Economic Principles and Problems
Solved Exam Questions
Course Introduction
This course provides an introduction to the fundamental principles of economics, focusing on both microeconomic and macroeconomic concepts. Students will explore the mechanisms of supply and demand, market structures, the role of government in the economy, and key challenges such as inflation, unemployment, and economic growth. Through real-world examples and case studies, the course examines how individuals, firms, and governments make economic decisions and address critical problems. Emphasis is placed on applying economic reasoning to contemporary issues, giving students a strong analytical foundation for understanding and debating economic policies.
Recommended Textbook
Principles of Macroeconomics A Streamlined Approach 3rd Edition by Robert H. Frank
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13 Chapters
2266 Verified Questions
2266 Flashcards
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Chapter 1: Thinking Like an Economist
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135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/49257
Sample Questions
Q1) You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Your economic surplus from going to work instead of seeing SPAM on Saturday is:
A) $0
B) $1
C) $35
D) $36
Answer: B
Q2) The Cost-Benefit Principle indicates that an action should be taken if, and only if:
A) its benefits are positive.
B) its costs are small.
C) its benefits are a result of its costs.
D) its benefits exceed its costs.
Answer: D
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Page 3
Chapter 2: Supply and Demand
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173 Verified Questions
173 Flashcards
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Sample Questions
Q1) If there are no unexploited opportunities for individuals in a particular market, then one can conclude that:
A) government regulation has been successful.
B) the market is in equilibrium.
C) the market is not in equilibrium.
D) a socially optimal outcome has been achieved.
Answer: B
Q2) Which of the following is NOT true of a demand curve?
A) It has negative slope.
B) It shows the amount consumers want to buy at various prices.
C) It relates the price of an item to the quantity demanded of that item.
D) It reflects sellers' reservations prices.
Answer: D
Q3) When the demand curve shifts to the right and supply doesn't change:
A) quantity demanded will rise.
B) equilibrium price will fall.
C) equilibrium quantity will rise.
D) supply will rise.
Answer: C
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Page 4
Chapter 3: International Trade and Trade Policy
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5P. If this economy is open to trade, and the world price of a car is $6,000, how many cars will be imported?
A) 2,000
B) 3,000
C) 4,000
D) 6,000
Answer: D
Q2) The demand for microwaves in a certain country is given by: D = 8,000-30P, where P is the price of a microwave. Supply by domestic microwave producers is: S = 4,000 + 10P. If this economy opens to trade while the world price of a microwave is $50, and the government imposes a tariff of $30 per microwave, then the domestic quantity demanded will be __ microwaves.
A) 4,000
B) 4,500
C) 5,000
D) 5,600
Answer: D
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Chapter 4: Macroeconomics: the Birds-Eye View of the Economy
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) After increasing at more than 2 percent per year between 1950 and 1973, the growth rate of average labor productivity _____ between 1973 and 1995, and ____ between 1996 to 2007.
A) slowed; decreased even more
B) speeded up; accelerated even more
C) slowed; picked up
D) speeded up; slowed
Q2) Government polices aimed at changing the underlying structure or institutions of the nation's economy are called:
A) structural policy.
B) trade policy.
C) monetary policy.
D) fiscal policy.
Q3) ______ policy focuses on the nation's money supply, while _____ policy focuses on the government's budget.
A) Monetary; structural
B) Fiscal, structural
C) Monetary, fiscal
D) Fiscal, monetary
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Chapter 5: Measuring Economic Activity: GDP, Unemployment,
and Inflation
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272 Verified Questions
272 Flashcards
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Sample Questions
Q1) If an economy produces 3 million oranges that sell for $0.25 each and 100,000 cars that sell for $25,000 each, then when the market value of total output is calculated:
A) oranges receive a greater weight than cars.
B) oranges receive the same weight as cars.
C) oranges receive a smaller weight than cars.
D) the market value of oranges is excluded.
Q2) Intermediate goods and services are ______ production and ______ counted in GDP.
A) the end products of; are B) the end products of; are not C) used up in the process of; are D) used up in the process of; are not
Q3) Suppose that the total expenditures for a typical household in 2010 equaled $5,500 per month, while the cost of purchasing exactly the same items in 2015 was $6,875. If 2010 is the base year, the CPI for the year 2015 equals:
A) 0.80
B) 1.00
C) 1.20
D) 1.25
Page 7
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Chapter 6: Economic Growth, Productivity, and Living Standards
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) Small differences in annual growth rates of real GDP generate large differences in real GDP over time because of the:
A) importance of average labor productivity.
B) power of compound interest.
C) diminishing returns to capital.
D) limits of economic growth.
Q2) Gamma has $30,000 of capital per worker, while Omega has $7,500 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will increase output ______ in Gamma compared to Omega, holding other factors constant.
A) more
B) less
C) not at all
D) by the same amount
Q3) GDP would be a better measure of economic well-being if it included:
A) the costs of education.
B) the total value of intermediate goods.
C) the market value of final goods.
D) the value of leisure.
Page 8
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Chapter 7: The Labor Market: Workers, Wages, and Unemployment
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) The value of the marginal product of labor equals the marginal product of labor times the:
A) real wage.
B) nominal wage.
C) price of output.
D) quantity of labor.
Q2) A Luddite is:
A) someone who opposes the introduction of new technologies.
B) a worker whose real wage rises as a result of globalization.
C) a fictional character from American folk history.
D) a consumer who refuses to buy imported goods, even if they are cheaper.
Q3) The extra production gained by employing one more worker is called the:
A) real wage of labor.
B) price of labor.
C) marginal product of labor.
D) opportunity cost of labor.
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Chapter 8: Saving and Capital Formation
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Which of the following hypotheses is a plausible explanation for why U.S. households save so little?
A) Government assistance to the elderly has reduced the need for life-cycling saving.
B) Most American already own homes and, therefore, have less need for life-cycle saving.
C) The highly developed financial markets in the U.S. have reduced the need for precautionary saving by Americans.
D) Government assistance to low-income U.S. households has increased the demonstration effects on spending by the poor.
Q2) Wealth increases as a result of _____ and/or _____.
A) positive saving; capital gains
B) negative saving (borrowing); capital gains
C) positive saving; crowding out
D) positive saving; capital losses
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Chapter 9: Money, The Federal Reserve, and Global
Financial Markets
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) Shares of stock are:
A) legal promises to repay a debt.
B) claims to partial ownership of a firm.
C) regular payments made to owners of a firm.
D) legal promises to make regular payments to the stockholder.
Q2) From the point of view of a particular country, capital inflows are:
A) purchases of domestic goods or services by foreigners.
B) purchases of domestic assets by foreigners.
C) purchases of foreign goods or services by domestic households or firms.
D) purchases of foreign assets by domestic households or firms.
Q3) The U.S. trade deficit has been mainly caused by:
A) production of inferior goods in the U.S.
B) unfair trade restrictions imposed by other countries on imports.
C) a low rate of national saving.
D) cheap labor in other countries.
Q4) Net capital inflows equal:
A) capital inflows minus capital outflows.
B) capital outflows minus capital inflows.
C) international production.
D) domestic production.
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Chapter 10: Short-Term Economic Fluctuations and Fiscal Policy
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190 Verified Questions
190 Flashcards
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Sample Questions
Q1) Which of the following workers is most likely to lose his/her job during a recession?
A) Construction worker
B) Baker
C) Farmer
D) Barber
Q2) Firms do not change prices frequently because:
A) there are legal prohibitions against doing so.
B) it is easier to change the quantity of capital used in production.
C) it is costly to do so.
D) customers will refuse to patronize firms that change prices frequently.
Q3) In the basic Keynesian model, an increase in transfer payments:
A) reduces short-run equilibrium output.
B) increases short-run equilibrium output.
C) reduces potential output.
D) increases potential output.
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Chapter 11: Stabilizing the Economy: The Role of the Fed
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) If the income-expenditure multiplier equals 4, and a 1 percent increase in the real interest rate reduces autonomous spending by 100 units, then a 1,000 unit recessionary gap can be eliminated by ______ the real interest rate by ______ percent.
A) increasing; 10.0
B) increasing; 4.0
C) increasing; 2.5
D) decreasing; 2.5
Q2) According to the Taylor rule, if inflation equals 4 percent and there is a recessionary gap equal to 4 percent of potential output, the Fed will set a real interest rate of ____ percent and a nominal interest rate of ____ percent.
A) 4; 4
B) 1; 5
C) 1; 4
D) 2; 4
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 13
Chapter 12: Inflation and Aggregate Supply
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Starting from long-run equilibrium, an increase in autonomous investment results in ____ output in the short run and _____ output in the long run.
A) higher; higher
B) higher; potential C) lower; potential D) lower; higher
Q2) The aggregate demand curve shifts to the left when the Fed: A) increases its target inflation rate, reflected by a downward shift in the Fed's policy reaction function.
B) decreases its target inflation rate, reflected by an upward shift in the Fed's policy reaction function.
C) increases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.
D) decreases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.
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Chapter 13: Exchange Rates and the Open Economy
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) As the dollar exchange rate, e, increases, the quantity of dollars supplied in the foreign exchange market ____, and the quantity of dollars demanded in the foreign exchange market ____.
A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases
Q2) The impact of monetary policy through exchange rates tends to ______ the impact of monetary policy through real interest rates.
A) reinforce B) contradict C) totally negate D) be exactly the same as
Q3) European firms wishing to purchase American goods and services are ______ the foreign exchange market.
A) suppliers of U.S. dollars in B) demanders of Euros in C) supplied dollars by the European Central Bank for use in D) demanders of U.S. dollars in
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