a loan to help pay for college. Now, five years later, Lori has graduated from college. How might rapid inflation impact Lori as she prepares to pay back her student loan?
Lori will more easily be able to purchase a home.
There will be more goods available for purchase.
Lori will be more likely to experience frictional unemployment.
Lori's student loan will be paid back with less valuable dollars.
On the first day of school, the Student Hub had 100 earbuds for sale at $1 each. At the end of the week, there were 90 earbuds left. The second week, the price of earbuds dropped to $.75 each. At the end of the week, there were 75 earbuds left. The Student Hub continued to lower the price by $.25 each week, and at the end of the fourth week, there were no earbuds left. Which price was the market clearing price?
Examine the image above. Assume that it shows a market for meals from Chick-fil-A. If the incomes of the consumers in this market increase, which of the following will occur?
The demand curve will shift to the right.
The market clearing price will remain unchanged.
The supply curve will shift to the left.
The market clearing price will fall.
Having a "buy-one, get one free" sale at a store leads to consumers purchasing more products. This is an example of
the Law of Supply.
a shift of the supply curve.
the Law of Demand.
a shift of the demand curve.
Assume that the national debt in 2000 was $6 trillion and in 2019 it was $21 trillion. Which of the following is one reason the national debt increased?
government budget surpluses led to excessive borrowing
increasing interest rates and an expansion of the money supply
a recession led to expansionary monetary and fiscal policy
student loan debt tripled during this time
Use the image above to answer the questions.

Dana is very risk-averse, but wants to put $1000 in a savings tool to get a good return. She should choose
certificates of deposit
bond-based mutual funds
stock-based mutual funds
Jeremy is willing to take on risk to earn high retuns, but wishes to have a diversified investment. Which investment tool should he select?
Individual stocks
Stock-based mutual fund
Bond-based mutual fund
Savings account
In the early 2000s, Chinese officials became concerned that imported poulty was carrying "Avian Flu." As a result, the Chinese government does not allow any foreign poultry to be imported into their country.

Which type of trade barrier is the Chinese government using?
Assume that the US is experiencing high levels of cyclical unemployment. Which of the following will likely result?
An increase in taxation.
An increase in government revenue due to higher taxes.
A decrease in the monetary supply and an increase in aggregate demand.
An increase in transfer payments through redistribution programs.
A personal budget reflects spending as well as saving. Why?
People need to see how to spend more on items they desire.
Spending and saving are constant, so people can see how much more they need to earn.
People need to learn how to spend more money rather than save it.
If people record what they spend, they can find ways to increase savings.
Why might government choose to regulate monopolies?
to put exploiting firms out of business
to raise prices on necessary goods
to promote trade barriers and the protection of domestic jobs
to promote competition and lower consumer prices
Based on the supply and demand model, which of the following would cause a market shortage?
The supply curve shifts to the right.
The government establishes a price ceiling above market clearing price.
The demand curve shifts to the left.
The government establishes a price ceiling lower than market clearing price.
A community in a remote region of South America are farmers. However, their harvest and profit is low because they primarily use minimal labor and have poor tools. What could best increase the standard-of-living for these farmers?
Increase slave labor
Promote shared ownership of land
Invest in physical capital
Tax all imported crops
Josh sells his Marvel Comic book collection for $10,000. He purchase a new car.

This shows that money can function as
a bartered good.
a medium of exchange.
a unit of account.
a store of value.
Why are regressive taxes considered burdensome for low income taxpayers?
The tax encourages employers to invest in physical capital rather than human capital.
The tax harms employers and hurts job opportunities for low wage earners.
The tax takes a higher percentage of their income than it does from a higher wage earner.
People with low incomes should be exempt from taxes due to concerns for economic equity.
New York has an income tax of 5% on all earned income.

Georgia has a tax that ranges from 2-8%, depending on income.

What type of tax does New York have?
In a modern economic system, government entities might respond to market failures. Which of the following is the best example of this?
The government acts to discourage entrepreneurship.
The government might encourage consumers to reduce demand for a product.
The government takes action to direct all factors of production.
The government might regulate to ensure that negative externalities are reduced.
Which of the following is a way that a modern government protects individual incentives and encourages efficiency and growth?
Citizens are required to serve on jury duty.
A business owner must pay the federal income tax.
A government entity may regulate pollution from a factory.
An inventor may apply for a patent on an invention.
The workers in the factory above most likely represent
absolute advantage.
investment in human capital.
division of labor.
Which would be an appropriate action by the Federal Reserve during a time of rapid inflation?
Increasing tax revenue
Decreasing tax revenue
Buying government securities on the open market
Selling government securities on the open market
Which of the following could result from a decision of the Federal Open Market Committee?
Tariffs on cars could be raised.
Government spending could increase.
The discount rate could be lowered.
Productivity could rise.
  • Decreased tariffs between the U.S., Mexico, and Canada
  • Wage increases in all three countries.
  • Increased trade between all three countries.
  • Net job gain for all three countries.

This list is most closely associated with.
The trading bloc, NAFTA.
The trading bloc, ASEAN.
The trade barrier, NAFTA.
The trade barrier, ASEAN.
*Price of related goods (substitutes or complements)
* Preference
*Expectations of Future Prices
*Number of Consumers

A change in the list above would change
the Law of Demand
the Law of Supply
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