Applied Economics

Fourth Summative Test

Name: _______________________________________ Date: __________ Score: ___________

I. True or False. Write TRUE if the statement is true and FALSE if it is otherwise on the space before each item.

___________1. The higher the interest rate, the lower the quantity of investments; the lower the interest rate, the higher the
quantity of investments.
___________2. When the cost of borrowing is low; more people are encouraged to avail of loans.
___________3. With changes in technology, demand for capital will have to increase in order to keep up with these
important developments.
___________4. When GDP is high, the level of production increases. This boosts demand for capital and encourages
higher investments.
___________5. A change in interest rates will not result in a change in investment demand.
___________6. Remote areas have higher land rents than city areas.
___________7. Land is easily liquidated.
___________8. There is a negative or inverse relationship between investment and interest rate.
___________9. As wage increases, more people will enter the labor market and compete for higher-paying jobs.
___________10. Rent is the price paid for the use of land and other natural resources or factors of production that is in
fixed supply.

II. Identification. Identify the following.

___________1. It refers to the value of machinery, plants, and buildings that are bought by firms for production purpose.
___________2. These are forms of investment that are suitable for risk tolerant individuals.
___________3. When the labor demand and supply meet at a certain wage and quantity of workers, an equilibrium is
reached. This point of equilibrium is called the ____________________.
___________4. It is the act of levying tax so that the sovereign, through its law-making body, can raise income to defray the
necessary expenses of the government.
___________5. These are taxes levied by government on goods and services to raise revenue and to act as an instrument of
fiscal policy.
___________6. These are investments that provide fixed periodic sources of income over a certain period of time.
___________7. It is the difference in wages that arise to offset the nonmonetary characteristics of different jobs.
___________8. These are taxes that place greater burden on those best able to pay and put little to no burden on the poor.
___________9. It is the lowest allowed wage paid to workers by virtue of legislation and government policies.
___________10. It refers to the amount of money lent out by a lender to a borrower, for which the borrower will pay an
interest rate to the lender for the use of that fund.
___________11. Also means capital spending.
___________12. These are taxes that are levied on households. These are taxes on particular persons.
___________13. It represents the cost of using or borrowing money.
___________14. This form of taxation takes a greater proportion of tax from a low-income taxpayer than from a high-
income taxpayer.
___________15. Taxes are levied at a constant rate as income rises.
III. Enumeration. Provide what is being asked for.

1. Give 5 of the basic principles of taxation.

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2. Give 4 determinants of investment.
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IV. ESSAY. Provide a brief and concise explanation. (3 pts. each)

1. Taxes are the lifeblood of the government.

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2. The scarcity of land becomes the concept of rent.

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Rubric for Writing Essay

3 2 1
Explained briefly and concisely but
Explained briefly and concisely Did not explain fully the concept
did not give examples or vice
providing examples. and did not provide examples.
versa.