Economics
Final Examination –January 2001
Name ______Date ______
Teacher ______Class Period ______
CITY SCHOOL DISTRICT
ROCHESTER, NEW YORK
ECONOMICS
FINAL EXAMINATION
2001
PART I
Part IMultiple-Choice35 questions – 2 pts. each (70 points total)
Part IIThematic EssaySelect 1 question – 5 pts. each( 5 points total)
Part IIIDBQ’s15 scaffolding questions 1 pt. each(25 points total)
Essay10 points
Students will need a machine-scorable answer sheet for Part I. Responses for Part II and Part III may be written in that booklet.
I agree that the test mods used for the administration of this test were those listed on the IEP.
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PART I
(ANSWER ALL QUESTIONS IN THIS PART)
Directions: This part contains thirty-five (35) multiple-choice questions. Mark your answers on the answer sheet provided. Choose the BEST ANSWER for each question. Make sure that if you change an answer, you thoroughly erase your first answer.
1.If the supply of a product increases and the demand decreases, the price of the product will probably
A.increase.C.remain the same.
B.decrease.D.fluctuate unpredictably.
2.In order to control inflation, the government is likely to
A.decrease corporations’ limited liability.
B.reduce the amount of money in circulation.
C.decrease interest rates.
D.establish public monopolies.
3.The Federal Reserve System exercises an important role in
A.making loans to individuals.C.making monetary policy.
B.regulating the stock market.D.determining tax rates.
4.During an economic depression, which can be expected to increase?
A.bank depositsC.unemployment
B.number of new businessD.home constructions
5.In a command economy, there is no
A.technology.C.competition.
B.currency.D.division of labor.
6.One advantage of a corporation as a form of business is that
A.the investment risk is shared by many people.
B.supply and demand will not affect prices of goods produced.
C.goods will be sold to the consumer for the lowest possible price.
D.dividends increase regardless of profit.
7.The total dollar value of all final goods and services produced within the nation each year is referred to as the
A.annual production rate.C.annual inflation rate.
B.gross domestic product.D.standard of living.
8.Which of the following is most essential for a market economy?
A.effective labor unions
B.good government regulation
C.responsible action by business leaders
D.active competition in the marketplace
9.An advantage of a traditional system is that it
A.provides people with the security of knowing what to do.
B.is highly democratic.
C.allows individual entrepreneurs to be innovative and take risks.
D.promotes technological development.
10.Which of the following examples is a public good or service?
A.newspaperC.highway
B.movie theaterD.automobile factory
11.The value of time, money, goods and services given up in an economic choice is an
A.economic tradeoff.C.item cost.
B.opportunity cost.D.economic cost.
12.If the government establishes a fixed price on a product which is below equilibrium, the effect is likely to be
A.a surplus.
B.a shortage.
C.first a shortage, then a surplus.
D.no product availability forecast can be made.
13.Which situation would be the best example of economic scarcity?
A.Consumer demand is not sufficient to maintain full employment.
B.The value of imported goods exceeds the value of goods exported.
C.There is not enough copper to supply current needs.
D.Tax revenues are less than projected expenditures.
14.If the quantity of a product that consumers want exceeds the quantity that producers are supplying, what is likely to happen?
A.Prices will rise.C.A glut will occur.
B.Prices will fall.D.Wages will increase.
15.A sales tax is a regressive tax because it
A.decreases every year.
B.is the same in every state.
C.places a greater burden on the poor.
D.is based on the evaluation of an assessor.
16.One cost of a college education is textbooks; a second cost is the full-time job most students give up to attend college. Economists usually call this second example a(n)
A.labor cost.C.increasing cost.
B.money cost.D.opportunity cost.
17.If the costs of producing a particular product increase, the supply is likely to
A.increase greatly.C.decrease.
B.increase slightly.D.remain the same.
18.Money functions as a
A.unit of account, a medium of exchange and a store of value.
B.determinant of investment, consumption and aggregate demand.
C.determinant of capital spending, aggregate supply and exchange.
D.system for accounting, a means of income redistribution and a resource allocator.
19.A limit on the amount of goods that can be imported into a country is called a
A.cartel.C.subsidy.
B.tariff.D.quota.
20.An easy money policy is usually pursued in order to achieve which of the following objectives?
A.decrease spendingC.decrease the discount rate
B.reduce employmentD.all of the answers are correct
21.If high school basketball games and college basketball games are close substitutes, an increase in the price of tickets for college basketball games will
A.increase demand for college basketball tickets.
B.increase demand for high school basketball tickets.
C.increase the supply of high school basketball tickets.
D.decrease the supply of college basketball tickets.
22.When too much money is being spent in the economy, the result is
A.a depression.
B.an increase in the net worth of banks.
C.inflation.
D.a decrease in the money supply.
23.According to the model, the equilibrium price for peaches is
A.$1.00.C.$3.00.
B.$2.00.D.$4.00.
24.Which of the following would be the normal pattern for a complete business cycle?
A.prosperity, depression, recession, prosperity
B.depression, recession, prosperity
C.prosperity, depression, recovery
D.prosperity, recession, depression, recovery, prosperity
25.The economic indicators that tend to rise or fall before a major economic change are called
A.leading.C.lagging.
B.coincident.D.composite.
26.Those who believe that people should be taxed according to their ability to pay would most likely favor a(n)
A.excise tax.C.progressive income tax.
B.general sales tax.D.residential property tax.
27.Which of the following would affect the price a consumer pays for an imported product?
A.a tariff on exportsC.federal grant for research on the item
B.a tariff on importsD.all of the above
Use the following cartoon to answer question 28.
28.In the cartoon above, the cartoonist is attempting to highlight a problem faced by
A.labor.C.management.
B.government.D.CEOs.
29.A market situation in which there is only one seller of a product is an example of
A.pure competition.C.monopoly.
B.imperfect competition.D.margin.
30.In a market economy, economic decisions are made according to
A.central planners.C.supply and demand.
B.government orders.D.custom.
31.The basic job of a labor union is
A.finding jobs for workers.C.collective bargaining.
B.organizing strikes.D.limiting job markets.
32.An entrepreneur is an individual who
A.operates with unlimited resources.
B.is always part of a partnership.
C.organizers and operates a business.
D.borrows from the government.
33.The equilibrium price is the point at which
A.quantity supplied equals quantity demanded.
B.suppliers make a profit.
C.suppliers lose money.
D.demand causes prices to rise.
34.As the price of an item increases, the amount demanded
A.decreases.C.remains the same.
B.increases.D.cannot be predicted.
35.The economy is said to be in recession when
A.unemployment remains stable.C.employment increases.
B.wages increase.D.real GDP declines for six months.
SSE-68(12/25/18)Page 1
Economics
Final Examination –January 2001
Name ______Date ______
Teacher ______Class Period ______
CITY SCHOOL DISTRICT
ROCHESTER, NEW YORK
ECONOMICS
FINAL EXAMINATION
2001
PART II AND PART III
This booklet contains Part II and Part III of the exam.
Complete all parts of the booklet as directed.
Complete the heading at the top of this page.
TEACHER USE ONLYPossible Points / Credits Earned
Part I / 70 / ______
Part II / 5
Part III – Scaffold
Essay / 15
10 / ______
TOTAL POINTS / 100
Part II – Thematic Essays. Select only one of the two Thematic Essays to answer in complete sentences.
THEMATIC ESSAY #1: SCARCITY (5)
DIRECTIONS: Write a well-organized essay that includes an introduction, several paragraphs addressing the task and a conclusion.
THEME:Throughout history every civilization has had to deal with the problem of scarcity.
TASK:Using gasoline as an example –
A.Define scarcity.
B.Identify ways to deal with scarcity.
THEMATIC ESSAY #2: INFLATION
DIRECTIONS: Write a well-organized essay that includes an introduction, several paragraphs addressing the task and a conclusion.
THEME:Every economy must deal with inflation. Inflation affects people in many different ways.
TASK:
- Define inflation
- Explain two options the government has when dealing with inflation
- How is a person on a fixed income affected by inflation?
- How is a person with money in the bank affected by inflation?
- How is a person who borrows money affected by inflation?
Essay
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PART III – Document-Based Question
This task is based on the accompanying documents (1-7). This task is designed to test your ability to work with documents. Some of these documents have been edited for the purpose of this task. As you analyze the documents, take into account both the source of each document and any point of view that may be presented in the document.
Directions: Read the documents in Part A and answer all of the questions that follow each documents. Read the directions for Part B and write your essay.
SURPLUS DEBATE
Historical Context:
For years, the Federal government has spent more money than is brought in resulting in a debt. This changed last year as the government had a surplus. This extra income lead to a debate as how to spend the money.
Task:
In a well-organized essay with an introduction, body and conclusion, answer the following tasks:
A.Define surplus.
B.What is the estimated surplus for the Federal government over the next ten years?
C.Explain what three options the government has for dealing with surplus.
D.For each, option explain two positive and two negative impacts the choice will have.
Part A: Short Answer
Document #1
Budget Background: A Decade of Black Ink?
The annual debate over the federal budget begins this year with familiar arguments over what to spend, what to give back and what amount to use to repay the trillions of dollars of debt that accumulated during decades of deficits. President Clinton, his would-be successors and leaders from both parties in Congress are all offering election-year tax and spending plans, each of which is based on complicated economic assumptions and forecasts. This taxpayer’s guide attempts to make some sense of the numbers.
Deficits and Surpluses
Deficits are the gap between what the government takes in and what the government spends each year. When the government takes in more than it spends, it creates a surplus.
Setting aside the money generated by Social Security taxes and the Postal Service, the government took in $1 billion more than it spent in the 1999 fiscal year which ended in October. The Congressional Budget Office (CBO) estimates that number will be $23 billion in the current fiscal year. That is 0.2 percent of the gross domestic product – a measure economists prefer because it allows for better comparisons from year to year.
CBO’s most conservative estimates assume that spending on programs whose appropriations are controlled by Congress will only grow at the rate of inflation. Under that scenario, surpluses will increase over the next ten years to $838 billion. Other estimates, which assume that spending will be capped at this year’s amount, project even higher surpluses over ten years – almost $1.9 trillion – would leave more room …
By Mark Stencel
Washingtonpost.com Staff
1.What are three possible options for the surplus?
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2.What is a surplus according to the article?
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Document #2
President Clinton announced yesterday that the government’s projected ten-year surplus has grown by $1 trillion since the last official estimate a mere four months ago, as a
seemingly unstoppable economy continues to pump money into the U.S. Treasury and
transform the 2000 political debate.
Emboldened by a surplus estimate that is more than double the previous projection –
some $1.87 trillion over the next decade, not even counting Social Security funds – Clinton
declared that he is willing to offer congressional Republicans a deal that he said could “break the
logjam” that has stalled many of the most critical tax and spending decisions now pending on
Capitol Hill.
The election-year bargain, as Clinton described it, would have him swallow misgivings
about the size of a GOP plan to eliminate the so-called marriage tax penalty, if Republicans
would accept his plan for an expensive prescription drug benefit for Medicare. The initial
Republican reaction was distinctly sour, suggesting that more money cannot necessarily lubricate
the significant political and policy frictions that remain.
The new budget figures also echoed on the campaign trail. Aides to Republican
presidential candidate George W. Bush said the surplus figures make plain that the across-the-
board tax cut the Texas governor is offering is easily affordable, despite Vice President Gore’s
protests that the cut is a “risky scheme.”
The administration made its new projections as part of a mid-year review required under
law. While a higher surplus projection had been anticipated for weeks by all sides of the debate,
the sheer magnitude of the new sum, based on improved expectations of economic growth over
the next decade, was nonetheless astonishing. The total surplus, when money from Social
Security taxes is included, is forecast to be $4.19 trillion over ten years.
By John F. Harris and Eric Pianin
Washington Post Staff Writers
3.How much of a budget surplus is predicted over the next ten years when Social Security is included?
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Document #3
U.S. Rep. Frank Lucas, R-Okla., is among a growing number of legislators considering
exactly what to do in the future with a whopping federal surplus that has Congress and the
Clinton administration salivating over the spending possibilities.
On June 26, the White House’s Office of Management and Budget released an estimate
that the federal surplus will swell to $1.87 trillion over ten years.
On top of this estimate, the OMB predicated, thanks to the surplus, the country’s national
debt of $5.4 trillion could be erased by the year 2013.
All this pontificating has legislators from both parties, as well as the president, offering
potential spending measures for funds that are not yet realized.
Slow down.
Hopefully, for the taxpayers’ sake, more legislators will cater to Lucas’ proposal of
earmarking any possible surplus to paying off the national debt rather than creating additional
federal government spending initiatives.
Lucas, who represents Oklahoma’s 6th District, makes sense for two primary reasons.
First, there is no guarantee the economy will keep humming along at its current pace,
therefore making such federal surplus estimates just that – a prediction.
Secondly, a fact many legislators seem to ignore, this estimate is a projected non-Social
Security surplus. In other words, the funds borrowed for years from Social Security are not
taken into account, making any federal surplus unrealistic. Currently, the national debt amounts
to $21,148 per person.
“We owe it to our children and grandchildren to work toward paying down the national
debt,” Lucas said. “This by no means gives Washington, D.C., bureaucrats the right to start
freely spending that growing surplus.”
Congress, as well as the White House, should not spend money they do not yet have.
And if the aforementioned estimates are accurate, these funds should be spent prudently and not
for the financial expansion of the federal government.
Amarillo Glove-News
07/06/2000
4.The debt could be paid off by what date?
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5.What are two reasons the author feels the legislators should be careful about how they spend the surplus?
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Document #4
As we have said, the federal government will spend nearly $1.8 trillion, and have a
surplus of over $117 billion in 2000, which we divided into nine large categories as shown in
Chart 2-6.
The largest federal program is Social Security, which will provide monthly benefits to nearly 45 million retired and disabled workers, their dependents and survivors. It accounts for 22 percent of your federal dollar (or 23 percent of all federal spending).
Medicare, which will provide health care coverage for almost 40 million elderly Americans and people with disabilities, consists of Part A (hospital insurance) and Part B (insurance for physician costs and other services). Since its birth in 1965, Medicare has accounted for an ever-growing share of spending. In 2000, it will be comprised of 11 percent of your federal dollar (or 12 percent of all federal spending).
*Means-tested entitlements are those for which eligibility is based on income. The Medicaid program is also a means-tested entitlement.
Medicaid, in 2000, will provide health care services to almost 34 million Americans, including the poor, people with disabilities and senior citizens in nursing homes. Unlike Medicare, the federal government shares the costs of Medicaid with the states, paying between 50 and 83 percent of the total (depending on each state’s requirements). Federal and state costs are growing rapidly. Medicaid accounts for six percent of your federal (also six percent of the budget).
Other means-tested entitlements provide benefits to people and families with incomes below certain minimum levels that vary from program to program. The major means-tested entitlements are food stamps and food aid to Puerto Rico, Supplemental Security Income, Child Nutrition, the Earned Income Tax Credit and veterans’ pensions. This category will account for an estimated six percent of your federal dollar (also six percent of the budget).
The remaining mandatory spending, which mainly consists of federal retirement and insurance programs, unemployment insurance and payments to farmers, comprises six percent of your federal dollar (also six percent of the budget).