Contemporary Economic Issues
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Course Introduction
This course explores significant economic challenges and policy debates facing societies today, including globalization, income inequality, environmental sustainability, technological change, labor markets, and financial crises. Students will examine how economic theory and empirical evidence inform contemporary issues, while considering the roles of government, markets, and international institutions. Through case studies and current events, the course encourages critical analysis of policy options and their impacts on diverse populations, equipping students with frameworks to understand and evaluate pressing economic questions in a rapidly changing world.
Recommended Textbook
ECON MACRO 6th Edition by William
A. McEachern
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) Rational choice implies:
A) the use of an economic model.
B) making decisions aimed at achieving some predetermined goal.
C) that only monetary costs and benefits are weighed.
D) that the individual will never regret any action taken.
E) that scarcity can be eliminated for that individual.
Answer: B
Q2) Environmentalists have continually argued for the use of alternatives to fossil fuels to generate energy and that wind farms are a good alternative. As windmills can harm migratory birds, we could say that environmentalists have committed the:
A) fallacy of composition.
B) fallacy that association is causation.
C) fallacy of segmentation.
D) mistake of ignoring secondary effects.
E) mistake of ignoring the obvious.
Answer: D
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3
Chapter 2: Economic Tools and Economic Systems
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Sample Questions
Q1) A command economy that is now allowing for a role for markets is known as a
A) traditional system.
B) transitional system.
C) pure command system.
D) mixed system.
E) pure capitalism system.
Answer: D
Q2) One flaw of pure capitalism is that a person who owns no resources could starve.
A)True
B)False
Answer: True
Q3) The economic question of what will be produced _____
A) is primarily answered by the government in a system of pure capitalism.
B) is primarily answered by markets in a command economy.
C) is faced by all economies regardless of their wealth.
D) does not have to be answered by economies possessing great wealth.
E) cannot be illustrated by the economic concept of the production possibilities frontier.
Answer: C
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Page 4
Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Individual income taxes illustrate the ability-to-pay principle of taxation.
A)True
B)False
Answer: True
Q2) Public goods are both rival and nonexclusive.
A)True
B)False Answer: False
Q3) Which of the following best defines foreign exchange?
A) trade between two countries
B) the market where exporting and importing activities take place
C) the price of a currency relative to another currency
D) revenue from imports
E) the currency that the United States uses to buy goods from other countries
Answer: E
Q4) An external benefit is a benefit from an activity that falls on a third party that is not involved in the activity.
A)True
B)False Answer: True
Page 5
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Chapter 4: Demand, Supply, and Markets
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Sample Questions
Q1) The income effect of an increase in the price of backpacks, a normal good, is a(n)
A) decrease in the demand for backpacks.
B) decrease in the quantity of backpacks demanded.
C) decrease in the supply of backpacks.
D) increase in the quantity of backpacks demanded.
E) increase in the quantity of backpacks supplied.
Q2) _____ is the relation between the price of a good and the quantity an individual producer is willing and able to sell per period, other things constant.
A) Individual supply
B) Law of supply
C) Supply
D) Quantity supplied
E) Market supply
Q3) If the supply of a good increases while its demand decreases, then the equilibrium price will fall.
A)True
B)False
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6
Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) _____ reflects the relationship between the economy's price level and aggregate output demanded.
A) Aggregate demand
B) The aggregate demand curve
C) Aggregate supply
D) The aggregate supply curve
E) Aggregate output
Q2) Refer to Table 5.1, which shows an aggregate demand schedule and an aggregate supply schedule. What is aggregate demand at a price level of $75?
A) $100 billion dollars
B) $200 billion dollars
C) $400 billion dollars
D) $600 billion dollars
E) $800 billion dollars
Q3) The Reagan administration's policies were aimed at managing aggregate demand.
A)True
B)False
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Page 7
Chapter 6: Tracking the U S Economy
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Sample Questions
Q1) If the real gross domestic product (GDP) for the base year is $3 trillion, then the nominal gross domestic product (GDP) for that year is _____
A) $.03 trillion.
B) $0.3 trillion.
C) $3 trillion.
D) $30 trillion.
E) $300 trillion.
Q2) A fixed-weight price index uses a process that adjusts the weights continuously year by year.
A)True
B)False
Q3) If an economy produces final output worth $5 trillion, then the aggregate income generated by that production _____
A) will be $5 trillion.
B) will be more than $5 trillion.
C) will be $5 trillion minus taxes.
D) will be less than $5 trillion.
E) will be $5 trillion plus transaction costs.
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8
Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) If the economy is experiencing extremely high increases in the price level, it is called
A) deflation.
B) inflation.
C) hyperinflation.
D) disinflation.
E) growth.
Q2) During periods of inflation, the real value of a given amount of nominal dollars decreases.
A)True
B)False
Q3) From 2005 to 2011, _____ experienced deflation.
A) the United States
B) France
C) Germany
D) Japan
E) Italy
Q4) A major cost of unemployment is lost production.
A)True
B)False
Page 9
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) The most important factor in determining a nation's standard of living in the long run is the productivity of its resources.
A)True
B)False
Q2) An increase in the production of capital goods and a reduction in the production of consumer goods would most likely lead to a faster rate of future economic growth.
A)True
B)False
Q3) The slope of the per-worker production function diminishes as the amount of capital per worker increases. This is a reflection of the law of _____
A) increasing marginal returns.
B) diminishing marginal returns.
C) constant marginal returns.
D) first diminishing and then increasing marginal returns.
E) demand.
Q4) The process of adding more capital per worker is called capital deepening. A)True B)False
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Page 10
Chapter 9: Aggregate Demand
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Sample Questions
Q1) Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. At the equilibrium level of gross domestic product (GDP), saving equals _____
A) $0.4 trillion.
B) $0.1 trillion.
C) $0.5 trillion.
D) $0.2 trillion.
E) $0.3 trillion.
Q2) An increase in the price level in an economy will _____
A) shift the aggregate demand curve to the right.
B) shift the aggregate demand curve to the left.
C) increase the quantity of real gross domestic product (GDP) demanded.
D) decrease the quantity of real gross domestic product (GDP) demanded.
E) increase the aggregate expenditure.
Q3) In aggregate spending, investment does not include _____
A) buying stocks and bonds.
B) a new housing development.
C) net increases to inventories.
D) purchases of equipment.
E) building a new factory.
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Chapter 10: Aggregate Supply
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Sample Questions
Q1) Refer to Exhibit 10.5, which shows the short-run equilibrium in an aggregate demand-aggregate supply model. If the economy is currently producing Y level of output, _____
A) potential output is less than actual output.
B) there is zero unemployment.
C) the price level will rise eventually.
D) aggregate supply will fall to restore equilibrium.
E) the actual unemployment rate is more than the natural rate.
Q2) Potential output is the amount produced when _____
A) firms' and workers' expectations about the price level are realized.
B) the actual price level is higher than the price level expected by workers.
C) firms and workers have the same expectations about the price level.
D) the actual price level remains constant.
E) the actual price level is lower than the price level expected by firms.
Q3) If the price level increases by 5 percent and the nominal wage increases by 3.5 percent, the real wage will decrease by 1.5 percent.
A)True
B)False
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Chapter 11: Fiscal Policy
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Sample Questions
Q1) During the 1970s, demand-management policy _____
A) continued to be highly successful in curing the economy's economic problems.
B) was found to be highly unsuitable in periods of stagflation such as the decade of the 1970s.
C) was so unsuccessful that economists advised a return to the pre-World War II philosophy of fiscal policy.
D) was unsuccessful because automatic stabilizers no longer influenced the economy.
E) was unsuitable because it affected aggregate supply more than aggregate demand.
Q2) According to Keynesian theory, the natural forces in the economy may not quickly move the economy toward potential real GDP.
A)True
B)False
Q3) Equal increases in government purchases and in net taxes have equal but opposite effects on the level of real GDP demanded.
A)True
B)False
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Chapter 12: Federal Budgets and Public Policy
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Sample Questions
Q1) How much do foreigners own of the U.S. federal debt?
A) about 60 percent
B) about 40 percent
C) about 20 percent
D) about 10 percent
E) none
Q2) Government deficits of one generation cannot affect the standard of living of the next generation.
A)True
B)False
Q3) If a budget deficit is the result of expenditures for programs such as farm subsidies and Social Security, the burden on future generations is slight.
A)True
B)False
Q4) The growth-reducing effects of high public debt are transmitted entirely through high real interest rates on that debt.
A)True
B)False
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Page 14
Chapter 13: Money and the Financial System
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Sample Questions
Q1) Exchange is necessary in an economy if _____
A) output is to be produced.
B) output is to be consumed.
C) individuals are self-sufficient.
D) families are self-sufficient.
E) labor is specialized.
Q2) Which of the following is not a thrift institution?
A) a savings-and-loan association
B) a commercial bank
C) a mutual savings bank
D) an employee credit union
E) a college credit union
Q3) The purpose of deregulating banks during the 1980s was to _____
A) eliminate the risks that banks incurred.
B) allow banks to compete with other financial institutions.
C) allow U.S. banks to compete with foreign banks.
D) help consumers earn more interest.
E) decrease the cost of banking regulation.
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Chapter 14: Banking and the Money Supply
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Sample Questions
Q1) Which of the following is true of banks?
A) Banks reduce the opportunity cost of holding idle cash.
B) Banks act as intermediaries between the government and private investors.
C) Banks can reduce risk by lending to rich borrowers.
D) Banks reduce the transaction costs of borrowing and lending money.
E) Banks can reduce risks by extending more loans.
Q2) If a bank has $6,000 in checkable deposits and the required reserve ratio is 0.2, then the bank can lend:
A) exactly $4,000.
B) about $16,000.
C) no more than $4,800.
D) about $13,000.
E) exactly $1,000.
Q3) Suppose the reserve requirement is 15 percent. Which of the following is true?
A) The simple money multiplier is 15.
B) The simple money multiplier is 1/15.
C) The simple money multiplier is 30,000.
D) The simple money multiplier is 1/30,000.
E) The simple money multiplier is 1/0.15.
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Page 16
Chapter 15: Monetary Theory and Policy
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Sample Questions
Q1) The demand for money is based primarily on money's role as a(n) _____
A) measure of wealth.
B) medium of exchange.
C) standard of economic well-being.
D) interest-bearing asset.
E) non-interest-bearing asset.
Q2) During the 2007-2009 financial crisis, the Federal Reserve took some unusual steps in its conduct of monetary policy. Which of the following was not one of them?
A) It invested in AIG.
B) It invested more than $1 trillion in mortgage-backed securities.
C) It worked with the U.S. Treasury and with other regulators to stabilize banks and thaw frozen credit lines.
D) It worked with the U.S. Treasury and other regulators to help conduct a stress test of the 19 largest banks.
E) It bailed out General Motors.
Q3) An identity is a relationship expressed in such a way that it is true by definition.
A)True
B)False
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Chapter 16: Macro Policy Debate: Active or Passive?
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Sample Questions
Q1) Contrary to what the Phillips curve would have predicted, the U.S. economy in the 1970s experienced simultaneous increases in both inflation and unemployment.
A)True
B)False
Q2) Which of the following would correspond to a movement downward along a short-run Phillips curve?
A) The aggregate demand curve shifts rightward, moving up along a short-run aggregate supply curve.
B) The aggregate demand curve shifts leftward, moving down along a short-run aggregate supply curve.
C) The short-run aggregate supply curve shifts leftward, moving up along the aggregate demand curve.
D) The money supply curve shifts rightward for a given money demand curve.
E) Both the money demand and the money supply curves shift leftward.
Q3) Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.
A)True
B)False
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18
Chapter 17: International Trade
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Sample Questions
Q1) Refer to Exhibit 17.b, which shows the supply of a product in the United States. With a quota of Q' or more per month, the U.S. price would _____
A) change from P to P'.
B) change from P' to P.
C) be at P.
D) be at P'.
E) fall to zero.
Q2) Terms of trade refers to _____
A) the quantity of one good exchanged for a unit of another good.
B) the opportunity cost of producing a good.
C) the quantity of a good demanded by U.S. consumers at a market-clearing price.
D) the price of a good in a country after the imposition of a tariff.
E) the maximum amount of credit that a country can borrow for a particular line of credit.
Q3) The establishment of GATT resulted in _____
A) lower tariff rates.
B) an increase in the net welfare loss of economies.
C) a decrease in total world trade.
D) increased protectionism.
E) a rise in the price of imports.
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Chapter 18: International Finance
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Sample Questions
Q1) The current international financial system is a managed float system.
A)True
B)False
Q2) In a fixed exchange-rate system, rates are maintained by the central bank's ongoing purchases and sales of currencies.
A)True
B)False
Q3) Under fixed exchange rates, government officials have limited roles to play in the foreign exchange market.
A)True
B)False
Q4) In 2016, the United States had the largest merchandise trade deficit with _____
A) the European Union.
B) Canada.
C) China.
D) Mexico.
E) Brazil.
Q5) The Bretton Woods system fixed all exchange rates in terms of the U.S. dollar.
A)True
B)False
Page 20
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Chapter 19: Economic Development
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Sample Questions
Q1) Which of the following is true of the foreign aid provided by the United States?
A) During the last four decades, the United States has provided less than $400 million in aid.
B) Most U.S. aid has been coordinated by the Department of Defense.
C) The U.S. Agency for International Development emphasizes short-range plans.
D) The U.S. Agency for International Development focuses on health, education, and agriculture.
E) Foreign aid is a large part of the U.S. federal budget.
Q2) Unemployment is measured primarily in urban areas because in rural areas farm work is usually an outlet for labor.
A)True
B)False
Q3) Sub-Saharan African countries fall under the category of industrial market economies.
A)True
B)False
Q4) An aging population poses fiscal problems for any country.
A)True
B)False
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