Contemporary Economic Issues
Exam Practice Tests
Course Introduction
This course examines current economic challenges and debates shaping societies globally, including income inequality, unemployment, globalization, sustainability, and the impacts of technological change. Students will develop a critical understanding of how economic theories and policies address issues such as environmental degradation, international trade disputes, fiscal crises, and economic growth in both developed and developing countries. Through case studies and analysis of recent data, the course encourages students to engage with real-world economic problems and policy responses, preparing them to interpret and contribute to ongoing public discussions about economic change in the modern world.
Recommended Textbook
ECON MACRO4 4th Edition by
William A. McEachern
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3789 Verified Questions
3789 Flashcards
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Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) Economists believe that people respond in a predictable way to changes in costs and benefits. The term that best describes this phenomenon is
A)opportunity cost
B)scarcity
C)innovation
D)marginal analysis
E)other things equal (or ceteris paribus)
Answer: D
Q2) Economics is as much art as it is science.
A)True
B)False
Answer: True
Q3) In economics, the term "marginal" usually refers to
A)a small change in an economic variable
B)a low-quality product or resource
C)an unimportant and irrelevant economic variable
D)an all-or-nothing economic decision
E)a footnote or minor point
Answer: A
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Page 3
Chapter 2: Understanding Graphs-Appendix
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Sample
Questions
Q1) In Exhibit 1-2, at x = 10, the
A)value of y is larger on curve A than on curve B
B)value of y is smaller on curve A than on curve B
C)value of y is the same on curve A as on curve B
D)slope of line A is negative
E)slope of line B is positive
Answer: C
Q2) Refer to Exhibit 1-16. Which graph illustrates a negative relationship between variable X and variable Y initially but then a positive relationship?
A)a
B)b
C)c
D)d
E)e
Answer: D
Q3) The slope of a U-shaped curve is infinity at the bottom of the U.
A)True
B)False
Answer: False
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Chapter 3: Economic Tools and Economics Systems
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Sample Questions
Q1) Suppose you have a choice of working full-time during the summer or going full-time to summer school. Summer tuition and books are $2,200. If you worked, you could make $7,000. Your rent is $1,000 for the summer, regardless of your choice. The opportunity cost of going to summer school is, therefore,
A)$2,200
B)$7,000
C)$8,000
D)$9,200
E)$10,200
Answer: D
Q2) The cost of attending college
A)is entirely monetary and consists of expenditures on tuition, books, transportation, and meals
B)is not monetary, but consists solely of forgone income
C)is the most valued alternative given up to attend college
D)is negligible for most people, because they really have no choice but to attend college
E)is the same whether you attend a public or a private college
Answer: C
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Chapter 4: Economic Decision Makers
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Sample
Questions
Q1) What part of federal government spending has grown the most slowly in recent decades?
A)national defense
B)welfare
C)interest on the national debt
D)social security and medicare
E)all other forms of federal government spending
Q2) Mr. Thomson has a before-tax income of $20,000 and paid taxes of $2,000. Ms. Lynch had a before-tax income of $10,000 and paid taxes of $1,500. Based on this information, which of the following is correct?
A)The tax system is progressive.
B)The tax system is proportional.
C)The tax system is regressive.
D)The tax system is based on the benefits received.
E)There is insufficient information to answer the question.
Q3) As the real wage increases, the opportunity cost of working outside the home increases.
A)True
B)False
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Page 6
Chapter 5: Demand, Supply, and Markets
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Sample Questions
Q1) An increase in demand will cause a(n)
A)increase in supply
B)decrease in supply
C)decrease in quantity supplied
D)increase in quantity supplied
E)decrease in equilibrium price
Q2) If the supply curves for the following goods were plotted, they all would slope upward except one. Which is the exception?
A)red Corvettes
B)yogurt
C)diamond rings
D)original copies of the Mona Lisa
E)wine from Greece
Q3) If a decrease in the price of a good causes a rightward shift of the demand curve for that good, then it is an inferior good.
A)True
B)False
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Chapter 6: Introduction to Macroeconomics
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Sample Questions
Q1) Since 1929, total U.S. employment
A)remained about the same while population increased
B)increased faster than the U.S. population
C)grew faster than real GDP so that real GDP per worker fell
D)grew more slowly than real GDP so that real GDP per worker fell
E)more than quadrupled
Q2) According to John Maynard Keynes' General Theory of Employment, Interest and Money, in order to get an economy out of a depression, the government should
A)increase spending
B)decrease spending
C)reduce taxes
D)increase taxes
E)allow the economy to correct itself
Q3) The Reagan tax cut of 1981 was an attempt at supply-side economics.
A)True
B)False
Q4) The Reagan administration's policies were aimed at managing aggregate demand.
A)True
B)False
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Chapter 7: Tracking the Us Economy
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Sample Questions
Q1) Which of the following is not a problem associated with GDP as a measure of social welfare?
A)It excludes many nonmarket activities.
B)It values all types of output equally.
C)It excludes pollution damage.
D)It excludes intermediate goods as a separate entry.
E)It excludes the value of leisure time.
Q2) Which of the actions below will not increase GDP?
A)Bears prowl suburban areas, overturning garbage cans so that the town must hire more sanitation workers to clean up.
B)Vandals spray paint all over brick buildings, increasing business for paint removal services.
C)An installer of automobile tires takes a knife to the tires of cars parked in his neighborhood.
D)A homemaker spends $20 taking the family to lunch at Burger King instead of spending the $20 to buy food to prepare at home.
E)A consumer has a tune-up done on his pick-up truck at the local garage.
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Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Which type of unemployment is experienced by a person who is laid off at an office because new technology reduces the need to handle customer service inquiries?
A)seasonal
B)cyclical
C)voluntary
D)structural
E)frictional
Q2) Exclusion of which of the following tends to understate the true extent of unemployment in the economy?
A)children
B)retired persons
C)students
D)people who do not want to work
E)discouraged workers
Q3) Full employment is when the unemployment rate is zero.
A)True
B)False
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Chapter 9: Productivity and Growth
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Sample Questions
Q1) An increase in the amount of capital per worker will
A)increase labor productivity but not capital productivity
B)increase capital productivity but not labor productivity
C)increase both labor and capital productivity
D)shift the per-worker production function upward
E)increase total output but not the productivity levels of individual workers
Q2) The resource whose productivity is most commonly measured is
A)labor
B)capital
C)land
D)energy
E)money
Q3) Since 1870, U.S. labor productivity growth has averaged roughly 2.1 percent annually.
A)True
B)False
Q4) Improvements in technology shift the per-worker production function downward.
A)True
B)False
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Chapter 10: Aaggregate Expenditure and Agregate Demand
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Sample Questions
Q1) Which of the following is the most volatile component of GDP?
A)investment (I)
B)consumption (C)
C)saving (S)
D)government purchases (G)
E)net exports (X - M)
Q2) Given the data in Exhibit 9-1, the level of saving decreases as disposable income increases.
A)True
B)False
Q3) More of society's resources will be channeled into capital when
A)interest rates are high
B)households decide to save less of their income
C)businesspeople have optimistic expectations about the future
D)corporate income taxes increase
E)aggregate income decreases
Q4) A decline in the interest rate, other things constant, shifts the investment function downward.
A)True
B)False
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Chapter 11: Aggregate Expenditure and Aggregate Demand
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148 Flashcards
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Sample Questions
Q1) We can use an aggregate expenditure line to show how an aggregate demand curve shifts by
A)shifting the 45-degree line
B)letting changes in autonomous spending shift the aggregate expenditure line
C)letting changes in the price level shift the aggregate expenditure line
D)letting changes in the level of income shift the aggregate expenditure line
E)letting changes in real GDP shift the aggregate expenditure line
Q2) In Exhibit 10-2, the government budget
A)has a deficit of $1 trillion
B)has a surplus of $1 trillion
C)is balanced
D)has a deficit of $2 trillion
E)has a surplus of $2 trillion
Q3) A decrease in the price level will have which of the following effects?
A)The real value of dollar-denominated assets will fall.
B)The aggregate expenditure line will shift upward.
C)The equilibrium level of output demanded will fall.
D)There will be upward movement along a particular aggregate demand curve.
E)The aggregate demand curve will shift rightward.
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Page 13
Chapter 12: Aggregate Supply
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Sample Questions
Q1) If the actual price level in Exhibit 11-2 exceeds the expected price level, then
A)equilibrium output is Y<sub>2</sub> in the short run
B)equilibrium output is Y<sub>1</sub> in the short run
C)the actual unemployment rate is below the natural rate
D)potential output is greater than actual output
E)the actual price level is less than the equilibrium price level
Q2) The potential output of an economy is the level of output produced when the A)real wage equals the nominal wage
B)price level is constant
C)expected real wage equals the inflation rate
D)expected price level equals the unemployment rate
E)expected price level equals the actual price level
Q3) Increases in the costs of production will shift the short-run aggregate supply curve to the left.
A)True
B)False
Q4) A decrease in the expected price level will shift the short-run aggregate supply curve.
A)True
B)False
Page 14
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Chapter 13: Fiscal Policy
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Sample Questions
Q1) Prior to the Great Depression, the principal fiscal policy was a balanced budget.
A)True
B)False
Q2) If the Naval Research Labs fired a chemist and the Environmental Protection Agency hired her at the same salary, the net effect of these events would to be __________ in aggregate demand.
A)an increase (rightward shift)
B)an increase (leftward shift)
C)a decrease (rightward shift)
D)a decrease (leftward shift)
E)no change
Q3) If the government wants the economy illustrated in Exhibit 12-4 to be at full employment, it should
A)increase taxes
B)decrease transfer payments
C)decrease government purchases
D)wait for the SRAS curve to shift to the left
E)do none of the above
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Chapter 14: Federal Budgets and Public Policy
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Sample
Questions
Q1) Federal budget deficits grow during recessions because
A)both tax revenues and transfer payments decrease
B)both tax revenues and transfer payments increase
C)tax revenues decrease while transfer payments increase
D)tax revenues increase while transfer payments decrease
E)tax revenues decrease but transfer payments are unchanged
Q2) A continuing resolution
A)shuts down government agencies in the absence of an approved budget
B)allows agencies to spend at the rate of the previous year in the absence of an approved budget
C)enables Congress to override the President's budget
D)contributes to the efficiency of the federal budget process
E)is seldom used
Q3) Which component of aggregate expenditure is most subject to crowding out?
A)consumption expenditures
B)investment spending
C)U.S. imports
D)government purchases of goods and services
E)saving
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Page 16
Chapter 15: Money and the Financial System
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Sample Questions
Q1) All of the following are depository institutions except one. Which is the exception?
A)commercial banks
B)savings and loan associations
C)stock brokers
D)mutual savings banks
E)credit unions
Q2) The United States has a dual banking system consisting of state banks and national banks.
A)True
B)False
Q3) Commodity money is something
A)that has no intrinsic value
B)that has an intrinsic value
C)that is based on a valuable metal
D)whose value never changes
E)whose value changes frequently
Q4) The chairman of the Fed is appointed by the president.
A)True
B)False
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Chapter 16: Banking and the Money Supply
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Sample Questions
Q1) Suppose that a bank has $100 million in checkable deposits and the required reserve ratio is 0.1. The bank has $5 million in actual reserves, so excess reserves are
A)$-10 million
B)$-5 million
C)0
D)$5 million
E)$10 million
Q2) Which of the following are the two forms in which a bank can legally hold reserves?
A)gold and coins
B)gold and checks
C)cash in its vault and non-interest-bearing reserve deposits at the Fed D)gold and non-interest-bearing reserve deposits at the Fed
E)U.S. government securities and coins
Q3) A bank can increase the money supply by the amount of total reserves it holds.
A)True
B)False
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Chapter 17: Monetary Theory and Policy
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Sample Questions
Q1) Planned investment expenditures will eventually increase after
A)the money supply decreases
B)the demand for money increases
C)the interest rate falls
D)the Fed sells government securities
E)business managers are pessimistic about future market conditions for their product
Q2) If the Fed sells government securities to banks, eventually we expect
A)the price level to increase
B)planned investment expenditures to increase
C)aggregate demand to increase
D)short-run aggregate supply to increase
E)interest rates to increase
Q3) In the situation shown in Exhibit 16-3, how could the Fed return the economy to potential output?
A)decrease government spending
B)decrease excess reserves in the banking system
C)sell U.S. government bonds to banks
D)increase the discount rate
E)lower the required reserve ratio
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Page 19
Chapter 18: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) Opponents of inflation targets say that
A)such targets encourage workers to plan on a low and stable inflation rate and hold down demands for wage increases
B)the Fed will pay less attention to jobs and economic growth
C)such targets encourage firms to plan on a low and stable inflation rate and hold down price increases
D)such targets encourage investors to plan on a low and stable inflation rate and hold down demands for interest rate increases
E)None of the answers is correct
Q2) Along the short-run Phillips curve, when the unemployment rate goes down,
A)unemployment benefit payments go up
B)prices go down
C)the Phillips curve shifts outward
D)the inflation rate goes up
E)there is no change in the rate of inflation
Q3) The short-run Phillips curve is drawn for a given expected inflation rate and so it shifts as inflation expectations change.
A)True
B)False
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Page 20
Chapter 19: International Trade
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Sample Questions
Q1) In Exhibit 19-1, the United States has an absolute advantage in the production of both rice and t-shirts.
A)True
B)False
Q2) In Exhibit 19-2, if the world price of corn is $2 and there are no trade restrictions, the United States will
A)produce 3,000, consume 7,000, and export 2,000 bushels of corn
B)have an excess supply of corn
C)be a net exporter of corn
D)not produce any corn
E)consume all of the corn that it produces
Q3) The General Agreement on Tariffs and Trade (GATT) was established in
A)1870 to protect U.S. industries and decrease world trade
B)1921 to manage legal and accounting requirements for U.S. tariffs and quotas
C)1947 to reduce trade restrictions among 23 countries
D)1973 to increase trade restrictions, after OPEC significantly raised oil prices
E)1990 to create a common market
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Chapter 20: International Finance
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Sample Questions
Q1) If the exchange rate changes from 20 cents per franc to 18 cents per franc, the U.S. dollar has
A)appreciated, since its value has increased
B)appreciated, since its value has declined
C)depreciated, making French goods more expensive in U.S. dollars
D)depreciated, since its value has declined
E)depreciated, since its value has increased
Q2) A floating exchange rate
A)is determined by the national governments involved
B)remains extremely stable over long periods of time
C)is determined by the actions of central banks
D)is allowed to vary only within a narrow range
E)adjusts in response to market forces
Q3) Which of the following is not considered a unilateral transfer?
A)foreign aid from one government to another
B)income earned from foreign investments
C)personal gifts to friends in foreign countries
D)donations to foreign countries from non-government domestic charities
E)government transfers to foreign residents
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Page 22
Chapter 21: Economic Development
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Sample Questions
Q1) In developing countries, it is not true that
A)banks are often viewed with suspicion
B)at the first sign of economic problems, many bank depositors withdraw their funds
C)because banks cannot rely on a continuous supply of deposits, banks cannot make loans for extended periods
D)if financial institutions fail to serve as intermediaries between savers and borrowers, the lack of funds for investment will make growth rates double
E)the credit provided by banks as a percent of total output is one fifth that in high-income countries
Q2) When a developing country relies on export promotion,
A)it concentrates on producing for its domestic market
B)it builds its technological and educational base and then can make more complex products for export
C)domestic producers have sufficient protection that they can afford to become inefficient
D)its government must intervene more in markets
E)None of the answers is correct
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