1) In a market economy, income depends mostly on a. productivity b. luck c. age
ID: 1245931 • Letter: 1
Question
1) In a market economy, income depends mostly on a. productivity b. luck c. age d. sex 2) 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 3) A fair distribution of income for the U.S. economy is a. not an economic issue b. defined by the Department of Agriculture c. a positive economic question d. a normative economic question 4) The major social insurance program in the United States is a. Social Security b. Temporary Assistance for Needy Families c. Medicare d. Medicaid 5) Which of the following is not "means-tested"? a. Temporary Assistance for Needy Families (TANF) b. welfare programs c. the Food Stamp program d. Social Security payments to a retiree 6) Which of the following is not "means-tested"? a. Temporary Assistance for Needy Families (TANF) b. welfare programs c. the Food Stamp program d. Social Security payments to a retiree 7) The benefit of the production of 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 8) Interest is a payment for deferred a. taxation b. saving c. consumption d. investment 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) The balance of payments summarizes the transactions that occur during a given time period between a. the government of one country and the government of another country b. the national government and local governments in the same country c. individuals, firms, and government of one country and individuals, firms, and governments throughout the rest of the world d. individuals, firms, and governments of two countries 12) Which of the following is not considered as a unilateral transfer? a. income earned from foreign investments b. foreign aid c. personal gifts to friends or family abroad d. institutional charitable donations 13) Which of the following is true of the United States? a. It has been and continues to be a net capital exporter. b. It is today the world's largest debtor nation. c. It was, until the last decade, a net capital importer. d. It has historically been a debtor nation. 14) The exchange rate is the a. ratio of exports to imports b. interest rate the U.S. government charges on international transactions c. pricing policy of goods scheduled for export d. price of one nation's currency in terms of another nation's currency 15) If the British pound appreciates, U.S. television stations need fewer dollars to buy episodes of a Britcom from the British Broadcasting Company. a. True b. False 16) The term autarky refers to a. equilibrium after trade begins between two countries b. the gains received from trade c. self-sufficiency d. political isolationism 17) If the United States has an absolute advantage in producing computer components, it should export them worldwide. a. True b. False 18) International trade is most likely to occur whenever a. one of the trading nations is self-sufficient b. all of the trading nations are self-sufficient c. one of the trading nations gains from trade d. each of the trading nations gains from tradeExplanation / Answer
1. ANS: A Luck, age, sex, and discrimination may play a role in determining income, but by far the number one determinant is productivity. A person with low productivity will have a low wage. 2. ANS: B. The statistics count only money income, so if in-kind transfers (housing, medical services, legal services, etc) were counted, the poverty statistics would indicate a lower rate. 3. ANS: B Interestingly, the definition of poverty goes back to the early 1930s when a government agency was assigned the task of coming up with a definition of poverty that could be used for government statistics purposes. Since food was considered to be a necessity, they declined that the definition should be related to the cost of food and specifically that the poverty level should be set at three times the cost of a nutritionally adequate diet. No consideration was given to the cost of housing or energy (heating, electric, gas). 4. ANS: A. Poverty is ultimately a relative concept because many of the people in the U.S. that we call poor own a car, a color tv, have access to free education and some public health care, and other items or services that people in many other countries would consider to be luxuries. This is not to say that the poor in the U.S. live well, but most live much better than the poor in Somalia or Darfur. 5. ANS: A. The Social Security system was established in the 1930s and the payments were based on work history and previous income. Those who paid more based on a higher income received more in retirement. 6. ANS: B 7. ANS: C 8. ANS: E. Even though efforts to reduce discrimination based on gender and race are important, unemployment or under employment that results from discrimination tends to be relatively small compared to the unemployment that would result from an economy in recession, so the most effective policy would emphasize a strong and growing economy. 9. ANS: A 10. ANS: A 11. ANS: A 12. ANS: A 13. ANS: C 14. ANS: B. By producing the goods in which the country is most efficient, efficiency and total production are increased. 15. ANS: D. At the price of $1, the domestic demand would be 85, but the domestic supply would only be 35. Importing 50 units would make the quantity supplied at $1 equal to the quantity demanded.. If the world price at been above $2, then this country would have exported the good rather than imported it. 16. ANS: B 17. ANS: B
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