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Chris M., M.S.W. Social Work
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1. The largest functional share of the national income consists of

A. corporate profits.

B. interest and rental income.

C. wages and salaries.

D. proprietors' income, that is, the income of unincorporated businesses.

2. Which one of the following statements about corporate bonds is correct?

A. Corporate bonds are illegal in the United States.

B. Corporate bonds are promises by a corporation to repay a loan.

C. Corporate bonds are shares of ownership of a corporation.

D. Corporate bonds are also known as stocks.

3. Black markets are associated with _______ and the resulting product _______.

A. price floors, shortages

B. ceiling prices, shortages

C. price floors, surpluses

D. ceiling prices, surpluses

4. The law of demand states that

A. price and quantity demanded are directly related.

B. the larger the number of buyers in a market, the lower will be product price.

C. consumers will buy more of a product at high prices than at low prices.

D. price and quantity demanded are inversely related.

5. Which one of the following statements about the scarcity problem is correct?

A. The scarcity problem has been solved in all industrialized nations.

B. The scarcity problem persists because economic wants exceed available productive resources.
C. The scarcity problem persists only because countries have failed to achieve continuous full employment.
D. The scarcity problem has been eliminated in affluent societies such as the United States and Canada

6. Which one of the following statements correctly describes the term laissez-faire?

A. Government shouldn't interfere with the operation of the economy.

B. Government action is necessary if the economy is to achieve full employment and full production.
C. Land and other natural resources should be privately owned, but capital should be publicly owned.
D. Land and other natural resources should be publicly owned, but capital equipment should be privately owned

7. Economic profits in an industry suggest that the industry

A. has excess production capacity.

B. should be larger to better satisfy consumers' desire for the product.

C. can earn more profits by increasing product price.

D. is the size that consumers want it to be.

8. When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes

A. the income effect.

B. an inferior good.

C. the substitution effect.

D. the rationing function of prices.

9. The major source of tax revenue for the United States federal government is _______ taxes.

A. corporate income

B. property

C. personal income

D. sales and excise

10. Specialization in production is important primarily because it

A. allows society to trade by barter.

B. results in greater total output.

C. allows society to avoid the coincidence-of-wants problem.

D. allows society to have fewer capital goods.

11. Taxes on commodities or on purchases are known as _______ taxes.

A. corporate income

B. personal income

C. sales and excise

D. payroll

12. An income tax is progressive if the

A. absolute amount paid as taxes varies directly with income.

B. tax rate varies inversely with income.

C. percentage of income paid as taxes is the same regardless of the size of income.

D. percentage of income paid as taxes increases as income increases.

13. Which one of the following statements correctly describes export subsidies?

A. Export subsidies are maximum limits on the quantity or total value of specific products imported to a nation.
B. Export subsidies are excise taxes or duties placed on imported products.

C. Export subsidies are licensing requirements, unreasonable quality standards, and the like designed to impede imports.
D. Export subsidies are government payments to domestic producers to enable them to charge lower prices and sell more goods in world marke

14. Macroeconomic stability is said to exist in an economy whenever

A. output matches production capacity, labor is fully employed, and inflation is low and stable.
B. there's no inflation.

C. the rates of output growth, unemployment, and inflation are all zero.

D. total spending exceeds production capacity.

15. The advantages of the corporate form of business include

A. the fact that owners are subject to unlimited liability.

B. single taxation of corporate earnings.

C. the ability to raise financial capital by selling stocks and bonds.

D. the elimination of the principal-agent problem.

16. In which one of the following situations does a trade deficit occur for a nation?

A. The nation exports more than it imports.

B. The nation imports more than it exports.

C. The nation receives more foreign currency than it sends out in domestic currency.

D. The nation loans out U.S. dollars to foreign buyers of domestically produced goods.

17. The two general types of economic systems that exist today are

A. laissez-faire systems and pure command systems.

B. market systems and command systems.

C. market systems and capitalism.

D. socialism and central planning.

18. The invisible-hand concept suggests that

A. government action is necessary to correct for market failures.

B. changes in product demands are only randomly reflected in changes in the demands for resources.
C. when firms maximize their profits, society's output will also be maximized.

D. profit maximization is inconsistent with an efficient allocation of resources

19. Microeconomics is concerned with

A. a detailed examination of specific economic units that make up the economic system.
B. positive economics, but not normative economics.

C. the establishing of an overall view of the operation of the economic system.

D. the aggregate or total levels of income, employment, and output

20. Other things equal, an excise tax on a product will increase

A. its supply.

B. its price.

C. the quantity sold.

D. its demand.

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