Business Economics
Exam Practice Tests
Course Introduction
Business Economics explores the application of economic theories, tools, and concepts to real-world business decision-making. The course examines how businesses operate within various market structures, allocate resources, respond to changes in demand and supply, and make pricing decisions. Students will analyze the impact of macroeconomic factors such as inflation, interest rates, and government policy on firm behavior and profitability. Case studies and practical examples illustrate how economic thinking informs strategic planning, risk assessment, and resource optimization within organizations. This course builds a strong foundation for understanding the economic environment of business and for making informed managerial choices.
Recommended Textbook
Macroeconomics 10th Edition by William Boyes
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21 Chapters
2257 Verified Questions
2257 Flashcards
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Page 2
Chapter 1: The Wealth of Nations: Ownership and Economic
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) A limitation one faces when shopping for clothes is the amount of time available to shop.
A)True
B)False
Answer: True
Q2) Which of the following should not be considered as an opportunity cost of attending college?
A) Expenses that are the same whether or not you attend college
B) Lost salary
C) Business lunches
D) Interest that could have been earned on your money had you put the money into a savings account, rather than spent it on tuition
E) Opportunities sacrificed in the decision to attend college
Answer: A
Q3) When you work to support your lifestyle, you are making a tradeoff.
A)True
B)False Answer: True
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Chapter 2: Scarcity and Opportunity Costs
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Sample Questions
Q1) Refer to Table 2.1. According to the production possibilities schedule, in the table above, which of the following statements is true?
A) Moving from choice 2 to choice 3, the opportunity cost of producing 20 more units of good B is 20 units of good A.
B) There are increasing opportunity costs associated with producing more units of good B.
C) Moving from choice 3 to choice 4, the opportunity cost of producing 20 more units of good B is 30 units of good A.
D) Moving from choice 1 to choice 2, the opportunity cost of producing 20 more units of good B is 10 units of good A.
E) All of these statements are true.
Answer: E
Q2) Julio makes wine and beer. Last year he made 20 bottles of wine and 20 cases of beer. If the price of grapes goes down (making wine cheaper to make), Julio will be able to make the same amount of wine and more beer.
A)True
B)False
Answer: True
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Page 4
Chapter 3: The Market and Price System
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Sample Questions
Q1) A rent control law, where tenants pay below-market rents, is a market restriction that may induce a decrease in the supply of rented apartments.
A)True
B)False
Answer: True
Q2) If more firms enter the telecommunications industry, we can expect the equilibrium price of telecom services to decrease and the equilibrium number of services to increase.
A)True
B)False
Answer: True
Q3) Consider the market described by Table 3.4. Identify the correct statement.
A) The law of demand is violated
B) The law of supply is violated
C) There is no equilibrium
D) At $5 per unit, people will purchase 400 units
E) At $2 per unit, people will purchase 900 units
Answer: D
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5
Chapter 4: The Aggregate Economy
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Sample Questions
Q1) Households and firms pay taxes to the government to:
A) increase their consumption spending.
B) finance the country's import bill.
C) increase their savings.
D) improve their standard of living.
E) finance government expenditures.
Q2) Which of the following is considered a financial intermediary?
A) The Federal Reserve
B) A bankruptcy court
C) The U.S. Department of Commerce
D) A credit union
E) A foreign exchange
Q3) The term "import" refers to:
A) a purchase of goods or services from another country.
B) a business transaction between two or more domestic firms.
C) a sale of goods or services to another nation.
D) a tax on foreign merchandise.
E) a trade agreement between two industrial countries.
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Chapter 5: National Income Accounting
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104 Flashcards
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Sample Questions
Q1) National income accounting fills in the dollar values in the circular flow of income.
A)True
B)False
Q2) Refer to Table 5.6. What is the constant-dollar real GDP growth from 1995 to 2003 using 2003 as the base year?
A) 50 percent
B) Zero percent
C) -75 percent
D) 100 percent
E) 14 percent
Q3) Which of the following is subtracted from GNP when calculating net national product?
A) Interest
B) Capital consumption allowance
C) Rent
D) Indirect business taxes
E) Income tax
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Page 7
Chapter 6: An Introduction to the Foreign Exchapterange
Market and the Balance of Payments
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99 Verified Questions
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Sample Questions
Q1) A computer sells for $800 in the United States and for 600 British pounds in England. Given an exchange rate of 0.65 British pounds = $1, how do the computer prices of these countries compare?
A) The computer sells for the same price in both countries.
B) The computer costs $923 more in the United States.
C) The computer costs $95 more in England.
D) The computer costs $124 less in the United States.
E) The computer costs $124 less in England.
Q2) Suppose a U.S. resident buys a car from a car maker in Japan. This transaction will:
A) have a negative effect on Japan's balance of trade in merchandise.
B) have a negative effect on the U.S. balance of trade in merchandise.
C) have a positive effect on the U.S. balance of trade in merchandise.
D) bring money into the United States.
E) have no effect on Japan's balance of trade in merchandise.
Q3) If Michelle can buy a woolen jacket for 40 yuan in China, and Rebecca pays $40 for the same jacket in the U.S., it implies that the exchange rate between these two nations is 10 yuan = $1.
A)True
B)False
Page 8
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Chapter 7: Unemployment and Inflation
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Which of the following is true of hyperinflation?
A) It causes the value of a currency to deteriorate so quickly that people become reluctant to hold that currency.
B) It is a situation in which people hoard currency expecting its value to increase in recent future.
C) It is a simultaneous increase in inflation and decrease in the quality of products.
D) It occurred in the United States in the 1970s.
E) It is a synonym for cost-push inflation.
Q2) Which of the following is not a coincident indicator of the business cycle?
A) Unemployment claims
B) Payroll employment
C) Industrial production
D) Personal income
E) Manufacturing and trade sales
Q3) Institutionalized adults are not considered to be a part of the labor force by the Bureau of Labor Statistics.
A)True
B)False
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9
Chapter 8: Macroeconomic Equilibrium: Aggregate
Demand and Supply
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Sample Questions
Q1) Refer to Figure 8.3. Movement from point B to point D could be initiated by:
A) a stock market crash that undermines consumer confidence.
B) a tax code changes that improve investor expectations.
C) a national emergency that increases government spending.
D) a higher net exports because of economic expansion in European countries.
E) a technological advancement.
Q2) A higher domestic price level lowers aggregate expenditures and, therefore, shifts the aggregate demand curve to the left.
A)True
B)False
Q3) Identify the correct statement.
A) As domestic income rises, imports rise and net exports fall.
B) As foreign income rises, net exports fall.
C) As domestic income falls, imports rise and net exports fall.
D) As domestic income rises, imports fall and net exports rise.
E) As foreign income falls, net exports rise.
Q4) In the long run, increased government spending is ineffective in raising equilibrium real GDP.
A)True
B)False
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Chapter 9: Aggregate Expenditures
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Sample Questions
Q1) Which of the following is least likely to contribute to the volatility of investment spending?
A) Expectations about business conditions
B) Changes in government spending
C) Changes in tax laws
D) Changes in capacity utilization
E) Interest rate fluctuations
Q2) Dissaving occurs when the consumption function lies below the 45-degree line.
A)True
B)False
Q3) If capacity utilization by businesses remains constant, investment spending is likely to be the most volatile component of aggregate expenditures in the United States.
A)True
B)False
Q4) An increase in the marginal propensity to consume necessarily reduces the marginal propensity to save.
A)True
B)False
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Page 11
Chapter 10: Income and Expenditures Equilibrium
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Sample Questions
Q1) Which of the following is true at the equilibrium level of income?
A) Unplanned inventory changes are positive.
B) Firms are unable to produce the desired rate of output.
C) Autonomous consumption spending is equal to induced consumption spending.
D) Aggregate expenditures equal real GDP.
E) Unplanned investment spending is positive.
Q2) Everything else constant, the international trade effect indicates that aggregate expenditures in the domestic economy fall when:
A) domestic prices fall relative to foreign prices.
B) domestic interest rates fall relative to foreign interest rates.
C) domestic prices rise relative to foreign prices.
D) domestic purchasing power rises relative to foreign purchasing power.
E) domestic interest rates rise relative to foreign interest rates.
Q3) Consider the economy described in Table 10.2. At an income level of $2,100:
A) leakages exceed injections by $800.
B) total output exceeds aggregate expenditures by $500.
C) injections exceed leakages by $500.
D) injections are equal to total output.
E) aggregate expenditures exceed total output by $500.
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Page 12
Chapter 11: Fiscal Policy
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Sample Questions
Q1) A higher U.S. federal budget deficit may act to raise future U.S. interest payments to foreigners.
A)True
B)False
Q2) Which of the following is true of fiscal policy before the Great Depression of the 1930s?
A) Fiscal policy was made at the federal level.
B) Policies associated with national defense were made at the state level.
C) Environmental degradation and education were the focus areas of the federal government while other areas of government policy were dealt by individual states.
D) The federal budget was determined mostly by economists and not by politicians.
E) National defense and foreign trade were the focus areas of the federal government while other areas of government policy were dealt by individual states.
Q3) A progressive tax system is one in which the tax rate actually increases as income rises.
A)True B)False
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Page 13
Chapter 12: Money and Banking
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Sample Questions
Q1) Perishable goods such as tomatoes and milk are never used as a form of money, primarily because they cannot function as:
A) a store of purchasing power.
B) a means of payment.
C) a standard of deferred payment.
D) a medium of exchange.
E) a unit of account.
Q2) The primary international reserve asset in most countries is:
A) silver.
B) gold.
C) the euro.
D) the U.S. dollar.
E) the Japanese yen.
Q3) What is the immediate effect when Bank A lends $1,000 to a local business?
A) The money supply increases by $1,000.
B) The money supply decreases by $1,000.
C) Bank A's liability increases by $1,000.
D) Bank A's excess reserves increase by $1,000.
E) Bank A's demand deposits decrease by $1,000.
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Page 14
Chapter 13: Monetary Policy
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Sample Questions
Q1) Suppose a bank has $850 million in vault cash and a deposit in the Fed of $100 million. If the bank's required reserves equal $500 million, then the bank has excess reserves of:
A) $100 million.
B) $350 million.
C) $400 million.
D) $450 million.
E) $500 million.
Q2) Suppose the interest rate on a bond is 12.5 percent and that bond pays $90 a year in interest and sells for $720. If the supply of bonds increases and the price of the bond falls to $600, the interest rate will ____ to ____.
A) increase; 15 percent
B) increase; 17.5 percent
C) decrease; 7.5 percent
D) decrease; 10 percent
E) increase; 13 percent
Q3) The Federal Reserve (Fed) was created by the Congress as an independent agency.
A)True
B)False
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Chapter 14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility,
and Sources of Business Cycles
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117 Verified Questions
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Sample Questions
Q1) Suppose that a labor union negotiates an increase in wages of 4 percent for the coming year because annual inflation for the past five years has been 4 percent. The expectations formed by the union are:
A) pessimistic expectations.
B) deductive expectations.
C) rational expectations.
D) adaptive expectations.
E) optimistic expectations.
Q2) In the short run, a decline in aggregate demand would be associated with:
A) an inward shift of the Phillips curve.
B) an outward shift of the Phillips curve.
C) an upward movement along the Phillips curve.
D) a downward movement along the Phillips curve.
E) no change along the Phillips curve.
Q3) Business inventories tend to fall after an unexpected increase in aggregate demand.
A)True
B)False
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Page 16
Chapter 15: Macroeconomic Viewpoints: New Keynesian,
Monetarist, and New Classical
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Sample Questions
Q1) According to the traditional classical school of thought, aggregate supply is vertical both in the short run and in the long run.
A)True
B)False
Q2) "The market is not a self-regulating mechanism because prices are not flexible and nothing ensures that planned leakages will be offset by planned injections. To bring the economy out of depression and end high unemployment, some way of stimulating aggregate demand is required. This can be best achieved by a combination of government deficit spending and regulation of tax rates." Which school of thought does this statement best represent?
A) Utopian economics
B) Monetarist economics
C) Classical economics
D) Keynesian economics
E) Marxist economics
Q3) Agreeing with Keynesian economists, monetarists believe that the economy is subject to disequilibrium that must be corrected by government action.
A)True
B)False
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Chapter 16: Economic Growth
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Sample Questions
Q1) Per capita real GDP is of limited use as a measure of economic well being for all the following reasons, except:
A) it says nothing about the quality of the environment.
B) it does not reflect the degree of personal freedom in a society.
C) it is not adjusted for changes in leisure time.
D) it is not adjusted for changes in the rate of inflation.
E) it says nothing about the distribution of income.
Q2) Total factor productivity is the ratio of a:
A) firm's marginal revenue to its marginal cost.
B) firm's total revenues to its total costs.
C) nation's total income to its total output.
D) nation's output to its stock of labor and capital.
E) nation's savings to its capital stock.
Q3) Contrary to popular belief, U.S. productivity growth did not actually improve in the mid 1990s despite the massive growth in technological innovation.
A)True
B)False
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Page 18
Chapter 17: Development Economics
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Sample Questions
Q1) What is measured by the ratio of export prices to import prices?
A) The terms of trade
B) The productivity ratio
C) The trade standards
D) The gains from trade
E) The balance of trade
Q2) The predominant source of multilateral aid is:
A) the European Community.
B) the United Nations.
C) the Agency for International Development.
D) the World Bank.
E) the British government.
Q3) Which of the following is true of import-substitution strategies?
A) They dominate the strategies of the developing world.
B) They focus on the production of goods not produced in developed countries.
C) They focus on the production of exportable goods.
D) These strategies lower the price of the domestically produced goods than the imported goods.
E) They generally require the removal of import barriers like tariffs or quotas.
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Page 19
Chapter 18: Globalization
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Sample Questions
Q1) Which of the following is a measure of political globalization (one of the three categories used by the KOF Swiss Economic Institute)?
A) Participation in U.N. peace missions
B) Spread of ideas
C) Flow of information
D) Limits on externalities
E) Progressive taxation
Q2) Supporters of globalization argue that multinational firms pay higher wages than local firms, and provide greater benefits for workers than existed in the country prior to globalization.
A)True
B)False
Q3) Which of the following multinational agreements allows the international movement of workers?
A) NATO
B) The European Union
C) The group of G-8
D) NAFTA
E) The United Nations Accords
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Page 20
Chapter 19: World Trade Equilibrium
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Sample Questions
Q1) Firms in industrial countries find a larger market for their goods in other industrial countries than in developing countries because:
A) the consumption patterns in the industrial countries are highly heterogeneous.
B) the trade policies of the industrial nations are more favorable than the developing countries.
C) the industrial countries tend to have a higher population than the developing countries.
D) the industrial countries are capital intensive countries.
E) the consumption patterns in the industrial countries are more or less similar.
Q2) The Dutch Disease had occurred in Netherlands because:
A) the Netherlands government had borrowed heavily from the World Bank to meet its Balance of Payment deficits.
B) the price of the primary commodities declined in the international market.
C) the demand for natural gas exports from Netherlands increased substantially.
D) the currency of Netherlands depreciated in the international market.
E) the price of the commodities manufactured by Netherlands declined in the international market.
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21
Chapter 20: International Trade Restrictions
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Sample Questions
Q1) The abbreviation GATT stands for:
A) General Analysis of Taxes and Transfers.
B) General Agreement on Tariffs and Trade.
C) Government Agency for Trade and Transportation.
D) Government Agency for Treaties and Taxes.
E) General Agreement on Terms of Trade.
Q2) In reality international trade is determined solely by comparative advantage and the free market forces of supply and demand.
A)True
B)False
Q3) When production does not proceed on the basis of comparative advantage, resources are expended on their most efficient uses.
A)True
B)False
Q4) Government standards for products sold in the domestic market can have the effect of protecting domestic producers from foreign competition.
A)True
B)False
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Page 22
Chapter 21: Exchapterange Rates and Financial Links
Between Countries
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Sample Questions
Q1) Refer to Figure 21.2. An increase in the equilibrium quantity of British pounds from 300 to 350 would most likely mean that:
A) the demand for British pounds has decreased.
B) the supply of British pounds has decreased.
C) increased demand for dollars has caused the dollar to depreciate and the pound to appreciate.
D) increased demand for dollars has caused the dollar to appreciate and the pound to depreciate.
E) the equilibrium exchange rate is $1.60 per British pound.
Q2) When a U.S. importer needs $22,000 to settle an invoice for 25,520 Swiss francs, the exchange rate must be:
A) 1 Swiss franc = $1.16.
B) 1 Swiss franc = $0.16.
C) 1 Swiss franc = $0.84.
D) $1 = 1.16 Swiss franc.
E) $1 = 1.84 Swiss franc.
Q3) Fixed exchange rates serve as a constraint on inflationary government policies.
A)True
B)False
Page 23
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