Chapter 2: The U.S.

Economy: A Global View

Chapter 2: The U.S. Economy: A Global View
Multiple Choice Questions
WHAT AMERCA !R"#UCES
$. The G#! i%:
A& The %'m o( the phy%ical amo'nt% o( )oo*% an* %er+ice% in the economy.
,& A *ollar mea%'re o( o'tp't pro*'ce* *'rin) a )i+en time perio*.
C& A mea%'re o( the per capita economic )rowth rate o( the economy.
#& A phy%ical mea%'re o( the capital %toc- o( the economy.
An%wer: , Type: #e(inition !a)e: 2.
2. The G#! i%:
A& Mea%'re* in phy%ical 'nit%.
,& A mea%'re o( the economic )rowth rate.
C& A per capita mea%'re.
#& The total +al'e o( all (inal )oo*% an* %er+ice% pro*'ce* within a nation/% bor*er% in a )i+en year.
An%wer: # Type: #e(inition !a)e: 2.
0. The mea%'re o( new )oo*% an* %er+ice% pro*'ce* in the Unite* State% i% the:
A& G#! o( the Unite* State%.
,& !ercenta)e chan)e in the G#! o( the Unite* State%.
C& !er capita G#! in the Unite* State%.
#& Total %ale% o( all )oo*% *'rin) the year.
An%wer: A Type: #e(inition !a)e: 2.
1. Which o( the (ollowin) co'ntrie% 2or re)ion%& pro*'ce% the mo%t o'tp't ann'ally3
A& 4apan. ,& Unite* State%. C& China. #& The combine* E'ropean 'nion.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 2.
5. Which o( the (ollowin) %tatement% i% tr'e abo't the Unite* State% economy3
A& The U.S. pro*'ce% appro6imately one7(o'rth o( the worl*/% pro*'ction.
,& The U.S. ha% the worl*/% lar)e%t economy.
C& The U.S. pro*'ce% more than twice a% m'ch a% 4apan *oe%.
#& All o( the abo+e are tr'e.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 2.
!a)e $
Chapter 2: The U.S. Economy: A Global View
.. The per capita G#! i%:
A& The %'m o( con%'mer )oo*%8 in+e%tment )oo*%8 )o+ernment %er+ice%8 an* net e6port%.
,& A *ollar mea%'re o( the economic )rowth rate o( a co'ntry.
C& The +al'e o( the (actor% o( pro*'ction '%e* to pro*'ce o'tp't in a co'ntry.
#& A mea%'re o( o'tp't *i+i*e* by the total pop'lation.
An%wer: # Type: #e(inition !a)e: 29
9. Tho%e who are intere%te* in a%%e%%in) the relati+e %tan*ar* o( li+in) o( *i((erent co'ntrie% o+er a )i+en time
perio* are mo%t li-ely to loo- at:
A& G#!. ,& !ercenta)e chan)e in G#!. C& !op'lation. #& !er capita G#!.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 29
:. The be%t mea%'re o( how m'ch o'tp't the a+era)e per%on wo'l* )et i( all o'tp't were *i+i*e* e+enly
amon) the pop'lation wo'l* be:
A& G#!. C& The economic )rowth o( the economy.
,& !er capita G#!. #& The capital %toc- o( the economy.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 29
;. A+era)e li+in) %tan*ar*% are be%t mea%'re* '%in):
A& G#!. C& The economic )rowth o( the economy.
,& !er capita G#!. #& The capital %toc- o( the economy.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 29
$<. The per capita G#! will alway% ri%e when:
A& The pop'lation ri%e%.
,& The rate o( economic )rowth increa%e%.
C& There i% an increa%e in the rate at which the economy/% labor (orce )row%.
#& The rate o( economic )rowth e6cee*% the rate o( pop'lation )rowth.
An%wer: # Type: Analytical !a)e: 29
$$. ( the pop'lation )rowth e6cee*% o'tp't )rowth (or a co'ntry then:
A& !er capita G#! will increa%e. C& G#! m'%t ha+e )rown at a +ery %low rate.
,& A+era)e li+in) %tan*ar*% will *ecrea%e. #& All o( the abo+e.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 29
$2. ( o'tp't )rowth e6cee*% pop'lation )rowth (or a co'ntry then:
A& A+era)e li+in) %tan*ar*% will increa%e.
,& G#! m'%t ha+e )rown at a +ery rapi* rate.
C& !er capita G#! will *ecrea%e.
#& Thi% co'ntry m'%t ha+e o+ercome the problem o( %carcity.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 29
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Chapter 2: The U.S. Economy: A Global View
$0. Economic )rowth:
A& % an increa%e in o'tp't or real G#!.
,& Ca'%e% a contraction in the pro*'ction7po%%ibilitie% c'r+e.
C& n+ol+e% re*'ce* capacity in the %hort r'n.
#& Cannot be %'%taine* o+er time.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 2:
$1. Which o( the (ollowin) %ector% contrib'te% the lar)e%t ab%ol'te amo'nt to the G#! in the U.S.3
A& =armin). ,& Man'(act'rin). C& Ser+ice%. #& E6port%.
An%wer: C Type: ,a%ic Un*er%tan*in) !a)e: 2;
$5. The c'rrent Unite* State% economy i% ba%e* primarily on the pro*'ction o(:
A& A)ric'lt'ral )oo*%. C& Goo*% (or =e*eral )o+ernment '%e.
,& Man'(act'rin) )oo*%. #& Ser+ice%.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 2;
$.. A% the Unite* State% economy relie% more an* more hea+ily on the pro*'ction o( %er+ice% rather than
)oo*%:
A& G#! will *ecrea%e %ince there will be le%% real pro*'ction.
,& nternational tra*e will become more *i((ic'lt.
C& Ma%% 'nemployment will re%'lt.
#& >early all o( the ('t're ?ob )rowth will be in %er+ice7pro*'cin) in*'%trie%.
An%wer: # Type: Comple6 Un*er%tan*in) !a)e: 2;
$9. Which o( the (ollowin) i% con%i*ere* a %er+ice in the calc'lation o( G#!3
A& A roc- concert. C& A phy%ical e6am by a me*ical *octor.
,& E*'cation. #& All o( the abo+e are %er+ice%.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 2;
$:. Which o( the (ollowin) i% con%i*ere* a %er+ice in the calc'lation o( G#!3
A& The man'(act're o( me*icine.
,& The help a %ale% cler- pro+i*e% when yo' b'y a pair o( pant%.
C& The pro*'ction o( a ta6i cab
#& All o( the abo+e are %er+ice%.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 2;
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Chapter 2: The U.S. Economy: A Global View
$;. Which o( the (ollowin) ha% contrib'te* to a *ecline in the n'mber o( (armer% in the Unite* State%3
A& Re*'ce* tra*e barrier%.
,& =actor mobility.
C& The )rowin) %hare o( %er+ice% in U.S. pro*'ction.
#& All o( the abo+e.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 2;
2<. Which o( the (ollowin) ha% been a cent'ry7lon) tren* in the Unite* State%3
A& #ecline o( tra*e. C& Relati+e increa%e in (armin).
,& Relati+e *ecline in man'(act'rin). #& Relati+e *ecline in %er+ice%.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 2;
2$. Which o( the (ollowin) contain% the two %ector% who%e percenta)e contrib'tion to the G#! ha% *ecline*
%ince $;<<3
A& =armin) an* man'(act'rin). C& Man'(act'rin) an* e6port%.
,& Man'(act'rin) an* %er+ice%. #& Ser+ice% an* e6port%.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 2;
22. The WHAT @'e%tion can be%t be an%were* '%in) *ata abo't which o( the (ollowin)3
A& The *i%trib'tion o( o'tp't amon) man'(act'rin)8 %er+ice%8 an* a)ric'lt'ral %ector%.
,& !er capita G#!.
C& !ro*'cti+ity.
#& The *i%trib'tion o( G#! amon) *i((erent income @'intile%.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 2;
20. The %'m o( the *ollar +al'e o( newly pro*'ce* con%'mer )oo*%8 in+e%tment )oo*%8 )o+ernment %er+ice%8
an* net e6port% i%:
A& A mea%'re o( income *i%trib'tion.
,& An an%wer to the @'e%tion o( H"W )oo*% are *i%trib'te*.
C& A mea%'re o( the (inal )oo*% an* %er+ice% pro*'ce* in the economy.
#& All o( the abo+e.
An%wer: C Type: Comple6 Un*er%tan*in) !a)e: 0$
21. The G#! i% e@'al to the %'m o( con%'mption8 in+e%tment8 )o+ernment p'rcha%e%8 an*:
A& >et e6port%. ,& The (actor% o( pro*'ction. C& Sa+in). #& Capital %toc-.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 0$
25. Which o( the (ollowin) i% part o( the G#!3
A& Tran%(er payment%. C& mport%.
,& Go+ernment p'rcha%e%. #& "'tp't pro*'ce* in (orei)n co'ntrie%.
An%wer: , Type: #e(inition !a)e: 0$
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Chapter 2: The U.S. Economy: A Global View
2.. Gro%% *ome%tic pro*'ct incl'*e% all o( the (ollowin) e6cept:
A& Con%'mer )oo*% an* %er+ice%.
,& State an* local )o+ernment p'rcha%e%.
C& E6port%.
#& =e*eral )o+ernment e6pen*it're% on income tran%(er%.
An%wer: # Type: #e(inition !a)e: 0$
29. Which o( the (ollowin) are incl'*e* in the G#!3
A& Social %ec'rity bene(it%. ,& >et e6port%. C& mport%. #& Wel(are chec-%.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 0$
2:. Which o( the (ollowin) type% o( %pen*in) wo'l* not be incl'*e* in the calc'lation o( G#!3
A& A (e*eral )o+ernment payment to a *i%able* war +eteran.
,& The payment o( the U.S. pre%i*ent/% %alary.
C& A co'nty )o+ernment/% payment o( a teacher/% %alary.
#& The e6pen%e% (or %now remo+al (rom a city/% %treet%.
An%wer: A Type: Comple6 Un*er%tan*in) !a)e: 0$
2;. S'ppo%e *'rin) the co'r%e o( a year an economy pro*'ce% A9 trillion o( con%'mer )oo*%8 A$ trillion o(
in+e%tment )oo*%8 A5 trillion in )o+ernment %er+ice%8 an* ha% A$ trillion o( e6port% an* A2 trillion o(
import%. =or that economy8 G#! wo'l* be:
A& A$. trillion. ,& A$1 trillion. C& A$0 trillion. #& A$2 trillion.
An%wer: # Type: #e(inition !a)e: 0$
0<. S'ppo%e *'rin) the co'r%e o( a year an economy pro*'ce% A$$ trillion o( con%'mer )oo*%8 A0 trillion o(
in+e%tment )oo*%8 A5 trillion in )o+ernment %er+ice%8 an* ha% A2 trillion o( e6port% an* A$ trillion o(
import%. =or that economy8 G#! wo'l* be:
A& A2< trillion. ,& A2$ trillion. C& A22 trillion. #& A$; trillion.
An%wer: A Type: #e(inition !a)e: 0$
0$. Which o( the (ollowin) %how% the correct or*er 2(rom lar)e%t to %malle%t percenta)e o( the G#!& (or the
*i((erent item% in the mi6 o( o'tp't in the U.S.3
A& =e*eral )o+ernment p'rcha%e%8 %tate an* local )o+ernment p'rcha%e%8 in+e%tment )oo*%8 e6port%.
,& =e*eral )o+ernment p'rcha%e%8 in+e%tment )oo*%8 %tate an* local )o+ernment p'rcha%e%8 e6port%.
C& n+e%tment )oo*%8 %tate an* local )o+ernment p'rcha%e%8 (e*eral )o+ernment p'rcha%e%8 net e6port%.
#& State an* local )o+ernment p'rcha%e%8 e6port%8 (e*eral )o+ernment p'rcha%e%8 in+e%tment )oo*%.
An%wer: C Type: Analytical !a)e: 0$
!a)e 5
Chapter 2: The U.S. Economy: A Global View
02. Mo%t o( the Unite* State% G#! i% '%e* by:
A& Con%'mer%. C& ,'%ine%%e%.
,& =e*eral8 %tate an* local )o+ernment%. #& =orei)n in*i+i*'al% an* b'%ine%%e%.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 0$
00. Which o( the (ollowin) can lea* to an increa%e in the capital %toc- o( the pri+ate %ector3
A& Con%'mer )oo*%. ,& Go+ernment %er+ice%. C& >et e6port%. #& n+e%tment )oo*%.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 0$
01. Which o( the (ollowin) e6pen*it're% i% mo%t important in e6pan*in) a co'ntry/% pro*'ction po%%ibilitie%3
A& Con%'mer )oo*%. ,& Go+ernment %er+ice%. C& >et e6port%. #& n+e%tment )oo*%.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 0$
05. n or*er to attain hi)her li+in) %tan*ar*% in the lon) r'n:
A& The pop'lation o( a co'ntry m'%t )row %lowly.
,& The le+el o( G#! m'%t increa%e e+en i( the pop'lation )rowth i% ne)ati+e.
C& A co'ntry m'%t *e+ote %ome o( it% %carce re%o'rce% to in+e%tment.
#& A co'ntry %ho'l* e6port more )oo*% than it import%.
An%wer: C Type: Comple6 Un*er%tan*in) !a)e: 0$
0.. n+e%tment )oo*% incl'*e:
A& ,'il*in)%. ,& Machine%. C& n+entorie%. #& All o( the abo+e.
An%wer: # Type: #e(inition !a)e: 0$
09. n the Unite* State%8 in+e%tment )oo*%:
A& Are a lar)er part o( G#! than (or mo%t other *e+elope* co'ntrie%.
,& Are )reater than 0< percent o( G#!.
C& Are (inance* by limitin) con%'mption.
#& All o( the abo+e.
An%wer: C Type: ,a%ic Un*er%tan*in) !a)e: 0$
0:. n+e%tment )oo*%:
A& ,oth maintain an* e6pan* pro*'ction po%%ibilitie%.
,& Maintain pro*'ction po%%ibilitie% b't *o not e6pan* them.
C& E6pan* pro*'ction po%%ibilitie% b't *o not maintain them.
#& ncl'*e con%'mption )oo*%.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 0$
!a)e .
Chapter 2: The U.S. Economy: A Global View
0;. Accor*in) to economi%t%8 in+e%tment incl'*e%:
A& !ro*'ction o( plant an* machinery. C& !'rcha%in) or hirin) (actor% o( pro*'ction.
,& !'rcha%e% o( corporate %toc-. #& Money p't into a pen%ion ('n*.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 0$
1<. Accor*in) to economi%t%8 in+e%tment incl'*e%:
A& "'tp't which i% '%e* to pro*'ce o'tp't. C& !'rcha%e% o( bon*%.
,& !'rcha%e% o( %toc-. #& The hirin) o( labor.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 0$
1$. Which o( the (ollowin) i% not in+e%tment8 a% economi%t% '%e the term3
A& An increa%e in the n'mber o( ba)% o( potato chip% pro*'ce* an* on )rocery %tore %hel+e%.
,& The p'rcha%e o( %toc-% an* bon*%.
C& The pro*'ction o( $<<< con*o 'nit% in =lori*a.
#& The pro*'ction o( $<< *'mp tr'c-%.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 0$
12. =e*eral )o+ernment p'rcha%e% o( )oo*% an* %er+ice% in the Unite* State% acco'nt (or abo't:
A& 9 percent o( the G#!. C& 2 percent o( the G#!.
,& 1< percent o( the G#!. #& 2< percent o( the G#!.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 0$
10. When the )o+ernment pro+i*e% more %er+ice% than it pre+io'%ly *i*8 ceteris paribus, there i% a chan)e in:
A& The mi6 o( o'tp't. ,& The (actor% o( pro*'ction. C& ncome *i%trib'tion. #& n*'%try %tr'ct're.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 0$
11. The term income tran%(er re(er% to:
A& A payment to an in*i+i*'al in e6chan)e (or newly pro*'ce* )oo*% or %er+ice%.
,& A payment to an in*i+i*'al (or which no c'rrent )oo*% or %er+ice% are e6chan)e*.
C& A payment to an in*i+i*'al in ret'rn (or c'rrent labor pro+i*e*.
#& =e*eral income ta6e% beca'%e money i% ta-en (rom in*i+i*'al% an* pai* to the )o+ernment.
An%wer: , Type: #e(inition !a)e: 02
15. ncome tran%(er% incl'*e:
A& =oo* %tamp%. ,& !'blic ho'%in). C& The Hea* Start pro)ram. #& All o( the abo+e.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 02
!a)e 9
Chapter 2: The U.S. Economy: A Global View
1.. State an* local )o+ernment p'rcha%e% in the Unite* State% acco'nt (or abo't:
A& 2 percent o( the G#!. C& $2 percent o( the G#!.
,& 1< percent o( the G#!. #& 2< percent o( the G#!.
An%wer: C Type: ,a%ic Un*er%tan*in) !a)e: 02
19. mport% re(er% to the )oo*%:
A& Sol* to (orei)n co'ntrie% b't not the %er+ice%.
,& ,o')ht (rom (orei)n co'ntrie% b't not the %er+ice%.
C& An* %er+ice% %ol* to (orei)n co'ntrie%.
#& An* %er+ice% bo')ht (rom (orei)n co'ntrie%.
An%wer: # Type: #e(inition !a)e: 02
1:. E6port% re(er% to the )oo*%:
A& Sol* to (orei)n co'ntrie% b't not the %er+ice%.
,& ,o')ht (rom (orei)n co'ntrie% b't not the %er+ice%.
C& Goo*% an* %er+ice% %ol* to (orei)n co'ntrie%.
#& Goo*% an* %er+ice% bo')ht (rom (orei)n co'ntrie%.
An%wer: C Type: #e(inition !a)e: 02
1;. E6port% o( )oo*% an* %er+ice% (rom the Unite* State% acco'nt (or abo't:
A& 2 percent o( the G#!. C& 2< percent o( the G#!.
,& $$ percent o( the G#!. #& 2: percent o( the G#!.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 02
5<. >et e6port% are:
A& The %'m o( e6port% an* import%.
,& E@'i+alent to the +al'e o( e6port% min'% the +al'e o( import%.
C& !o%iti+e i( the U.S. economy import% more than it e6port%.
#& !o%iti+e i( (orei)ner% con%'me le%% o( U.S. o'tp't than U.S. re%i*ent% con%'me o( (orei)n o'tp't.
An%wer: , Type: #e(inition !a)e: 02
5$. >et e6port% in the Unite* State% are:
A& Alway% po%iti+e.
,& Greater than (e*eral )o+ernment e6pen*it're% a% a percenta)e o( G#!.
C& ncl'*e* in the G#!.
#& The %'m o( e6port% an* import%.
An%wer: C Type: ,a%ic Un*er%tan*in) !a)e: 02
!a)e :
Chapter 2: The U.S. Economy: A Global View
52. Comparati+e a*+anta)e re(er% to the ability to pro*'ce a )oo* at a:
A& Bower opport'nity co%t than yo'r tra*in) partner.
,& Hi)her opport'nity co%t than yo'r tra*in) partner.
C& Bower ab%ol'te co%t o( pro*'ction than yo'r tra*in) partner.
#& Hi)her ab%ol'te co%t than yo'r tra*in) partner.
An%wer: A Type: #e(inition !a)e: 02
50. ( all nation% %pecialiCe in their area o( comparati+e a*+anta)e an* then tra*e8 total worl* o'tp't will:
A& #ecrea%e.
,& ncrea%e.
C& Remain 'nchan)e*.
#& !o%%ibly increa%e or *ecrea%e *epen*in) on the term% o( tra*e .
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 02
H"W AMERCA !R"#UCES
51. The term (actor% o( pro*'ction re(er% to:
A& "nly tho%e )oo*% that are pro*'ce* an* then '%e* to pro*'ce other )oo*% an* %er+ice%.
,& Babor only.
C& Any re%o'rce '%e* to pro*'ce )oo*% an* %er+ice%.
#& =actorie% an* machinery only.
An%wer: C Type: #e(inition !a)e: 00
55. !ro*'cti+ity i% a mea%'re o(:
A& "'tp't per 'nit o( inp't. C& "'tp't per *ollar o( inp't.
,& np't per 'nit o( o'tp't. #& np't per *ollar o( o'tp't.
An%wer: A Type: #e(inition !a)e: 00
5.. !ro*'cti+ity:
A& Ri%e% when the +al'e o( o'tp't ri%e% relati+e to the co%t o( inp't%.
,& =all% when the +al'e o( o'tp't ri%e% relati+e to the co%t o( inp't%.
C& Ri%e% when the ratio o( o'tp't to inp't increa%e%.
#& =all% when (actor% o( pro*'ction co%t more.
An%wer: C Type: #e(inition !a)e: 00
59. Greater pro*'cti+ity re(er% to:
A& Bower labor co%t per 'nit o( o'tp't. C& Bower o'tp't per wor-er.
,& Hi)her labor co%t per 'nit o( o'tp't. #& Hi)her o'tp't per wor-er.
An%wer: # Type: Comple6 Un*er%tan*in) !a)e: 00
!a)e ;
Chapter 2: The U.S. Economy: A Global View
5:. Which o( the (ollowin) *e(initely mean% pro*'cti+ity ha% increa%e*3
A& More o'tp't (rom (ewer wor-er%. C& Be%% o'tp't (rom (ewer wor-er%.
,& More o'tp't (rom more wor-er%. #& Be%% o'tp't (rom more wor-er%.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 00
5;. When economi%t% *e%cribe a pro*'ction proce%% a% capital inten%i+e they mean that the:
A& !roce%% '%e% a hi)h ratio o( machinery an* other capital to labor.
,& !roce%% nee*% a )reater empha%i% on capital in or*er to increa%e pro*'cti+ity.
C& Capital '%e* in the proce%% re(lect% the mo%t a*+ance* technolo)y.
#& Capital '%e* in the proce%% ten*% to wear o't 2i.e. *epreciate& +ery rapi*ly.
An%wer: A Type: #e(inition !a)e: 01
.<. Which o( the (ollowin) contrib'te% to the hi)h pro*'cti+ity o( American wor-er%3
A& The labor7inten%i+e pro*'ction proce%% in the Unite* State%.
,& The ab'n*ance o( capital.
C& The low le+el o( (actor mobility.
#& The *ecrea%in) in+e%tment in h'man capital.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 01
.$. Which o( the (ollowin) i% li-ely to be mo%t capital7inten%i+e3
A& =armin) in Thir* Worl* co'ntrie%. C& !ro*'ction o( apparel by the Chine%e.
,& "il re(inin) in the Unite* State%. #& A (actory in R'%%ia.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 01
.2. Which o( the (ollowin) i% li-ely to be mo%t labor7inten%i+e3
A& A'tomate* irri)ation %y%tem%. C& A'tomobile man'(act're in E'rope.
,& =armin) in the Unite* State%. #& =armin) in China.
An%wer: # Type: Comple6 Un*er%tan*in) !a)e: 01
.0. The hi)h le+el o( pro*'cti+ity in the U.S. i% the re%'lt o( the:
A& SiCe o( the labor (orce. C& Ab'n*ance o( nat'ral re%o'rce%.
,& Contin'al in+e%tment in h'man capital. #& All o( the abo+e.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 01
.1. The in+e%tment in h'man capital thro')h e*'cation an* trainin) can re%'lt in:
A& Greater pro*'cti+ity. C& Bow (actor mobility.
,& More capital inten%i+e pro*'ction. #& Re*'ce* o'tp't per labor ho'r.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 01
!a)e $<
Chapter 2: The U.S. Economy: A Global View
.5. H'man capital i% *e(ine* a% the:
A& Amo'nt o( machinery8 (actorie%8 etc. an in*i+i*'al own%.
,& Dnowle*)e an* %-ill% po%%e%%e* by the wor-(orce.
C& #ollar +al'e o( all %toc-% an* bon*% an in*i+i*'al own%.
#& >'mber o( employee% wor-in) (or a partic'lar b'%ine%%.
An%wer: , Type: #e(inition !a)e: 01
... How will an increa%e in the le+el o( h'man capital8 ceteris paribus8 a((ect an economy/% pro*'ction7
po%%ibilitie% c'r+e3
A& Shi(t the c'r+e inwar*.
,& Re%'lt in a mo+ement (rom in%i*e the c'r+e to a point on the c'r+e.
C& Shi(t the c'r+e o'twar*.
#& Re%'lt in a mo+ement alon) the c'r+e.
An%wer: C Type: Comple6 Un*er%tan*in) !a)e: 01
.9. A% a nation/% a+era)e e*'cation le+el increa%e%8 the nation/% le+el o( pro*'cti+ity:
A& ncrea%e% an* the pro*'ction7po%%ibilitie% c'r+e %hi(t% to the ri)ht.
,& #ecrea%e% an* the nation/% pro*'ction7po%%ibilitie% c'r+e %hi(t% to the le(t.
C& ncrea%e% an* the nation mo+e% to a new point on the %ame pro*'ction7po%%ibilitie% c'r+e.
#& #ecrea%e% an* the nation mo+e% to a new point on the %ame pro*'ction7po%%ibilitie% c'r+e.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 02
.:. Which o( the (ollowin) will re%'lt in an increa%e in the le+el o( h'man capital in an economy3
A& An increa%e in the pop'lation. C& An increa%e in (actory capacity.
,& An increa%e in hi)h %chool )ra*'ation rate%. #& All o( the abo+e.
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 01
.;. =actor mobility re(er% to:
A& Technolo)ical chan)e in the '%e o( capital. C& The ea%e o( reallocatin) re%o'rce%.
,& Technolo)ical chan)e in the '%e o( labor. #& The increa%e in labor pro*'cti+ity.
An%wer: C Type: #e(inition !a)e: 05
9<. When wor-er% mo+e (rom one in*'%try to another in re%pon%e to *eman* chan)e%8 thi% i% an e6ample o(:
A& =actor @'ality. C& Capital %toc-.
,& =actor mobility. #& The *ecrea%in) in+e%tment in h'man capital.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 05
!a)e $$
Chapter 2: The U.S. Economy: A Global View
9$. "ne (actor that ha% allowe* the U.S. economy to chan)e the mi6 o( o'tp't in re%pon%e to
con%'mer *eman* i% the:
A& Ea%e with which re%o'rce% mo+e (rom one in*'%try to another.
,& Ab'n*ance o( %carce re%o'rce%.
C& Bar)e n'mber o( proprietor%hip%.
#& Babor7inten%i+e pro*'ction proce%%.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 05
92. Which o( the (ollowin) wo'l* not be a le)itimate )o+ernment acti+ity in the U.S. economy3
A& The *i%trib'tion o( )oo*% an* %er+ice%.
,& The re)'lation o( water poll'tion.
C& En(orcin) chil* labor law%.
#& Re@'irin) pro*'cer% to label the content% o( baby (oo*.
An%wer: A Type: Comple6 Un*er%tan*in) !a)e: 0.
90. The )o+ernment e%tabli%he% the r'le% o( the )ame (or economic tran%action% in or*er to:
A& Be)itimatiCe an* en(orce contract%.
,& Enco'ra)e the pro*'ction o( capital by e%tabli%hin) owner%hip ri)ht%.
C& Enco'ra)e the pro*'ction o( p'bli%he* material% by (orbi**in) 'na'thoriCe* copyin).
#& All o( the abo+e
An%wer: # Type: Comple6 Un*er%tan*in) !a)e: 0.
91. The term e6ternalitie% re(er% to:
A& ,lac-7mar-et economic acti+ity.
,& The impact on mar-et% o( importe* )oo*%.
C& The co%t% an* bene(it% o( a mar-et acti+ity borne by a thir* party.
#& The ine@'itable *i%trib'tion o( income.
An%wer: C Type: #e(inition !a)e: 09
95. Which o( the (ollowin) i% an e6ample o( an e6ternal co%t3
A& Unemployment. C& Un(air pricin) beha+ior by a monopoly.
,& A'tomobile e6ha'%t ('me%. #& !o+erty.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 09
9.. When the pro*'ction o( a )oo* create% e6ternal co%t%:
A& !ro(it% (or the pro*'cer o( the )oo* will be lower.
,& !ro*'ction o( the )oo* will be lower.
C& Society/% collecti+e well7bein) will be lower.
#& The le+el o( en+ironmental poll'tion will be lower.
An%wer: C Type: Comple6 Un*er%tan*in) !a)e: 09
!a)e $2
Chapter 2: The U.S. Economy: A Global View
99. Go+ernment inter+ention to re*'ce the le+el o( poll'tion i% prompte* by the e6i%tence o(:
A& An ine@'itable *i%trib'tion o( income. C& E6ternalitie%.
,& A monopoly. #& Go+ernment (ail're.
An%wer: C Type: ,a%ic Un*er%tan*in) !a)e: 09
9:. Bocal telephone an* 'tility %er+ice% are typically:
A& Unre)'late* an* allowe* to e6ploit their mar-et power.
,& Re)'late* by the )o+ernment to re%train their mar-et power.
C& ne((icient beca'%e o( )o+ernment inter+ention.
#& An e6ample o( mar-et (ail're.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 09
9;. A monopoly e6i%t% when:
A& A %mall n'mber o( (irm% are the only pro*'cer% o( a )oo*.
,& Con%'mer% are bein) e6ploite*.
C& The )o+ernment inter+ene% on behal( o( con%'mer%.
#& "ne (irm pro*'ce% the entire mar-et o( a )oo* or %er+ice.
An%wer: # Type: #e(inition !a)e: 09
:<. When monopolie% e6i%t:
A& !rice% ten* to be hi)her. C& E'ality ten*% to be lower.
,& !ro*'ction ten*% to be lower. #& All o( the abo+e can occ'r.
An%wer: # Type: ,a%ic Un*er%tan*in) !a)e: 09
:$. The p'rpo%e o( anti7tr'%t policy in the Unite* State% i% to:
A& Enco'ra)e competition amon) pro*'cer%. C& #etermine *r') %a(ety an* per(ormance.
,& Chec- the +ali*ity o( a*+erti%in) claim%. #& Enco'ra)e b'%ine%% mer)er% an* ac@'i%ition%.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 09
:2. n a mar-et economy with no )o+ernment inter+ention8 the H"W to pro*'ce @'e%tion i% ba%e* on:
A& !ro*'ction co%t% alone.
,& !ro*'ction co%t% pl'% en+ironmental con%i*eration%.
C& En+ironmental con%i*eration% only.
#& Con%'mer *eman*.
An%wer: A Type: Comple6 Un*er%tan*in) !a)e: 09
:0. The re%'lt o( )o+ernment inter+ention in the mar-et8 i% that:
A& Society i% alway% better o((.
,& The pro*'ction7po%%ibilitie% c'r+e alway% %hi(t% o'twar*.
C& Society may be wor%e o((.
#& Society i% alway% wor%e o((.
An%wer: C Type: ,a%ic Un*er%tan*in) !a)e: 09
!a)e $0
Chapter 2: The U.S. Economy: A Global View
:1. Which o( the (ollowin) %tatement% abo't the way mar-et% allocate re%o'rce% i% mo%t acc'rate (rom %ociety/%
per%pecti+e3
A& The mar-et alway% allocate% re%o'rce% in the be%t way.
,& The mar-et may allocate re%o'rce% in a way that i% not in %ociety/% be%t intere%t.
C& Re%o'rce allocation by mar-et% may not be per(ect b't it i% alway% better than )o+ernment allocation o(
re%o'rce%.
#& Mar-et% alway% (ail to allocate re%o'rce% properly %o we m'%t rely on the )o+ernment to *etermine the
proper '%e o( o'r re%o'rce%.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 09
:5. n the ab%ence o( )o+ernment inter+ention:
A& Con%'mer% mi)ht be e6ploite* by monopoli%t%.
,& Minor chil*ren mi)ht be e6ploite* in the wor-place.
C& The e6ternal co%t% o( pro*'ction mi)ht be )reater.
#& All o( the abo+e.
An%wer: # Type: Comple6 Un*er%tan*in) !a)e: 09
="R WH"M AMERCA !R"#UCES
:.. The income *i%trib'tion o( the Unite* State% i% ba%ically the nation/% an%wer to the:
A& WHAT @'e%tion. ,& H"W @'e%tion. C& ="R WH"M @'e%tion. #& All o( the abo+e.
An%wer: C Type: ,a%ic Un*er%tan*in) !a)e: 0:
:9. "ne ar)'ment (or permittin) income ine@'ality i% that:
A& !eople nee* incenti+e% to wor-.
,& #e+elope* co'ntrie% ha+e )reater income ine@'ality than *e+elopin) co'ntrie%.
C& The )o+ernment ha% no way to alter income ine@'ality.
#& The (ree mar-et pro*'ce% an 'ne@'al *i%trib'tion o( income.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 0:
::. When we re(er to a @'intile o( the pop'lation we are re(errin) to:
A& The riche%t percenta)e o( the economy. C& The poore%t percenta)e o( the pop'lation.
,& "ne7(i(th o( the pop'lation. #& The a+era)e income o( a pop'lation.
An%wer: , Type: #e(inition !a)e: 0:
:;. The riche%t 2< percent o( the (amilie% in the U.S. recei+e appro6imately FFFFFF percent o( total income.
A& $< ,& 2< C& 5< #& ;<
An%wer: C Type: ,a%ic Un*er%tan*in) !a)e: 0:
!a)e $1
Chapter 2: The U.S. Economy: A Global View
;<. The 2< percent o( (amilie% with the lowe%t income in the U.S. recei+e appro6imately FFFFFF percent o(
total income.
A& $ ,& 1 C& $5 #& 21
An%wer: , Type: ,a%ic Un*er%tan*in) !a)e: 0:
;$. ne@'alitie% in income ca'%e* by mar-et (orce%:
A& Are alway% 'n*e%irable.
,& Can pro+i*e incenti+e% an* rewar*% (or achie+ement%.
C& Cannot be a**re%%e* by )o+ernment action.
#& #o not e6i%t.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 0:
;2. ncome ine@'ality i%:
A& >ot an i%%'e (or wealthy co'ntrie% %'ch a% the U.S.
,& An i%%'e beca'%e ho'%ehol*% in the lowe%t @'intile recei+e more than their %hare o( income.
C& "(ten )reate%t in the poore%t co'ntrie%.
#& >ot an i%%'e in the U.S. beca'%e o( the re*i%trib'tion o( income thro')h the (e*eral ta6 %y%tem.
An%wer: C Type: Comple6 Un*er%tan*in) !a)e: 1<
;0. n which o( the (ollowin) wo'l* the top @'intile o( the pop'lation be mo%t li-ely to recei+e the hi)he%t
percenta)e o( the co'ntry/% income3
A& Thir* Worl* co'ntrie%. ,& The Unite* State%. C& E'rope. #& 4apan.
An%wer: A Type: ,a%ic Un*er%tan*in) !a)e: 1<
;1. Which o( the (ollowin) i% a mar-et %i)nal3
A& The Clean Air Act o( $;9<.
,& Con%'mer% %witch to or)anically pro*'ce* +e)etable% an* away (rom +e)etable% pro*'ce* with
chemical7ba%e* (ertiliCer% in re%pon%e to health concern%.
C& Bocal Conin) law%.
#& Tra*e re%triction% which re%trict import% into the Unite* State% an* enco'ra)e e6port%.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 1<
The (ollowin) m'ltiple7choice @'e%tion% re@'ire critical thin-in) abo't In the News an* World View article% which
appeare* in the te6t.
;5. A World View article8 GThe E*'cation Gap ,etween Rich an* !oor >ation%8G %ay% that :5 percent o( all
American% )ra*'ate (rom hi)h %chool. Thi% i% an e6ample o(:
A& The ine@'itable *i%trib'tion o( income. C& A ne)ati+e e6ternality.
,& n+e%tment in h'man capital. #& Capital inten%i+e pro*'ction.
An%wer: , Type: Comple6 Un*er%tan*in) !a)e: 01
!a)e $5
Chapter 2: The U.S. Economy: A Global View
;.. "ne World View article title* GThe E*'cation Gap ,etween Rich an* !oor >ation%G %ay% that a
)reater percenta)e o( people )ra*'ate (rom hi)h %chool in rich nation% than in poor nation%. Thi% in+e%tment in
h'man capital can lea* to:
A& Greater pro*'cti+ity. C& ncrea%e* o'tp't per wor-er.
,& ncrea%e* @'ality o( labor. #& All o( the abo+e.
An%wer: # Type: Comple6 Un*er%tan*in) !a)e: 01
;9. "ne World View article in the te6t title* Gncome Share o( the RichG report% that Gn poor8 *e+elopin)
co'ntrie% the riche%t tenth o( the pop'lation typically )et% 1< to 5< percent o( all income.G Which o( the
(ollowin) i% a (orm o( )o+ernment inter+ention *e%i)ne* to chan)e thi% %it'ation3
A& Antitr'%t law%. ,& Spillo+er co%t%. C& Bai%%eC (aire. #& ncome tran%(er%.
An%wer: # Type: Comple6 Un*er%tan*in) !a)e: 1<
True!alse Questions
WHAT AMERCA !R"#UCES
T = ;:. The G#! i% a mea%'re o( the mar-et +al'e o( all (inal )oo*% an* %er+ice% pro*'ce* in the economy
in a )i+en time perio*.
An%wer: Tr'e Type: #e(inition !a)e: 2.
T = ;;. The G#! o( the Unite* State% incl'*e% pro*'ction by (orei)n7owne* (irm% that are locate* in the
Unite* State%.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 2.
T = $<<. The U.S economy pro*'ce% abo't one7tenth o( the worl*/% o'tp't o( )oo*% an* %er+ice%.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 29
T = $<$. The %tan*ar* o( li+in) ri%e% when pop'lation )rowth e6cee*% economic )rowth.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 29
T = $<2. n the U.S.8 b'%ine%% in+e%tment %pen*in) i% appro6imately 0< percent o( G#!.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 0$
T = $<0. n economic%8 in+e%tment i% the e6pen*it're by b'%ine%%e% on new plant an* e@'ipment.
An%wer: Tr'e Type: #e(inition !a)e: 0$
!a)e $.
Chapter 2: The U.S. Economy: A Global View
T = $<1. =inancial in+e%tment an* economic in+e%tment are *i((erent term% which *e%cribe the %ame
economic acti+ity.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 0$
T = $<5. All (e*eral )o+ernment %pen*in) i% (or )oo*% an* %er+ice%.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 02
T = $<.. n the U.S.8 %tate an* local )o+ernment p'rcha%e% o( )oo*% an* %er+ice% are a lar)er part o( G#!
than (e*eral )o+ernment p'rcha%e%.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 02
T = $<9. ncome tran%(er% are incl'*e* with )o+ernment p'rcha%e% in the calc'lation o( G#!.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 02
T = $<:. =oo* %tamp% are an income tran%(er.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 02
T = $<;. When e6port% are lar)er than import%8 the +al'e o( net e6port% i% ne)ati+e.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 02
H"W AMERCA !R"#UCES
T = $$<. Since $;1< American% ha+e become better e*'cate*.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 01
T = $$$. E*'cation an* trainin) are an e6ample o( in+e%tment in h'man capital.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 01
T = $$2. The hi)h pro*'cti+ity o( the U.S. economy re%'lt% (rom '%in) hi)hly e*'cate* wor-er% in a
capital7inten%i+e pro*'ction proce%%.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 01
!a)e $9
Chapter 2: The U.S. Economy: A Global View
T = $$0. Go+ernment inter+ention i% %ometime% nece%%ary to re*'ce the e6ternal co%t% o(
pro*'ction.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 09
T = $$1. Go+ernment *irecti+e% are mar-et %i)nal%.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 09
T = $$5. Go+ernment re)'lation%8 ta6e%8 an* %'b%i*ie% a((ect the mi6 o( o'tp't in the economy.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 09
T = $$.. Monopoli%t% can *ictate the price8 the @'ality8 an* the @'antity o( the pro*'ct they pro*'ce.
An%wer: Tr'e Type: ,a%ic Un*er%tan*in) !a)e: 09
="R WH"M AMERCA !R"#UCES
T = $$9. The top @'intile o( income recipient% in the Unite* State% recei+e% appro6imately 2< percent o( all
income that U.S. ho'%ehol*% recei+e.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 0:
T = $$:. n *e+elope* co'ntrie% the riche%t @'intile o( the pop'lation )et% a m'ch lar)er proportion o( total
income than that @'intile recei+e% in poor8 *e+elopin) nation%.
An%wer: =al%e Type: ,a%ic Un*er%tan*in) !a)e: 1<
!a)e $: