Economic Theory Exam
Review
Course Introduction
Economic Theory provides a foundational understanding of how individuals, firms, and societies allocate scarce resources to satisfy unlimited wants. This course explores the core principles of microeconomics and macroeconomics, including supply and demand, market equilibrium, consumer behavior, production and costs, and different market structures. Students will also examine the role of government, the functioning of markets under various conditions, and the broader implications for economic policy and welfare. Through both theoretical models and real-world applications, the course aims to equip students with analytical tools to critically assess economic phenomena and decision-making processes.
Recommended Textbook
Macroeconomics 12th Edition by Robert J Gordon
Available Study Resources on Quizplus
18 Chapters
2208 Verified Questions
2208 Flashcards
Source URL: https://quizplus.com/study-set/1513
Page 2
Chapter 1: What Is Macroeconomics
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/29964
Sample Questions
Q1) Among the subjects covered in macroeconomics are the
A)unemployment rate for the entire labor force,and the causes of the increase in the overall price level.
B)causes of the increase in the price of oil relative to other commodities.
C)effects of low wages on the laborers' moral.
D)causes of the change in the individual firms' profits.
Answer: A
Q2) Macroeconomics is the study of
A)the economic issues which affect individual well-being and individual firms' profit levels.
B)the economic issues which affect foreign and domestic prices of related goods and services.
C)inflation and poverty at the level of the household.
D)the economic issues which affect the nation's total income,employment,and output.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Measurement of Income,prices,and Unemployment
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/29974
Sample Questions
Q1) Assuming a closed economy (i.e. ,NX =O)the data in Figure 2-1 suggest that for each year after 1980
A)private saving could have been either positive or negative.
B)private saving was negative.
C)private saving was positive.
D)private saving equaled zero.
Answer: C
Q2) When the dollar strengthens,
A)exports will increase and U.S.consumers benefit.
B)imports will increase and U.S.consumers benefit.
C)exports will decrease and U.S.exporters benefit.
D)exports will increase and U.S.exporters gain.
Answer: B
Q3) Refer to above Table 2-2.The chain-weighted real GDP for year 2 is
A)$14.53.
B)$14.49.
C)$14.44.
D)$16.61.
Answer: A
Page 4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Income and Interest Rates: the Keynesian Cross
Model and the Is Curve
Available Study Resources on Quizplus for this Chatper
167 Verified Questions
167 Flashcards
Source URL: https://quizplus.com/quiz/29975
Sample Questions
Q1) Income on the horizontal axis at which the vertical distance to the 45-degree line is greater than the vertical distance to the Ep line gives rise to a ________ amount of unplanned inventory investment,and thus ________ pressure on output.
A)positive,upward
B)positive,downward
C)negative,upward
D)negative,downward
Answer: B
Q2) Which of the following defines the multiplier for a change in autonomous taxes?
A)-s/c
B)1/s
C)1/c
D)-c/s
Answer: D
Q3) In Figure 3-6 above,income and planned expenditure are equal at
A)point J.
B)point K.
C)point L.
D)all of the above.
Answer: B
Page 5
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Strong and Weak Policy Effects in the Is-Lm
Model
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/29976
Sample Questions
Q1) The economy is in short-run equilibrium
A)at any point on the IS curve.
B)only at the natural level of GDP.
C)at any point on the LM curve.
D)only at a point that is on both the IS and LM curves.
Q2) The "crowding-out" effect refers to the fact that
A)fiscal policy cannot be used to shift the IS curve.
B)rising interest rates tend to accompany an expansionary fiscal policy.
C)there may be a liquidity trap.
D)All of these.
Q3) Using the information contained in Figure 4-7 above,the initial equilibrium Y is 3500.If there is 500 of new fiscal stimulus and a constant money supply,Y will increase to ________ and the interest rate will ________.
A)4000;remain constant
B)4000;rise to 10%
C)4500;rise to 12.5%
D)5500;remain constant
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Financial Markets, financial Regulation, and Economic Instability
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/29977
Sample Questions
Q1) Positive output gap indicates that
A)the actual real GDP is above natural real GDP.
B)the actual real GDP is below natural real GDP.
C)nominal GDP is above real GDP.
D)nominal GDP is below real GDP.
Q2) Past centuries witnessed two important stock price bubbles.The first one occurred between ________,and the second one occurred between ________.
A)1927-29;2006-08
B)1973-76;2006-08
C)1965-73;1996-2000
D)1927-29;1996-2000
Q3) Bank equity is also referred to as
A)bank deposits.
B)bank reserves.
C)bank capital.
D)bank assets.
Q4) In the recent Global Economic Crisis,the negative wealth effect caused
A)LM curve to shift to the right.
B)LM curve to shift to the left.
C)IS curve to shift to the left.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: The Government Budget, the
Debt, and the Limitations of Fiscal Policy
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/29978
Sample Questions
Q1) The debt-GDP ratio
A)fell sharply after 1997 due to a high output ratio and higher income tax rates.
B)rose from 1981-1992 due to large budget deficits.
C)began to decline in 1993.
D)all of the above.
Q2) Government debt which pays for ________ is a burden in that it yields no ________ benefits.
A)hospitals,future
B)ammunition for military target practice,current
C)Social Security benefits,future
D)public universities,current
Q3) Which of the following will cause the date that the Social Security trust fund runs out of money to be pushed further into the future?
A)a decrease in the rate of real GDP growth
B)an increase in the population growth rate
C)a decrease in the growth of the real wage
D)all of the above
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: International Trade, exchange Rates, and Macroeconomic Policy
Available Study Resources on Quizplus for this Chatper
156 Verified Questions
156 Flashcards
Source URL: https://quizplus.com/quiz/29979
Sample Questions
Q1) Suppose that the supply of euros is at point B in Figure 6-2 above and Europe only trades with the United States.We would conclude that ________ in the United States prefer ________ goods at ________ $ per euro.
A)U.S.citizens;European;0.21
B)U.S.citizens;American;0.21
C)European citizens;European;0.15
D)European citizens;American;0.15
Q2) Suppose that the U.S.government devalues the dollar by 10% and maintains the new rate by intervening in the foreign exchange market.The ________ of ________ will ________,ceteris paribus.
A)supply;$;increase
B)demand;$;decrease
C)supply;foreign currencies;increase
D)demand;foreign currencies;decrease
Q3) A nation's net international investment position moves toward surplus when
A)that nation runs a current account deficit.
B)that nation runs a current account surplus.
C)that nation runs a capital account surplus.
D)none of the above.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Aggregate Demand, aggregate Supply, and the Great Depression
Available Study Resources on Quizplus for this Chatper
155 Verified Questions
155 Flashcards
Source URL: https://quizplus.com/quiz/29980
Sample Questions
Q1) Which of the following will NOT shift the aggregate demand curve?
A)an increase in the money supply
B)a change in the price level
C)a reduction in the marginal propensity to save
D)an increase in government spending
Q2) Keynes said that even should monetary impotence not occur,full self-correction could be short-circuited by
A)the price level failing to fall sufficiently due to downwardly-rigid wages.
B)the price level failing to fall sufficiently due to continuously falling wages.
C)the price level falling too much due to downwardly-rigid wages.
D)the price level falling too much due to continuously falling wages.
Q3) According to the classical economists when aggregate demand declines,AD to AD in the figure above,and output,falls below the natural rate of unemployment at 3000,wages and prices would
A)fall to E causing output to rise and unemployment would be temporary.
B)rise to E causing output to rise and unemployment would be temporary.
C)rise to A causing output to fall and unemployment would be temporary.
D)fall to A causing output to fall and unemployment would be permanently increased.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Inflation: Its Causes and Cures
Available Study Resources on Quizplus for this Chatper
191 Verified Questions
191 Flashcards
Source URL: https://quizplus.com/quiz/29981
Sample Questions
Q1) A negative relationship between inflation and unemployment emerged in
A)1963-70.
B)1974-75.
C)1979-81.
D)All of the above
Q2) Oil price increases generally produce ________ supply shocks in which the price level rises and then ________.
A)temporary,holds at its new higher level
B)temporary,returns to its previous level
C)permanent,holds at its new higher level
D)permanent,returns to its previous level
Q3) At every current AD/SAS equilibrium point to the left of the LAS curve,the price level is ________ than that expected on average and figured into the wage contracts in force,and thus there is pressure on the SAS curve to shift ________ with wage renegotiations.
A)greater,upward
B)greater,downward
C)less,upward
D)less,downward
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: The Goals of Stabilization Policy: Low Inflation and
Low Unemployment
Available Study Resources on Quizplus for this Chatper
132 Verified Questions
132 Flashcards
Source URL: https://quizplus.com/quiz/29965
Sample Questions
Q1) A one percent increase in the unemployment rate is statistically associated with ________ more deaths.
A)37
B)370
C)3,700
D)37,000
Q2) The textbook cites an estimate of the "sacrifice ratio" in the United States of approximately
A)one-third.
B)one-half.
C)one.
D)three.
E)six.
Q3) The classic loser from an unanticipated inflation is
A)the borrower who pays less nominal interest than expected.
B)the borrower who pays more nominal interest than expected.
C)the saver who earns less real interest than expected.
D)the saver who earns more real interest than expected,and so should have saved more.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: The Theory of Economic Growth
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/29966
Sample Questions
Q1) When we study economic growth,we are most concerned about changes in A)the output ratio.
B)the level of natural real output.
C)the absolute difference between natural and actual real output.
D)None of these.
Q2) Refer to the information above.If an economy can raise its annual real GDP growth rate from 1.8 percent to 2.4 percent,its real GDP doubling time is reduced by ________ years.
A)30
B)24
C)10
D)43.2
Q3) Probably the best measure of a country's economic growth is the growth of A)real domestic investment.
B)real GDP.
C)real GDP per person.
D)real consumption expenditures.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Big Questions of Economic Growth
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/29967
Sample Questions
Q1) One of the shortcomings of the Solow model is that it
A)treats technological change as freely available to all countries.
B)does not treat technological change as freely available to all countries.
C)treats technological change as an endogenous variable.
D)treats technological change as the only source of economic growth.
Q2) The period between ________ is commonly regarded by economists as a "golden age" of rapid productivity growth in the United States.
A)1898 and 1929
B)1920 and 1940
C)1933 and 1965
D)1948 and 1973
Q3) Which of the following is NOT the cause of an adverse productivity shock to the labor market?
A)a decline in the quantity of non-labor factors of production
B)a drop in multifactor productivity
C)a decrease in the labor force
D)none of the above
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Money,banks,and the Federal Reserve
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/29968
Sample Questions
Q1) Beyond the Fed's immediate control,a wave of pessimistic economic forecasts in the banking industry can effectively ________ e and thus ________ the money supply.
A)raise,raise
B)raise,reduce
C)reduce,raise
D)reduce,reduce
Q2) Money is created through the banking processes of taking deposits and making loans if
A)the banks require individual depositors to hold "reserves."
B)the banks require individual borrowers to hold "reserves."
C)paper deposit receipts are not acceptable means of payment.
D)paper deposit receipts are accepted as a means of payment.
Q3) The largest category of capital-market instrument is
A)corporate stock.
B)large-denomination negotiable certificates of deposit.
C)U.S.government securities.
D)commercial and consumer loans.
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: The Goals, tools, and Rules of Monetary Policy
Available Study Resources on Quizplus for this Chatper
135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/29969
Sample Questions
Q1) According to the new classical macroeconomists,each of the following statements is true EXCEPT:
A)Disinflation will be harder to bring about because of the time-inconsistency problem.
B)Policymakers are tempted to deviate from the preannounced policy once the public changes its expectations.
C)Feedback rules are preferred to discretionary rules.
D)Disinflation will be painless if the restrictive policies announced by the government are credible.
Q2) During which of the following years did the Fed fail to pursue a policy aimed at stabilizing the output ratio?
A)1988
B)1990
C)1994
D)1997
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: The Economics of Consumption Behavior
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/29970
Sample Questions
Q1) When it is assumed that people desire a smooth pattern of consumption enjoyment,if not consumption expenditure,this limits the permanent-income and life-cycle hypotheses to predicting the demand for consumer A)durables.
B)durables and services.
C)services and nondurables.
D)nondurables and durables.
E)nondurables.
Q2) The permanent-income hypothesis was developed in the 1950s by economist
A)Edward Prescott.
B)James Tobin.
C)Robert Solow.
D)Milton Friedman.
Q3) According to the life-cycle hypothesis,if the average person expects to live another 48 years,the short-run MPC out of unexpected changes in income is A)0.52.
B)0.48.
C)0.9792.
D)0.0208.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: The Economics of Investment Behavior
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/29971
Sample Questions
Q1) In an economy's labor-intensive industries are growing relative to its capital-intensive industries,v* ________,which makes the economy more ________.
A)rises,stable
B)rises,unstable
C)falls,stable
D)falls,unstable
Q2) The high tech boom of the late 1990s and early 2000s came to an end in part because
A)investment to address the Y K problem was temporary.
B)new computer applications were consumer oriented rather than directed at increasing productivity.
C)the fiber optic cable boom has resulted in most optic cable capacity being unused.
D)All of the above.
Q3) The desired stock of capital is that stock which A)firms always obtain.
B)corresponds to the natural level of output.
C)would obtain when net investment is zero.
D)firms are always adjusting toward.
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: New Classical Macro and New Keynesian Macro
Available Study Resources on Quizplus for this Chatper
170 Verified Questions
170 Flashcards
Source URL: https://quizplus.com/quiz/29972
Sample Questions
Q1) The natural real GDP will ________ following a rise in energy prices because
A)rise;labor productivity increases.
B)fall;labor productivity increases.
C)fall;real wages are flexible and employment is less attractive relative to leisure.
D)B and C are both correct.
Q2) In the fooling model's labor market diagram,from an initial intersection point of the labor supply and demand curves,tracing "northwest" up the labor demand curve shows
A)what happens to real wages and employment when aggregate demand expands.
B)what happens to real wages and employment when aggregate demand contracts.
C)what workers think is happening to real wages if an aggregate demand expansion fools them.
D)what firms think is happening to real wages if an aggregate demand contraction fools them.
Q3) The new Keynesian economists argue that prices are relatively rigid because of A)menu costs.
B)overlapping staggered contracts.
C)efficiency wages.
D)All of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Conclusion: Where We Stand
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/29973
Sample Questions
Q1) When did the Fed fail to engage in a pre-emptive strike to keep the economy at or near the natural rate of unemployment?
A)1994
B)1998
C)2001
D)None of the above.The Fed acted in each of these years.
Q2) The evolution of macroeconomic theory
A)usually precedes and causes major macroeconomic events.
B)usually is in reaction to major macroeconomic events.
C)is evenly divided between causing and reacting to major macroeconomic events. D)proceeds rather independently of major macroeconomic events.
Q3) The great failure of activist fiscal policy in the 1960s was its
A)timidity in the face of persistent stagnation.
B)over-reliance on tax cuts to the exclusion of government spending programs.
C)delay in reversing course as the economy became overstimulated.
D)limited role as an accommodator of an activist monetary policy.
To view all questions and flashcards with answers, click on the resource link above.