Economic Principles
Test Questions
Course Introduction
Economic Principles introduces students to the foundational concepts and analytical tools essential for understanding how economies function. The course explores microeconomic topics such as supply and demand, market structures, consumer behavior, and production decisions, as well as macroeconomic themes like national income, inflation, unemployment, fiscal policy, and monetary policy. Through real-world examples and theoretical frameworks, students gain insight into how individuals, businesses, and governments make economic choices and interact within domestic and global markets. The course equips learners with critical thinking skills and a strong economic perspective useful for further studies and practical decision-making.
Recommended Textbook
Principles of Macroeconomics 1st Edition by N. Gregory Mankiw
Available Study Resources on Quizplus
17 Chapters
3530 Verified Questions
3530 Flashcards
Source URL: https://quizplus.com/study-set/1269 Page 2
Chapter 1: Ten Principles of Economics
Available Study Resources on Quizplus for this Chatper
218 Verified Questions
218 Flashcards
Source URL: https://quizplus.com/quiz/25034
Sample Questions
Q1) What are two very likely reasons for a government to intervene in a market?
A) to promote stability and to raise revenues
B) to promote equity and to promote efficiency
C) to promote equity and to promote stability
D) to promote efficiency and to raise revenues
Answer: B
Q2) What happens when government policies such as the welfare system try to help the neediest members of society?
A) It increases equity and reduces efficiency.
B) It reduces charitable contributions in an economy.
C) It increases the productivity of the needy in society.
D) It causes market failure to occur.
Answer: A
Q3) Which term refers to a single entity that has the ability to influence market prices?
A) competition
B) market power
C) efficiency
D) productivity
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Thinking Like an Economist
Available Study Resources on Quizplus for this Chatper
239 Verified Questions
239 Flashcards
Source URL: https://quizplus.com/quiz/25035
Sample Questions
Q1) A circular-flow diagram is a visual model of how an economy is organized.
A)True
B)False
Answer: True
Q2) Refer to Figure 2-6. What was the most likely cause of the movement from point C to point D?
A) unemployment
B) a decrease in society's preference for bananas
C) a decrease in society's preference for playing baseball
D) a shift to a longer working day
Answer: A
Q3) An economy can produce at any point on or outside the production possibilities frontier, but it cannot produce at points inside the frontier.
A)True
B)False
Answer: False
Q4) Economic growth causes a production possibilities frontier to shift outward.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Interdependence and the Gains From Trade
Available Study Resources on Quizplus for this Chatper
202 Verified Questions
202 Flashcards
Source URL: https://quizplus.com/quiz/25036
Sample Questions
Q1) Refer to Table 3-5. What is the opportunity cost of one airplane for Canada?
A) 1/4 car
B) 1/3 car
C) 3 cars
D) 4 cars
Answer: C
Q2) What is trade based on?
A) absolute advantage
B) comparative advantage
C) production costs
D) relative dollar prices
Answer: B
Q3) What is David Ricardo's contribution?
A) He wrote books opposing the ideas of Adam Smith.
B) He was the founder of modern economics.
C) He argued in favour of Britain following a free-trade policy.
D) He wrote An Inquiry into the Nature and Causes of the Wealth of Nations.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: The Market Forces of Supply and Demand
Available Study Resources on Quizplus for this Chatper
347 Verified Questions
347 Flashcards
Source URL: https://quizplus.com/quiz/25037
Sample Questions
Q1) Refer to the Table 4-2. What is the space that would represent an increase in equilibrium price and an indeterminate change in equilibrium quantity?
A) space A
B) space B
C) space C
D) space D
Q2) A supply curve slopes upward because, all else equal, a higher price means a greater quantity supplied.
A)True
B)False
Q3) Which of the following is NOT a determinant of demand?
A) the price of an input
B) the price of a complementary good
C) the price of the good next month
D) the price of a substitute good
Q4) Surpluses drive price up while shortages drive price down.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Measuring a Nations Income
Available Study Resources on Quizplus for this Chatper
169 Verified Questions
169 Flashcards
Source URL: https://quizplus.com/quiz/25038
Sample Questions
Q1) Which of the following is the best definition of GDP?
A) the market value of all goods produced within a country
B) the market value of all final goods and services produced by the citizens of a country
C) the market value of all final goods and services consumed within a country over a number of years
D) the market value of all final goods and services produced within a country in a given period of time
Q2) Sean used to volunteer to shovel his elderly neighbour's walk, but now his neighbour pays a company to do it. How does this change affect GDP?
A) It decreases GDP by more than the price of the service.
B) It increases GDP by less than the price of the service. .
C) It decreases GDP by the price of the service.
D) It increases GDP by the price of the service.
Q3) Refer to the Table 5-4. What is the nominal GDP for 2014?
A) $900
B) $1000
C) $1100
D) $1250
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Measuring the Cost of Living
Available Study Resources on Quizplus for this Chatper
173 Verified Questions
173 Flashcards
Source URL: https://quizplus.com/quiz/25039
Sample Questions
Q1) In 1954, Canadian Prime Minister Louis Stephen St. Laurent was paid a salary of $15,000. Stephen Harper, the Prime Minister in 2014, was paid $157,731. The price index for 1954 is 14.1 and the price index for 2014 is 121.7. What is, approximately, Prime Minister St. Laurent's salary equivalent in 2014 dollars?
A) $110,500
B) $114,500
C) $129,500
D) $211,500
Q2) In the country of Hyrkania, the CPI in 2014 was 140 and the CPI in 2015 was 154. Jake, a resident of Hyrkania, borrowed money in 2014 and repaid the loan in 2015. If the nominal interest rate on the loan was 14 percent, what was the real interest rate?
A) 4 percent
B) 10 percent
C) 14 percent
D) 18 percent
Q3) Which is likely to have the larger effect on the CPI, a 2 percent increase in food or a 3 percent increase in diamond rings? Explain.
Q4) Why does the GDP deflator give a different rate of inflation than the CPI does?
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Production and Growth
Available Study Resources on Quizplus for this Chatper
182 Verified Questions
182 Flashcards
Source URL: https://quizplus.com/quiz/25040
Sample Questions
Q1) Economists differ in their views of the role of the government in promoting economic growth. According to the text, at the very least, what should the government do?
A) lend support to the invisible hand by maintaining property rights and political stability
B) limit foreign investment to industries that don't already exist
C) impose trade restrictions to protect the interests of domestic producers and consumers
D) subsidize key industries
Q2) Which of the following would NOT be considered physical capital?
A) a sewing machine in an alterations shop
B) a computer used to help Mercury Delivery Service keep track of their orders
C) on-the-job training
D) a desk used in an accountant's office
Q3) International data on the history of real GDP growth rates show that the rich countries get richer and the poor countries get poorer.
A)True
B)False
Q4) What is the difference between human capital and technology
Q5) What might the African governments do to foster higher economic growth
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Saving, Investment, and the Financial System
Available Study Resources on Quizplus for this Chatper
214 Verified Questions
214 Flashcards
Source URL: https://quizplus.com/quiz/25041
Sample Questions
Q1) Suppose Sarah Lee Corporation stock has a P/E ratio of 10. Which statement best describes this P/E ratio?
A) The P/E ratio is low, indicating that buyers may expect earnings to rise.
B) The P/E ratio is low, indicating that buyers may expect earnings to fall.
C) The P/E ratio is high, indicating that buyers may expect earnings to rise.
D) The P/E ratio is high, indicating that buyers may expect earnings to fall.
Q2) The country of Hykania does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth of goods and services each year, collects $3 billion in taxes, and provides $1 billion in transfer payments to households. Private saving in Hyrkania is $4 billion. What is investment in Hyrkania?
A) $1 billion
B) $2 billion
C) $3 billion
D) $4 billion
Q3) When is a budget surplus created?
A) when the government sells more bonds than it buys back
B) when the government spends more than it receives in tax revenue
C) when private savings are greater than zero
D) when the government spends less than the tax revenue
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Unemployment and Its Natural Rate
Available Study Resources on Quizplus for this Chatper
194 Verified Questions
194 Flashcards
Source URL: https://quizplus.com/quiz/25042
Sample Questions
Q1) Refer to the Figure 9-2. If the minimum wage rose from $5 to $7, what would happen to unemployment?
A) It would rise by 40.
B) It would rise by 20.
C) It would fall by 20.
D) It would fall by 40.
Q2) In which situation would Statistics Canada count a person as unemployed?
A) when that person is not in the labour force
B) when that person is not looking for work
C) when that person is under the age of 15
D) when that person is age 15 or over and looking for work
Q3) Aaron is the owner of a firm that produces wind power in southern Alberta. There are many such firms in the area. Aaron decides that if he pays his workers a wage higher than the going market wage, his profits will increase. What is a likely explanation for his decision?
A) The higher the wage, the less often his workers will choose to leave his firm.
B) The higher the wage, the lower will be the cost of obtaining needed supplies.
C) The higher the wage, the more he can charge for his wind power.
D) The higher the wage, the less competition will be in the industry.
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: The Monetary System
Available Study Resources on Quizplus for this Chatper
188 Verified Questions
188 Flashcards
Source URL: https://quizplus.com/quiz/25043
Sample Questions
Q1) The money multiplier equals 1 divided by (1 - the reserve ratio).
A)True
B)False
Q2) What is a debit card?
A) a form of money
B) a means of payment
C) a form of investment
D) a means of borrowing
Q3) In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?
A) The money multiplier increases by a higher percentage change than the increase in the reserve ratio.
B) The money multiplier decreases by a higher percentage change than the increase in the reserve ratio.
C) The money multiplier increases by a lower percentage change than the increase in the reserve ratio.
D) The money multiplier decreases by a lower percentage change than the increase in the reserve ratio.
Q4) What is the difference between money and wealth?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Money Growth and Inflation
Available Study Resources on Quizplus for this Chatper
196 Verified Questions
196 Flashcards
Source URL: https://quizplus.com/quiz/25044
Sample Questions
Q1) What is the immediate and longer-term effect of a decrease in the money supply?
A) A decrease in the money supply creates an excess supply of money that is eliminated by rising prices.
B) A decrease in the money supply creates an excess supply of money that is eliminated by falling prices.
C) A decrease in the money supply creates an excess demand for money that is eliminated by rising prices.
D) A decrease in the money supply creates an excess demand for money that is eliminated by falling prices.
Q2) How can inflation be measured?
A) by the change in the consumer price index
B) by the percentage change in the consumer price index
C) by the percentage change in nominal GDP
D) by the change in the price of a specific commodity
Q3) The source of all four classic hyperinflations was high rates of money growth.
A)True
B)False
Q4) Define each of the symbols and explain the meaning of M × V = P × Y.
Q5) What are the costs of inflation?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Open-Economy Macroeconomics: Basic Concepts
Available Study Resources on Quizplus for this Chatper
218 Verified Questions
218 Flashcards
Source URL: https://quizplus.com/quiz/25045
Sample Questions
Q1) Suppose that a country exports $300 million of goods and services and imports $180 million of goods and services. What is the value of that country's net exports?
A) $-120 million
B) $120 million
C) $300 million
D) $380 million
Q2) List the factors that might influence a country's exports, imports, and trade balance.
Q3) What does net capital outflow measure?
A) foreign assets held by domestic residents minus domestic assets held by foreign residents
B) the imbalance between the amount of domestic assets bought by domestic residents and the amount of foreign assets bought by foreigners
C) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners
D) domestic assets held by foreigners minus foreign assets held by domestic residents
Q4) How do the nominal exchange rate and the real exchange rate differ?
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: A Macroeconomic Theory of the Small Open Economy
Available Study Resources on Quizplus for this Chatper
195 Verified Questions
195 Flashcards
Source URL: https://quizplus.com/quiz/25046
Sample Questions
Q1) Mexico suffered from capital flight in 1994. What happened to Mexico's real interest rate and the peso?
A) The real interest rate fell, and the peso appreciated.
B) The real interest rate fell, and the peso depreciated.
C) The real interest rate rose, and the peso appreciated.
D) The real interest rate rose, and the peso depreciated.
Q2) A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.
A)True
B)False
Q3) What is the effect of an increase in the Canadian real interest rate above the world interest rate?
A) Canadians buy more foreign assets, which increases Canadian net capital outflow.
B) Canadians buy more foreign assets, which reduces Canadian net capital outflow.
C) Foreigners buy more Canadian assets, which reduces Canadian net capital outflow.
D) Foreigners buy more Canadian assets, which increases Canadian net capital outflow.
Q4) Explain why saving need not equal domestic investment in an open economy.
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Aggregate Demand and Aggregate Supply
Available Study Resources on Quizplus for this Chatper
256 Verified Questions
256 Flashcards
Source URL: https://quizplus.com/quiz/25047
Sample Questions
Q1) Technological progress shifts the long-run aggregate-supply curve to the right.
A)True
B)False
Q2) Use the misperceptions theory to discuss the economic forces that shift the aggregate-supply curve when the expectations about the overall price level change.
Q3) What is classical dichotomy?
A) It is the separation of variables that move with the business cycle and variables that do not.
B) It is the separation of changes in money and changes in government expenditures.
C) It is the separation of endogenous and exogenous variables.
D) It is the separation of real and nominal variables.
Q4) Which government action will shift the aggregate demand right?
A) a rise in personal income taxes
B) increases in military expenditures
C) a repeal of an investment tax credit
D) closing up a military facility to reduce costs
Q5) The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand
Available Study Resources on Quizplus for this Chatper
223 Verified Questions
223 Flashcards
Source URL: https://quizplus.com/quiz/25048
Sample Questions
Q1) Suppose that the MPC is 0.5 and there is no investment accelerator or crowding-out effects. If government expenditures increase by $200 billion, what happens to aggregate demand?
A) It shifts right by $200 billion.
B) It shifts left by $200 billion.
C) It shifts right by $400 billion.
D) It shifts left by $400 billion.
Q2) According to the theory of liquidity preference, what does a decrease in the price level cause the interest rate and investment to do?
A) It causes both the interest rate and investment to rise.
B) It causes both the interest rate and investment to fall.
C) It causes the interest rate to rise and investment to fall.
D) It causes the interest rate to fall and investment to rise.
Q3) For the Canadian economy, what is the least important of the three reasons for the downward slope of the aggregate-demand curve?
A) wealth effect
B) interest-rate effect
C) exchange-rate effect
D) real-wage effect
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: The Short-Run Tradeoff Between Inflation and Unemployment
Available Study Resources on Quizplus for this Chatper
205 Verified Questions
205 Flashcards
Source URL: https://quizplus.com/quiz/25049
Sample Questions
Q1) What is the effect of an adverse supply shock?
A) The long-run aggregate supply curve shifts to the left.
B) The short-run aggregate supply curve shifts to the right.
C) The long-run Phillips curve shifts to the left.
D) The short-run Phillips curve shifts to the right.
Q2) How does a decrease in the expected rate of inflation shift the Phillips curves?
A) It shifts both the short-run and long-run Phillips curves to the right.
B) It shifts the long-run Phillips curve left and the short-run Phillips curve right.
C) It shifts only the short-run Phillips curve to the right.
D) It shifts only the short-run Phillips curve to the left.
Q3) Refer to the Figure 16-2. If the economy starts at c and the money supply growth rate increases, where does the economy move to in the long run?
A) b
B) d
C) e
D) a
Q4) The Phillips curve and the short-run aggregate-supply curve are closely related, yet one slopes downward and the other slopes upward. Discuss.
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Five Debates Over Macroeconomic Policy
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/25050
Sample Questions
Q1) Why should monetary policy be made by rule rather than discretion?
A) The economy is subject to a variety of random shocks.
B) Monetary policymakers are now allowed undisciplined discretion.
C) It is not clear how important political business cycles have been in the past.
D) Central banks can achieve credibility over time by backing up their words with deeds.
Q2) Explain why a government deficit is likely to lead to lower living standards in the future.
Q3) What would those who desire that policymakers stabilize the economy advocate when aggregate demand is insufficient to ensure full employment?
A) decreasing the money supply
B) decreasing taxes
C) decreasing government expenditures
D) decreasing government deficit
Q4) Suppose that the government goes into deficit in order to help local school districts build better schools. Does this action burden future generations?
Q5) Explain why policy lags could make stabilization policies counterproductive.
Q6) Explain the main argument in favour of economic stabilization.
To view all questions and flashcards with answers, click on the resource link above.
Page 19