Economic Theory Exam
Preparation Guide
Course Introduction
Economic Theory explores the fundamental principles that underlie the functioning of economies, focusing on the behavior of individuals, firms, and governments in the allocation of scarce resources. The course covers foundational concepts in both microeconomics and macroeconomics, such as supply and demand, market structures, consumer behavior, production theory, game theory, and general equilibrium analysis. Students will also examine the role of government intervention, the effects of market failures, and the impacts of monetary and fiscal policies on economic stability and growth. Through mathematical modeling and real-world applications, Economic Theory provides a rigorous framework for analyzing, understanding, and predicting economic phenomena.
Recommended Textbook
Principles of Economics 5th Edition by N.
Gregory Mankiw
Available Study Resources on Quizplus
36 Chapters
12910 Verified Questions
12910 Flashcards
Source URL: https://quizplus.com/study-set/2580 Page 2
Chapter 1: Ten Principles of Economics
Available Study Resources on Quizplus for this Chatper
281 Verified Questions
281 Flashcards
Source URL: https://quizplus.com/quiz/51328
Sample Questions
Q1) When you calculate your true costs of going to college,what portion of your room-and-board expenses should be included?
A) Your full room-and-board expenses should always be included.
B) None of your room-and-board expenses should ever be included.
C) You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college.
D) You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.
Answer: D
Q2) Guns and butter are used to represent the classic societal tradeoff between spending on
A) durable and nondurable goods.
B) imports and exports.
C) national defense and consumer goods.
D) law enforcement and agriculture.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Thinking Like an Economist
Available Study Resources on Quizplus for this Chatper
451 Verified Questions
451 Flashcards
Source URL: https://quizplus.com/quiz/51329
Sample Questions
Q1) A circular-flow diagram is a visual model of the economy.
A)True
B)False Answer: True
Q2) Good assumptions simplify a problem without substantially affecting the answer.
A)True
B)False Answer: True
Q3) In the circular-flow diagram,which of the following items does not flow from firms to households?
A) goods
B) services
C) capital
D) profit Answer: C
Q4) Points on the production possibilities frontier represent efficient levels of production.
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
353 Verified Questions
353 Flashcards
Source URL: https://quizplus.com/quiz/51330
Sample Questions
Q1) Trade allows a person to obtain goods at prices that are less than that person's opportunity cost because each person specializes in the activity for which he or she has the lower opportunity cost.
A)True
B)False
Answer: True
Q2) Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year,and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year.Each nation has 10 workers.Without trade,Freedonia produces and consumes 30 units of corn and 10 units of wheat per year.Sylvania produces and consumes 10 units of corn and 30 units of wheat.Suppose that trade is then initiated between the two countries,and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat.Sylvania will now be able to consume a maximum of A) 30 units of corn and 30 units of wheat. B) 40 units of corn and 30 units of wheat. C) 40 units of corn and 20 units of wheat. D) 10 units of corn and 40 units of wheat.
Answer: A
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
467 Verified Questions
467 Flashcards
Source URL: https://quizplus.com/quiz/51331
Sample Questions
Q1) Suppose roses are currently selling for $20 per dozen,but the equilibrium price of roses is $30 per dozen.We would expect a
A) shortage to exist and the market price of roses to increase.
B) shortage to exist and the market price of roses to decrease.
C) surplus to exist and the market price of roses to increase.
D) surplus to exist and the market price of roses to decrease.
Q2) Price cannot fall so low that some sellers choose to supply a quantity of zero.
A)True
B)False
Q3) Sellers respond to a surplus by cutting their prices.
A)True
B)False
Q4) If a good is normal,then an increase in income will result in
A) an increase in the demand for the good.
B) a decrease in the demand for the good.
C) a movement down and to the right along the demand curve for the good.
D) a movement up and to the left along the demand curve for the good.
Q5) At the equilibrium price,quantity demanded is equal to quantity supplied.
A)True
B)False
Page 6
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Elasticity and Its Application
Available Study Resources on Quizplus for this Chatper
409 Verified Questions
409 Flashcards
Source URL: https://quizplus.com/quiz/51332
Sample Questions
Q1) OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.
A)True
B)False
Q2) Economists compute the price elasticity of demand as the
A) percentage change in price divided by the percentage change in quantity demanded.
B) change in quantity demanded divided by the change in the price.
C) percentage change in quantity demanded divided by the percentage change in price.
D) percentage change in quantity demanded divided by the percentage change in income.
Q3) The price elasticity of supply measures how responsive
A) sellers are to a change in price.
B) sellers are to a change in buyers' income.
C) buyers are to a change in production costs.
D) equilibrium price is to a change in supply.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Supply, Demand, and Government Policies
Available Study Resources on Quizplus for this Chatper
459 Verified Questions
459 Flashcards
Source URL: https://quizplus.com/quiz/51333
Sample Questions
Q1) Refer to Figure 6-10.The effective price received by sellers after the tax is imposed is
A) $8.
B) $10.
C) $14.
D) $18.
Q2) Refer to Figure 6-12.The price paid by buyers after the tax is imposed is
A) $3.
B) $4.
C) $5.
D) $7.
Q3) The proportion of minimum-wage earners who are in families with incomes below the poverty line is
A) less than one-third.
B) between one-third and one-half.
C) between one-half and two-thirds.
D) greater than two-thirds.
Q4) A price ceiling set below the equilibrium price is binding.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Consumers, Producers, and the Efficiency of Markets
Available Study Resources on Quizplus for this Chatper
363 Verified Questions
363 Flashcards
Source URL: https://quizplus.com/quiz/51334
Sample Questions
Q1) Refer to Table 7-6.If the price is $775,who would be willing to supply the product?
A) Abby and Bobby
B) Abby,Bobby,and Carlos
C) Carlos,Dianne,and Evalina
D) Dianne and Evalina
Q2) Michael values a stainless steel refrigerator for his new house at $3,500,but he succeeds in buying one for $3,000.Michael's willingness to pay is
A) $500.
B) $3,000.
C) $3,500.
D) $6,500.
Q3) Which of the following will cause an increase in producer surplus?
A) the imposition of a binding price ceiling in the market
B) buyers expect the price of the good to be lower next month
C) the price of a substitute increases
D) income increases and buyers consider the good to be inferior
Q4) Producer surplus is the cost of production minus the amount a seller is paid.
A)True
B)False
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Application: The Costs of Taxation
Available Study Resources on Quizplus for this Chatper
353 Verified Questions
353 Flashcards
Source URL: https://quizplus.com/quiz/51335
Sample Questions
Q1) When a tax is imposed on the buyers of a good,the demand curve shifts
A) downward by the amount of the tax.
B) upward by the amount of the tax.
C) downward by less than the amount of the tax.
D) upward by more than the amount of the tax.
Q2) Refer to Figure 8-8.The decrease in consumer and producer surpluses that is not offset by tax revenue is the area
A) C.
B) F.
C) G.
D) C+F.
Q3) One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the
A) size of the market is unchanged.
B) price the seller effectively receives is higher.
C) supply curve for the good shifts upward by the amount of the tax.
D) tax reduces the welfare of both buyers and sellers.
Q4) A tax on a good causes the size of the market to increase.
A)True
B)False
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Application: International Trade
Available Study Resources on Quizplus for this Chatper
333 Verified Questions
333 Flashcards
Source URL: https://quizplus.com/quiz/51336
Sample Questions
Q1) Refer to Scenario 9-1.If trade in tomatoes is allowed,the United States
A) will become an importer of tomatoes.
B) will become an exporter of tomatoes.
C) may become either an importer or an exporter of tomatoes,but this cannot be determined.
D) will experience increases in both consumer surplus and producer surplus.
Q2) Refer to Figure 9-15.With the tariff,the domestic price and domestic quantity demanded are
A) P<sub>1</sub> and Q<sub>1</sub>.
B) P<sub>1</sub> and Q<sub>4</sub>.
C) P<sub>2</sub> and Q<sub>2</sub>.
D) P<sub>2</sub> and Q<sub>3</sub>.
Q3) Refer to Figure 9-10.When trade takes place,the quantity Q<sub>2</sub>Q<sub>1</sub> is
A) the number of cameras bought and sold in Australia.
B) the number of cameras produced in Australia.
C) the number of cameras exported by Australia.
D) the number of cameras imported by Australia.
Q4) How does an import quota differ from an equivalent tariff?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Externalities
Available Study Resources on Quizplus for this Chatper
352 Verified Questions
352 Flashcards
Source URL: https://quizplus.com/quiz/51337
Sample Questions
Q1) Negative externalities lead markets to produce
A) greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels.
B) smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
C) greater than efficient output levels and positive externalities lead markets to produce efficient output levels.
D) efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
Q2) When an industry is characterized by technology spillover,what should the government do to ensure that the market equilibrium equals the socially optimal equilibrium?
A) Impose a tax greater than the value of the technology spillover.
B) Not allow production of any product that causes a technology spillover.
C) Provide a subsidy equal to the value of the technology spillover.
D) Require producers to "clean up" any spillover that results from their production process.
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 11: Public Goods and Common Resources
Available Study Resources on Quizplus for this Chatper
270 Verified Questions
270 Flashcards
Source URL: https://quizplus.com/quiz/51338
Sample Questions
Q1) A stairwell in a certain office building is always congested at 12:00 p.m.and 2:00 p.m.The congestion is so bad that people have been complaining to the building's owner.Which of the following methods would be the most efficient way of reducing congestion?
A) Assign each person in the building a time when they are allowed to use the stairwell.
B) Encourage people to voluntarily keep off the stairwell during peak times.
C) Charge everyone who uses the stairwell when it is congested the same fee.People who value the use of the stairs the most will be the ones who use the stairwell at peak times.
D) Hold a lottery to determine who wins the right to use the stairwell at peak times.
Q2) Private markets usually fail to provide lighthouses because
A) lighthouses cost too much to build relative to their benefits.
B) government intervention makes it hard for private lighthouse owners to compete in the market.
C) ship captains have incentives to use lighthouses without paying.
D) lighthouses are valued very little by ship captains these days.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Design of the Tax System
Available Study Resources on Quizplus for this Chatper
397 Verified Questions
397 Flashcards
Source URL: https://quizplus.com/quiz/51339
Sample Questions
Q1) Refer to Table 12-17.A regressive tax is illustrated by tax
A) A only.
B) B or D.
C) C only.
D) A or D.
Q2) Tax evasion is
A) facilitated by legal deductions to taxable income.
B) the same as tax avoidance.
C) recommended by the American Accounting Association.
D) illegal.
Q3) One tax system is less efficient than another if it
A) places a lower tax burden on lower-income families than on higher-income families.
B) places a higher tax burden on lower-income families than on higher-income families.
C) raises the same amount of revenue at a higher cost to taxpayers.
D) raises less revenue at a lower cost to taxpayers.
Q4) By law,all states must have a state income tax.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: The Costs of Production
Available Study Resources on Quizplus for this Chatper
434 Verified Questions
434 Flashcards
Source URL: https://quizplus.com/quiz/51340
Sample Questions
Q1) Variable cost divided by quantity produced is A) average total cost.
B) marginal cost.
C) profit.
D) None of the above is correct.
Q2) If long-run average total cost decreases as the quantity of output increases,the firm is experiencing
A) economies of scale.
B) diseconomies of scale.
C) coordination problems arising from the large size of the firm.
D) fixed costs greatly exceeding variable costs.
Q3) Refer to Table 13-13.Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7?
A) Firm 1
B) Firm 2
C) Firm 3
D) Firm 4
Q4) How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Firms in Competitive Markets
Available Study Resources on Quizplus for this Chatper
381 Verified Questions
381 Flashcards
Source URL: https://quizplus.com/quiz/51341
Sample Questions
Q1) Refer to Figure 14-9.When the market is in long-run equilibrium at point A in panel (b),the firm represented in panel (a)will
A) have a zero economic profit.
B) have a negative accounting profit.
C) exit the market.
D) choose to increase production to increase profit.
Q2) Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?
A) $9
B) $10
C) $11
D) $12
Q3) Which of the following is not a characteristic of a competitive market?
A) Buyers and sellers are price takers.
B) Each firm sells a virtually identical product.
C) Free entry is limited.
D) Each firm chooses an output level that maximizes profits.
Q4) List and describe the characteristics of a perfectly competitive market.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Monopoly
Available Study Resources on Quizplus for this Chatper
427 Verified Questions
427 Flashcards
Source URL: https://quizplus.com/quiz/51342
Sample Questions
Q1) University financial aid can be viewed as a type of price discrimination.
A)True
B)False
Q2) The laws governing patents and copyrights
A) promote monopolies.
B) are intended to serve private interests,not the public's interest.
C) have costs but not benefits.
D) eliminate the need for firms to engage in research and development.
Q3) A firm that is the sole seller of a product without close substitutes is
A) perfectly competitive.
B) monopolistically competitive.
C) an oligopolist.
D) a monopolist.
Q4) With perfect price discrimination the monopoly
A) eliminates all price discrimination by charging each customer the same price.
B) charges each customer an amount equal to the monopolist's marginal cost of production.
C) eliminates deadweight loss.
D) eliminates profits and increases consumer surplus.
Q5) Give some examples of the benefits and costs of antitrust laws.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Monopolistic Competition
Available Study Resources on Quizplus for this Chatper
416 Verified Questions
416 Flashcards
Source URL: https://quizplus.com/quiz/51343
Sample Questions
Q1) New firms will likely enter a monopolistically competitive market when price exceeds A) marginal revenue.
B) average revenue.
C) marginal cost.
D) average total cost.
Q2) Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?
A) panel a
B) panel b
C) panel c
D) All of the above are correct.
Q3) Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?
A) panel a
B) panel b
C) panel c
D) panel d
Q4) List five goods that are likely sold in a monopolistically competitive market.
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: Oligopoly
Available Study Resources on Quizplus for this Chatper
325 Verified Questions
325 Flashcards
Source URL: https://quizplus.com/quiz/51344
Sample Questions
Q1) Refer to Scenario 17-5.If the bank is unable to use tying,what is the profit-maximizing price to charge for unlimited use of an ATM card?
A) $14
B) $11
C) $9
D) $2
Q2) The Sherman Antitrust Act prohibits executives of competing companies from A) fixing prices,but it does not prohibit them from talking about fixing prices.
B) even talking about fixing prices.
C) sharing with one another their knowledge of game theory.
D) failing to stand by agreements that they had made with one another.
Q3) Refer to Scenario 17-1.As long as the combined level of output is less than the Nash equilibrium level,both Irun and Urun have the individual incentive to A) hold production constant.
B) decrease production.
C) increase production.
D) increase price.
Q4) What effect does the number of firms in an oligopoly have on the characteristics of the market?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: The Markets for the Factors of Production
Available Study Resources on Quizplus for this Chatper
361 Verified Questions
361 Flashcards
Source URL: https://quizplus.com/quiz/51345
Sample Questions
Q1) Owners of land are compensated according to the A) absolute level of production from the land.
B) number of laborers the land can support.
C) purchase price of the land stock.
D) value of the marginal product of land.
Q2) Which of the following correctly describes a representative labor market?
A) The wage adjusts to balance the supply and demand for labor.
B) The wage equals the value of the marginal product of labor.
C) An increase in the supply of labor increases the equilibrium wage.
D) Both a and b are correct.
Q3) The opportunity cost of leisure is impossible to measure,since we can't measure leisure time in dollars.
A)True
B)False
Q4) A competitive firm will hire workers up to the point at which the value of the marginal product of labor equals the A) average total cost.
B) average variable cost.
C) wage.
D) price per unit of output.
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Earnings and Discrimination
Available Study Resources on Quizplus for this Chatper
335 Verified Questions
335 Flashcards
Source URL: https://quizplus.com/quiz/51346
Sample Questions
Q1) If an employer pays a man a higher wage than a woman,the employer
A) is discriminating against the woman but is still maximizing profit.
B) is not discriminating against the woman.
C) may or may not be discriminating against the woman.
D) is discriminating against the woman and is not maximizing profit.
Q2) Karen is a black 21-year-old female,and Jessica is a black 41-year-old female.Both Karen and Jessica are accounting majors,and they graduated from the same college with the same GPA - Karen in 2008 and Jessica in 1988.Karen and Jessica are both financial advisers at the same mutual fund firm.Karen earns $45,000 a year,and Jessica earns $90,000 a year.Select the best explanation for this wage difference.
A) Karen has more human capital than Jessica.
B) Karen has less human capital than Jessica.
C) Karen has been discriminated against because she is young.
D) Jessica has been discriminated against because she is old.
Q3) A compensating differential refers to a difference in wages that arises from nonmonetary characteristics.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Income Inequality and Poverty
Available Study Resources on Quizplus for this Chatper
312 Verified Questions
312 Flashcards
Source URL: https://quizplus.com/quiz/51347
Sample Questions
Q1) Economic mobility in the United States is
A) uncommon.Over 50 percent of poor families remain poor for 8 or more years.
B) uncommon.Over 75 percent of poor families remain poor for 8 or more years.
C) common.Fewer than 3 percent of poor families remain poor for 8 or more years.
D) common.Fewer than 1 percent of poor families remain poor for 8 or more years.
Q2) The maximin criterion is attributed to which political philosophy?
A) Utilitarianism.
B) Liberalism.
C) Libertarianism.
D) Repubicanism.
Q3) Based on U.S.data for 2005,the poverty rate is the highest for which group of people?
A) children
B) married couples
C) female households,no spouse present
D) the elderly
Q4) Since 1959 the United States' income distribution has become more equal.
A)True
B)False
Q5) Explain the relationship between labor earnings and the distribution of income.
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: The Theory of Consumer Choice
Available Study Resources on Quizplus for this Chatper
354 Verified Questions
354 Flashcards
Source URL: https://quizplus.com/quiz/51348
Sample Questions
Q1) Graphically demonstrate the conditions associated with a consumer optimum.Carefully label all curves and axes.
Q2) When a consumer is purchasing the best combination of two goods,X and Y,subject to a budget constraint,we say that the consumer is at an optimal choice point.A graph of an optimal choice point shows that it occurs
A) along the highest attainable indifference curve.
B) where the indifference curve is tangent to the budget constraint.
C) where the marginal utility per dollar spent is the same for both X and Y.
D) All of the above are correct.
Q3) Suppose that for Emily,DVDs and trips to the movie theater are perfect substitutes.Currently,Emily is spending all of her income on trips to the movie theater.If the price of DVDs doubles,the substitution effect will
A) be two times the income effect.
B) be half the income effect.
C) be zero.
D) always increase the number of trips to the movie theater Emily makes.
Q4) The marginal rate of substitution is the slope of the indifference curve.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Frontiers of Microeconomics
Available Study Resources on Quizplus for this Chatper
262 Verified Questions
262 Flashcards
Source URL: https://quizplus.com/quiz/51349
Sample Questions
Q1) Which of the following would violate transitivity?
A) John likes A more than B,C more than B,and C more than A.
B) Steve likes C more than B,A more than B,B more than D,and C more than D.
C) Sarah likes C more than A,B more than D,A more than B,and D more than C.
D) Mitch likes C more than B,C more than D,and B more than D.
Q2) Which of the following relationships involves asymmetric information?
A) An employee knows more than his employer knows about his work effort.
B) A borrower knows more than the lender about his ability to repay the loan.
C) The seller of a 30-year-old house knows more than the buyer about the condition of the house.
D) All of the above are correct.
Q3) The suggestion that people are "satisficers" is similar to the view that people A) are wealth-maximizers.
B) exhibit "bounded rationality."
C) go to a lot of trouble to weigh costs and benefits before choosing a course of action.
D) change their minds often.
Q4) Majority rule will produce the outcome most preferred by the median voter.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Measuring a Nations Income
Available Study Resources on Quizplus for this Chatper
343 Verified Questions
343 Flashcards
Source URL: https://quizplus.com/quiz/51350
Sample Questions
Q1) While GDP includes tangible goods such as books and bug spray,it excludes intangible services such as the services provided by teachers and exterminators.
A)True
B)False
Q2) National income is defined as
A) the total income of a nation's permanent residents minus losses from depreciation.
B) the income that households and noncorporate businesses receive.
C) the total income earned by a nation's permanent residents in the production of goods and services.
D) the income that households and noncorporate businesses have left after satisfying all their obligations to the government.
Q3) Consumption consists of spending by households on goods and services,with the exception of
A) purchase of intangible services.
B) purchases of durable goods.
C) purchases of new houses.
D) spending on education.
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 24: Measuring the Cost of Living
Available Study Resources on Quizplus for this Chatper
358 Verified Questions
358 Flashcards
Source URL: https://quizplus.com/quiz/51351
Sample Questions
Q1) The CPI was 172 in 2007,and the CPI was 46.5 in 1982.If your parents put aside $1,000 for you in 1982,then how much would you have needed in 2007 in order to buy what you could have bought with the $1,000 in 1982?
A) $270.35
B) $1,255.00
C) $2,698.92
D) $3,698.92
Q2) Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100,100 to 120,or 150 to 170?
A) 80 to 100
B) 100 to 120
C) 150 to 170
D) All of these changes produce the same rate of inflation.
Q3) The purpose of measuring the overall level of prices in the economy is to permit comparison between dollar figures from different times.
A)True
B)False
Q4) Why does the GDP deflator give a different rate of inflation than the CPI?
To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 25: Production and Growth
Available Study Resources on Quizplus for this Chatper
335 Verified Questions
335 Flashcards
Source URL: https://quizplus.com/quiz/51352
Sample Questions
Q1) Which of the following would not be considered physical capital?
A) a new factory building
B) a computer used to help Mercury Delivery Service keep track of its orders
C) on-the-job training
D) a desk used in an accountant's office
Q2) "When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement
A) represents the traditional view of the production process.
B) is an assertion that capital is subject to diminishing returns.
C) is made under the assumption that the quantities of human capital,natural resources,and technology are being held constant.
D) All of the above are correct.
Q3) It is possible for a country without a lot of domestic natural resources to have a high standard of living.
A)True
B)False
Q4) In addition to investment in physical and human capital,what other public policies might a country adopt to increase productivity?
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 26: Saving, investment, and the Financial System
Available Study Resources on Quizplus for this Chatper
381 Verified Questions
381 Flashcards
Source URL: https://quizplus.com/quiz/51353
Sample Questions
Q1) Other things the same,an increase in the interest rate
A) would shift the demand for loanable funds to the right.
B) would shift the demand for loanable funds to the left.
C) would increase the quantity of loanable funds demanded.
D) would decrease the quantity of loanable funds demanded.
Q2) If Congress instituted an investment tax credit,the demand for loanable funds would shift rightward.
A)True
B)False
Q3) Y = C + I + G + NX is an identity because
A) each symbol identifies a macroeconomic variable.
B) the right-hand and left-hand sides are equal when an equilibrium is reached.
C) the equality holds due to the way the variables are defined.
D) None of the above is correct.
Q4) The slope of the supply of loanable funds curve represents the
A) positive relation between the real interest rate and investment.
B) positive relation between the real interest rate and saving.
C) negative relation between the real interest rate and investment.
D) negative relation between the real interest rate and saving.
Q5) Draw and label a graph showing equilibrium in the market for loanable funds.
To view all questions and flashcards with answers, click on the resource link above. Page 28
Chapter 27: The Basic Tools of Finance
Available Study Resources on Quizplus for this Chatper
336 Verified Questions
336 Flashcards
Source URL: https://quizplus.com/quiz/51354
Sample Questions
Q1) According to the rule of 70,if the interest rate is 10 percent,about how long will it take for the value of a savings account to double?
A) about 6.3 years
B) about 7 years
C) about 7.7 years
D) about 10 years
Q2) Suppose that an increased risk of mortgage defaults lowers the expected profitability of banks.Then we would expect to see
A) the demand for bank stocks rise which would raise the prices of bank stocks.
B) the demand for bank stocks rise which would reduce the prices of bank stocks.
C) the demand for bank stocks fall which would raise the prices of bank stocks.
D) the demand for bank stocks fall which would reduce the prices of bank stocks.
Q3) Which of the following changes would decrease the present value of a future payment?
A) a decrease in the size of the payment
B) an increase in the time until the payment is made
C) an increase in the interest rate
D) All of the above are correct.
Q4) Discuss the statistical evidence concerning the efficient markets hypothesis.
To view all questions and flashcards with answers, click on the resource link above. Page 29
Chapter 28: Unemployment
Available Study Resources on Quizplus for this Chatper
533 Verified Questions
533 Flashcards
Source URL: https://quizplus.com/quiz/51355
Sample Questions
Q1) Refer to Table 28-5.The total adult population of Wrexington in 2010 is 30,000.
A)True
B)False
Q2) Refer to Table 28-1.The labor force of Wrexington in 2006 was
A) 1600
B) 1800
C) 3000
D) 3200
Q3) Since unemployment rates are consistently higher in Canada and some Western European countries than in the United States,it appears that the natural rate of unemployment is lower in the United States.What might explain this difference?
Q4) A union is an employer association that bargains with workers over wages,benefits,and working conditions.
A)True
B)False
Q5) Long-run unemployment arises from a single problem that has a single solution.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 30
Chapter 29: The Monetary System
Available Study Resources on Quizplus for this Chatper
366 Verified Questions
366 Flashcards
Source URL: https://quizplus.com/quiz/51356
Sample Questions
Q1) You receive money as payment for babysitting your neighbors' children.This best illustrates which function of money?
A) medium of exchange
B) unit of account
C) store of value
D) liquidity
Q2) As the reserve ratio increases,the money multiplier
A) increases.
B) does not change.
C) decreases.
D) could do any of the above.
Q3) Refer to Scenario 29-1.Suppose the Central Bank of Salidiva loaned the banks of Salidiva 5 million salidos.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much would the money supply of Salidiva change?
A) 60 million salidos
B) 50 million salidos
C) 40 million salidos
D) None of the above is correct.
Q4) What makes the New York Federal Reserve regional bank so important?
Page 31
To view all questions and flashcards with answers, click on the resource link above.
Chapter 30: Money Growth and Inflation
Available Study Resources on Quizplus for this Chatper
312 Verified Questions
312 Flashcards
Source URL: https://quizplus.com/quiz/51357
Sample Questions
Q1) Refer to Figure 30-1.When the money supply curve shifts from MS<sub>1</sub> to MS<sub>2</sub>,
A) the equilibrium value of money decreases.
B) the equilibrium price level decreases.
C) the supply of money has decreased.
D) the demand for goods and services will decrease.
Q2) Tara deposits money into an account with a nominal interest rate of 6 percent.She expects inflation to be 2 percent.Her tax rate is 20 percent.Tara's after-tax real rate of interest
A) will be 2.8 percent if inflation turns out to be 2 percent;it will be higher if inflation turns out to be higher than 2 percent.
B) will be 2.8 percent if inflation turns out to be 2 percent;it will be lower if inflation turns out to be higher than 2 percent.
C) will be 3.2 percent if inflation turns out to be 2 percent;it will be higher if inflation turns out to be higher than 2 percent.
D) will be 3.2 percent if inflation turns out to be 2 percent;it will be lower if inflation turns out to be higher than 2 percent.
Q3) Explain how inflation affects savings.
To view all questions and flashcards with answers, click on the resource link above. Page 32
Chapter 31: Open-Economy Macroeconomics: Basic Concepts
Available Study Resources on Quizplus for this Chatper
346 Verified Questions
346 Flashcards
Source URL: https://quizplus.com/quiz/51358
Sample Questions
Q1) A country has $20 billion of domestic investment and net capital outflow of $10 billion.What is saving?
A) $10 billion
B) $30 billion
C) -$20 billion
D) -$30 billion
Q2) Suppose that foreign citizens decide to purchase more U.S.pharmaceuticals and U.S.citizens decide to buy more stock in foreign corporations.Other things the same,these actions
A) raise both U.S.net exports and U.S.net capital outflows.
B) raise U.S.net exports and lower U.S.net capital outflows.
C) lower both U.S.net exports and U.S.net capital outflows.
D) lower U.S.net exports and raise U.S.net capital outflows.
Q3) A U.S.based company sells semiconductors to an Italian firm.The U.S.company uses all of the revenues from this sale to purchase automobiles from Italian firms.These transactions
A) increase both U.S.net exports and U.S.net capital outflow.
B) decrease both U.S.net exports and U.S.net capital outflow.
C) increase U.S.net exports and do not affect U.S.net capital outflow.
D) None of the above is correct.
To view all questions and flashcards with answers, click on the resource link above. Page 33
Chapter 32: A Macroeconomic Theory of the Open Economy
Available Study Resources on Quizplus for this Chatper
300 Verified Questions
300 Flashcards
Source URL: https://quizplus.com/quiz/51359
Sample Questions
Q1) If a country went from a government budget deficit to a surplus,national saving would
A) increase,shifting the supply of loanable funds right.
B) increase,shifting the supply of loanable funds left.
C) decrease,shifting the demand for loanable funds right.
D) decrease,shifting the demand for loanable funds left.
Q2) U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.Borrowing for which well is included in the demand for loanable funds in the U.S.?
A) The U.S.and Venezuela.
B) The U.S.only.
C) Venezuela only.
D) Neither the U.S.or Venezuela.
Q3) Which of the following would not be a consequence of an increase in the U.S.government budget deficit?
A) U.S.interest rates rise.
B) U.S.net capital outflow falls.
C) The real exchange rate of the U.S.dollar depreciates.
D) The U.S.supply of loanable funds shifts left.
Q4) Why do higher real interest rates lead to lower net capital outflow?
To view all questions and flashcards with answers, click on the resource link above. Page 34
Chapter 33: Aggregate Demand and Aggregate Supply
Available Study Resources on Quizplus for this Chatper
386 Verified Questions
386 Flashcards
Source URL: https://quizplus.com/quiz/51360
Sample Questions
Q1) The aggregate demand and aggregate supply graph has
A) quantity of output on the horizontal axis.Output can be measured by the GDP deflator.
B) quantity of output on the horizontal axis.Output can be measured by real GDP.
C) quantity of output on the vertical axis.Output can be measured by the GDP deflator.
D) quantity of output on the vertical axis.Output can be measured by real GDP.
Q2) In the short-run an increase in the costs of production makes A) output and prices rise.
B) output rise and prices fall.
C) output fall and prices rise.
D) output and prices fall.
Q3) The variables on the vertical and horizontal axes of the aggregate demand and supply graph are
A) the price level and real output.
B) real output and employment.
C) employment and the inflation rate.
D) the value of money and the price level.
Q4) Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.
To view all questions and flashcards with answers, click on the resource link above. Page 35
Chapter 34: The Influence of Monetary and Fiscal Policy on Aggregate Demand
Available Study Resources on Quizplus for this Chatper
334 Verified Questions
334 Flashcards
Source URL: https://quizplus.com/quiz/51361
Sample Questions
Q1) Both the multiplier effect and the investment accelerator tend to make the aggregate-demand curve shift further than it does due to an initial increase in government expenditures.
A)True
B)False
Q2) Refer to Figure 34-4.What is measured along the vertical axis of the graph?
A) the quantity of output
B) the amount of crowding out
C) the interest rate
D) the price level
Q3) In which of the following cases would the quantity of money demanded be largest?
A) r = 0.03,P = 1.4
B) r = 0.03,P = 1.2
C) r = 0.04,P = 1.2
D) r = 0.06,P = 1.0
Q4) In principle,the government could increase the money supply or increase government expenditures to try to offset the effects of a wave of pessimism about the future of the economy.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 36
Chapter 35: The Short-Run Trade-Off Between Inflation and Unemployment
Available Study Resources on Quizplus for this Chatper
306 Verified Questions
306 Flashcards
Source URL: https://quizplus.com/quiz/51362
Sample Questions
Q1) If the minimum wage increased,then at any given rate of inflation
A) both output and employment would be higher.
B) neither output nor employment would be higher.
C) output would be higher and unemployment would be lower.
D) output would be lower and unemployment would be higher.
Q2) According to Friedman and Phelps,policymakers face a tradeoff between inflation and unemployment
A) only in the long run.
B) only in the short run.
C) in neither the long run nor short run.
D) in both the short run and long run.
Q3) Which of the following is disinflation?
A) prices stay the same.
B) prices fall.
C) prices rise at a slower rate than they used to.
D) prices rise as a faster rate than they used to.
Q4) The sacrifice ratio of the Volcker disinflation was larger than previous estimates had predicted.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 37
Chapter 36: Five Debates Over Macroeconomic Policy
Available Study Resources on Quizplus for this Chatper
179 Verified Questions
179 Flashcards
Source URL: https://quizplus.com/quiz/51363
Sample Questions
Q1) A policymaker in favor of stabilizing the economy would be likely to believe
A) recessions are a waste of resources.
B) economies must suffer through the booms and busts of the business cycle.
C) the long policy lags make implementing policy changes in response to recession too risky.
D) policy exacerbates the magnitude of economic fluctuations.
Q2) A reduction in the marginal tax-rate includes an income effect that tends to increase savings.
A)True
B)False
Q3) The average person's share of the U.S.government debt as a percentage of lifetime income is
A) less than 2 percent.
B) about 5 percent.
C) about 10 percent.
D) over 12 percent.
Q4) Suppose that the government goes into deficit in order to help local school districts build better schools.Does this burden future generations?
Q5) Is it possible that deficits do not burden future generations?
To view all questions and flashcards with answers, click on the resource link above. Page 38