1. Which of the following contributed to
the soaring housing prices of 2002-2005?
a. Regulations designed to make housing
more affordable increased the demand for housing and drove housing prices
b. Regulations designed to make housing
more affordable decreased the number of sub-prime loans and made home buying a
c. Mortgage lending standards tightened,
and therefore mortgage loans for housing were only available to buyers
purchasing highly expensive homes.
d. Home buyers were required to make
larger down payments and this increased the demand for housing, driving housing
of the following is true of regulation?
a. Regulatory agencies often ignore the
secondary effects of their actions and fail to foresee future problems.
b. Policy-makers are hesitant to call for
new regulations even when it is clear they would help avert future crises.
c. Mortgage lending and banking have
historically been unregulated and therefore regulation in these sectors is unpopular.
d. Past regulations have been effective at
averting crises, but they are unpopular because they reduce the profitability
of the regulated industry.
3. Inflation is
a. a persistent increase in the general level of prices.
b. a persistent increase in the price of an individual good,
service or resource.
c. a one time increase in the general level of prices.
d. a one time increase in the price of an individual good or
4. Money is
a. whatever is generally used to pay for goods, services and
b. an object that is directly consumed.
c. widely used in a barter economy.
d. something that can be used to buy things but cannot be
5. Monetary and price instability will
a. make it easier for both individuals and businesses to
plan wisely for the future.
b. generate uncertainty, and encourage investors and
businesses to move their activities to countries with a more stable monetary
c. encourage businesses to invest and expand their future
d. encourage domestic citizens to increase their rate of
6. Which of the following will discourage
a. well-defined property rights
b. high and variable rates of inflation
c. a low and steady rate of inflation
d. low tax rates
7. The Fed’s low short-term interest rate
policy of 2002 to 2004 encouraged decision makers to
a. make large down payments when
b. purchase housing only if it could be
financed with a 30-year, fixed interest-rate mortgage.
c. borrow more and increase their
purchases of housing.
d. borrow less and reduce their purchases
of the following is true of taxes?
drive a wedge between what buyers pay and what sellers receive.
increase the volume of mutually advantageous exchanges.
in taxes are the primary cause of inflation.
taxes generate government revenue without imposing a burden on consumers and
9. Why do foreigners export goods
and services to buyers in the United States?
a. They want to acquire dollars so they can purchase things
b. They like helping Americans.
c. They are forced to sell to Americans.
d. They want to harm Americans and one way of doing so is to
sell goods at low prices in the U.S. market.
10.Trade restrictions like tariffs and
a. protect American jobs and increase employment.
b. ensure that more dollars stay in the United States.
c. reduce the value of goods and services that we will be
able to produce and consume.
d. make all Americans better off.
11.Which of the following resulted from
the Smoot-Hawley trade bill of 1930?
a. The stock market began a steady
recovery from the crash of October 1929.
b. Many countries responded by imposing
higher tariffs on American products, and the volume of international trade fell
c. Imports decreased, while exports
increased, resulting in an overall increase in GDP and tariff revenues.
d. The unemployment rate, which had been
rising, began to steadily decline as jobs were protected by the trade
12.In order to achieve a high economic
freedom rating, a country must
a. elect political officials democratically.
b. protect property rights, enforce contracts even-handedly,
and rely extensively on markets to allocate goods and services.
c. provide citizens with housing, health care, and other
basic goods free of charge.
d. use the taxing power of the state to redistribute income
from the rich to the poor and thereby promote income equality.