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?
Consumers have decreased demand for compact discs.
The download of music has become less efficient.
Consumers have increased demand for compact discs.
There are more music stores than ever before.
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 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.
Prices and the ability to determine supply will ensure that government is less capable of disrupting the factors of production.
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?
There will be more goods available for purchase.
Lori will more easily be able to purchase a home.
Lori's student loan will be paid back with less valuable dollars.
Lori will be more likely to experience frictional unemployment.
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 supply curve will shift to the left.
The market clearing price will fall.
The demand curve will shift to the right.
The market clearing price will remain unchanged.
Having a "buy-one, get one free" sale at a store leads to consumers purchasing more products. This is an example of
a shift of the demand curve.
a shift of the supply curve.
the Law of Demand.
the Law of Supply.
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?
student loan debt tripled during this time
increasing interest rates and an expansion of the money supply
a recession led to expansionary monetary and fiscal policy
government budget surpluses led to excessive borrowing
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
stock-based mutual funds
certificates of deposit
bond-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?
Savings account
Individual stocks
Bond-based mutual fund
Stock-based mutual fund
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 government revenue due to higher taxes.
An increase in transfer payments through redistribution programs.
An increase in taxation.
A decrease in the monetary supply and an increase in aggregate demand.
A personal budget reflects spending as well as saving. Why?
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.
People need to see how to spend more on items they desire.
If people record what they spend, they can find ways to increase savings.
Why might government choose to regulate monopolies?
to promote trade barriers and the protection of domestic jobs
to raise prices on necessary goods
to promote competition and lower consumer prices
to put exploiting firms out of business
Based on the supply and demand model, which of the following would cause a market shortage?
The government establishes a price ceiling lower than market clearing price.
The supply curve shifts to the right.
The demand curve shifts to the left.
The government establishes a price ceiling above 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?
Promote shared ownership of land
Increase slave labor
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 unit of account.
a store of value.
a medium of exchange.
a bartered good.
Why are regressive taxes considered burdensome for low income taxpayers?
The tax takes a higher percentage of their income than it does from a higher wage earner.
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.
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 might regulate to ensure that negative externalities are reduced.
The government might encourage consumers to reduce demand for a product.
The government takes action to direct all factors of production.
The government acts to discourage entrepreneurship.
Which of the following is a way that a modern government protects individual incentives and encourages efficiency and growth?
A government entity may regulate pollution from a factory.
Citizens are required to serve on jury duty.
An inventor may apply for a patent on an invention.
A business owner must pay the federal income tax.
The workers in the factory above most likely represent
investment in human capital.
division of labor.
absolute advantage.
Which would be an appropriate action by the Federal Reserve during a time of rapid inflation?
Selling government securities on the open market
Decreasing tax revenue
Buying government securities on the open market
Increasing tax revenue
Which of the following could result from a decision of the Federal Open Market Committee?
Productivity could rise.
Government spending could increase.
Tariffs on cars could be raised.
The discount rate could be lowered.
  • 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, ASEAN.
The trading bloc, NAFTA.
The trade barrier, ASEAN.
The trade barrier, NAFTA.
*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
Add to my formatives list

Formative uses cookies to allow us to better understand how the site is used. By continuing to use this site, you consent to the Terms of Service and Privacy Policy.