Business Economics
Exam Bank
Course Introduction
Business Economics examines the application of economic theory and analytical tools to business decision-making. The course covers essential topics such as market structures, demand and supply analysis, production and cost functions, pricing strategies, and the impact of government policies on business operations. Emphasis is placed on understanding how economic forces influence organizational strategy, resource allocation, and overall business performance in both domestic and global contexts. Through real-world case studies and practical examples, students develop the ability to make informed economic decisions that enhance business effectiveness and sustainability.
Recommended Textbook
Macroeconomics 9th Edition by Andrew B. Abel
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15 Chapters
1566 Verified Questions
1566 Flashcards
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Page 2
Chapter 1: Introduction to Macroeconomics
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73 Verified Questions
73 Flashcards
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Sample Questions
Q1) When national output declines,the economy is said to be in A)an expansion.
B)a deflation.
C)an inflation.
D)a recession.
Answer: D
Q2) In the 1980s,1990s,and 2000s,the United States has had a
A)small trade surplus.
B)small trade deficit.
C)large trade deficit.
D)large trade surplus.
Answer: C
Q3) The main goal of macroeconomic research is to
A)predict how the macroeconomy will perform in the future.
B)analyze current macroeconomic data.
C)develop new data that can be used to understand better the operation of the economy.
D)make general statements about how the economy works.
Answer: D
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Page 3
Chapter 2: The Measurement and Structure of the National Economy
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110 Flashcards
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Sample Questions
Q1) The Boskin Commission concluded that the CPI overstates increases in the cost of living by ________ percentage point(s)per year.
A)Less than 1
B)1 to 2
C)About 3
D)Over 4
Answer: B
Q2) Private disposable income equals
A)GNP - taxes + transfers + interest.
B)NNP - taxes + transfers + interest.
C)national income - taxes + transfers + interest.
D)national income - taxes - transfers + interest.
Answer: A
Q3) The value of real GDP in the current year equals
A)the value of current-year output in prices of the base year.
B)the value of current-year output in prices of the current year.
C)the value of base-year output in prices of the base year.
D)the value of base-year output in prices of the current year.
Answer: A
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Chapter 3: Productivity, output, and Employment
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111 Flashcards
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Sample Questions
Q1) According to Okun's Law,if the natural rate of unemployment is 5% and the actual unemployment rate is 4%,what is the level of full-employment output if output equals $10,125 billion?
A)$10,328 billion
B)$10,226 billion
C)$10,025 billion
D)$9926 billion
Answer: D
Q2) The real wage
A)is the nominal wage divided by the price level.
B)automatically increases with the cost of living.
C)is the price level divided by the nominal wage.
D)is the nominal wage multiplied by the price level.
Answer: A
Q3) An increase in the real wage rate will cause
A)the labor demand curve to shift to the right.
B)the labor demand curve to shift to the left.
C)the quantity of labor demanded to rise.
D)a movement along the labor demand curve.
Answer: D
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Chapter 4: Consumption, saving, and Investment
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Sample Questions
Q1) An economy has full-employment output of 5000.Government purchases are 1000.Desired consumption and desired investment are given by C<sup>d </sup>= 30002000r + 0.10Y
I<sup>d </sup>= 1000 - 4000r
Where Y is output and r is the real interest rate.The real interest rate that clears the goods market is equal to
A)1)25%.
B)2)50%.
C)8)33%.
D)25.00%.
Q2) How would the expected real after-tax rate of return be affected by each of the following events?
(1)the tax rate on interest income increases
(2)expected inflation declines
Q3) Tobin's q is equal to
A)the ratio of capital's market value to its replacement cost.
B)the ratio of capital's replacement cost to its market value.
C)the expected after-tax real interest rate.
D)the stock market value of a firm.
Q4) What is the marginal propensity to consume,and why is it always less than one?
Page 6
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Chapter 5: Saving and Investment in the Open Economy
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118 Flashcards
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Sample Questions
Q1) In a small open economy,S<sup>d</sup> = 200 + 500r<sup>w</sup> and I<sup>d</sup> = 300 - 200r<sup>w</sup>.If r<sup>w</sup> = 0.1,then net exports = A)-50.
B)-30.
C)30.
D)50.
Q2) Suppose output is $440 billion,government purchases are $40 billion,desired consumption is $320 billion,and net exports are $35 billion.Then desired investment equals
A)$20 billion.
B)$30 billion.
C)$35 billion.
D)$45 billion.
Q3) In a two-economy model of the United States and another large economy made up of the rest of the world,if desired saving by the rest of the world declined
A)U)S. investment would increase.
B)U)S. saving would decrease.
C)the world real interest rate would increase.
D)the world real interest rate would decrease.
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Page 7
Chapter 6: Long-Run Economic Growth
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Sample Questions
Q1) Which of the following best describes a steady state?
A)Political stability is maintained by the state.
B)The standard of living is increasing at a stable rate.
C)Each firm in the economy receives a steady stream of income.
D)Output per worker, consumption per worker, and capital per worker are constant.
Q2) An increase in population growth will lead to a ________ in the steady-state capital-labor ratio and a ________ in output per worker.
A)fall; fall
B)fall; rise
C)rise; rise
D)rise; fall
Q3) The growth accounting equation is
A)Y = Aa<sub>K</sub>K a<sub>N</sub>N
B)Y = AF(K, N)
C) Y/Y = A/A + a<sub>K</sub> K/K + a<sub>N</sub> N/N
D) Y/Y = A/A - a<sub>K</sub> K/K - a<sub>N</sub> N/N
Q4) What types of government policies can increase long-run living standards?
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8
Chapter 7: The Asset Market, money, and Prices
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Sample Questions
Q1) One of moneys primary roles in the economy comes from the use of money to transfer purchasing power to the future.This role of money is called
A)store of value.
B)unit of account.
C)medium of exchange.
D)standard of deferred payment.
Q2) moneys primary role in the economy comes from the benefits of lowering transactions costs and allowing specialization.This function of money is called A)store of value.
B)medium of exchange.
C)standard of deferred payment.
D)unit of account.
Q3) Which of the following statements about M1 and M2 is true?
A)Demand deposits are not part of M1.
B)M2 is more liquid than M1.
C)M1 is larger than M2.
D)Savings deposits are part of M2.
Q4) What are the major components of M1? What are the major components of M2? Describe each component.
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Chapter 8: Business Cycles
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Sample Questions
Q1) The ADS Business Conditions Index is a
A)leading index based on variables released with different frequencies.
B)coincident index based on variables released with different frequencies.
C)leading index based on 85 monthly variables.
D)coincident index based on 85 monthly variables.
Q2) In the long run,a reduction in labor supply would cause output to ________ and the aggregate price level to ________.
A)fall; rise
B)fall; fall
C)rise; fall
D)rise; rise
Q3) Which of the following macroeconomic variables is the most seasonally procyclical?
A)Expenditure on services
B)The unemployment rate
C)Expenditure on durable goods
D)The real wage
Q4) What are some of the problems with using the leading indicators to forecast recessions? If you were a policymaker,would you rely on them?
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Chapter 9: The Is-Lmad-As Model
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Sample Questions
Q1) A temporary adverse supply shock directly causes
A)a shift down and to the left of the IS curve.
B)a shift to the left of the FE line.
C)a shift down and to the right of the LM curve.
D)a shift up and to the right of the IS curve.
Q2) At a given output level,a temporary reduction in government purchases will
A)increase desired saving, causing the IS curve to shift down and to the left.
B)increase desired saving, causing the IS curve to shift up and to the right.
C)decrease desired saving, causing the IS curve to shift down and to the left.
D)decrease desired saving, causing the IS curve to shift up and to the right.
Q3) The probably effect of introducing an increased number of automatic teller machines is to
A)increase money demand, shifting the LM curve up and to the left.
B)increase money demand, shifting the LM curve down and to the right.
C)decrease money demand, shifting the LM curve up and to the left.
D)decrease money demand, shifting the LM curve down and to the right.
Q4) Calculate the real money supply growth rate when the nominal money supply increases by 10% and the price level increases by each of the following percentages: a)2%; b)8%; c)10%; d)15%.
Q5) Describe what happens to the FE line if government purchases increase.
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Chapter 10: Classical Business Cycle Analysis
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106 Flashcards
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Sample Questions
Q1) If producers have imperfect information about the general price level and sometimes misinterpret changes in the general price level as changes in relative prices,then
A)the short-run aggregate supply curve is vertical.
B)the short-run aggregate supply curve slopes upward.
C)the aggregate demand curve is vertical.
D)the aggregate demand curve is horizontal.
Q2) In recession years,________ jobs are lost than created,and vacancies and job openings ________.
A)more; increase
B)more; decline
C)fewer; decline
D)fewer; increase
Q3) The most common measure of productivity shocks is known as
A)the Solow residual.
B)the Lucas supply curve.
C)the Prescott productivity parameter.
D)the Kydland factor.
Q4) According to the real business cycle theory,what is the principal cause of business cycle fluctuations?
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Chapter 11: Keynesianism: the Macroeconomics of Wage and Price Rigidity
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Sample Questions
Q1) In the Keynesian model in the short run,a decrease in government purchases causes output to ________ and the real interest rate to ________.
A)fall; rise
B)fall; fall
C)rise; rise
D)rise; fall
Q2) The effort curve is
A)horizontal, because work effort is independent of the real wage.
B)negatively sloped, because of diminishing marginal returns to labor.
C)positively sloped, because of the law of increasing cost.
D)S-shaped, because a small increase in the real wage will increase work effort more at an intermediate wage than at a low wage or at a high wage.
Q3) According to Nakamura and Steinsson's research,prices are ________ sticky than Bils and Klenow found because the latter failed to account for ________.
A)more; sales
B)more; taxes
C)less; taxes
D)less; sales
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Chapter 12: Unemployment and Inflation
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101 Flashcards
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Sample Questions
Q1) In years when teenagers become a greater percentage of the labor force,
A)the natural rate of unemployment falls.
B)the natural rate of unemployment rises.
C)the inflation rate rises.
D)the inflation rate falls.
Q2) The argument that when policy changes,people's behavior changes so that historical relationships between macroeconomic variables will no longer hold is known as
A)the Phillips curve.
B)the policy irrelevance hypothesis.
C)hysteresis.
D)the Lucas critique.
Q3) Classical macroeconomists argue that the short-run Phillips curve ________ represent a usable trade-off for policymakers because ________.
A)does; people have rational expectations
B)does; people do not have rational expectations
C)does not; people do not have rational expectations
D)does not; people have rational expectations
Q4) Describe the principal costs of unemployment.Are there any benefits to unemployment?
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Chapter 13: Exchange Rates, business Cycles, and
Macroeconomic Policy in the Open Economy
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Suppose the Swiss franc rises against the British pound but falls against the Japanese yen.What happens to the prices of goods imported into Switzerland?
A)Both British and Japanese goods fall in price.
B)Both British and Japanese goods rise in price.
C)British goods rise in price while Japanese goods fall in price.
D)British goods fall in price while Japanese goods rise in price.
Q2) An increase in the foreign real interest rate would cause the domestic country's net exports to ________ and cause the domestic country's IS curve to ________.
A)rise; shift up
B)rise; shift down
C)fall; shift up
D)fall; shift down
Q3) Describe the effects of contractionary fiscal policy by the domestic government on output,the real interest rate,and net exports in both the domestic and foreign country,using a Keynesian model.
Q4) Describe how the euro was created.What are the benefits of the monetary union? What are the costs?
Q5) What is purchasing power parity? Why might it not hold?
Page 15
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Chapter 14: Monetary Policy and the Federal Reserve System
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Sample Questions
Q1) Vault cash is equal to $2 million,deposits by depository institutions at the central bank are $1 million,the monetary base is $15 million,and bank deposits are $35 million.Currency held by the nonbank public is
A)$3 million.
B)$12 million.
C)$15 million.
D)$20 million.
Q2) Since the 1930s,the Fed's most important tool for controlling the money supply has been
A)setting the discount rate.
B)setting reserve requirements.
C)moral suasion.
D)open-market operations.
Q3) Which of the following is an instrument of monetary policy?
A)The interest rate on three-month Treasury bills
B)The mortgage interest rate
C)The discount rate
D)The budget deficit
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Chapter 15: Government Spending and Its Financing
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Sample Questions
Q1) Since 1960,the only period of several years when the full-employment government budget deficit was negative (that is,there was a full-employment surplus)was
A)from 2000 to 2005.
B)the late 1990s and early 2000s.
C)the mid-1980s.
D)the early 1970s.
Q2) The idea that all aspects of economic behavior,such as labor supply,saving,and investment,respond to economic incentives,especially tax rates,is known as A)New Keynesian economics.
B)new classical economics.
C)tax-structured classical economics.
D)supply-side economics.
Q3) The revenue that a government raises by printing money is called A)seignorage.
B)monetary revenue.
C)currency credit.
D)currency inflation.
Q4) What are the main reasons (give at least three)that Ricardian equivalence might not hold?
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