Contemporary Economic Issues
Final Exam
Course Introduction
This course explores current economic challenges and debates shaping the global and national landscape. Students will examine a range of pressing topics such as income inequality, globalization, financial crises, labor market shifts, sustainability, and the impacts of technological change. Emphasis is placed on understanding policy responses, analyzing economic data, and considering the social and ethical dimensions of economic decisions. Through case studies and real-world examples, learners will develop critical skills in evaluating contemporary issues affecting economies and societies today.
Recommended Textbook
Macroeconomics 4th Edition by Glenn P. Hubbard
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19 Chapters
2676 Verified Questions
2676 Flashcards
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Chapter 1: Economics: Foundations and Models
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Sample Questions
Q1) Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics?
a.gasoline prices
b.unemployment
c.inflation
d.health care costs
e.air pollution
f.economic growth
Answer: b,c,and f are primarily macroeconomic topics. a,d,and e are primarily microeconomic topics.
Q2) Explain the economic idea that "people respond to incentives."
Answer: Human beings act from a variety of motives,including religious belief,envy,and compassion."People respond to incentives" means that people will act if they feel it is in their best economic interest to do so.
Q3) Economists assume that rational people do all of the following except
A) use all available information as they act to achieve their goals.
B) undertake activities that benefit others and hurt themselves.
C) weigh the benefits and costs of all possible alternative actions.
D) respond to economic incentives.
Answer: B
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Chapter 2: Trade-Offs, comparative Advantage, and the Market System
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Adam Smith's invisible hand refers to
A) the government's unobtrusive role in ensuring that the economy functions efficiently.
B) property ownership laws and the rule of the court system.
C) the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.
D) the laws of nature that influence economics decisions.
Answer: C
Q2) Which of the following statements about an entrepreneur is false?
A) organizes the other factors of production into a working unit
B) develops the vision for the firm and funds the producing unit
C) sells his entrepreneurial services in the output market
D) risks the personal funds provided
Answer: C
Q3) What is meant by the term "free market"?
Answer: A free market is a market with few government restrictions on how a good or service can be produced or sold or on how factors of production can be employed.
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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149 Flashcards
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Sample Questions
Q1) Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the market price is $35.Which of the following statement is true?
A) There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25.
B) There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals $25.
C) There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals $25.
D) There is a surplus that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25.
Answer: A
Q2) Market equilibrium occurs where supply equals demand.
A)True
B)False
Answer: False
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Chapter 4: Economic Efficiency,government Price
Setting,and
Taxes
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) If equilibrium is achieved in a competitive market
A) there is no deadweight loss.
B) the deadweight loss will be maximized.
C) the deadweight loss will equal the sum of consumer surplus and producer surplus.
D) the deadweight loss will be the same as the opportunity cost of the last unit of output sold.
Q2) If the demand curve for a product is vertical,any tax increase on the product is paid for entirely by the consumer.
A)True
B)False
Q3) Which of the following is not a consequence of minimum wage laws?
A) Low skilled workers are hurt because minimum wage reduces the number of jobs providing low skilled workers with training.
B) Employers will be reluctant to offer low-skill workers jobs with training.
C) Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage.
D) Some workers benefit when the minimum wage is increased.
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Chapter 5: The Economics of Health Care
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) Automobile insurance companies have a problem with people who buy insurance and then drive recklessly or take less care to avoid losses after being insured.In other words,the automobile insurance market is subject to
A) asymmetric information.
B) market signaling.
C) moral hazard.
D) adverse selection.
Q2) Some economists have proposed making the tax treatment of employer-provided health insurance the same as the tax treatment of individually purchased health insurance and out-of-pocket health care spending.Such changes would make it more likely that
A) consumers would pay prices closer to the actual costs for routine medical care.
B) employers would provide more generous medical coverage to their employees.
C) insurance deductibles would decrease.
D) the quantity of medical services demanded would increase.
Q3) How can improvements in health increase a country's total income?
Q4) What is adverse selection?
Q5) What is moral hazard?
Q6) What are the main sources of health insurance in the United States?
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Chapter 6: Firms, the Stock Market, and Corporate Governance
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140 Flashcards
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Sample Questions
Q1) When the coupon rate on newly issued bonds decreases relative to older,outstanding bonds,what happens?
A) The market price of the older bond falls in the secondary market.
B) The market price of the older bond rises in the secondary market.
C) Older bonds can still be sold at their face value.
D) Older bonds will sell for more than their face value.
Q2) Tanesha sells homemade candles over the Internet.Her annual revenue is $64,000 per year,the explicit costs of her business are $17,000,and the opportunity costs of her business are $22,000.What are the implicit costs of her business?
A) $17,000
B) $22,000
C) $39,000
D) $47,000
Q3) If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?
A) 2%
B) 5%
C) 10%
D) 20%
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Chapter 7: Comparative Advantage and the Gains From International Trade
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124 Flashcards
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Sample Questions
Q1) Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because
A) they do not want to offend their employers who want them.
B) politicians lobby to convince workers the restrictions will make them better off.
C) they believe the restrictions will protect their jobs.
D) they don't understand that the restrictions will threaten their jobs.
Q2) U)S.firms that sell products in foreign markets protested the "Buy American" provision in the 2009 stimulus bill,arguing that if the United States restricted imports from foreign firms,
A) foreign countries would likely retaliate by limiting U.S. exports.
B) foreign firms would stop selling all products in the United States.
C) U.S. firms would never be able to meet the increased demand for U.S.-produced goods.
D) eventually the government would demand price cuts from U.S. manufacturers.
Q3) Protectionism refers to the use of trade barriers to shield domestic firms from foreign competition.
A)True
B)False
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Chapter 8: Gdp: Measuring Total Production and Income
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Sample Questions
Q1) Gross domestic product understates the total production of final goods and services because of the omission of
A) the underground economy.
B) intermediate goods.
C) inflation.
D) exports.
Q2) What is the largest component of spending in the United States?
A) consumption spending
B) investment spending
C) government spending
D) net investment spending
Q3) People complain that inflation increases the cost of goods and services and therefore reduces their purchasing power.If inflation and income grow at the same rate,is this complaint valid? Explain carefully.
Q4) High-income countries such as the United States spend a greater amount on services as compared to goods.
A)True
B)False
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Chapter 9: Unemployment and Inflation
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148 Flashcards
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Sample Questions
Q1) The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.
A) employed
B) unemployed
C) a discouraged worker
D) out of the labor force
Q2) Refer to Table 20-2.Assume the market basket for the consumer price index has two products bread and milk with the following values in 2006 and 2011 for price and quantity: The Consumer Price Index for 2011 equals A) 118.
B) 116.
C) 86.
D) 85.
Q3) The real interest rate equals the nominal interest rate ________ the inflation rate. A) times
B) divided by
C) plus
D) minus
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Chapter 10: Economic Growth, the Financial System, and Business Cycles
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130 Flashcards
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Sample Questions
Q1) Refer to Figure 21-1.Which of the following is consistent with the graph depicted above?
A) An expected recession decreases the profitability of new investment.
B) Technological change increases the profitability of new investment.
C) The government runs a budget surplus.
D) Households become spendthrifts and begin to save less.
Q2) Refer to Table 21-1.Using the table above,what is the approximate growth rate of real GDP from 2010 to 2011?
A) 1%
B) 2%
C) 3%
D) 4%
Q3) Explain and show graphically how an increase in household saving affects the equilibrium interest rate and the equilibrium quantity of loanable funds.
Q4) What is "human capital," and how does human capital affect labor productivity and economic growth?
Q5) How are unemployment,inflation,and the business cycle related?
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Q6) When potential GDP increases,is it necessarily the case that real GDP increases as well? Explain.
Chapter 11: Long-Run Economic Growth: Sources and Policies
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Sample Questions
Q1) Which of the following government policies would most likely result in an increase in economic growth?
A) a decrease in the life of a patent from 20 years to 15 years
B) a decrease in the interest rate at which the government provides student loans
C) a decrease in government spending on grants issued through the National Institutes of Health
D) decreased copyright protection on music and movies
Q2) Some factors currently exist that inhibit the growth rate of the Chinese economy.The main reason given is
A) the introduction of free-market reforms.
B) the introduction of the relatively new resource of entrepreneurship.
C) the lack of laws that predictably enforce property rights.
D) the total lack of governmental intervention in the market place.
Q3) Which of the following advances contributed to the "new economy" of the mid-1990s?
A) the increased use of the Internet in selling products and services
B) expanded cell phone use
C) the lower cost and increased availability of laptop computers
D) all of the above
Page 13
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Chapter 12: Aggregate Expenditure and Output in the Short Run
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Sample Questions
Q1) In the aggregate expenditure model,________ has both an autonomous component and an induced component.
A) planned investment spending
B) consumption spending
C) government spending
D) net export spending
Q2) Given the equations for C,I,G,and NX below,what is the equilibrium level of GDP?
C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400
A) $4,333
B) $7,100
C) $8,778
D) $79,000
Q3) Consumer spending ________ and investment spending ________.
A) is very volatile and subject to fluctuations; follows a smooth trend
B) follows a smooth trend; is more volatile and subject to fluctuations
C) follows a smooth trend; is the most stable component of aggregate expenditure
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D) is very erratic; is also erratic, but less erratic than consumer spending
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Chapter 13: Aggregate Demand and Aggregate Supply Analysis
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Sample Questions
Q1) If aggregate demand just increased,which of the following may have caused the increase?
A) an increase in government purchases
B) an increase in the interest rate
C) an increase in the price level
D) an increase in imports
Q2) Which of the following models advocate that the quantity of money should be increased at a constant rate?
A) the monetarist model
B) the new classical model
C) the real business cycle model
D) the new Keynesian model
Q3) Which of the following models relies on emphasizing the importance of sticky wages and prices?
A) the monetarist model
B) the new classical model
C) the real business cycle model
D) the new Keynesian model
Q4) Using an aggregate demand graph,illustrate the impact of an increase in the interest rate.
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Chapter 14: Money,banks,and the Federal Reserve System
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Sample Questions
Q1) To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency,the Federal Reserve could
A) raise bank taxes.
B) sell Treasury securities.
C) raise government spending.
D) lower the required reserve ratio.
Q2) Refer to Scenario 25-2.As a result of Kristy's deposit,Bank A's reserves immediately increase by
A) $2,000.
B) $8,000.
C) $10,000.
D) $50,000.
Q3) If the rate of growth in real GDP exceeds the rate of growth in the money supply,the quantity theory of money predicts a price deflation.
A)True
B)False
Q4) In countries that have experienced hyperinflation,what role have large government budget deficits played in causing the very high inflation rates?
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Chapter 15: Monetary Policy
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Sample Questions
Q1) A monetary policy target is a variable that the Fed can affect directly,which then affects one or more of the Fed's policy goals.
A)True
B)False
Q2) Refer to Figure 26-4.In the figure above,if the economy is at point A,the appropriate monetary policy by the Federal Reserve would be to
A) lower interest rates.
B) raise interest rates.
C) lower income taxes.
D) raise income taxes.
Q3) Changes in interest rates affect all four components of aggregate demand.
A)True
B)False
Q4) The Fed can simultaneously reduce the inflation rate and stimulate growth through lowering interest rates.
A)True
B)False
Q5) What actions should the Fed take if it believes the economy is about to fall into recession?
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Chapter 16: Fiscal Policy
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Sample Questions
Q1) From an initial long-run equilibrium,if aggregate demand grows faster than long-run and short-run aggregate supply,then Congress and the president would most likely
A) decrease the required reserve ratio.
B) decrease government spending.
C) decrease oil prices.
D) decrease tax rates.
Q2) An increase in individual income taxes ________ disposable income,which ________ consumption spending.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
Q3) If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.
A)True
B)False
Q4) If the federal budget goes from a budget deficit in Year 1 to a budget surplus in Year 2,does it follow that the federal government acted to raise taxes or cut government spending in Year 2?
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Chapter 17: Inflation, unemployment, and Federal Reserve Policy
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Sample Questions
Q1) Refer to Figure 28-2.Suppose the economy is at point B in the figure above.Which of the following is true?
A) The expected rate of inflation is 3%.
B) The natural rate of unemployment is 3.8%.
C) The current unemployment rate is 5%.
D) The economy is producing at potential GDP.
E) Expected inflation and actual inflation are the same.
Q2) What impact does expansionary monetary policy have on the short-run Phillips curve if consumers and firms expect the expansionary monetary policy to increase inflation?
A) The short-run Phillips curve shifts down.
B) The short-run Phillips curve shifts up.
C) The short-run Phillips curve becomes the long-run Phillips curve.
D) The short-run Phillips curve is not affected by expansionary monetary policy.
Q3) An increase in the inflation rate increases employment only if the increase in inflation is unexpected.
A)True
B)False
Q4) What is the relationship between the short-run Phillips curve and the long-run Phillips curve?
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Chapter 18: Macroeconomics in an Open Economy
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Sample Questions
Q1) Monetary policy has a ________ effect on aggregate demand in a(n)________ economy,and fiscal policy has a ________ effect on aggregate demand in a(n)________ economy.
A) weaker; open; weaker; open B) weaker; closed; weaker; closed C) stronger; open; weaker; open D) stronger; closed; weaker; open
Q2) The United States is called a debtor nation because A) it has a large current account deficit and is simultaneously funded by foreign investment.
B) it has a large financial account deficit that is used to fund the current account deficit. C) it has a large balance of payments deficit that is used to fund the current account deficit.
D) U.S. capital outflows are much greater than U.S. capital inflows.
Q3) Ceteris paribus,an increase in the government budget deficit increases interest rates in the United States and causes a real appreciation of the dollar.
A)True
B)False
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Chapter 19: The International Financial System
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Sample Questions
Q1) The exchange rate system agreed to in 1944 in which the U.S.government agreed to buy or sell gold at a fixed price of $35 per ounce is referred to as
A) the gold standard.
B) the Bretton Woods System.
C) a floating currency standard.
D) a flexible exchange rate system.
Q2) If the purchasing power of the dollar is greater than the purchasing power of the euro,purchasing power parity predicts that the exchange rate will A) increase if the exchange rate is greater than 1 euro per dollar.
B) decrease if the exchange rate is less than 1 euro per dollar.
C) be equal to the relative purchasing power across the currencies in the long run.
D) not fluctuate and stay constant in the long run.
Q3) Under the Bretton Woods system,the World Trade Organization (WTO)provided foreign currency loans to central banks and approved adjustments to the agreed upon fixed exchange rates.
A)True
B)False
Q4) What are the three main exchange rate systems,and how do they operate?
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