Chapter 1
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) Which of the following is NOT a primary participant in the financial marketplace? 1)
A) businesses B) military units
C) individual households D) governments
2) Jane Smith made $30,000 last year and paid $8,400 in taxes. What percentage of her income did 2)
Jane pay in taxes?
A) 2.8% B) 3.57% C) 7.2% D) 28% E) 72%
3) There are several markets in the United States. The market where television sets are exchanged is 3)
the
A) retail market.
B) commodity market.
C) real estate market.
D) financial market
E) none of the above.
4) If the Fed purchases $10,000 in government securities it will have the effect of 4)
A) decreasing the money supply.
B) increasing the money supply.
C) changing the money supply, but the direction is not clear.
D) having no effect on the money supply.
E) unable to tell with the information provided.
5) Which of the following is an example of a progressive tax? 5)
A) flat tax
B) income tax
C) sales tax
D) property tax
E) Both A and B above were noted in the text as progressive taxes.
6) The four basic factors that affect the price paid (interest rate) for money are 6)
A) the demand for money saved, the demand for borrowed funds, Federal Reserve policy, and
risk.
B) the supply of money saved, the supply for borrowed funds, Federal Reserve policy, and
risk.
C) the supply of money saved, the demand for borrowed funds, Federal Reserve policy, and
risk.
D) the demand for money saved, the supply for borrowed funds, Federal Reserve policy, and
risk.
1
, 7) Albert Jones went to his local department store to purchase a pair of Levi's®. He thought that the 7)
style of Levi's® that he wanted would sell for about $30 a pair. When he got to the store, he saw a
sign which said, Levi's®, all styles, $18 a pair. Albert bought three pairs of Levi's®. The behavior
of Albert is consistent with
A) the law of supply and demand.
B) the law of demand.
C) the law of supply.
D) ceteris paribus.
E) can't tell with the information provided.
8) Which of the following is NOT an example of economic capital? 8)
A) a desk in a classroom
B) a bond issued by IBM
C) a delivery truck used by Federal Express
D) an electric plant used by a local utility to generate electricity
E) all of the above
9) When the Federal Reserve increases the interest rate it charges banks to borrow reserves, it is 9)
controlling the money supply by using which of the following tools?
A) risk
B) open market operations
C) discount rate
D) reserve requirements ratio
E) unable to tell with the information provided
Table 1-1. Supply and Demand for Personal Computers
Market Price Quantity Quantity
per Computer Demanded Supplied
$2,000 14,000 20,000
$1,900 15,000 19,000
$1,800 16,000 18,000
$1,700 17,000 17,000
$1,600 18,000 16,000
$1,500 19,000 15,000
10) Refer to Table 1-1. At a market price of $1,800, there will be 10)
A) a surplus of 2,000 computers.
B) neither a surplus nor a shortage of computers as the market is in equilibrium at this price.
C) a surplus or a shortage of 2,000 computers.
D) a shortage of 2,000 computers.
2
,11) John Gates made $25,000 last year and paid $2,500 in taxes on this income. Jane Smith made 11)
$30,000 last year and paid $2,700 in taxes on this income. What type of tax is the government
using?
A) proportional taxes
B) regressive taxes
C) proposed taxes
D) progressive taxes
E) impossible to calculate with the information provided
12) Jane just graduated from college with a Bachelor of Science Degree in Computer Information 12)
Systems. She received the following job offers. Jones and Associates at a starting salary of $30,000.
Smith Brothers at a starting salary of $33,000. Joan Cannery Consulting at a starting salary of
$35,000. Consultants-R-We at a starting salary of $32,000. Andrews Computer Vendors at a
starting salary of $36,000. If she takes the job with Andrews Computer Vendors, her opportunity
cost is
A) $30,000.
B) $32,000.
C) $33,000.
D) $35,000.
E) nothing because she took the job with the highest salary.
13) Which of the following is NOT an example of economic capital? 13)
A) an electric plant used by a local utility to generate electricity
B) a delivery truck used by Federal Express
C) a desk in a classroom
D) a share of stock issued by IBM
E) all of the above
14) When the Federal Reserve notifies banks that they must hold fifteen cents for every dollar that is 14)
deposited, it is controlling the money supply by using which of the following tools?
A) reserve requirements ratio
B) risk
C) discount rate
D) open market operations
E) unable to tell with the information provided
15) John Gates made $25,000 last year and paid $2,500 in taxes on this income. Jane Smith made 15)
$30,000 last year and paid $3,000 in taxes on this income. What type of tax is the government
using?
A) proposed taxes
B) proportional taxes
C) progressive taxes
D) regressive taxes
E) impossible to calculate with the information provided
3
, 16) Which of the following can be used to finance a small business? 16)
A) borrowing money from financial institutions
B) borrowing from other individuals
C) using cash generated from current sales
D) using one's own savings
E) all of the above
17) There are several markets in the United States. The market where corn, wheat, soybeans, and oil 17)
are exchanged is the
A) real estate market.
B) commodity market.
C) financial market.
D) retail market.
E) none of the above.
18) John's friend just gave him a pair of concert tickets to see his favorite rock group perform this 18)
weekend. Each ticket sells for $25. John's boss asked him to work overtime the same weekend and
at the same time as the concert. John currently makes $10.00 an hour and his overtime pay for the
four hours his boss asked him to work is double the hourly rate. If John decides to go to the
concert, his opportunity cost is
A) $80.00 in lost pay.
B) $50.00 for the two tickets.
C) $50.00 because that is what his friend paid for the tickets.
D) $40.00 in lost pay.
E) nothing because the concert tickets were free for John.
19) John Gates made $25,000 last year and paid $1,500 in taxes on this income. Jane Smith made 19)
$30,000 last year and paid $3,000 in taxes on this income. What type of tax is the government
using?
A) proposed taxes
B) progressive taxes
C) regressive taxes
D) proportional taxes
E) impossible to calculate with the information provided
20) The probability that the desired return on an investment will be different from the desired return 20)
is defined as
A) discount rate.
B) open market operations.
C) risk.
D) reserve requirements ratio.
E) unable to tell with the information provided.
4
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) Which of the following is NOT a primary participant in the financial marketplace? 1)
A) businesses B) military units
C) individual households D) governments
2) Jane Smith made $30,000 last year and paid $8,400 in taxes. What percentage of her income did 2)
Jane pay in taxes?
A) 2.8% B) 3.57% C) 7.2% D) 28% E) 72%
3) There are several markets in the United States. The market where television sets are exchanged is 3)
the
A) retail market.
B) commodity market.
C) real estate market.
D) financial market
E) none of the above.
4) If the Fed purchases $10,000 in government securities it will have the effect of 4)
A) decreasing the money supply.
B) increasing the money supply.
C) changing the money supply, but the direction is not clear.
D) having no effect on the money supply.
E) unable to tell with the information provided.
5) Which of the following is an example of a progressive tax? 5)
A) flat tax
B) income tax
C) sales tax
D) property tax
E) Both A and B above were noted in the text as progressive taxes.
6) The four basic factors that affect the price paid (interest rate) for money are 6)
A) the demand for money saved, the demand for borrowed funds, Federal Reserve policy, and
risk.
B) the supply of money saved, the supply for borrowed funds, Federal Reserve policy, and
risk.
C) the supply of money saved, the demand for borrowed funds, Federal Reserve policy, and
risk.
D) the demand for money saved, the supply for borrowed funds, Federal Reserve policy, and
risk.
1
, 7) Albert Jones went to his local department store to purchase a pair of Levi's®. He thought that the 7)
style of Levi's® that he wanted would sell for about $30 a pair. When he got to the store, he saw a
sign which said, Levi's®, all styles, $18 a pair. Albert bought three pairs of Levi's®. The behavior
of Albert is consistent with
A) the law of supply and demand.
B) the law of demand.
C) the law of supply.
D) ceteris paribus.
E) can't tell with the information provided.
8) Which of the following is NOT an example of economic capital? 8)
A) a desk in a classroom
B) a bond issued by IBM
C) a delivery truck used by Federal Express
D) an electric plant used by a local utility to generate electricity
E) all of the above
9) When the Federal Reserve increases the interest rate it charges banks to borrow reserves, it is 9)
controlling the money supply by using which of the following tools?
A) risk
B) open market operations
C) discount rate
D) reserve requirements ratio
E) unable to tell with the information provided
Table 1-1. Supply and Demand for Personal Computers
Market Price Quantity Quantity
per Computer Demanded Supplied
$2,000 14,000 20,000
$1,900 15,000 19,000
$1,800 16,000 18,000
$1,700 17,000 17,000
$1,600 18,000 16,000
$1,500 19,000 15,000
10) Refer to Table 1-1. At a market price of $1,800, there will be 10)
A) a surplus of 2,000 computers.
B) neither a surplus nor a shortage of computers as the market is in equilibrium at this price.
C) a surplus or a shortage of 2,000 computers.
D) a shortage of 2,000 computers.
2
,11) John Gates made $25,000 last year and paid $2,500 in taxes on this income. Jane Smith made 11)
$30,000 last year and paid $2,700 in taxes on this income. What type of tax is the government
using?
A) proportional taxes
B) regressive taxes
C) proposed taxes
D) progressive taxes
E) impossible to calculate with the information provided
12) Jane just graduated from college with a Bachelor of Science Degree in Computer Information 12)
Systems. She received the following job offers. Jones and Associates at a starting salary of $30,000.
Smith Brothers at a starting salary of $33,000. Joan Cannery Consulting at a starting salary of
$35,000. Consultants-R-We at a starting salary of $32,000. Andrews Computer Vendors at a
starting salary of $36,000. If she takes the job with Andrews Computer Vendors, her opportunity
cost is
A) $30,000.
B) $32,000.
C) $33,000.
D) $35,000.
E) nothing because she took the job with the highest salary.
13) Which of the following is NOT an example of economic capital? 13)
A) an electric plant used by a local utility to generate electricity
B) a delivery truck used by Federal Express
C) a desk in a classroom
D) a share of stock issued by IBM
E) all of the above
14) When the Federal Reserve notifies banks that they must hold fifteen cents for every dollar that is 14)
deposited, it is controlling the money supply by using which of the following tools?
A) reserve requirements ratio
B) risk
C) discount rate
D) open market operations
E) unable to tell with the information provided
15) John Gates made $25,000 last year and paid $2,500 in taxes on this income. Jane Smith made 15)
$30,000 last year and paid $3,000 in taxes on this income. What type of tax is the government
using?
A) proposed taxes
B) proportional taxes
C) progressive taxes
D) regressive taxes
E) impossible to calculate with the information provided
3
, 16) Which of the following can be used to finance a small business? 16)
A) borrowing money from financial institutions
B) borrowing from other individuals
C) using cash generated from current sales
D) using one's own savings
E) all of the above
17) There are several markets in the United States. The market where corn, wheat, soybeans, and oil 17)
are exchanged is the
A) real estate market.
B) commodity market.
C) financial market.
D) retail market.
E) none of the above.
18) John's friend just gave him a pair of concert tickets to see his favorite rock group perform this 18)
weekend. Each ticket sells for $25. John's boss asked him to work overtime the same weekend and
at the same time as the concert. John currently makes $10.00 an hour and his overtime pay for the
four hours his boss asked him to work is double the hourly rate. If John decides to go to the
concert, his opportunity cost is
A) $80.00 in lost pay.
B) $50.00 for the two tickets.
C) $50.00 because that is what his friend paid for the tickets.
D) $40.00 in lost pay.
E) nothing because the concert tickets were free for John.
19) John Gates made $25,000 last year and paid $1,500 in taxes on this income. Jane Smith made 19)
$30,000 last year and paid $3,000 in taxes on this income. What type of tax is the government
using?
A) proposed taxes
B) progressive taxes
C) regressive taxes
D) proportional taxes
E) impossible to calculate with the information provided
20) The probability that the desired return on an investment will be different from the desired return 20)
is defined as
A) discount rate.
B) open market operations.
C) risk.
D) reserve requirements ratio.
E) unable to tell with the information provided.
4
