Economic Principles and Policy Practice Exam
Course Introduction
Economic Principles and Policy provides a comprehensive introduction to the fundamental concepts of microeconomics and macroeconomics, focusing on how individuals, businesses, and governments make decisions regarding the allocation of resources. The course explores topics such as supply and demand, market structures, fiscal and monetary policy, the role of government in the economy, and the effects of economic policy decisions on overall economic growth and stability. Emphasis is placed on understanding real-world economic issues and analyzing the impact of policy measures on society, enabling students to critically evaluate current economic debates and policy outcomes.
Recommended Textbook
Principles of Macroeconomics 5th Edition by
Robert Frank
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15 Chapters
1841 Verified Questions
1841 Flashcards
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Page 2
Chapter 1: Thinking Like an Economist
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134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/58108
Sample Questions
Q1) Suppose a retail store was offering 10% off all prices on all goods. The incentive to take advantage of the 10% savings is:
A) unrelated to the list price of one good.
B) inversely related to the list price of the good.
C) directly related to the list price of the good.
D) independent of the list price.
Answer: C
Q2) The marginal benefit of an activity is the:
A) same as the total benefits of the activity.
B) total benefit divided by the level of the activity.
C) extra benefit associated with an extra unit of the activity.
D) total benefit associated with an extra unit of the activity.
Answer: C
Q3) An economic naturalist is described as someone who:
A) uses economic arguments to protect forests and wetlands from development.
B) has a natural talent for drawing graphs.
C) applies economic insights to everyday life.
D) studies the process of natural selection in a marginal cost and marginal benefit framework.
Answer: C
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Chapter 2: Comparative Advantage
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) The fundamental reason the production possibilities curve has a downward slope is:
A) workers are inefficient.
B) resources are of low quality.
C) resources are fixed and therefore tradeoffs must be made.
D) it has empirical support but why it is so is still a mystery.
Answer: C
Q2) According to the principle of increasing opportunity cost, expanding production requires using resources in which order?
A) In random order.
B) Starting with the resource with the highest opportunity cost and progressing to the lower opportunity cost resources.
C) Starting with the resource closest to the average opportunity cost, then progressing to higher opportunity cost resources.
D) Starting with the resource with the lowest opportunity cost and proceeding to the higher opportunity cost resources.
Answer: D
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4
Chapter 3: Supply and Demand
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) You can spend $5 for lunch and you would like to have two double cheeseburgers. When you get to the restaurant, you find out the price for double cheeseburger has increased from $2.50 to $2.99. You decide to have just one double cheeseburger for lunch. This is best described as a(n):
A) substitution effect.
B) income effect.
C) buyer's reservation price effect.
D) seller's reservation price effect.
Answer: B
Q2) Suppose the local slaughterhouse gives off an unpleasant stench. The price of meat would then be _______ because not all of the _________ are accounted for in the marketplace.
A) too high; benefits
B) too low; benefits
C) too high; costs
D) too low; costs
Answer: D
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Page 5
Chapter 4: Macroeconomics: the Birds-Eye View of the Economy
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) The largest expenditure component of U.S. GDP is:
A) consumption.
B) investment.
C) government purchases.
D) exports.
Q2) If two countries are identical except that there is significant air and water pollution in one, then the level of GDP:
A) will be higher in the country with pollution.
B) will be higher in the country with no pollution.
C) will be the same in both countries.
D) will be greater than the level of economic well being in each country.
Q3) Summing the value added of all firms yields the value of final goods and services produced because both measures:
A) exclude the value of capital goods.
B) exclude the value of intermediate goods and services.
C) use constant prices.
D) are adjusted for population growth.
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Page 6
Chapter 5: Measuring Economic Activity: Gdp and Unemployment
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) Suppose the value of the CPI is 1.100 in year one, 1.122 in year two, and 1.133 in year three. Assume also that the price of computers increases by 3% between year one and year two, and by another 3% between year two and year three. The price level is increasing, the inflation rate is _______, and the relative price of computers is
A) decreasing; increasing B) increasing; increasing C) decreasing; decreasing D) increasing; decreasing
Q2) The price of a gallon of gasoline at the pump increased by 5 percent at the same time that the inflation rate was also 5 percent. The nominal price of gasoline _____, and the real price of gasoline _____.
A) did not change; increased B) did not change; did not change C) increased; did not change D) increased; decreased
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Chapter 6: Measuring the Price Level and Inflation
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Health and safety regulations in the labor market:
A) are always efficient because they improve working conditions.
B) should be evaluated by comparing their costs to their benefits.
C) are necessarily inefficient if they impose additional costs on employers.
D) can lead to an increase in frictional unemployment.
Q2) Cyclical unemployment is:
A) the additional unemployment not captured in official statistics resulting from discouraged workers and involuntary part-time workers.
B) the extra unemployment that occurs during periods of recession.
C) short-term unemployment that is associated with the process of matching workers with jobs.
D) long-term and chronic unemployment that exists even when the economy is producing at a normal rate.
Q3) Minimum wage laws contribute to structural unemployment by:
A) keeping wages above the market-clearing level.
B) keeping wages below the market-clearing level.
C) allowing unemployed workers to search longer or less intensively for jobs.
D) forcing unemployed workers to take the first job offered to them.
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8
Chapter 7: Economic Growth, Productivity, and Living Standards
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) Managers contribute to increased average labor productivity in each of the following ways EXCEPT by:
A) developing new products.
B) obtaining financing.
C) assigning workers to jobs.
D) dealing with suppliers.
Q2) Government policies that increase the long-term economic growth rate by a small amount result in ______ in average living standards.
A) large increases
B) small increases
C) small decreases
D) no change
Q3) Economic growth may face environmental limits because:
A) economic growth can take the form of new, different, and "cleaner" goods and services.
B) economic growth may lead to less, not more, pollution.
C) the market mechanism mobilizes resources to deal with shortages.
D) global environmental problems are not handled by markets or national governments.
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Chapter 8: Workers, Wages, and Unemployment
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Holding other factors constant, if terrorist attacks increase the desire for precautionary saving, then the real interest rate will ______ and the equilibrium quantity of saving and investment will _______.
A) increase; increase
B) decrease; decrease
C) increase; decrease
D) decrease; increase
Q2) National saving is saving by:
A) households for retirement.
B) the government.
C) households and firms.
D) the entire economy.
Q3) Which of the following is a flow?
A) Saving
B) Wealth
C) Assets
D) Money
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10
Chapter 9: Saving and Capital Formation
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126 Flashcards
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Sample Questions
Q1) If the money supply equals 2,000, velocity equals 3, and real GDP equals 4,000, then the price level equals:
A) 1.5.
B) 2.
C) 3.
D) 6,000.
Q2) If real GDP equals 5,000, nominal GDP equals 10,000, and the price level equals 2, then what is velocity if the money stock equals 2,000?
A) 2
B) 2.5
C) 10
D) 5
Q3) You own shares in a well-managed and diversified company. If a booming economy decreases investors' concerns about market risk, then the price of your shares will _____, holding other factors constant.
A) increase.
B) decrease.
C) not change.
D) either increase or decrease.
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Page 11
Chapter 10: Money, Prices, and the Federal Reserve
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) The longest expansion of the United States economy since 1925 began in _____.
A) 1991
B) 1945
C) 1961
D) 1982
Q2) If potential output equals $8 billion and actual output equals $7 billion, then this economy has an output gap equal to:
A) -$1 billion.
B) $1 billion.
C) 12.5 percent.
D) -12.5 percent.
Q3) Economic activity moves from a period of expansion to a ______ and then moves into a period of ______ until it reaches a _____.
A) peak; expansion; trough
B) peak, recession; trough
C) trough; expansion; peak
D) trough; recession; peak
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Chapter 11: Financial Markets and International Capital Flows
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) Government policy actions intended to decrease planned spending and output are called ______ policies.
A) aggregate
B) monetary
C) fiscal
D) contractionary
Q2) An economic recession in the U.S. ______ the demand for exports from Canada resulting in a reduction in Canadian autonomous expenditures and a(n) ______ output gap in Canada.
A) reduces; expansionary
B) increases; expansionary
C) reduces; recessionary
D) increases; recessionary
Q3) If consumption increases by $9 when after-tax disposable income increases by $10, the marginal propensity to consume (mpc) equals:
A) 0.1.
B) 0.9.
C) 1.0.
D) 9.0.
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Chapter 12: Short-Term Economics Fluctuations: An Introduction
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) For the past 40 years, the Federal Reserve has expressed policy in terms of a target value for:
A) bank reserves.
B) the Federal Reserve discount rate.
C) the federal funds rate.
D) open market operations.
Q2) Because an increase in the nominal interest rate raises the opportunity costs of holding money, the money demand curve:
A) shifts to the right.
B) shifts to the left.
C) slopes upward.
D) slopes downward.
Q3) If the Federal Reserve wants to decrease the money supply, it should:
A) decrease reserve requirements.
B) decrease the discount rate.
C) decrease the interest that it pays on reserves.
D) conduct open-market sales.
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Page 14
Chapter 13: Spending and Output in the Short Run
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) The self-correcting property of the economy means that output gaps are eventually eliminated by:
A) rising or falling prices.
B) falling prices only.
C) increasing or decreasing potential output.
D) government policy.
Q2) Starting from long-run equilibrium, a negative inflation shock results in a short-run equilibrium with ___ inflation and ____ output.
A) higher; higher
B) higher; lower
C) higher; potential
D) lower; lower
Q3) Starting from potential output, if consumer confidence increases and consumers decide to spend more, then this will generate a(n) _____ gap and inflation will _____.
A) recessionary; increase
B) recessionary; decrease
C) expansionary; decrease
D) expansionary; increase
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Chapter 14: Stabilizing the Economy: the Role of the Fed
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75 Verified Questions
75 Flashcards
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Sample Questions
Q1) The Fed cannot achieve a negative real interest rate if the inflation rate is zero or negative because:
A) the nominal interest rate cannot fall below zero.
B) inflation doves will not permit a negative real interest rate.
C) zero or negative values of inflation cannot be accurately measured.
D) inflationary expectations are not anchored when the inflation rate is zero.
Q2) Most economists believe that the reduced variability of inflation in the U.S. is the result of:
A) globalization.
B) better management of inventories.
C) improved monetary policymaking by the Fed.
D) deregulation.
Q3) Following an adverse inflation shock the economy will return to potential more rapidly if:
A) inflationary expectations are anchored.
B) inflationary expectations change quickly in response to the shock.
C) the Fed has frequently accommodated higher inflation in the past.
D) the Fed has frequently raised its target inflation rate in the past.
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Chapter 15: Aggregate Demand, Aggregate Supply, and Inflation
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) For a given nominal exchange rate and foreign price level, a decrease in the domestic price level ______ the real exchange rate.
A) increases
B) decreases
C) may either increase or decrease
D) offsets any change in
Q2) The price of gold is 300 U.S. dollars per ounce in New York and 435 Canadian dollars per ounce in Toronto, Canada. If the law of one price holds for gold, the nominal exchange rate is ______ Canadian dollars per U.S. dollar.
A) 0.333
B) 0.690
C) 1
D) 1.45
Q3) Which of the following events will decrease the domestic real interest rate in an open economy?
A) An increase in domestic saving.
B) A decrease in the domestic saving.
C) An increase in the perceived riskiness of investing in the domestic economy.
D) An decrease in net capital inflow.
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