Economic Policy Analysis
Test Questions
Course Introduction
Economic Policy Analysis explores the tools and methods used to evaluate and design public policies that affect economic outcomes. The course introduces students to core economic concepts, models, and empirical techniques relevant for analyzing the effectiveness, efficiency, and impact of policy interventions on individuals, businesses, and the broader economy. Through case studies and real-world applications, students gain insight into the challenges of policy formulation, implementation, and assessment, covering areas such as taxation, regulation, labor markets, social welfare programs, and international trade. The goal is to equip students with the analytical skills needed to critically assess policy proposals and contribute to informed decision-making in both public and private sectors.
Recommended Textbook
Economics and Contemporary Issues 8th Edition by Ronald Moomaw
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18 Chapters
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Page 2
Chapter 1: Economic Growth: an Introduction to Scarcity and Choice
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Sample Questions
Q1) As resources are transferred from production of trucks to the production of computers, marginal cost of computers decreases.
A)True
B)False
Answer: False
Q2) A change in the best technology that allows more to be produced with a given amount of resources is referred to as:
A) technological gain.
B) technical efficiency change.
C) technological growth.
D) technological improvement.
Answer: D
Q3) The U.S. growth rates for the 1990-99 period has:
A) increased compared to 1973-90 period.
B) decreased compared to 1973-90 period.
C) has remained the same as that of 1973-90 period.
D) has stagnated at low rates.
Answer: A
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Chapter 2: An Introduction to Economic Systems and the Workings
of the Price System
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Sample Questions
Q1) Suppose the supply of cellular telephones increases. We would expect:
A) both the equilibrium price and quantity of cellular telephones to increase.
B) both the equilibrium price and quantity of cellular telephones to decrease.
C) the equilibrium price of cellular telephones to decrease and the equilibrium quantity of cellular telephones to increase.
D) the equilibrium price of cellular telephones to increase and the equilibrium quantity of cellular telephones to decrease.
Answer: C
Q2) Refer to Price Per Unit. If the quantity of apartment is 1000, what is the supply price?
Answer: If the number of apartments is 1000, the minimum suppliers must receive is $300 per unit. (This is found by reading up to the supply curve and across to the price axis.) The $300 per unit represents the supply price of apartments.
Q3) The demand curve shows the quantity demanded of a good for each possible price, holding other factors that affect demand constant.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Competitive Markets and Government Policy: Agriculture
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Sample Questions
Q1) A decrease in demand is represented graphically as:
A) a leftward shift in the demand curve.
B) a rightward shift in the demand curve.
C) a movement upward along the demand curve.
D) a movement downward along the demand curve.
Answer: A
Q2) An increase in the price of milk will cause an increase in the amount of milk demand.
A)True
B)False
Answer: False
Q3) Suppose cheese is a normal good. An increase in income will cause:
A) a rightward shift of the demand curve for cheese.
B) a leftward shift of the demand curve for cheese.
C) a movement upward along the demand curve for cheese.
D) a movement downward along the demand curve for cheese.
Answer: A
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Chapter 4: Efficiency in Resource Allocation:
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Sample Questions
Q1) 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
Q2) No external benefits are provided by the public goods.
A)True
B)False
Q3) The supply curve represents the marginal cost of producing various quantities of a good or service.
A)True
B)False
Q4) A competitive industry usually produces the efficient level of output.
A)True
B)False
Q5) The total cost of production is measured as the:
A) the area under the supply curve.
B) the area under the demand curve.
C) the net area under the demand and supply curves.
D) the intersection of the demand and supply curves.
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Chapter 5: Market Power: Does It Help or Hurt the Economy
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Sample Questions
Q1) Government might grant patents in order to:
A) increase private-sector research.
B) enhance competition.
C) decrease market power.
D) ensure that politicians are re-elected to office.
Q2) Economists object to monopoly because of the profits earned.
A)True
B)False
Q3) According to the marginal principle, profits are maximized when marginal revenue exceeds marginal cost.
A)True
B)False
Q4) Refer to Diagram 5-2. The price and output that would emerge under a competitive industry are:
A) P and Q , respectively.
B) P and Q , respectively.
C) P and Q , respectively.
D) P and Q , respectively.
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Chapter 6: Air Pollution: Balancing Benefits and Costs
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Sample Questions
Q1) The Clean Air Act has had an impact on:
A) visibility.
B) health.
C) damage to structures.
D) All of the above.
Q2) Electrical generating plants contribute to a sulfuric acid solution known as:
A) nitrogen oxide.
B) sulfur dioxide.
C) acid rain.
D) a volatile organic compound.
Q3) Refer to Miles. In the absence of any government regulation individuals will travel:
A) 1,000 miles.
B) 1,500 miles.
C) 2,000 miles.
D) between 1,500 and 2,000 miles.
Q4) Evaluate the following statement. "Instead of controlling pollutants through regulation, the government should simply assign property rights."
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8
Chapter 7: Health Care: How Much for Whom
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Sample Questions
Q1) What is the present value of $100 paid to you a year from now if the rate of interest is 5%?
A) $95.24
B) $95.00
C) $5.25
D) $105.50
Q2) Defensive medicine is medical care given to reduce the risk of a malpractice suit.
A)True
B)False
Q3) Which of the following are policy suggestions for reforming the health care system?
A) eliminating the federal tax exemption for health insurance.
B) greater reliance on managed care.
C) decreasing third party payments.
D) all of the above.
Q4) Discuss the impact of the federal income tax exemption on the health care system.
Q5) What factors work to limit physician-induced demand?
Q6) Carefully explain what is meant by "excessive spending" on health care.
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Page 9
Chapter 8: Crime and Drugs: a Modern Dilemma
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Sample Questions
Q1) Many people argue that legalization of drugs would result in:
A) increased birth defects.
B) increased criminal activity.
C) greater family stability as drug users would no longer be stigmatized.
D) more hospital admissions as hospitals would have more drug-related violence to deal with.
Q2) Suppose the marginal benefit of employing an additional police officer in efforts to decrease marijuana abuse in Suburbia is $15,000 per year while the marginal cost is $35,500. In this instance the city should:
A) probably hire the additional officer as the city gets a benefit of $15,000.
B) probably not hire the additional officer as the city incurs as cost of $35,500.
C) probably hire the additional officer as the city gets a net benefit of $20,500.
D) probably not hire the additional officer as the city incurs a net loss of $20,500.
Q3) The efficient level of public safety would be provided by private firms.
A)True
B)False
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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) Which statement is correct?
A) Higher education is subject to the law of demand.
B) Higher education is not subject to the law of demand.
C) Increases in tuition do not cause drops in enrollment.
D) Increased state income does not increase the demand for higher education.
Q3) If you won the lottery and were offered to receive $50,000 a year from now or an alternate sum today, given that the interest rate is 5%, how much would you expect to receive today:
A) $47,619
B) $45,750
C) $43,946
D) $55,000
Q4) "The interest income that could have been earned on money invested in a college education is not relevant to the decision to attend college." Is this statement correct? Defend your answer.
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Chapter 10: Educational Reform: the Role of Incentives and Choice
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Sample Questions
Q1) Which statement is true?
A) School districts do not have many characteristics in common with a large organization.
B) School districts are consistent with the three principles of economic organization.
C) A state department of education can be thought of as the central planning office of a state-owned enterprise.
D) None of the above are true.
Q2) 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.
Q3) 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) There is evidence that earnings differentials between white males and others is less among individuals with less education.
A)True
B)False
Q2) The largest public assistance program is:
A) Aid to Families with Dependent Children.
B) food stamps.
C) Medicaid.
D) housing assistance.
Q3) Unemployment plays only a minor role in maintaining high poverty rates among African-Americans.
A)True
B)False
Q4) Suppose the basic benefit is $200, the benefit reduction rate is 40 percent, and net income is $100. What is the benefit?
A) $340.
B) $240.
C) $160.
D) $140.
Page 13
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Chapter 12: Tracking and Explaining the Macroeconomy
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Sample Questions
Q1) Government purchases refer to purchases of goods and services by:
A) the federal government.
B) by state governments.
C) by local governments.
D) All of the above.
Q2) A good that is purchased for final use is:
A) an intermediate good.
B) a final good.
C) an inventory good.
D) an ultimate good.
Q3) Fiscal policy refers to:
A) changes in the money supply designed to achieve full employment.
B) changes in government regulations designed to achieve full employment.
C) special incentives given to businesses to hire groups with traditionally high unemployment rates.
D) changes in taxes and government spending designed to achieve full employment.
Q4) Gross domestic product (GDP) is the market value of all goods and services produced in an economy over some time period.
A)True
B)False
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) The minimum wage would have the most adverse effect on which of the following groups?
A) Females.
B) Males.
C) Hispanics.
D) Teenagers.
Q2) Which of the following results in impediments to accepting employment in most European nations?
A) labor unions.
B) relatively high minimum wages.
C) relatively large unemployment benefits.
D) relatively low tax rates.
Q3) Individuals are considered unemployed if they do not have a job.
A)True
B)False
Q4) An increase in the minimum wage is likely to:
A) cause unemployment among high-skill workers.
B) cause unemployment among low-skill workers.
C) increase the income of labor.
D) increase on-the-job training opportunities.
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Chapter 14: Inflation: a Monetary Phenomenon
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Sample Questions
Q1) Suppose the growth rate in the money supply is 8 percent. If the growth rate in real GDP is 3 percent, the quantity theory of money would predict:
A) an inflation rate of 8 percent.
B) an inflation rate of 5 percent.
C) an inflation rate of 3 percent.
D) an inflation rate of 2 percent.
Q2) As a result of unanticipated inflation,
A) government will be made worse off due to increases in expenditures. B) government will be made better off due to increases in revenues.
C) individuals living on fixed incomes will be made better off.
D) debtors will be made worse off due to increases in the interest rate.
Q3) Suppose the GDP deflator in 1997 was 140.0 and the GDP deflator in 1998 was 146.72 What was the rate of change in the GDP deflator?
Q4) Inflation is a monetary phenomenon.
A)True
B)False
Q5) Suppose the growth rate in real GDP is 4 percent and the growth rate in the money supply is 7.3 percent. What is the rate of inflation?
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Chapter 15: Sustained Budget Deficits: Is
This Any Way to
Run a Government
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Sample Questions
Q1) Which of the following statements is False?
A) The case for lowering taxes with a budget surplus is stronger if the economy is at less than full employment.
B) Sustained budget deficits will produce sustained annual reductions in domestic investment.
C) Older generations have a greater stake in reducing the national debt than younger generations.
D) It would takes several years before the benefits of a reduced national debt would be felt by Americans.
Q2) A deficit financed by issuing U.S. Treasury bonds to the private sector will have an insignificant effect on the interest rate if:
A) the economy is at the peak of the business cycle.
B) unemployment rates are relatively low.
C) the economy is near the peak of the business cycle.
D) the economy is in a severe recession.
Q3) Explain how the federal government saves the Social Security surplus.
Q4) Evaluate the following statement. "Older generations have less of a stake in decreasing the national debt than do younger generations."
Page 17
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Chapter 16: Social Security: Leading Issues and Approaches to Reform
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Sample Questions
Q1) Among the factors accounting for the rapid build-up of the Social Security trust fund is:
A) a significant increase in fertility rates resulting in an increase in the size of the labor force.
B) a significant fall in fertility rates.
C) a decrease in the number of people who are self-employed.
D) a large increase in the labor force due to the entrance of baby-boomers.
Q2) Refer to Payroll. Suppose a payroll tax of 7% is imposed. By how much will the wage rate of the workers fall?
A) Wage rates will not fall.
B) 7%
C) 10.6%
D) This cannot be determined from the above diagram.
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?
Page 18
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Chapter 17: International Trade: Beneficial, but
Controversial
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Sample Questions
Q1) Free trade causes average costs to increase as industries expand output.
A)True
B)False
Q2) If a quota is in place, what will happen to the price of rubber thread if there is a large increase in demand for spandex clothing (a major user of rubber thread)?
A) Quantity will be limited, but price will not be affected.
B) Price will increase, but as it does so, the quantity imported will also increase. This will limit the price increase somewhat.
C) Because of the quantity restriction, the increased demand will cause prices to increase.
D) The impact on prices is not clear.
Q3) Wages in the United States are high because worker productivity is high.
A)True
B)False
Q4) According to economists, trade is based on:
A) related advantage.
B) positive advantage.
C) absolute advantage.
D) comparative advantage.
19
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Chapter 18: Financing Trade and the Trade Deficit
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Sample Questions
Q1) Suppose the exchange rate is $0.01 per ¥ 1. An IBM computer selling for $1500 in New York would be sell for ____ in Tokyo.
A) ¥100,000.
B) ¥150,000.
C) ¥150.
D) ¥1,500.
Q2) In recent years, the United States has run a deficit in its current account.
A)True
B)False
Q3) If a country that maintains fixed exchange rates decides to let their exchange rate fall, the currency has:
A) devalued
B) revalued
C) appreciated
D) depreciated
Q4) When the U.S. imports goods from Brazil, this is entered as a debit in the current account.
A)True
B)False
Q5) If 1 dollar can be traded for 5 francs, how many dollars will 1 franc buy?
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