Course Introduction
Economic Policy Analysis
Pre-Test Questions
Economic Policy Analysis explores the formulation, implementation, and evaluation of economic policies designed to influence the behavior of individuals, firms, and markets. The course covers fundamental principles of microeconomics and macroeconomics as they relate to policy issues, introduces analytical tools for assessing the costs and benefits of policy interventions, and examines the effectiveness of various policy instruments in achieving economic objectives such as efficiency, equity, and stability. Students will engage with real-world case studies on topics including taxation, trade, labor markets, public goods, social welfare programs, and environmental regulation, equipping them with the skills to critically analyze policy alternatives and provide informed recommendations to policymakers.
Recommended Textbook
Macroeconomics 4th Edition by Glenn P. Hubbard
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19 Chapters
2676 Verified Questions
2676 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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145 Flashcards
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Sample Questions
Q1) Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________,meaning they make the best decisions given their knowledge of the costs and benefits.
A) equitably
B) rationally
C) emotionally
D) selfishly
Answer: B
Q2) Refer to Figure 1-4.Which of the following statements is false?
A) The slope of the tangent at E is positive.
B) The slope of the tangent at F is negative.
C) The slope of the tangent at E and the slope of the tangent at F are equal.
D) Neither the slope of the tangent at E nor the slope of the tangent at F are equal to zero.
Answer: C
Q3) When voluntary exchange takes place,both parties gain from the exchange.
A)True
B)False
Answer: True
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Page 3
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) How do firms and households interact in markets?
Answer: Firms supply goods and services to households,and buy factors of production from households.Households supply factors of production to firms,and buy goods and services from firms.
Q2) Which of the following statements is true?
A) Individuals who have never been the best at doing anything cannot have a comparative advantage in producing any product.
B) Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product.
C) Individuals who have never been the best at doing anything perform all tasks at a higher opportunity cost than others.
D) Individuals who have never been the best at doing anything must have an absolute advantage in at least ones task.
Answer: B
Q3) What is the difference between product markets and factor markets?
Answer: Product markets are markets for goods and services.Factor markets are markets for the factors of production,which are the inputs used to make goods and services.
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Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Select the phrase that correctly completes the following statement."A positive change in technology caused an increase in the supply of flat-screen televisions.As a result ________."
A) the price of flat-screen televisions decreased and the demand for flat-screen televisions increased
B) the equilibrium quantity of flat-screen televisions decreased
C) the price of flat-screen televisions decreased and the quantity demanded of flat-screen televisions increased
D) the price of flat-screen televisions decreased. The lower price caused the supply of flat-screen televisions to decrease
Answer: C
Q2) Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good)to increase?
A) an increase in consumer income
B) a drought that sharply reduces cotton output
C) a decrease in consumer income
D) unusually good weather that results in a bumper crop of cotton
Answer: A
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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) The government proposes a tax on imported champagne.Buyers will bear the entire burden of the tax if the
A) supply curve for imported champagne is vertical.
B) demand curve for imported champagne is vertical.
C) demand curve for imported champagne is horizontal.
D) demand curve is downward sloping and the supply curve is upward sloping.
Q2) Refer to Figure 4-3.What is the value of producer surplus at a price of $18??
A) $240
B) $300
C) $340
D) $720
Q3) Refer to Table 4-3.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?
A) W* = $10.50; Q* = 590,000
B) W* = $11.50; Q* = 570,000
C) W* = $9.50; Q* = 570,000
D) W* = $10.50; Q* = 1,200,000
Q4) What is producer surplus? What does producer surplus measure?
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Q5) What is "tax incidence"? What determines tax incidence in a competitive market?
Chapter 5: The Economics of Health Care
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117 Flashcards
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Sample Questions
Q1) Because consumers who have insurance provided by their employers usually only pay a deductible for a visit to the doctor's office,
A) they demand a larger quantity of health care services than they would if they paid a price that better represented the true cost of providing the service.
B) they demand a smaller quantity of health care services than they would if they paid a price that better represented the true cost of providing the service.
C) the doctors supply a smaller quantity of health care services than they would if the consumer paid a price that better represented the true cost of providing the service.
D) the insurance companies provide a larger quantity of health care services than they would if the consumer paid a price that better represented the true cost of providing the service.
Q2) The average height of adult males in the United States
A) has steadily increased since the early 1700s.
B) has remained very constant since the Civil War.
C) rose significantly beginning in 1830.
D) declined in the mid-1800s before beginning to rise again around 1890.
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Chapter 6: Firms, the Stock Market, and Corporate Governance
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) Generally with bond ratings,the higher the rating,the ________ the interest rate an investor will receive and the ________ the the risk that the issuer of the bond will default.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
Q2) How much is a bond that pays $50 in coupon payments for 3 years and $1,000 at the end of the third year worth if the interest rate is 10%?
A) $876
B) $952
C) $1,045
D) $1,150
Q3) How do unlimited and limited liability differ?
Q4) What takes place in the indirect finance market?
A) Part ownership of corporations is sold in the form of stocks.
B) Corporate and government bonds are sold to savers.
C) Deposits of savers are accepted and loans made to borrowers.
D) Government purchases of buildings and equipment are sold to the highest bidder.
Page 8
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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) Refer to Figure 9-3.What is the area that represents revenue to foreign producers who are granted permission to sell in the U.S.market when there is a quota?
A) I + J
B) E + I + J + M
C) I + J + K+ L
D) G + H + I + J
Q2) Japan has developed a comparative advantage in designing and producing automobiles.The source of its comparative advantage in these products is
A) abundant supplies of natural resources.
B) a favorable climate.
C) a strong central government.
D) technology.
Q3) China has developed a comparative advantage in the production of clothing.The source of this comparative advantage is
A) a large supply of natural resources.
B) a large supply of unskilled workers and relatively little capital.
C) investment in capital used to produce clothing.
D) superior process technology.
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Chapter 8: Gdp: Measuring Total Production and Income
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135 Flashcards
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Sample Questions
Q1) Investment,as defined by economists,would not include which of the following? Ford
A) buys a new robotic machine (from a plant in Ohio) to assemble cars.
B) adds 1,000 new cars to inventories.
C) builds another assembly plant in the United States.
D) buys U.S. government bonds.
Q2) The nominal GDP of the U.S.in 2010 was approximately $14.6 trillion.This means that
A) the value of output in 2010 was around $14.6 trillion.
B) total income in 2010 was around $14.6 trillion.
C) total spending in 2010 was around $14.6 trillion.
D) all of the above are true.
Q3) The GDP deflator is a measure of the
A) total production of the economy adjusted for inflation.
B) total production of the economy unadjusted for inflation.
C) average level of prices of final goods and services in the economy.
D) average level of prices of intermediate goods and services in the economy.
Q4) In the term "real GDP," what does "GDP" stand for and what does it measure? What does "real" indicate?
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10
Chapter 9: Unemployment and Inflation
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148 Flashcards
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Sample Questions
Q1) To understand why someone cannot get a job,it helps to know the three types of unemployment.List the three types of unemployment and explain what causes each type.What advice for finding a job would be appropriate for someone in each type of unemployment?
Q2) If the federal government implements programs so that the unemployed are more quickly matched with jobs,then
A) the natural rate of unemployment will increase.
B) the natural rate of unemployment will decrease.
C) the natural rate of unemployment will not change.
D) the natural rate of unemployment could either increase or decrease.
Q3) Refer to Table 20-8.The real average hourly earnings for 1965 in 2010 dollars equal A) $3.87.
B) $5.80.
C) $12.10.
D) $18.14.
Q4) Real interest rates at times have been negative.Why would anyone lending money agree to a negative real interest rate?
Q5) Describe how inflation can be costly even if it is anticipated.
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Chapter 10: Economic Growth, the Financial System, and Business Cycles
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) During the recession phase of the business cycle,
A) production is usually rising.
B) interest rates are usually falling.
C) unemployment is usually falling.
D) income is usually rising.
Q2) Human capital refers to which of the following?
A) the quantity of goods and services that can be produced by one worker or by one hour of work
B) the accumulated knowledge and skills workers acquire from education and training or from their life experiences
C) manufactured goods that are used to produce other goods and services
D) physical equipment that is made by human laborers, not machines
Q3) Since the 1950s,
A) the United States has not experienced a business cycle.
B) U.S. business cycle fluctuations have becomes more volatile.
C) U.S. business cycle fluctuations have become milder.
D) U.S. business cycle fluctuations have not changed.
Q4) What factors increase potential GDP? Include a definition of potential GDP in your answer.
Page 12
Q5) How are unemployment,inflation,and the business cycle related?
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Chapter 11: Long-Run Economic Growth: Sources and Policies
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Sample Questions
Q1) Growth in real GDP per hour worked in the United States was slowest during what period of time?
A) 1900-1949
B) 1950-1972
C) 1973-1994
D) 1995-2008
Q2) Some economists argue that the apparent slowdown in economic growth in the United States during the mid-1970s may not really have reduced the standard of living because
A) spending on new government regulations such as the Clean Air Act increased output dramatically without increasing the standard of living of Americans.
B) significant improvements in the quality of services occurred, although the quantity of these services did not increase much during this time.
C) changes in well-being are accurately reflected in statistics measuring economic growth.
D) higher production costs from higher oil prices raised production and transportation costs and reduced output.
Q3) Is knowledge capital subject to the law of diminishing returns? Explain.
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Chapter 12: Aggregate Expenditure and Output in the Short Run
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Sample Questions
Q1) If planned investment is greater than actual investment,then aggregate expenditure is less than GDP.
A)True
B)False
Q2) Use a 45-degree diagram to illustrate macroeconomic equilibrium.Make sure your diagram shows the aggregate expenditure function.Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than GDP.
Q3) If inventories decline by more than analysts predict they will decline,this implies that A) actual investment spending was greater than planned investment spending. B) actual investment spending was less than planned investment spending. C) actual investment spending was equal to than planned investment spending.
D) there is no relationship between actual investment spending and planned investment spending.
Q4) For all points below the 45-degree line,planned aggregate expenditure will be less than GDP.
A)True
B)False
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Chapter 13: Aggregate Demand and Aggregate Supply Analysis
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Sample Questions
Q1) A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?
A) The price level will fall, and the level of GDP will be unaffected.
B) The price level will fall, and the level of GDP will fall.
C) The price level will rise, and the level of GDP will fall.
D) The price level will rise, and the level of GDP will be unaffected.
Q2) Refer to Figure 24-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from
A) AD<sub>1</sub> to AD<sub>2</sub>.
B) AD<sub>2</sub> to AD<sub>1</sub>.
C) point A to point B.
D) point B to point A.
Q3) Which of the following best describes the "wealth effect"?
A) When the price level falls, the real value of household wealth falls.
B) When the price level falls, the nominal value of household wealth falls.
C) When the price level falls, the nominal value of household wealth rises.
D) When the price level falls, the real value of household wealth rises.
Q4) Explain how the aggregate demand and aggregate supply model can be made more dynamic.
Page 15
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Chapter 14: Money,banks,and the Federal Reserve System
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Sample Questions
Q1) What are the four functions of money? Can something be considered money if it does not fulfill all four functions?
Q2) The Fed has complete control over the money supply.
A)True
B)False
Q3) In economics,money is defined as
A) the total value of one's assets in current prices.
B) the total value of one's assets minus the total value of one's debts, in current prices.
C) the total amount of salary, interest, and rental income earned during a year.
D) any asset people generally accept in exchange for goods and services.
Q4) According to the U.S.Treasury,
A) the government will not accept cash in payment of taxes.
B) creditors do not have to accept cash in payment of debts.
C) firms do not have to accept cash as payment for goods and services.
D) U.S. dollars must be accepted as payment for any good or service sold in the United States.
Q5) How is the quantity theory of money different from the quantity equation and why must the quantity equation always be true?
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Chapter 15: Monetary Policy
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Sample Questions
Q1) An increase in the interest rate should ________ the demand for dollars and the value of the dollar,and net exports should ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
E) increase; not change
Q2) An increase in the demand for Treasury bills will
A) increase the price of Treasury bills.
B) increase the interest rate on Treasury bills.
C) increase the opportunity cost of holding money vs. Treasury bills.
D) eventually cause households to hold less money.
Q3) Which of the following will lead to a decrease in the equilibrium interest rate in the economy?
A) an increase in the price level
B) a sale of government securities by the Fed
C) a decrease in GDP
D) an increase in the discount rate
E) an increase in the reserve requirement
Q4) List the Fed's four main monetary goals.
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Chapter 16: Fiscal Policy
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Sample Questions
Q1) The tax multiplier equals the change in ________ divided by the change in
A) taxes; equilibrium real GDP
B) equilibrium real GDP; taxes
C) taxes; consumption spending
D) consumption spending; taxes
Q2) Of the $825 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest spending increase occurred in which category?
A) energy and the environment
B) military, veterans, and homeland security
C) health care, social services, and education
D) transportation and housing
Q3) What is the "tax wedge"?
Q4) If Congress and the president pursue an expansionary fiscal policy at the same time as the Federal Reserve pursues an expansionary monetary policy,how might the expansionary monetary policy affect the extent of crowding out in the short run?
Q5) What is expansionary fiscal policy? What is contractionary fiscal policy?
Q6) What is the difference between fiscal policy and monetary policy?
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Chapter 17: Inflation, unemployment, and Federal Reserve Policy
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Sample Questions
Q1) What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?
A) The Fed could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent.
B) The Fed could maintain a growth rate of the money supply of 4 percent, regardless of whether inflation was rising or falling in the economy.
C) The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently.
D) The Fed has no direct control over real GDP in the long run, so there are no actions it could take to achieve that goal.
Q2) A "long-run exploitable Phillips curve" refers to a Phillips curve that in the long run is ________ rather than ________.
A) vertical; horizontal
B) upward sloping; vertical
C) horizontal; upward sloping
D) downward sloping; vertical
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Chapter 18: Macroeconomics in an Open Economy
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Sample Questions
Q1) What impact might an increase in the budget deficit have on interest rates and exchange rates?
A) Interest rates and exchange rates increase.
B) Interest rates increase and exchange rates decrease.
C) Interest rates decrease and exchange rates increase.
D) Interest rates and exchange rates decrease.
Q2) Assuming no change in the nominal exchange rate,how will a decrease in the price level in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)
A) The real exchange rate will rise.
B) The real exchange rate will fall.
C) The real exchange rate will be unaffected.
D) The impact on the real exchange rate cannot be predicted.
Q3) If the dollar appreciates against the Mexican peso,
A) Mexican imports to the U.S. become more expensive.
B) U.S. exports to Mexico become less expensive.
C) U.S. exports to Mexico become more expensive.
D) The value of Mexican imports to the United States does not change.
Q4) Why is the balance of payments always zero?
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Chapter 19: The International Financial System
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Sample Questions
Q1) From the beginning of 1973 until October 2011,the value of the dollar has ________ relative to the Canadian dollar and ________ relative to the Japanese yen.
A) appreciated; appreciated
B) appreciated; depreciated
C) depreciated; appreciated
D) depreciated; depreciated
Q2) If a country's currency is "pegged" to the dollar,its exchange rate is A) floating.
B) flexible.
C) fixed.
D) undervalued.
Q3) China has been accused of deliberately undervaluing its currency,the yuan,in order to
A) increase its exports.
B) increase its imports.
C) prevent deflation.
D) maintain purchasing power parity.
Q4) Why might a developing country choose to peg the value of its currency to the dollar?
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