Current Topics in Economics Exam Preparation Guide
Course Introduction
This course explores contemporary issues and developments in the field of economics, addressing both global and local perspectives. Students will engage with recent academic research, policy debates, and economic events that shape markets, governments, and societies. Emphasis is placed on understanding the relevance of economic theories to current topics such as globalization, technological change, inequality, environmental policy, and financial crises. Through critical analysis, discussions, and case studies, students will develop the ability to apply economic reasoning to real-world problems and evaluate policy responses in a rapidly changing economic landscape.
Recommended Textbook
Economics and Contemporary Issues 8th Edition by Ronald
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Page 2
Moomaw
Chapter 1: Economic Growth: an Introduction to Scarcity and Choice
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) Refer to Housing. A point at which the economy might be technically inefficient would be:
A) A.
B) B.
C) C.
D) D.
Answer: D
Q2) The growth of labor productivity is caused by the growth of capital relative to labor and by technological and efficiency improvements.
A)True
B)False
Answer: True
Q3) The management department's secretary has just gotten a new computer that allows him to do reports in less time. This is an example of:
A) efficiency progress.
B) efficiency change.
C) efficiency improvement.
D) efficiency growth.
Answer: C
Page 3
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Chapter 2: An Introduction to Economic Systems and the Workings
of the Price System
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94 Verified Questions
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Sample Questions
Q1) The market for housing is in equilibrium when the quantity of housing demanded is equal to the quantity of housing supplied.
A)True
B)False
Answer: True
Q2) Refer to Tea. Suppose the supply for tea decreases from S to S . The new equilibrium price and quantity are:
A) P and Q , respectively.
B) P and Q , respectively.
C) P and Q , respectively.
D) P and Q<sub>3</sub>, respectively.
Answer: C
Q3) According to economic theory:
A) producers attempt to maximize output.
B) consumers attempt to maximize profits.
C) consumers and producers in a competitive economy are price seekers.
D) consumers and producers in a competitive economy are price takers.
Answer: D
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Chapter 3: Competitive Markets and Government Policy: Agriculture
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Refer to Diagram 4-4. With the target price, P , there is potential excess supply of:
A) Q - Q .
B) Q<sub>3</sub> - Q .
C) Q<sub>3</sub> - Q .
D) Q<sub>3</sub> - 0.
Answer: B
Q2) Refer to Diagram 4-1. When price is P the quantity demanded is:
A) Q .
B) Q .
C) Q<sub>3</sub>
D) somewhere between Q and Q<sub>3</sub>.
Answer: A
Q3) Flooding in the Midwest causes much of the farm crop to be destroyed. As a result, the market price of corn increases. We would expect:
A) farm income to remain unchanged.
B) farm income to decrease.
C) farm income to increase.
D) quantity demanded to increase because the good is more scarce.
Answer: C
Page 5
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Chapter 4: Efficiency in Resource Allocation:
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Sample Questions
Q1) A competitive industry usually produces the efficient level of output.
A)True
B)False
Q2) Refer to Diagram 4-1. If individuals are currently consuming Q units of compact discs. The total benefit of this consumption is given by area:
A) 0BFJ.
B) ABF.
C) 0AFJ.
D) 0BCI.
Q3) Which of the following is an example of government failure?
A) Monopoly.
B) Rent controls.
C) External benefits.
D) External costs.
Q4) Income taxes result in allocative inefficiency because most people would work the same number of hours per year regardless of their hourly wage.
A)True
B)False
Page 6
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Chapter 5: Market Power: Does It Help or Hurt the Economy
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Sample Questions
Q1) A firm is said to have market power if:
A) it takes market price as given.
B) its actions affect market price.
C) its actions cause other firms to enter the industry.
D) it does not earn a loss.
Q2) According to the marginal principle, profits are maximized when marginal revenue exceeds marginal cost.
A)True
B)False
Q3) Refer to Pharmaceuticals. The marginal revenue associated with the second unit of pharmaceuticals is:
A) $120.
B) $90.
C) $50.
D) $45.
Q4) Cartel members have an incentive to cheat by:
A) lowering price and selling less output.
B) lowering price and selling more output.
C) raising price and selling less output.
D) raising price and selling more output.
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Chapter 6: Air Pollution: Balancing Benefits and Costs
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85 Flashcards
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Sample Questions
Q1) Which of the following would most likely lead to excessively high costs of pollution regulation?
A) excise taxes.
B) the use of regulations.
C) the use of marketable pollution permits.
D) the use of emissions taxes.
Q2) You are asked to estimate any external costs associated with production at Write On Paper. You estimate that at current production levels, marginal social benefit at Write On is $30, marginal social cost is $27 and marginal cost is $25.
Q3) Emissions reduction credits can be sold to firms seeking an offset for new sources of emission.
A)True
B)False
Q4) On a nationwide basis, many areas of the country still do not meet the NAAQS.
A)True
B)False
Q5) The efficient level of pollution will generally be greater than zero.
A)True
B)False
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Chapter 7: Health Care: How Much for Whom
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Sample Questions
Q1) Some medical care in United States is provided in situations where it is of little or no value.
A)True B)False
Q2) The quantity of health care provided is said to be excessive if at that quantity the marginal benefits of health care are greater than the marginal costs of health care.
A)True B)False
Q3) Federal tax exemption for employer-provided health insurance increases the demand for health insurance, and thus adds to the excess demand for health services.
A)True
B)False
Q4) Managed care helps slow the rising costs of health care by:
A) having a third party review services and price.
B) denying payment for some services.
C) negotiating price with providers.
D) All of the above.
Q5) What factors work to limit physician-induced demand?
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Chapter 8: Crime and Drugs: a Modern Dilemma
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Sample Questions
Q1) Some individuals argue for the legalization of drugs on the basis that legalization would:
A) decrease organized criminal activity.
B) increase property crimes.
C) result in more corruption of police officials.
D) impose significant third party-effects on society.
Q2) Refer to Nirvana. Suppose a new drug, nirvana, were made illegal. We would expect:
A) supply to change from S to S .
B) demand to change from D to D .
C) supply to change from S to S .
D) None of the above.
Q3) Efficiency dictates that:
A) society be crime free.
B) there be some positive level of crime.
C) resources be used to eliminate crime in the inner city.
D) cities direct more resources to crime prevention.
Q4) Evaluate the following statement. "In order for society to function efficiently, drug use needs to be eliminated."
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Chapter 9: College Education: Is It Worth the Cost
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Sample Questions
Q1) Which statement is correct?
A) Engineering majors tend to have an earnings advantage over education majors.
B) Taking lots of math improves the pay-off from college.
C) The biggest pay-off is for a high grade point average.
D) All of the above are true.
Q2) Often, subsidies to education are justified because of the external benefits created by education. Using this argument, do you think it would be easier to justify the subsidies going to secondary or higher education?
Q3) If you won the lottery and were offered to receive $25,000 a year from now, and $25,000 two years from now, or to receive an alternate sum today, given that the interest rate is 5%, how much would you expect to receive today:
A) $46,485
B) $45,750
C) $43,946
D) $55,000
Q4) Social rate of return for a four-year college education is slightly higher than the student rate of return.
A)True
B)False
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Chapter 10: Educational Reform: the Role of Incentives and Choice
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Sample Questions
Q1) An absolute grading scale for high stakes test:
A) is based on an external standard.
B) prevents teachers from judging students relative to their classmates. C) would strengthen the incentive for students to perform well.
D) all of the above.
Q2) The U.S. outperforms most nations in science, but lags behind most nations in math.
A)True
B)False
Q3) Cindy says that she really has to work with a new software application for several weeks before she will understand it.This is a form of:
A) local knowledge.
B) assembled knowledge.
C) tacit knowledge.
D) general knowledge.
Q4) Which is not a characteristic of high-stakes testing?
A) universal
B) based on absolute performance standards
C) based on memorization
D) internationally referenced
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Chapter 11: Poverty: Old and New Approaches to a
Persistent Problem
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Sample Questions
Q1) When an individual's resources are not sufficient to provide a minimum standard of living, they are considered poor.
A)True
B)False
Q2) Each state is allowed to design and implement its own TANF program, including benefit levels and criteria for eligibility, however, they must spend at least 75 percent of the amount they were spending from their own funds on AFDC in 1994.
A)True
B)False
Q3) All of the following help to explain the increase in the pre-transfer poverty rate over the 1979-2001 time period except:
A) the changing composition of the poverty population.
B) a decline in government transfers.
C) the increasing incidence of unemployment.
D) the impact of government transfers on work incentives.
Q4) Suppose the basic benefit is $300 and the break-even net income is $2000. What is the benefit reduction rate?
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Chapter 12: Tracking and Explaining the Macroeconomy
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Sample Questions
Q1) The aggregate supply curve shows the total output of final goods and services that will be produced at each price level.
A)True
B)False
Q2) Which of the following is included in GDP?
A) the illegal sale of marijuana.
B) the money you pay to your baby-sitter that is not reported as income when she files her tax.
C) the money you pay a maid to clean your home.
D) the value of the time you spend cleaning your home.
Q3) As the price level falls the purchasing power of your currency increases. This is an example of:
A) the interest rate effect.
B) the real balance effect.
C) the valuation effect of prices.
D) the substitution effect.
Q4) Suppose the GDP deflator is 125 and real GDP is $8,000 billion. What is nominal GDP?
Q5) Refer to Imports. What are net exports?
Q6) Refer to Imports. What is net investment?
Page 14
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Chapter 13: Unemployment: the Legacy of Recession, Technological
Change,
and Free Choice
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Sample Questions
Q1) Which of the following is likely to lead to a increase in aggregate demand?
A) contractionary fiscal policy.
B) expansionary monetary policy.
C) contractionary monetary policy
D) the interest rate effect.
Q2) Refer to Homemakers. The number of persons in the civilian labor force is:
A) 679,000.
B) 595,200.
C) 592,000.
D) 586,500.
Q3) Refer to Minimum Wage. The imposition of a minimum wage would:
A) increase the wage from W<sub>1</sub> to W<sub>2</sub>.
B) decrease the wage from W<sub>2</sub> to W<sub>1</sub>.
C) decrease the wage from W<sub>1</sub> to W<sub>3</sub>.
D) cause the equilibrium wage to increase.
Q4) Which of the following would be most likely to suffer from unemployment?
A) a 34 year old female.
B) a 40 year old male.
C) a 17 year old male.
D) a 30 year old Hispanic male.
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Chapter 14: Inflation: a Monetary Phenomenon
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Sample Questions
Q1) "Inflationary policies followed by the government helped to increase the trade deficit." Is this statement true or False? Defend your answer.
Q2) If you wish to measure price changes of the goods and services bought by households, you should use:
A) the consumer price index.
B) the GDP deflator.
C) the producer price index for finished goods.
D) the producer price index for crude materials.
Q3) The GDP deflator is:
A) a weighted average of the prices of goods and services purchased by a typical urban household.
B) a weighted average of the prices of goods and services purchased by a typical manufacturer.
C) a weighted average of the prices of all final goods and services produced in the economy.
D) a weighted average of the prices of all intermediate goods and services produced in the economy.
Q4) Suppose the money supply is $450 billion and velocity is 3. What is nominal GDP?
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Chapter 15: Sustained Budget Deficits:
Run a Government
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Sample Questions
Q1) The government is justified in running a deficit and financing it by issuing U.S. Treasury bonds to the private sector when:
A) the economy is in the contractionary phase of the business cycle.
B) the economy is in the expansionary phase of the business cycle.
C) the economy is at the peak of the business cycle.
D) The government should never run a deficit as this will force up interest rates.
Q2) The amount by which government receipts exceeds government outlays over the relevant time span is called:
A) the structural surplus.
B) the national debt.
C) the budget surplus.
D) the budget excess.
Q3) Which of the following is most likely to be harmed by a large national debt?
A) an individual currently receiving Social Security benefits.
B) a member of the labor force who will retire in the next ten years.
C) a college graduate who is entering the labor force for the first time.
D) a forty-year old homemaker.
Q4) Explain how the federal government saves the Social Security surplus.
Page 17
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Chapter 16: Social Security: Leading Issues and Approaches to Reform
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Sample Questions
Q1) An effect that induces workers to substitute Social Security wealth for other types of wealth that could be financed by saving is:
A) the wealth substitution effect.
B) the induced retirement effect.
C) the bequest effect.
D) the income effect.
Q2) Studies indicate that Social Security benefits have had:
A) a significant positive effect on savings.
B) a significant negative effect on savings.
C) a significant negative effect on the savings of the current generation of workers, but have had no effect on the savings of past generations of workers.
D) inconclusive results as to Social Security's effect on savings.
Q3) According to the wealth substitution effect, workers will save less as they substitute Social Security wealth for other types of wealth that could be financed by saving.
A)True
B)False
Q4) Who bears the burden of the Social Security payroll tax?
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Chapter 17: International Trade: Beneficial, but
Controversial
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Sample Questions
Q1) Which statement is False?
A) Tariffs and quotas are valuable tools in helping to maintain full employment.
B) Imports can cause unemployment in import-competing industries.
C) Over time, some industries lose their comparative advantage and become vulnerable to foreign competition.
D) Government may need to help some workers who lose their jobs due to international trade upgrade their skills.
Q2) France can produce 2 bicycles or 6 units of wine. Italy can produce 1 bicycles or 6 units of wine. France is said to have:
A) a comparative advantage in the production of bicycles.
B) a comparative disadvantage in the production of bicycles.
C) an absolute advantage in the production of wine.
D) an absolute disadvantage in the production of bicycles.
Q3) Suppose the U.S. demand for Japanese cars increases. Which of the following would most likely result in the greatest increase in price?
A) tariff.
B) quota.
C) export tax.
D) voluntary import restraint.
Page 19
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Chapter 18: Financing Trade and the Trade Deficit
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Sample Questions
Q1) Which nation owes more to foreign creditors than any other nation in the world?
A) The United States
B) Mexico
C) Russia
D) Australia
Q2) The U.S. tends to have relatively more capital flowing into the country than out of the country.
A)True
B)False
Q3) Under a flexible exchange rate system, if a country's exchange rate increases, then the currency has:
A) devalued.
B) revalued.
C) depreciated.
D) appreciated.
Q4) In a fixed exchange rate system, supply and demand determine exchange rates, much like in a flexible exchange rate system.
A)True
B)False
Q5) If 1 dollar can be traded for 5 francs, how many dollars will 1 franc buy?
Page 20
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