1) Saving is necessary for production because a. more roundabout production is b

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1) Saving is necessary for production because a. more roundabout production is better b. less roundabout production is better c. production takes time d. production is expensive 2) Roundabout production occurs when a. entrepreneurs hire others to work for them, rather than taking the time to produce things themselves b. workers avoid intermediary entrepreneurs and cooperate to produce output themselves c. inefficient technology is used d. producers make capital goods instead of consumption goods 3) If an economy increases the amount of roundabout production today, a. more consumer goods can be produced in the present b. fewer consumer goods can be produced in the future c. more capital accumulates d. less capital accumulates 4) The opportunity cost of producing capital is a. decreased current production of consumption goods b. increased future production of consumption goods c. the amount of roundabout production d. abundant capital accumulation 5) Goods and activities typically are more highly valued the sooner they can be enjoyed, other things constant, a. only when interest rates are positive b. because interest rates are positive c. only when people save d. because people have positive rates of time preference 6) The interest rate compensates a. bankers for their time spent on paperwork b. borrowers for their increased consumption today c. savers for consumption forgone today d. consumers for more consumption today 7) The old adage that "a bird in the hand is worth two in the bush" refers to a. a normal good b. opportunity cost c. scarcity d. a positive rate of time preference 8) The difference between income and consumption is a. rent b. profit c. saving d. opportunity cost 9) A profit-maximizing firm invests up to the point at which the marginal rate of return on capital is greatest. a. True b. False 10) If a firm can borrow or lend at a 10 percent annual interest rate, it will a. buy all units of capital with a marginal rate of return above 10 percent b. buy all units of capital with an average rate of return above 10 percent c. buy all units of capital with a marginal rate of return below 10 percent d. buy all units of capital with an average rate of return below 10 percent 11) Interest provides an incentive for households to defer current consumption a. True b. False 12) Financial intermediaries bring suppliers and demanders together in the market for a. checks b. loanable funds c. saving d. physical capital 13) The supply of loanable funds comes, in part, from a. consumer saving b. business investment c. the federal government d. current consumption 14) Generally, the longer the maturity on a bond, the lower the interest rate. a. True b. False 15) The term structure of interest rates describes the relationship between the rate of interest charged and the a. length of time until repayment of the loan b. amount of the loan c. riskiness of the borrower d. identity of the borrower 16) Intellectual property is a. a special form of capital b. a type of labor c. a special type of service d. cheap to produce, but expensive to transmit 17) The patent and copyright systems a. reduce the cost of duplicating intellectual property b. help make the market for intellectual property more competitive c. are forms of intellectual property d. help increase the incentives to create new intellectual property 18) The procedure of determining the present value of payments to be received in the future is known as a. compounding b. amortizing c. perpetuating d. discounting 19) A given sum of money received each year for a specific number of years is called a(n) a. bond b. perpetuity c. debt d. annuity 20) The payment of a given sum of money each year that continues indefinitely into the future is known as a. a perpetuity b. a lottery c. a term payment d. a permanent annuity 21) In most state-run lotteries, a. the winner receives a single lump-sum payment b. the present value of the winnings is less than the number of dollars won c. the present value of the winnings exceeds the number of dollars won d. winners are paid the present value of the total amount won 22) Corporations can obtain investment funds by a. buying government securities b. selling stock c. increasing dividends d. purchasing more capital 23) One reason investors may prefer bonds over stocks is a. potential profits are larger b. bond prices never vary c. bondholders get paid before stockholders d. owning bonds implies owning a part of the company 24) The exchange of secondhand securities a. takes place in an oligopolistic market b. does not provide funds to the firm that issued those securities c. includes the initial sale when securities are issued by a firm d. involves very few institutional investors 25) Laura Kaid owns a business and is willing to invest in capital until, at the margin, her investment yields a cash stream with a present value less than the marginal cost of the investment. a. True b. False 26) In a market economy, income is primarily determined by a. the productivity of household resources b. the level of transfer payments c. government monetary and fiscal policy d. the geographic distribution of resources 27) The most recent data indicates households in the top fifth of the income distribution earn more than ten times as much income as those in the bottom fifth. a. True b. False 28) The Lorenz curve shows the a. functional distribution of income b. personal distribution of income c. relative percentage of income going to each of the resources d. cumulative percentage of income received by cumulative percentages of households 29) Compared to the United States, the income distribution in other major industrial nations tends to be a. more concentrated b. less concentrated c. similar d. impossible to calculate 30) Families receive income from two primary sources: a. resource earnings and transfers b. transfers and subsidies c. wages and rents d. transfers and gifts 31) If official U.S. poverty statistics included in-kind transfer payments, a. the poverty rate would be close to zero b. the poverty rate would be lower c. the government deficit would be lower d. the inflation rate would be higher 32) The normal life-cycle pattern of income reflects differences in earnings based on a. race and education b. gender and education c. age and education d. race 33) In-kind transfer programs such as Medicaid have increased more rapidly than other welfare programs over the last decade. a. True b. False 34) Measurement of the official poverty level a. includes all transfers b. excludes all transfers c. includes cash transfers but not in-kind transfers d. includes in-kind transfers but not cash transfers 35) The official poverty definition in the U.S. is having an income that a. provides minimum biological needs b. is less than three times the cost of a nutritionally adequate yet frugal diet c. places the household in the bottom 20 percent of the income distribution d. is less than the average U.S. welfare allowance 36) The major social insurance program in the United States is a. Social Security b. Temporary Assistance for Needy Families c. Medicare d. Medicaid 37) The social insurance system generally redistributes income from a. rich to poor and from old to young b. rich to poor and from young to old c. poor to rich and from old to young d. poor to rich and from young to old 38) The federal government's earned-income tax credit a. provides support only for elderly and disabled poor b. represents a type of in-kind transfer program c. provides food assistance to the working poor d. reduces taxes if the poor buy housing e. offers an income tax refund to the working poor greater than the taxes they paid 39) The most effective government policy for reducing poverty is to a. reduce discrimination in the job market based on gender and race b. abandon all government programs and rely on private charity c. reduce programs that promote education and training of the poor d. dramatically increase Medicare payments to the elderly e. promote economic growth and job creation 40) Data show that the poorest U.S. demographic group is a. the elderly because Social Security payments have not kept pace with inflation b. the elderly because they have no steady income c. the elderly because poverty increases with age d. households headed by someone under 18 years of age 41) Transfer payments have reduced poverty among the elderly, but poverty among females has not fallen. a. True b. False 42) In the last 30 years, the number of poor people in the United States in households headed by women has a. been constant b. increased slightly c. increased dramatically d. decreased slightly 43) Which of the following would not account for the observed wage differential between African Americans and whites in the United States? a. differences in the quantity of on-the-job training b. differences in the quality of education c. discrimination by employers d. differences in access to public assistance programs 44) Most people on welfare a. are not U.S. citizens b. are poorly educated and have few job skills c. do not qualify for food stamps, child care, or Medicaid d. have jobs 45) Because women make up 54 percent of those ages 18 to 24 enrolled in college, graduate school, or professional school, men and women are now more likely to meet their future spouses a. at hayrides b. in some educational setting c. in entry-level jobs such as in food service d. at volunteer events 46) Social Security and Medicare, programs that benefit the elderly primarily, make up the greatest share of federal redistribution programs since 1962. a. True b. False 47) Which of the following has been a result of welfare reform? a. employment among mothers who head families substantially decreased b. about two thirds of mothers who head families found work only eight years after reform c. the incomes of mothers who head families went down on average d. most states combined tough new eligibility rules with an expanded menu of welfare services 48) One of the hardest hit groups by the recession from 2007 - 2009 was a. individuals on welfare b. high income individuals c. families headed by single mothers d. middle income individuals 49) Because more than half the federal welfare budget goes for health care, almost zero U.S. residents lacked health insurance in 2006. a. True b. False 50) The Equal Employment Opportunity Commission was established by a. the Social Security Act b. the Reagan administration c. the Civil Rights Act d. the Equal Rights Amendment

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