Are You Economically Literate?

First Published: 2002-11-23

Survey courtesy of The Federal Reserve Bank of Minneapolis, U.S.A.

1) Which of the following occurs when one country trades wheat to another in exchange for oil?

a. Both countries gain

b. Both countries lose

c. The country that trades wheat gains, the country that trades oil loses

d. The country that trades oil gains, the country that trades wheat loses

 

2) What is the most important task of all economics?

a. To balance imports and exports

b. To balance the government’s budget

c. To make the best use of scarce resources

d. To save money to reduce the national debt.

 

3) When a country’s people and its other resources are fully employed, which of the following must be true before more of any one item can be produced?

a. Private enterprise has to produce it rather than the government

b. There has to be less production of other products

c. There has to be a general decrease in prices.

 

4) When industries or countries specialize in producing goods and services, this results in…..?

a. Increased price inflation

b. Less output per hour worked

c. Greater economic interdependence

d. More equal distribution of income.

 

5) What is the most essential characteristic of a market economy?

a. Effective labour unions

b. Good government regulation

c. Responsible action by business leaders.

d. Active competition in the marketplace.

 

6) In a market economy, individuals pursue their own self-interest. Does this serve the public interest because of the….?

a. Operation of competitive markets

b. Social responsibility of business leaders

c. Careful planning and coordination of market activity

d. Individuals understand what is in the public interest.

 

7) What would happen to employment if the government mandated a minimum wage above what employers currently pay?

a. Employment would go up

b. Employment would go down

c. Employment would stay the same

 

8) Why do professional sports players generally earn more than farmers and steelworkers?

a. Team owners are monopolists

b. Sports players are really entertainers rather than producers

c. There are fewer professional sports players than farmers or steelworkers

d. Good sports players are more scarce, given the demand for their services

 

9) Which of the following approaches to pollution control makes the best use of a country’s economic resources?

a. Abolishing the use of toxic chemicals

b. Using resources to reduce all pollution damage.

c. Controlling pollution as long as the extra benefits are greater than the extra costs.

d. Prohibiting economic activities that cause pollution or harm the environment.

 

10) Which of the following limits and economy’s potential output?

a. The quantity and quality of labour, capital and natural resources

b. Business demand for final goods and services

c. Government regulations and spending

d. The amount of money in circulation.

 

11) What must the government do to reduce high inflation?

a. Increase both spending and the money supply

b. Decrease both spending and the money supply

c. Decrease spending and increase the money supply

d. Increase spending and decrease the money supply.

 

12) Why are private businesses not likely to operate a lighthouse?

a. Ship owners buy insurance to protect themselves from losses so they won’t pay for lighthouses

b. The light from the lighthouse can be used even by ships that do not pay a fee for the service

c. It would cost private business more to operate a lighthouse than it costs government

d. The cost of operating a lighthouse is too high.

 

You can find the answers by clicking this link to the Economic Lieracy Test, or you can print and complete the test, mail it to The Nassau Institute at P.O. Box N-1688 and we will mark it and let you know your results.

Please print this form, circle your answers and fax to (242) 322-1361 – or mail to: The Nassau Institute P.O. Box N-1688 Nassau, N.P. Bahamas.

 

The answers and your marks will be sent to you.

 

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