Business Economics
Exam Answer Key
Course Introduction
Business Economics explores the foundational principles and analytical tools necessary for understanding how economic theory applies to real-world business decision-making. The course covers topics such as market structure and competition, pricing strategies, production and cost analysis, and the impact of government regulation on businesses. By examining both microeconomic and macroeconomic forces, students learn how firms navigate the challenges of resource allocation, demand forecasting, and financial planning within various market environments. The course equips students with critical thinking skills and economic insight essential for effective strategic planning and management in the business sector.
Recommended Textbook
Macroeconomics 5th Edition by Stephen
D. Williamson
Available Study Resources on Quizplus
18 Chapters
966 Verified Questions
966 Flashcards
Source URL: https://quizplus.com/study-set/357
Page 2
Chapter 1: Introduction
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/5954
Sample Questions
Q1) Business cycles are
A) each unique, but all have a single cause.
B) each unique and they can have many causes.
C) similar, and they all have a single cause.
D) similar, but they can have many causes.
Answer: D
Q2) For the study of economic growth,it is most helpful to examine movements in ________; for the study of business cycles,it is most helpful to examine movements in
A) trend GNP; trend GNP
B) trend GNP; deviations from trend in GNP
C) deviations from trend in GNP; trend GNP
D) deviations from trend in GNP; deviations from trend in GNP
Answer: B
Q3) A likely explanation for the 2008-2009 recession is
A) an increase in energy prices.
B) financial market problems.
C) a drastic reduction in government expenses.
D) an increase in taxes.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Measurement
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/5955
Sample Questions
Q1) All of the following present significant problems with measuring real GDP and the price level except
A) changes in absolute price levels.
B) changes in relative price levels.
C) changes in the quality of goods over time.
D) the introduction of new goods.
Answer: A
Q2) Suppose that GDP is equal to 1000,national saving is equal to 200,the current account deficit is equal to 100,and the government budget deficit is equal to 50.
Investment must equal
A) 150.
B) 200.
C) 250.
D) 300.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Business Cycle Measurement
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/5956
Sample Questions
Q1) Which of the following is not a correct characterization of the U.S. business cycle?
A) Employment is procyclical.
B) Consumption is procyclical.
C) Real wages are procyclical.
D) Prices are procyclical.
Answer: D
Q2) Which of the following is not a correct characterization of the U.S. business cycle?
A) Prices are procyclical.
B) Consumption fluctuates little.
C) Investment fluctuates a lot.
D) Average labor productivity is procyclical.
Answer: A
Q3) Real investment tends to be
A) procyclical and less variable than real GDP.
B) procyclical and more variable than real GDP.
C) countercyclical and less variable than real GDP.
D) countercyclical and more variable than real GDP.
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
5
Chapter 4: Consumer and Firm Behavior: The Work-Leisure
Decision and Profit Maximization
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/5957
Sample Questions
Q1) The fact that indifference curves are downward sloping A) is not true.
B) follows from the fact that more is preferred to less.
C) follows from the property that the consumer likes diversity in his or her consumption bundle.
D) follows from the property that consumption and leisure are normal goods.
Q2) If the firm hires more labor,everything else held constant,then
A) the marginal product of labor falls.
B) output decreases.
C) there is an increase in the marginal product of labor.
D) total factor productivity falls.
Q3) A production function describes the
A) technological possibilities for converting factor inputs into outputs.
B) intellectual possibilities for converting factor inputs into outputs.
C) amount of resources available to the representative firm.
D) actual process of converting factor inputs into outputs.
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: A Closed-Economy One-Period Macroeconomic
Model
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/5958
Sample Questions
Q1) The presence of a distorting tax on wage income can result in
A) MPN < MRT?,C.
B) MRT?,C < MRS?,C.
C) MPN < w.
D) MRS?,C < MPN
Q2) In the model of public goods
A) GDP is fixed.
B) there is a production function.
C) labor supply matters.
D) public goods production is proportional to labor input.
Q3) The production possibilities frontier represents
A) all combinations of consumption and leisure for fixed output.
B) all equally affordable combinations of consumption and leisure for a given wage.
C) all technologically feasible combinations of consumption and leisure.
D) all equally liked combinations of consumption and leisure.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Search and Unemployment
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/5959
Sample Questions
Q1) In the 1948-2012 data,the unemployment rate was highest in A) 2009
B) 1991
C) 1975
D) 1982
Q2) A decrease in matching efficiency
A) can never happen.
B) is due to a change in the productivity of firms.
C) is not related to sectoral shocks.
D) can explain the shift in the Beveridge curve.
Q3) If N is the working-age population,Q is the labor force,and U is the number of unemployed,then the employment/population ratio is measured as
A) N/Q
B) U/Q
C) (Q-U)/N
D) Q/N
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Economic Growth: Malthus and Solow
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/5960
Sample Questions
Q1) In the Malthusian model of economic growth
A) Per capita consumption affects birth rates and death rates.
B) Per capita consumption affects birth rates but not death rates.
C) Per capita consumption affects death rates but not birth rates.
D) Per capita consumption is always constant.
Q2) If an epidemic hits a Malthusian economy,the immediate consequence is
A) an increase in the standard of living.
B) a reduction in the standard of living.
C) no change in the standard of living.
D) dependent on the population growth rate.
Q3) Growth accounting,popularized by Robert Solow,attempts to attribute a change in aggregate output
A) to its most important single cause.
B) separately between changes in government policy and changes in total factor productivity.
C) separately between changes in total factor productivity and changes in the supplies of factors of production.
D) separately between changes in the supplies of factors of production and changes in government policy.
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Income Disparity Among Countries and Endogenous Growth
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/5961
Sample Questions
Q1) An example of an increase in b,the efficiency of human capital accumulation,is
A) more mandatory school years.
B) better teachers.
C) better school material.
D) better total factor productivity.
Q2) According to the endogenous growth model with human capital,what can we say about countries with more efficient schools?
A) They are richer.
B) They are richer and grow faster.
C) They are richer and grow more slowly.
D) They grow faster.
Q3) The Solow growth model tells us that the standard living in country A can be higher than in country B for all the following reasons,except
A) country A has lower population growth than country B.
B) country A has a higher savings rate than country B.
C) country A has a higher depreciation rate than country B.
D) country A has higher total factor productivity than country B.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: A Two-Period Model: The Consumption-Savings
Decision and Credit Markets
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/5962
Sample Questions
Q1) Ricardian equivalence implies
A) that when the government borrows more, the market real interest rate goes up.
B) that if the government saves less, then the nation saves less.
C) that when taxes are cut people consume more.
D) that consumers will save their tax cuts to pay their future taxes.
Q2) In the data,which of the following is most volatile?
A) real GDP
B) consumption of durables
C) consumption of nondurables
D) consumption of services
Q3) Intertemporal decisions involve economic decisions
A) made within a given period of time.
B) made in between two periods of time.
C) involving trade-offs across periods of time.
D) that ignore concerns about the future.
Q4) The endowment point is the consumption bundle in which
A) first-period consumption is equal to zero.
B) second-period consumption is equal to zero.
C) the consumer finds the most utility.
D) consumption is equal to disposable income in each period.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter
Available Study Resources on Quizplus for this Chatper
28 Verified Questions
28 Flashcards
Source URL: https://quizplus.com/quiz/5963
Sample Questions
Q1) If a consumer borrows at an interest rate greater than the interest rate at which he or she can lend,then
A) banks cannot make a profit.
B) the budget constraint has a kink at the endowment point.
C) the consumer must be a lender.
D) this makes no difference for consumer behavior.
Q2) In the two-period model with asymmetric information,the presence of bad borrowers who always default
A) makes good borrowers better off.
B) matters only for the loan interest rate faced by bad borrowers.
C) affects the equilibrium profits of banks.
D) affects good borrowers adversely.
Q3) Limited commitment means
A) one cannot credibly promise something.
B) one saves only part of what is optimal.
C) only some households are allowed to save.
D) there is rationing on the credit market.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: A Real Intertemporal Model with Investment
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/5964
Sample Questions
Q1) Firms discount future profits at the interest rate r because
A) it is the interest rate on their debt.
B) it is the same rate as for households.
C) Ricardian equivalence holds.
D) it has to equal the marginal productivity of capital in equilibrium.
Q2) In the real intertemporal model,if future total factor productivity increases,this captures the effects of A) intemporal substitution.
B) Ricardian equivalence.
C) the government expenditure multiplier.
D) news shocks.
Q3) The condition,MRS?,'C' = w ',describes the representative consumer's A) investment decision.
B) consumption - savings decision.
C) current period work - leisure decision.
D) future period work - leisure decision.
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Money, Banking, Prices, and Monetary Policy
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/5965
Sample Questions
Q1) In the Friedman-Lucas money surprise model
A) consumers cannot observe all aggregate variables.
B) prices are sticky.
C) money is neutral.
D) credit market frictions matter.
Q2) The Taylor rule
A) is a rule stating that money should grow at a constant rate.
B) is not considered to be a practical policy rule for central banks to follow.
C) dictates that the central bank's target interest rate be responsive to real economic activity and to inflation.
D) dictates that the nominal interest rate stay constant in the long run.
Q3) The real return on bonds is
A) 0.
B) r.
C) R.
D) i.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Business Cycle Models with Flexible Prices and Wages
Available Study Resources on Quizplus for this Chatper
37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/5966
Sample Questions
Q1) The phenomenon of underutilization of labor during a recession is called
A) labor stockpiling.
B) investing in human capital.
C) labor force stabilization.
D) labor hoarding.
Q2) An important critique of real business cycle theory is the belief that cyclical movements in total factor productivity
A) rarely occur.
B) may, in part, be an artifact of measurement error.
C) lead to imperceptible changes in labor demand.
D) are too small to account for the size of fluctuations in real GDP.
Q3) According to real business cycle theory
A) monetary policy is driving business cycles.
B) Federal Reserve actions need to be watched closely.
C) technology shocks have a major role in business cycles.
D) cash-in-advance is necessarily to explain business cycles.
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: New Keynesian Economics: Sticky Prices
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/5967
Sample Questions
Q1) In the New Keynesian model,the stabilization effects of fiscal and monetary policy are different because
A) the effects on the composition of output are different.
B) monetary policy does not work in a liquidity trap, but fiscal policy does.
C) monetary policy affects spending on goods indirectly; fiscal policy affects spending directly.
D) all of the above.
Q2) Under fiscal stabilization policy in the New Keynesian model,after a positive shock to output,
A) the government increases expenditures and the central bank increases the money supply.
B) the government increases expenditures and the central bank decreases the money supply.
C) the government decreases expenditures and the central bank increases the money supply.
D) the government decreases expenditures and the central bank decreases the money supply.
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: International Trade in Goods and Assets
Available Study Resources on Quizplus for this Chatper
23 Verified Questions
23 Flashcards
Source URL: https://quizplus.com/quiz/5968
Sample Questions
Q1) The behavior of investment and real GDP in the United States after the 1990s
A) is not consistent with the two-period model with production.
B) is consistent with the effects of an increase in the government deficit in the two-period model with production.
C) is consistent with the effects of an increase in optimism about future total factor productivity in the two-period model with production.
D) is consistent with the effects of a decrease in the government deficit in the two-period model with production.
Q2) In a two-period model,holding everything else constant,an increase in future taxes
A) unambiguously increases the current account surplus.
B) unambiguously decreases the current account surplus.
C) has an uncertain effect on the current account surplus.
D) has no effect on the current account surplus, as long as Ricardian equivalence holds.
To view all questions and flashcards with answers, click on the resource link above.
17
Chapter 16: Money in the Open Economy
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/5969
Sample Questions
Q1) In the New Keynesian open economy model,if the exchange rate is fixed
A) fiscal policy and monetary policy are powerless.
B) fiscal policy is an effective stabilization tool.
C) a change in current total factor productivity increases output.
D) monetary policy is an effective stabilization tool.
Q2) Which of the following was specifically instituted to ensure a successful hard peg?
A) the Bretton Woods Agreement
B) the European Monetary System
C) the European Monetary Union
D) the International Monetary Fund
Q3) A principal reason that purchasing power parity does not hold exactly in practice is
A) that foreign and domestic assets are not perfect substitutes.
B) the existence of non-traded goods.
C) that consumers in different countries have different preferences.
D) that costs of production are not the same in all countries.
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Money, Inflation, and Banking
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/5970
Sample Questions
Q1) If money is superneutral,
A) a one-time change in the money supply has no real impact.
B) a one-time change in the money supply has a real impact.
C) a change in the money growth rate has no real impact.
D) a change in the money growth rate has a real impact.
Q2) The double coincidence of wants problem is solved by
A) credit markets.
B) government intervention.
C) the use of money.
D) specialization.
Q3) There is a double coincidence of wants when
A) person 1 has what person 2 wants, who in turn wants what person 3 has.
B) person 1 has what person 2 wants, and person 2 has money.
C) person 1 has what person 2 wants, and person 2 has what person 1 wants.
D) person 1 has money, and person 2 has what person 1 wants.
Q4) The gold standard is an example of A) commodity money.
B) commodity-backed paper currency.
C) barter currency.
D) fiat money.
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Inflation, the Phillips Curve, and Central Bank Commitment
Available Study Resources on Quizplus for this Chatper
21 Verified Questions
21 Flashcards
Source URL: https://quizplus.com/quiz/5971
Sample Questions
Q1) If the central bank cannot commit,then
A) the inflation rate is higher than with commitment, but aggregate output is the same.
B) money is neutral in the short run.
C) the inflation rate is higher than with commitment, and aggregate output is lower.
D) the central bank can permanently increase the quantity of real output.
Q2) The fact that private sector economic agents cannot be systematically fooled by economic policymakers is implied by
A) the Phillips curve.
B) time inconsistency.
C) commitment.
D) the rational expectations hypothesis.
Q3) Time inconsistency means
A) taking different decisions at different times despite facing the same situation.
B) making policy choices that violate the intertemporal budget constraint.
C) deciding to do something tomorrow, and then doing something different tomorrow.
D) adding a random factor to decisions.
To view all questions and flashcards with answers, click on the resource link above.