Contemporary Economic Issues
Exam Bank
Course Introduction
Contemporary Economic Issues examines the pressing economic challenges and developments facing societies today. The course explores topics such as globalization, income inequality, technological change, environmental sustainability, labor market dynamics, and the implications of monetary and fiscal policies. Students analyze real-world case studies and current events to understand the interconnectedness of economic systems and the impact of policy decisions on national and global scales, fostering critical thinking about possible solutions and future trends in economics.
Recommended Textbook
Macroeconomics 10th Edition by William Boyes
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21 Chapters
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Chapter 1: The Wealth of Nations: Ownership and Economic
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Sample Questions
Q1) The PPC in Figure 1.2 indicates a student who:
A) is more proficient at Economics than English.
B) is more proficient at English than Economics.
C) is equally proficient in Economics and English.
D) prefers Economics over English.
E) prefers English over Economics.
Answer: C
Q2) In Figure 1.3, full employment is shown with:
A) points A, B, and C.
B) only point C.
C) point D.
D) only point A.
E) only point B.
Answer: A
Q3) Specialization according to comparative advantage, followed by trade, allows everyone to acquire more of the goods they want.
A)True
B)False
Answer: True
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Chapter 2: Scarcity and Opportunity Costs
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Q1) Opportunity cost is best defined as:
A) the sum of all alternatives given up when a choice is made.
B) the money spent once a choice is made.
C) the highest-valued alternative given up when a choice is made.
D) the difference between the cost price and the selling price of a good.
E) the cost of capital resources used in the production of additional capital.
Answer: C
Q2) In economics, the concept of opportunity cost is:
A) negated by ensuring that the government has a role in a capitalist society.
B) defined to be the highest-valued alternative that must be forgone when a choice is made.
C) best illustrated by knowing why consumers choose one good over another.
D) quantifiable only if you know the real dollar price of the goods and services you are giving up to consume something.
E) the methodology that government economists use to determine the total amount of the national debt.
Answer: B
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Chapter 3: The Market and Price System
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Q1) The removal of a price ceiling in a market results in:
A) an increase in the market price.
B) a shortage in the market.
C) over-production of the commodity and a surplus.
D) a fall in the market price.
E) abnormal profits for producers.
Answer: A
Q2) Which of the following statements is not true about a market system?
A) The market system provides an incentive to consumers to acquire purchasing ability.
B) The market system magnifies the problem of scarcity of goods and services.
C) The market system provides an incentive for allocating resources.
D) The market system provides an incentive to improve the quality of goods produced.
E) The market system provides everything everyone wants to consume.
Answer: B
Q3) The demand for luxurious goods are usually unaffected by an increase in income.
A)True
B)False
Answer: False
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5
Chapter 4: The Aggregate Economy
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Q1) National economic policies are usually set by the local government in the U.S., making it the focus of economic discussions.
A)True
B)False
Q2) An enterprise that has only one shareholder does not constitute a corporation.
A)True
B)False
Q3) According to the World Bank, the high-income oil-exporting nations like Libya, Saudi Arabia, Kuwait, and the United Arab Emirates:
A) are considered to be still-developing countries.
B) are the major trade partners of the U.S.
C) are considered as underdeveloped economies.
D) have highly interdependent economies.
E) are considered highly-developed countries.
Q4) A person obtains income by selling the services of the resources that he or she owns. A)True
B)False
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Chapter 5: National Income Accounting
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Q1) Wheat produced in the U.S. but sold in Japan would not be included while calculating the U.S. GDP.
A)True
B)False
Q2) Consider GDP calculated according to the expenditures approach. Which of the following components of GDP would need to decrease for GDP to increase?
A) Imports
B) Consumption
C) Exports
D) Investment
E) Government spending
Q3) A reduction in the value of capital goods over time due to their use in production is called:
A) amortization.
B) erosion.
C) consumption.
D) investment.
E) depreciation.
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Chapter 6: An Introduction to the Foreign Exchapterange
Market and the Balance of Payments
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Q1) The domestic currency value of the foreign currency price of a product is equal to:
A) the reciprocal exchange rate between the domestic and foreign currency.
B) the reciprocal of the foreign currency price of the product.
C) the difference between the foreign currency price of the product and the exchange rate between the domestic and foreign currency.
D) the foreign currency price of the product multiplied by the exchange rate between the domestic and foreign currency.
E) the reciprocal exchange rate between the domestic and foreign currency divided by the foreign currency price of the product.
Q2) The Wall Street Journal publishes an exchange rate of US$/C$ = 0.714, where US$ represents the U.S. dollar and C$ represents the Canadian dollar. What does this mean?
A) The Canadian dollar price of one U.S. dollar is US$0.714.
B) The Canadian dollar price of one U.S. dollar is C$0.714.
C) The U.S. dollar price of one Canadian dollar is C$1.40.
D) The U.S. dollar price of one Canadian dollar is US$1.40
E) The U.S. dollar price of one Canadian dollar is US$0.714.
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Chapter 7: Unemployment and Inflation
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Q1) Which of the following led to an introduction of a new currency in Argentina in the mid 1980s?
A) An economic depression
B) A misguided political situation
C) Social instability
D) Hyperinflation
E) A prolonged deflation
Q2) The part of a business cycle that follows a peak is the:
A) trough phase of the cycle.
B) break-even point of the cycle.
C) peak period of the cycle.
D) recessionary phase of the cycle.
E) expansionary phase of the cycle.
Q3) If the average price level in 1991 was 1.20 relative to the base year in 1986, then a dollar in 1991 bought 20 percent more goods and services than a dollar in 1986.
A)True
B)False
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Chapter 8: Macroeconomic Equilibrium: Aggregate
Demand and Supply
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Q1) If a large number of laborers shift from fixed-wage contracts to wages that depend on the cost of living adjustments, the long-run aggregate supply curve for the economy will become relatively steeper.
A)True
B)False
Q2) In the long-run, the aggregate supply curve normally is downward-sloping.
A)True
B)False
Q3) Refer to Figure 8.1. Which of the graphs in the figure best describes the impact of lower real income in Germany on U.S. equilibrium real GDP and the U.S. equilibrium price level?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
E) Panel E
Q4) A change in foreign demand does not affect aggregate demand.
A)True
B)False
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Chapter 9: Aggregate Expenditures
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Sample Questions
Q1) Which of the following is a determinant of investment?
A) Technological change
B) Net exports
C) Demographics
D) Nominal GDP
E) Population
Q2) As capacity utilization in an economy rises:
A) firms sell their fixed assets to remain solvent.
B) the gap between the potential output and actual output widens.
C) firms reduce their demand for labor.
D) employment of inputs by firms declines.
E) firms add more factories and machines and increase output.
Q3) Refer to the Figure 9.4. If the economy is in equilibrium at A, which of the following is most likely to occur if consumers expect a period of rapid economic expansion?
A) The equilibrium will move from point A to point F.
B) The equilibrium will move from point A to point C.
C) There will be a new equilibrium disposable income at point G.
D) The equilibrium will remain at point A.
E) There will be a new equilibrium disposable income at point E.
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Chapter 10: Income and Expenditures Equilibrium
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Sample Questions
Q1) Refer to Table 10.3. The equilibrium value of imports in year 1 is:
A) $1,600
B) $1,450.
C) $1,400.
D) $1,300.
E) $1,200.
Q2) The percentage of a change in income that is spent domestically is:
A) the sum of the MPC and the MPI.
B) the sum of the MPC and the MPS.
C) the difference between the MPC and the MPI.
D) the product of the MPC and the MPI.
E) the sum of the MPS and the MPI.
Q3) A rise in the price level that reduces the real wealth of people who hold financial assets is an illustration of the:
A) interest rate effect.
B) monetary theory.
C) supply-side theory.
D) wealth effect.
E) trade effect
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Page 12
Chapter 11: Fiscal Policy
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Sample Questions
Q1) _____ refers to the changes in government spending and taxation that are aimed at achieving a policy goal.
A) Discretionary monetary policy
B) Discretionary fiscal policy
C) Discretionary foreign trade policy
D) Discretionary exchange rate policy
E) Discretionary interest rate policy
Q2) Suppose the Congress enacts a 5 percent decrease in annual military expenditures. Other things equal, this can be associated with:
A) a change in the slope of the aggregate demand curve.
B) a leftward shift of the aggregate demand curve.
C) a rightward shift of the aggregate demand curve.
D) a movement down along the aggregate demand curve.
E) a movement up along the aggregate demand curve.
Q3) A balanced budget would not affect income because an increase in government spending is exactly matched by an increase in taxes.
A)True
B)False
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Chapter 12: Money and Banking
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Sample Questions
Q1) An increase in the reserve requirement from 20 percent to 25 percent is most likely to:
A) reduce total deposits in the banking system.
B) reduce excess reserves and the deposit expansion multiplier.
C) increase the money supply.
D) reduce the amount of reserves required.
E) increase total deposits and the deposit expansion multiplier.
Q2) Which of the following statements apply to international banking facilities (IBFs)?
A) IBFs are subject to U.S. interest rate regulations.
B) IBFs are located all over the world.
C) IBFs do not require FDIC deposit insurance premiums.
D) IBFs offer a higher interest rate spread than normal U.S. banks.
E) IBFs allow European residents to participate in the American stock exchanges.
Q3) Total reserve holdings over and above required reserves constitute the minimum amount of loans a depository institution can make.
A)True
B)False
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Chapter 13: Monetary Policy
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Sample Questions
Q1) The monetary policy decisions made by the Federal Reserve must be approved by the Congress before they are enacted.
A)True
B)False
Q2) The aggregate demand curve will shift outward and to the right when the Federal Reserve undertakes which of the following monetary policies?
A) Open market purchases of government securities
B) An increase in the discount rate
C) An increase in the reserve requirement
D) A reduction in loans to the U.S. Treasury
E) A more lenient supervision of savings and loan institutions
Q3) 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.
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Chapter 14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility,
and Sources of Business Cycles
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Q1) If an increase in inflation is expected, which of the following events is the least likely to occur?
A) There will be an upward movement along the long-run Phillips curve.
B) Nominal GDP will increase.
C) Nominal wage rates will increase at the same rate as expected inflation.
D) A worker's reservation wage will rise at the same rate as expected inflation.
E) Unemployment rate will increase.
Q2) To some economists, the "Great moderation" means:
A) a small change in real wages.
B) a low inflation rate.
C) a low unemployment rate.
D) low output growth variability.
E) low money supply growth.
Q3) Business inventories tend to fall after an unexpected increase in aggregate demand.
A)True
B)False
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Chapter 15: Macroeconomic Viewpoints: New Keynesian,
Monetarist, and New Classical
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Q1) "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
Q2) Traditional classical economists believe that:
A) wage rates are perfectly flexible.
B) people do not have perfect information about the economy.
C) prices are fixed for long periods of time.
D) the price of resources, technology, and expectations cannot influence the equilibrium?level of real GDP.
E) changes in aggregate demand change only the real GDP.
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Chapter 16: Economic Growth
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Q1) If real GDP remains unchanged, the population size is stationary, and people have more leisure time, then per capita real GDP will _____.
A) overstate actual economic growth
B) understate actual economic growth
C) be the most accurate measure of actual economic growth
D) show that actual economic growth was negative
E) show that actual economic growth was positive
Q2) Other things remaining equal, total factor productivity will fall if _____.
A) labor input grows more slowly than total output
B) capital input grows faster than total output
C) the economy's output divided by total inputs increases
D) the ratio of total output to the stock of labor and capital changes by zero percent
E) the ratio of total output to the stock of labor and capital increases
Q3) A country with a low living standard can save easily.
A)True
B)False
Q4) Consumer spending is considered a determinant of economic growth.
A)True
B)False
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Chapter 17: Development Economics
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Sample Questions
Q1) Which of the following is most likely to be a reason for immigrants to become entrepreneurs in developing countries?
A) They usually hold government positions.
B) They are poorer than the domestic population.
C) They are risk-averse.
D) They have skills and experience that are lacking in poor nations.
E) They quickly assimilate to their new environment.
Q2) As of 2010, the World Bank classified a country as a low-income economy when its domestic per capita GDP fell below _____.
A) $1000
B) $995
C) $675
D) $530
E) $475
Q3) Less-developed countries are experiencing rapid population growth because _____.
A) birthrates are rising at a slower rate than mortality rates
B) birthrates are falling while mortality rates are rising
C) both birthrates and mortality rates are falling
D) birthrates are rising while mortality rates are falling
E) birthrates are constant and mortality rates are rising
Page 19
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Chapter 18: Globalization
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Sample Questions
Q1) The primary international reserve asset is foreign currency, mainly _____.
A) Japanese yen
B) eurobonds
C) ringgit
D) U.S. dollars
E) Chinese yuan
Q2) India is one of the countries that did not participate in the process of 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
Q4) International trade constantly increased throughout the twentieth century.
A)True
B)False
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Chapter 19: World Trade Equilibrium
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Sample Questions
Q1) Which of the following counties are largely dependent on trade with the United States?
A) China and Japan
B) U.K. and Germany
C) Canada and Mexico
D) France and Belgium
E) Canada and U.K
Q2) If the world price is below the domestic "no-trade" equilibrium price, then with international trade:
A) the domestic shortage can be eliminated by rationing.
B) the domestic surplus can be consumed at home.
C) the domestic surplus can be exported to the rest of the world.
D) the domestic quantity demanded is equal to that supplied by the world.
E) the domestic shortage can be met by foreign imports.
Q3) Trade between industrial countries account for the majority of international trade.
A)True
B)False
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Chapter 20: International Trade Restrictions
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Q1) Protection provided to the infant industries is rarely withdrawn because:
A) the costs of withdrawing protection outweigh the benefits.
B) the industries begin to experience diseconomies of scale.
C) it leads to a loss of government revenue.
D) the industries produce goods which are close substitutes of the imported goods.
E) the larger and more successful the industry becomes, the more political power it wields.
Q2) When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.
A)True
B)False
Q3) Industries that are truly critical to the national defense should be protected from foreign competition if that is the only way to ensure their existence.
A)True
B)False
Q4) Every country imposes tariffs on at least some imports.
A)True
B)False
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Chapter 21: Exchapterange Rates and Financial Links
Between Countries
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Q1) The exchange-rate arrangement that emerged from the Bretton Woods conference is often called a managed float standard.
A)True
B)False
Q2) How many U.S. dollars does a U.S. importer need to pay for 100,000 yen worth of stereo equipment when the price of 1 yen is $0.008?
A) $125 million
B) $1.25 million
C) $80,000
D) $1,250
E) $800
Q3) Under a fixed exchange-rate system, in order to maintain the exchange rate:
A) governments must adopt a laissez-faire economic policy.
B) all trading partners must enjoy the same level of economic growth.
C) currencies must be inconvertible.
D) the imports of one country must equal the exports of its trading partner.
E) governments must intervene in the foreign exchange market.
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