Contemporary Economic Issues
Exam Review
Course Introduction
This course provides an in-depth exploration of the major economic challenges and debates shaping todays world. Students will examine issues such as globalization, income inequality, unemployment, environmental sustainability, and the impacts of technological change on economies. Emphasis is placed on understanding the policy responses to these issues at national and global levels, as well as analyzing their social, political, and ethical implications. Through case studies, data analysis, and current events, the course encourages critical thinking and informed discussion about the complexities of contemporary economic life.
Recommended Textbook
Macroeconomics Principles Applications and Tools 8th Edition by OSullivan SheffrinPerez
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19 Chapters
2875 Verified Questions
2875 Flashcards
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Page 2
Chapter 1: Introduction: What Is Economics?
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) Resources are all of the following EXCEPT
A) unlimited and in abundance.
B) the things we use to produce goods and services.
C) limited in quantity and can be used in different ways.
D) scarce and therefore require choices to be made.
Answer: A
Q2) Economics is best defined as the study of
A) financial decision-making.
B) how consumers make purchasing decisions.
C) the choices made by people faced with scarcity.
D) inflation, unemployment, and economic growth.
Answer: C
Q3) When economists assume that people are rational and respond to incentives, they mean
A) people act with kindness.
B) people are altruistic.
C) people act in their own self-interest.
D) people are selfish.
Answer: C
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Page 3
Chapter 2: The Key Principles of Economics
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144 Flashcards
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Sample Questions
Q1) The principle that individuals and firms pick the activity level where the incremental benefit of that activity equals the incremental cost of that activity is known as the A) marginal principle.
B) principle of opportunity cost.
C) principle of diminishing returns.
D) spillover principle.
Answer: A
Q2) What is a marginal benefit?
Answer: A marginal benefit is the additional benefit resulting from a small increase in the production of a good.
Q3) At what point should Jasper Johns consider painting his own house?
A) if the house painter charges $500 per day and takes 20 days to paint the house
B) if the house painter charged $2,500 per day, since that is excessive for painting a house
C) if his earnings dropped to $1,000 per day
D) if the house painter charged more for 10 days worth of work than Johns could earn each day
Answer: D
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4
Chapter 3: Exchange and Markets
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111 Flashcards
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Sample Questions
Q1) According to this Application, workers in the EU were more productive than workers in Latvia in the 1990s, yet EU nations still purchased products from Latvia. This is because Latvia ________ in the production of the products it sold to EU nations.
A) had an absolute advantage
B) had a comparative advantage
C) used fewer resources
D) had a higher opportunity cost
Answer: B
Q2) Specialization and exchange result from differences in productivity that lead to A) opportunity cost.
B) comparative advantage.
C) absolute advantage.
D) self-sufficiency.
Answer: B
Q3) Market failure happens when a market does not generate the most efficient outcome.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Demand, Supply, and Market Equilibrium
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172 Flashcards
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Sample Questions
Q1) Figure 4.5 illustrates a set of supply and demand curves for hamburgers. An increase in supply and an increase in quantity demanded are represented by a movement from
A) point a to point b.
B) point a to point c.
C) point d to point b.
D) point c to point d.
Q2) Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, if the market quantity supplied is 18, the price must be
A) $2.
B) $3.
C) $4.
D) $5.
Q3) When the price of apples goes up
A) the demand for apples will decrease, ceteris paribus.
B) the demand for apples will increase, ceteris paribus.
C) the quantity of apples demanded will decrease, ceteris paribus.
D) the quantity of apples demanded will increase, ceteris paribus.
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Chapter 5: Measuring a Nation's Production and Income
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Sample Questions
Q1) If Cassie's Coffee House purchases 33 cents worth of ingredients and spends 36 cents on wages per cup of coffee to produce an 89 cent cup of coffee, then Cassie's Coffee House's contribution to GDP is ________ per cup of coffee.
A) 20 cents
B) 33 cents
C) 36 cents
D) 56 cents
Q2) This Application addresses the economic concept of
A) real versus nominal GDP.
B) fluctuations in GDP.
C) GDP as a measure of welfare.
D) measuring a nation's national income.
Q3) According to this Application, why is the value of Wal-Mart's 2008 sales NOT an accurate measurement of its actual sales impact on the U.S. economy?
A) The sales figure did not account for chain-weighted inflation measurements.
B) The sales figure includes the value of purchases from other firms.
C) The sales figure did not take into account the recession of 2008.
D) The sales figure was in nominal, not real, dollars..
Q4) Explain the difference between U.S. GDP and U.S. GNP.
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Chapter 6:Unemployment and Inflation
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155 Flashcards
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Sample Questions
Q1) Marginally attached workers are discouraged workers who have stopped their job search for reasons other than the lack of jobs.
A)True
B)False
Q2) Economists define the unemployed as individuals who are
A) not currently working.
B) not currently working but are actively looking for work.
C) working but looking for a different job.
D) working less than their desired amount of time.
Q3) At full employment there is no
A) structural unemployment.
B) cyclical unemployment.
C) frictional unemployment.
D) all of the above
Q4) Unemployment insurance typically replaces a worker's full earnings.
A)True
B)False
Q5) What is a "cost-of-living" adjustment?
Q6) Could the advent of the Internet completely eliminate frictional unemployment?
Q7) What is meant by the term "the natural rate of unemployment"?
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Chapter 7:The Economy at Full Employment
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148 Flashcards
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Sample Questions
Q1) Consider a two-input production function, one of which is increasing while the other is fixed. At the point of diminishing returns, output will
A) increase at an increasing rate.
B) increase at a decreasing rate.
C) decrease at an increasing rate.
D) decrease at a decreasing rate.
Q2) Which of the following factors is likely to increase the amount of available labor and decrease the real wages of workers?
A) consumers demanding more goods
B) a large number of factory closings
C) a high influx of immigration
D) in increase in the supply of capital stock
Q3) If the demand for labor ________, real wages fall and the amount of labor employed ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
Q4) Explain the difference between nominal wages and real wages.
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Chapter 8: Why Do Economies Grow?
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167 Flashcards
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Sample Questions
Q1) At a 3.5 percent annual growth rate it would take 20 years for GDP per capita to double.
A)True B)False
Q2) The point of diminishing returns means that output will decrease at an increasing rate.
A)True B)False
Q3) According to this Application, transformative economic growth, such as that which occurred with the Industrial Revolution, typically requires
A) more participatory political institutions.
B) more authoritarian political institutions.
C) both participatory and authoritarian political institutions.
D) neither participatory nor authoritarian political institutions.
Q4) As the stock of capital grows, there will typically be ________ depreciation.
A) less
B) more
C) the same amount of
D) no
Q5) In what two ways can education contribute to economic growth?
Page 10
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Chapter 9: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) When consumers spend and buy things regardless of their level of income, this is known as
A) bad financial management.
B) living the good life.
C) autonomous consumption spending.
D) using credit to its maximum.
Q2) Figure 9.1 shows three aggregate demand curves. A movement from curve AD<sub>1</sub> to curve AD<sub>0</sub> could be caused by a(n)
A) increase in the money supply.
B) decrease in taxes.
C) increase in the price level.
D) decrease in government spending.
Q3) Explain why the long-run aggregate supply curve is vertical.
Q4) The multiplier represents the ratio of the total shift in aggregate demand to the
A) total shift in short-run aggregate supply.
B) initial shift in short-run aggregate supply.
C) initial shift in aggregate demand.
D) total shift in long-run aggregate supply.
Q5) Define "autonomous consumption spending."
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Chapter 10: Fiscal Policy
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133 Flashcards
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Sample Questions
Q1) Estate and gift taxes account for a very small portion of total tax revenues collected by the federal government because taxes are levied only on large estates.
A)True
B)False
Q2) The time it takes to formulate a policy is known as
A) fiscal policy.
B) crowding out.
C) inside lags.
D) outside lags.
Q3) Spending on programs that ________, such as Social Security and Medicare, is classified as entitlement and mandatory spending.
A) is authorized by Congress on an annual basis
B) has been authorized by prior law
C) is authorized only in times of budget surpluses
D) is authorized only in times of budget deficits
Q4) Describe the relationship illustrated by the Laffer curve.
Q5) Social insurance taxes are paid by corporations based on their profits.
A)True
B)False
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Chapter 11: The Income-Expenditure Model
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193 Flashcards
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Sample Questions
Q1) As we move along a planned expenditures line
A) price level rises.
B) price level falls.
C) price level is held constant.
D) price level fluctuates depending on whether the economy is expanding or contracting.
Q2) Suppose the United States is in the midst of a recession. What will happen to the value of the mpi?
A) It will increase.
B) It will decrease.
C) It will not change.
D) It will fall to zero.
Q3) Let C = 40 + 0.8y and I = 10. Autonomous consumption is
A) 10.
B) 32.
C) 40.
D) 50.
Q4) An increase in the price level shifts the planned expenditures curve upward. A)True
B)False
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Chapter 12: Investment and Financial Markets
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Optimistic investors tend to ________ their investment spending.
A) reduce
B) increase
C) defer
D) not change
Q2) Recall the Application. Assume that immediately before the housing bubble burst, you purchased a $250,000 home and took out a $225,000 mortgage to make the purchase. When the bubble burst, the value of your home fell by 20 percent. The value of the home is now ________ and you owe the mortgage company ________.
A) $200,000; $225,000
B) $180,000; $225,000
C) $200,000; $180,000
D) $180,000; $200,000
Q3) The relationship between interest rates and investment spending is graphed as A) an upward sloping curve.
B) a downward sloping curve.
C) a horizontal line.
D) a vertical line.
Q4) What is a broad definition for an investment?
Q5) Explain why it is difficult to determine expected real rates of interest.
Page 14
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Chapter 13: Money and the Banking System
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170 Flashcards
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Sample Questions
Q1) According to this Application, following the attacks of September 11, 2001, the Fed effectively put an additional $20 billion into the banking system by increasing the difference between the credits and debits it extended while serving as a clearinghouse for checks. The difference between the credits and debits extended by the Federal Reserve is called the
A) Federal Reserve balance sheet.
B) federal funds rate.
C) Federal Reserve float.
D) federal deficit.
Q2) One of the essential functions that a bank performs is
A) purchasing government bonds.
B) creating deposits by lending required reserves.
C) transferring money from savers to lenders.
D) owning assets like real estate.
Q3) As inflation rates increase, money becomes less useful as a
A) unit of account.
B) store of value.
C) medium of exchange.
D) double coincidence of wants.
Q4) List four of the Federal Reserve's key functions.
Page 15
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Chapter 14: The Federal Reserve and Monetary Policy
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Sample Questions
Q1) The supply of money is determined by the Federal Reserve and is dependent on the demand for money.
A)True
B)False
Q2) How would the Fed's changing the discount rate affect the money supply?
Q3) A U.S. company that wishes to sell more to other countries would favor
A) an appreciation of the dollar.
B) a depreciation of the dollar.
C) neither an appreciation nor a depreciation of the dollar.
D) higher interest rates.
Q4) Outside lags occur because
A) firms must change investment plans before monetary policy can be effective.
B) it takes time to identify a problem.
C) once a problem is diagnosed, it still takes time to implement policy changes.
D) once changes are finally diagnosed and implemented, policies are immediately effective.
Q5) Explain what happens to the money supply, interest rates, investment spending and GDP when the Fed makes open market bond purchases.
Q6) What three factors affect the demand for money?
Page 16
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Chapter 15: Modern Macroeconomics: From the Short Run
to the Long Run
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Suppose Venezuela experiences economic expansion in 2013, yet its unemployment rate is 15 percent. All else equal, if this unemployment rate is above the natural rate of unemployment, what will tend to happen over time?
A) Wages and prices will fall.
B) Wages and prices will rise.
C) Wages will rise and prices will fall.
D) Wages will fall and prices will rise.
Q2) Assuming an upward-sloping short-run aggregate supply curve, an increase in the money supply results in ________ in output and ________ in prices in the short run.
A) an increase; an increase
B) a decrease; a slight decrease
C) a decrease; no change
D) no change; an increase
Q3) The Keynesian aggregate supply curve moves up if output is below its potential.
A)True
B)False
Q4) If GDP is higher than potential output, wages and prices will rise.
A)True
B)False
Page 17
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Chapter 16: The Dynamics of Inflation and Unemployment
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Sample Questions
Q1) Recall the Application. If the natural rate of unemployment has been underestimated and is actually higher than is commonly perceived, reducing the unemployment rate to the perceived natural rate will tend to A) increase anticipated inflation.
B) decrease anticipated inflation
C) increase unanticipated inflation. D) decrease unanticipated inflation.
Q2) In the long run, increases in the growth rate of the money supply will ________ nominal rates of interest and ________ real rates of interest.
A) increase; decrease B) decrease; decrease C) increase; not affect D) decrease; not affect
Q3) All else equal, nominal wages would not likely increase if there is no inflation. A)True
B)False
Q4) Define a hyperinflation and explain what causes it.
Q5) What factors can shift the natural rate of unemployment?
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Chapter 17: Macroeconomic Policy Debates
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Sample Questions
Q1) A large government debt increases the amount of capital in the economy and thereby increases future incomes and real wages.
A)True
B)False
Q2) What method is used as the standard way to measure the effect of debt in an economy?
Q3) A flat tax which does allow deductions for investment spending is a type of
A) luxury tax.
B) consumption tax.
C) investment tax.
D) excise tax.
Q4) Many economists believe that our price indexes ________ the true inflation rate. A) understate
B) overstate
C) perfectly measure
D) minimize
Q5) The federal government ran a budget deficit of approximately $1.3 trillion in 2010. A)True
B)False
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Chapter 18: International Trade and Public Policy
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Sample Questions
Q1) Among the problems associated with subsidizing an industry in the hope of establishing a worldwide monopoly is that if two nations subsidize firms in the same industry, each could lose money.
A)True
B)False
Q2) What are GATT and the WTO?
Q3) What are the rationales for protectionist policies?
Q4) Refer to Figure 18.2. After trade and specialization begin, the maximum amount of spears that Macadamia can consume is
A) 40.
B) 100.
C) 120.
D) 160.
Q5) What is the difference between price discrimination and predatory pricing?
Q6) If the tradeoff between the two goods is constant, the production possibilities curve is
A) a negatively-sloped straight line.
B) a positively-sloped straight line.
C) a negatively-sloped curve which is bowed outward.
Page 20
D) a negatively-sloped curve which is bowed inward.
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Chapter 19: The World of International Finance
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Sample Questions
Q1) A depreciation is
A) a decrease in the value of currency.
B) a decrease in the trade deficit.
C) an increase in the trade surplus.
D) an increase in the value of currency.
Q2) What is a balance of payments system, and what three types of international transactions are typically found in the balance of payments?
Q3) The exchange rate between currencies of different countries is controlled primarily by ________ in currency markets.
A) diplomatic relations
B) supply and demand
C) tariff rates
D) the outsourcing agreements
Q4) If the U.S. government wants to increase the price of the dollar relative to the euro, it could buy euros with dollars in the foreign exchange market.
A)True
B)False
Q5) Distinguish between fixed and flexible exchange rate systems.
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