Economic Theory
Exam Solutions
Course Introduction
Economic Theory explores the foundational principles and models that underpin the functioning of economies, considering both individual decision-making (microeconomics) and aggregate outcomes (macroeconomics). The course examines concepts such as supply and demand, market equilibrium, consumer behavior, production and costs, competitive and non-competitive market structures, and the role of government intervention. Students will also analyze macroeconomic phenomena including national income, inflation, unemployment, and monetary and fiscal policy. Through theoretical frameworks and real-world applications, the course aims to equip students with analytical tools to understand and address economic issues at both micro and macro levels.
Recommended Textbook
Economics Principles and Policy 12th Edition by William
Available Study Resources on Quizplus
37 Chapters
7602 Verified Questions
7602 Flashcards
Source URL: https://quizplus.com/study-set/783
Page 2
J. Baumol
Chapter 1: What Is Economics?
Available Study Resources on Quizplus for this Chatper
227 Verified Questions
227 Flashcards
Source URL: https://quizplus.com/quiz/15406
Sample Questions
Q1) Probably the most important factor affecting material well-being is
A) inflation rates.
B) unemployment rates.
C) budget deficits.
D) growth in productivity.
E) monopoly power.
Answer: D
Q2) Economists probably agree more often than they disagree.
A)True
B)False
Answer: True
Q3) Only economists and other "social" scientists have areas of dispute within their disciplines.
A)True
B)False
Answer: False
Q4) The optimal degree of abstraction depends on the objective of the analysis.
A)True
B)False
Answer: True
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: The Economy: Myth and Reality
Available Study Resources on Quizplus for this Chatper
150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/15407
Sample Questions
Q1) Nonconsumption spending accounts for roughly what percent of total output of goods and services?
A) 20%
B) 30%
C) 40%
D) 60%
Answer: B
Q2) Which of the following illustrates government acting as a referee?
A) taxing high income persons
B) enforcing contract provisions between buyer and seller
C) buying new weapons for defense
D) mailing checks to social security recipients
E) collecting data on imports and exports
Answer: B
Q3) The corporate income tax is the single largest source of revenue for the federal government.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: The Fundamental Economic Problem: Scarcity and Choice
Available Study Resources on Quizplus for this Chatper
250 Verified Questions
250 Flashcards
Source URL: https://quizplus.com/quiz/15408
Sample Questions
Q1) All of the points inside a production possibilities frontier are ____; all of the points outside the production possibilities frontier are ____.
A) efficient, inefficient
B) optimal, irrational
C) attainable, unattainable
D) rational, zero-cost
E) unattainable, efficient
Answer: C
Q2) Probably the most important source of efficiency in production is
A) investing in more capital goods.
B) consuming rationally.
C) expanding the production possibilities frontier.
D) increasing inputs of energy and raw materials.
E) the specialization of labor.
Answer: E
Q3) All actions and purchases, even those of wealthy people, involve a sacrifice.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Supply and Demand: An Initial Look
Available Study Resources on Quizplus for this Chatper
308 Verified Questions
308 Flashcards
Source URL: https://quizplus.com/quiz/15409
Sample Questions
Q1) Price floors set a legal minimum price on a product or commodity.
A)True
B)False
Q2) Which of the following will tend to occur if price controls are imposed on a product?
A) persistent shortages
B) illegal markets
C) illicit channels of distribution
D) industry investment slows or stops
E) All of the above are correct.
Q3) At equilibrium, the market will clear, with no surpluses or shortages occurring.
A)True
B)False
Q4) From 2007 to 2008, the Federal Reserve System reduced interest rates, the price that borrowers pay.As a result, economists expected demand for money to A) increase.
B) decrease.
C) not change.
D) be influenced by the interest rate, but with an uncertain effect.
Q5) Why are sellers willing to sell more at a higher price?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Consumer Choice: Individual and Market Demand
Available Study Resources on Quizplus for this Chatper
202 Verified Questions
202 Flashcards
Source URL: https://quizplus.com/quiz/15410
Sample Questions
Q1) The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped demand curve.
A)True
B)False
Q2) Points along a budget line represent the maximum combinations of two commodities that a consumer can afford.
A)True
B)False
Q3) A change in the price of one good results in a rotation of the budget line, so that it is steeper or flatter.
A)True
B)False
Q4) In Figure 5-17, the consumer would prefer
A) D to C.
B) B to D.
C) C to B or A.
D) D to A but not B.
Q5) Using Table 5-3, graph the marginal utility curve.
Q6) Are there ever exceptions to the law of demand?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Demand and Elasticity
Available Study Resources on Quizplus for this Chatper
209 Verified Questions
209 Flashcards
Source URL: https://quizplus.com/quiz/15411
Sample Questions
Q1) A good will tend to be more price elastic if it A) is a luxury good.
B) has no close substitutes.
C) is a small part of the household budget. D) is a necessity.
Q2) Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.
A)True
B)False
Q3) After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from
A) 0.9 to 0.5.
B) 0.9 to 1.5.
C) -0.5 to -0.2.
D) -0.9 to -1.5.
Q4) The slope of the demand curve conveys all the useful information about elasticity. A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis
Available Study Resources on Quizplus for this Chatper
216 Verified Questions
216 Flashcards
Source URL: https://quizplus.com/quiz/15412
Sample Questions
Q1) Production indifference curves show the combination of inputs that produce a given output.
A)True
B)False
Q2) Marginal physical product can tell a producer
A) at what point to stop adding inputs to the production process.
B) how much profit will be made at each level of production.
C) how much the last input added to the total amount of revenue.
D) how much the last input added to the total amount of production.
Q3) The production relationship in Table 7-4 indicates a process characterized by A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) increasing then decreasing returns to scale.
Q4) "Optimal input curve analysis is useless.Since firms never know the demand for their product with certainty, they will rarely operate at the optimal input combination." Agree or disagree?
Q5) Input choices in the present are often affected by past decisions.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Output, Price, and Profit: The Importance of Marginal Analysis
Available Study Resources on Quizplus for this Chatper
189 Verified Questions
189 Flashcards
Source URL: https://quizplus.com/quiz/15413
Sample Questions
Q1) Marginal, average, and total figures are bound together.If any two are known, the third can be calculated.
A)True
B)False
Q2) What rule(s) should a firm follow in deciding optimum output for profit maximization?
Q3) Marginal cost curves and average cost curves are both purely upward sloping.
A)True
B)False
Q4) Economists assume that business firms have many goals, and profit maximization is just one of them.
A)True
B)False
Q5) A firm should keep producing output as long as the marginal profit is greater than zero, no matter how small it is.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Q6) According to the text, when management selects a price or quantity, it also selects the other.Explain why this is true.
Chapter 9: Securities: Business Finance, and the Economy:
The Tail that Wags the Dog?
Available Study Resources on Quizplus for this Chatper
198 Verified Questions
198 Flashcards
Source URL: https://quizplus.com/quiz/15414
Sample Questions
Q1) Speculators serve no useful function in a market.
A)True
B)False
Q2) If stock exchanges did not exist,
A) the risk to the investor of buying stocks would be much greater.
B) the economy's resources could be more efficiently allocated among firms.
C) there would be no organized way for firms to issue stock.
D) investment banks would no longer play a role in handling stocks.
Q3) The activities of speculators often reduce the risk borne by other stock market participants.
A)True
B)False
Q4) Corporations account for a ____ proportion of U.S.firms and a ____ proportion of sales by U.S.firms.
A) small; small
B) small; large
C) large; small
D) large; large
Page 11
Q5) What is the stock market's role in achieving efficient use of resources?
Q6) Explain how mutual funds are advantageous to small investors.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 10: The Firm and the Industry under Perfect Competition
Available Study Resources on Quizplus for this Chatper
208 Verified Questions
208 Flashcards
Source URL: https://quizplus.com/quiz/15415
Sample Questions
Q1) In the long run, the perfectly competitive firm in Figure 10-8 will leave the industry if the price falls below
A) $10.
B) $9.
C) $5.
D) $2.
Q2) The short-run supply curve of the perfectly competitive industry is found by summing the
A) AC curves of the individual firms in the industry.
B) AVC curves of the individual firms in the industry.
C) MC curves above AVC of the individual firms in the industry.
D) There is no short-run supply curve in a competitive industry.
Q3) Economists study perfect competition
A) because many markets are perfectly competitive.
B) for its descriptive realism.
C) to establish a benchmark by which to measure the performance of the economy.
D) All of the above are correct.
Q4) Perfectly competitive firms are known for being "price makers."
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 11: Monopoly
Available Study Resources on Quizplus for this Chatper
203 Verified Questions
203 Flashcards
Source URL: https://quizplus.com/quiz/15416
Sample Questions
Q1) ____ mean that the costs involved cannot be recouped for a considerable period of time.
A) Sunk costs
B) Opportunity costs
C) Overheads
D) Restructuring costs
Q2) Although monopoly has lower output than competition, the level of output is efficient.
A)True
B)False
Q3) Monopoly as a market structure leads to
A) prices equal to average cost.
B) quick response to economic change.
C) prices that equal minimum long-run average cost.
D) persistent economic profits.
Q4) Monopoly firms may lead to higher costs than perfectly competitive firms.
A)True
B)False
Q5) Graphically show why one electric company can operate more cheaply than two.
Page 14
Q6) Explain why marginal revenue is less than price for a monopolist.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: Between Competition and Monopoly
Available Study Resources on Quizplus for this Chatper
225 Verified Questions
225 Flashcards
Source URL: https://quizplus.com/quiz/15417
Sample Questions
Q1) Cartels are
A) difficult to organize.
B) difficult to preserve.
C) especially unlikely to succeed if the members sell many varied products.
D) All of the above are correct.
Q2) The key difference between monopolistic competition and perfect competition is that in monopolistic competition the tangency of
A) AC and the demand curve occurs along the negatively sloped part of AC.
B) the demand curve and AC occurs at the minimum point of the AC curve.
C) AC and the demand curve occurs along the positively sloped part of AC.
D) MC and MR at the optimum output.
Q3) An example of overt collusion is
A) a cartel.
B) price leadership.
C) tacit collusion.
D) a perfectly contestable market.
Q4) A monopolistic competitor faces a horizontal demand curve.
A)True
B)False
Q5) Why is oligopoly more difficult to model than competition or monopoly?
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Limiting Market Power: Regulation and Antitrust
Available Study Resources on Quizplus for this Chatper
152 Verified Questions
152 Flashcards
Source URL: https://quizplus.com/quiz/15418
Sample Questions
Q1) What does the Herfindahl-Hirschman Index value near 10,000 imply about the market?
A) Pure monopoly
B) Perfect competition
C) Monopolistic competition
D) Oligopoly
Q2) One reason regulators push for higher prices in an industry is to
A) prevent excess profits in the industry.
B) protect the public from excessively low prices.
C) encourage usage of the good or service.
D) protect against the demise of existing firms.
Q3) By definition, an industry with high concentration also is highly competitive.
A)True
B)False
Q4) From an efficiency standpoint, should the courts prosecute all suspected antitrust violations?
Q5) Unrestrained monopolies are criticized because they restrict output and reduce innovation.
A)True
B)False
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: The Case for Free Markets I: The Price System
Available Study Resources on Quizplus for this Chatper
220 Verified Questions
220 Flashcards
Source URL: https://quizplus.com/quiz/15419
Sample Questions
Q1) In a free market, economic activity is coordinated by A) central planners.
B) prices.
C) costs.
D) majority rule.
Q2) A Pareto optimal allocation of resources is one in which any change to benefit one person would come at the expense of hurting another.Another word for Pareto optimal is A) unfair.
B) fair.
C) efficient.
D) inefficient.
Q3) For a rational consumer, the consumer's surplus will never be a negative number.
A)True
B)False
Q4) Centrally planned economies use free-market systems for their production planning.
A)True
B)False
Q5) How does the task of production planning happen in a laissez-faire economy?
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 15: The Shortcomings of Free Markets
Available Study Resources on Quizplus for this Chatper
212 Verified Questions
212 Flashcards
Source URL: https://quizplus.com/quiz/15420
Sample Questions
Q1) The pollution emitted by a power plant is an example of a detrimental externality.
A)True
B)False
Q2) Imposing fines on companies that contribute heavily to air and water pollution is an attempt to bring marginal private costs in line with marginal social costs.
A)True
B)False
Q3) A good's marginal social cost is defined as its
A) marginal private cost minus the value of any detrimental externality.
B) incidental cost.
C) marginal private cost plus the value of any taxes paid on its production.
D) marginal private cost plus its incidental cost.
Q4) Unemployment insurance is often criticized because workers can extend the amount of time they are unemployed and thus increase the cost of the program.This phenomenon is best described as
A) rent-seeking behavior.
B) moral hazard.
C) free riding.
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 16: The Market's Prime Achievement: Innovation and Growth
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/15421
Sample Questions
Q1) The existence of innovators like Bill Gates proves that innovators on average earn positive economic profits.
A)True
B)False
Q2) One of the reasons for the growth performance of free market economies is firms' use of innovation to compete with one another.
A)True
B)False
Q3) Invention alone does not explain why free market societies have experienced such rapid rates of economic growth.
A)True
B)False
Q4) Briefly explain Schumpeter's model of innovation.Why does an innovator's economic profit eventually reduce to zero?
Q5) The story of innovation battles among firms is analogous to the story of armaments races among countries.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 17: Externalities, the Environment, and Natural Resources
Available Study Resources on Quizplus for this Chatper
217 Verified Questions
217 Flashcards
Source URL: https://quizplus.com/quiz/15422
Sample Questions
Q1) Contrary to most thinking, governments play ____ in causing pollution.
A) almost no role
B) a large but decreasing role
C) a major role
D) a reconstructive role
Q2) To protect the environment, governments in the United States have mainly used
A) legally enforceable direct controls on pollution.
B) taxes on goods whose production creates pollution.
C) direct taxes on emissions.
D) discretionary guidelines suggested to polluting firms.
Q3) Briefly and concisely define the following terms.
a.voluntarism
b.direct controls
c.depletable resource
Q4) When a resource is being depleted and becomes scarce, the market's way of encouraging conservation is for the price of the resource to rise, without any government intervention.
A)True
B)False
Q5) What are the advantages of a tax system for pollution control?
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 18: Taxation and Resource Allocation
Available Study Resources on Quizplus for this Chatper
219 Verified Questions
219 Flashcards
Source URL: https://quizplus.com/quiz/15423
Sample Questions
Q1) Tax deductions were significantly ____ under the Tax Reform Act of 1986.
A) increased
B) decreased
C) expanded
D) left unchanged for individual taxpayers
Q2) The share of GDP taken by taxes is considerably higher in the United States than in other countries.
A)True
B)False
Q3) Which of the following is a direct tax?
A) excise tax
B) tax on corporate profits
C) property tax
D) sales tax
Q4) The federal income tax is a good example of a
A) regressive tax.
B) proportional tax.
C) digressive tax.
D) progressive tax.
Q5) Explain the excess burden of a tax on luxury yachts.
Page 21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Pricing the Factors of Production
Available Study Resources on Quizplus for this Chatper
228 Verified Questions
228 Flashcards
Source URL: https://quizplus.com/quiz/15424
Sample Questions
Q1) Economic rent is the payment made to a factor of production above the amount necessary to induce any of that factor to be supplied at its present employment.
A)True
B)False
Q2) In 1862, the Homestead Act made land available to farmers at zero cost.Yet many farmers preferred to purchase land along the rail line from the railroad.The farmers
A) were duped by the railroads.
B) knew the soil was better near the railroads.
C) realized that crops would be less costly to grow and transport on land near the railroads.
D) were exploited by the railroads.
Q3) Contrast the shapes of the supply curves for financial capital and land.
Q4) Firms should stop borrowing funds
A) as soon as the bank raises the interest rate.
B) when the MRP of borrowed funds is equal to the cost of borrowing.
C) whenever the future of the firm looks gloomy.
D) if their debts are more than 25 percent of the value of the firm.
Q5) Explain the distinction between investment and capital.
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 20: Labor and Entrepreneurship: The Human Inputs
Available Study Resources on Quizplus for this Chatper
223 Verified Questions
223 Flashcards
Source URL: https://quizplus.com/quiz/15425
Sample Questions
Q1) The goal of a union may be to maximize the A) number of union members.
B) income received by workers in the relevant industry.
C) number of workers employed in the relevant industry.
D) All of the above are correct.
Q2) Some economists believe that education's primary function is to sort individuals by their ability rather than increase their productivity.
A)True
B)False
Q3) The quantity of labor supplied is dependent on the size of the working population and the wage rate.
A)True
B)False
Q4) The last two decades in the United States have seen
A) a fall in real wages.
B) an increase in labor-force participation.
C) growth in service sector employment.
D) All of the above are correct.
Q5) Give some explanations for the decline in union membership in the United States.
Page 23
Q6) Explain how the demand for labor is determined.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 21: Poverty, Inequality, and Discrimination
Available Study Resources on Quizplus for this Chatper
167 Verified Questions
167 Flashcards
Source URL: https://quizplus.com/quiz/15426
Sample Questions
Q1) Is education the swiftest method to eliminate poverty.Explain.
Q2) How does the idea of a leaky bucket relate to the study of income distribution?
Q3) Roughly what was the median level of household income in the U.S.in 2009?
A) 50,000
B) 60,000
C) 70,000
D) 80,000
Q4) It has been found that
A) less-developed countries have more equality of income distribution.
B) more-developed countries have more equality of income distribution.
C) only prior communist countries have more equality of income distribution.
D) income distribution cannot be measured among countries with different political and economic systems.
Q5) Aid to families with dependent children was
A) a close-to-perfect welfare or public assistance program.
B) criticized because it provided little incentive for recipients to get jobs.
C) contributing to efficient production of goods.
D) superior to a negative income tax for work incentives.
Q6) What has been the trend in eliminating poverty since 1960?
Q7) How do income redistribution programs affect equality and efficiency?
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 22: An Introduction to Macroeconomics
Available Study Resources on Quizplus for this Chatper
211 Verified Questions
211 Flashcards
Source URL: https://quizplus.com/quiz/15427
Sample Questions
Q1) Gross Domestic Product includes the sale of intermediate goods and services.
A)True
B)False
Q2) In the early 1980s, the economy experienced high unemployment with falling inflation.
A)True
B)False
Q3) In Figure 5-2, if the aggregate demand curve shifts outward over time, the economy will
A) experience inflation.
B) see a sustained decrease in the price level.
C) experience a significant decrease in unemployment.
D) experience economic recession.
Q4) Since the end of World War II, the economy of the United States has been more influenced by stabilization policy.One of the undesirable side effects of this has been that the economy now has a greater tendency to suffer from
A) more severe recessions and depressions.
B) higher levels of unemployment and lower rates of employment growth.
C) lower rates of growth in real and nominal GDP.
D) more persistent periods of inflation.
25
To view all questions and flashcards with answers, click on the resource link above.
Chapter 23: The Goals of Macroeconomic Policy
Available Study Resources on Quizplus for this Chatper
207 Verified Questions
207 Flashcards
Source URL: https://quizplus.com/quiz/15428
Sample Questions
Q1) The production function shows the volume of output that can be produced from given inputs.
A)True B)False
Q2) The most important determinant of the decisions to lend or borrow is the real rate of interest.
A)True B)False
Q3) From 1991 to 2008, the rate of inflation in the U.S.has been A) zero.
B) between zero and 2.1%.
C) between 1.6% and 4.1%.
D) between 3.2% and 7.2%.
Q4) Businesses will want to borrow more funds as the real rate of interest decreases.
A)True B)False
Q5) Frictional unemployment is a "necessary" cost of a dynamic economy. A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 24: Economic Growth: Theory and Policy
Available Study Resources on Quizplus for this Chatper
223 Verified Questions
223 Flashcards
Source URL: https://quizplus.com/quiz/15429
Sample Questions
Q1) The financing of investment spending is often made possible by A) consumer spending.
B) money supply creation.
C) borrowing.
D) tax reductions.
Q2) Devoting more of a country's resources for producing consumer goods means
A) economy is using it resources for future production.
B) fewer resources to producing investment goods.
C) country will grow more rapidly in the future.
D) productivity of the invested capital is extremely high.
Q3) On-the-job training is the one area of education in the United States most influenced by the
A) business sector.
B) government sector.
C) household sector.
D) foreign sector.
Q4) The change in the contribution of capital formation was the chief cause of the productivity slowdown in 1973-1995.
A)True
B)False
Page 27
To view all questions and flashcards with answers, click on the resource link above.
Chapter 25: Aggregate Demand and the Powerful Consumer
Available Study Resources on Quizplus for this Chatper
214 Verified Questions
214 Flashcards
Source URL: https://quizplus.com/quiz/15430
Sample Questions
Q1) The purchase of stocks and bonds is included in which component of GDP?
A) saving
B) investment
C) consumer spending
D) They are not included in GDP.
Q2) Saving is a leakage in the sense that
A) saving is lost to the economy and ultimately leads to stagnation.
B) the financial system often makes negative profits.
C) it often accompanies a trade deficit.
D) consumers spend less than their total income.
Q3) According to the data in Table 8-1, the value of GNP is
A) 900.
B) 950.
C) 955.
D) 960.
Q4) If the price level increases, we would expect consumers to A) raise their consumption functions.
B) move downward along their consumption functions.
C) lower their consumption functions.
D) move upward along their consumption functions.
To view all questions and flashcards with answers, click on the resource link above. Page 28
Chapter 26: Demand-Side Equilibrium: Unemployment or Inflation?
Available Study Resources on Quizplus for this Chatper
210 Verified Questions
210 Flashcards
Source URL: https://quizplus.com/quiz/15431
Sample Questions
Q1) If the amount that consumers wish to save at the full employment level of income is greater than the amount that businesses plan to invest, then
A) there will be an inflationary gap.
B) there will be a recessionary gap.
C) total demand will exceed potential GDP.
D) the economy will move to a higher level of output.
Q2) In the real world, the actual multiplier is ____ the simplified multiplier.
A) much larger than B) slightly larger than C) equal to D) slightly smaller than E) much smaller than
Q3) Using the saving-investment approach, which of the following describes an equilibrium condition of GDP?
A) I = X - IM
B) S = X - IM
C) I = S + (X - IM)
D) S = I + (X - IM)
Q4) What is a multiplier? How does the multiplier effect occur?
Page 29
To view all questions and flashcards with answers, click on the resource link above.
Chapter 27: Bringing in the Supply Side: Unemployment and
Inflation?
Available Study Resources on Quizplus for this Chatper
223 Verified Questions
223 Flashcards
Source URL: https://quizplus.com/quiz/15432
Sample Questions
Q1) An increase in the money wage rate will cause the aggregate supply curve to shift
A) outward, which means the quantity supplied at any price level decreases.
B) outward, which means the quantity supplied at any price level increases.
C) inward, which means the quantity supplied at any price level increases.
D) inward, which means the quantity supplied at any price level decreases.
Q2) The post-World War II record shows that recessionary gaps may be long-lasting because ____ tends not to occur.
A) deflation
B) reflation
C) stagflation
D) disinflation
Q3) In Figure 10-3, both graphs (a) and (b) indicate that the economy is experiencing a(n)
A) recessionary gap of RE.
B) recessionary gap of RG.
C) inflationary gap of RG.
D) inflationary gap of RE.
Q4) Why is a period of stagflation part of the normal aftermath of a period of excessive aggregate demand?
Page 30
To view all questions and flashcards with answers, click on the resource link above.
Chapter 28: Managing Aggregate Demand: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
205 Verified Questions
205 Flashcards
Source URL: https://quizplus.com/quiz/15433
Sample Questions
Q1) Why does the numerical value of the multiplier fall when an income tax is added to the income-expenditure model?
Q2) In order to maintain a balanced budget, Congress has decided to cut taxes and government spending both by $25 billion.What will happen to GDP?
A) It will increase.
B) It will remain the same.
C) It will decrease.
D) It's impossible to know without the multiplier.
Q3) If all fixed taxes in the United States were removed and only variable taxes remained, what would be the effect on the expenditures schedule?
A) The expenditure schedule will shift upward.
B) The expenditure schedule will shift downward.
C) The expenditure schedule will become flatter.
D) The expenditure schedule will become steeper.
Q4) The main idea behind supply-side tax cuts is that
A) tax cuts increase spending, which increases aggregate supply.
B) some tax cuts can increase aggregate supply.
C) people like lower taxes and will spend more if they get them.
D) it is easier to shift aggregate supply than aggregate demand.
To view all questions and flashcards with answers, click on the resource link above. Page 31
Chapter 29: Money and the Banking System
Available Study Resources on Quizplus for this Chatper
219 Verified Questions
219 Flashcards
Source URL: https://quizplus.com/quiz/15434
Sample Questions
Q1) Banks that are managed in a very safe and conservative manner can be expected to earn
A) high, steady profits.
B) high but volatile profits.
C) low and consistent profits.
D) low profits with occasional major losses.
Q2) Banks try to keep their excess reserves at a maximum in order to maximize profits.
A)True
B)False
Q3) If a bank has $1,000,000 in reserves and checking deposits of $3,000,000, what is the bank's reserve position if the required reserve ratio is 20 percent?
A) The bank has $500,000 of required reserves and $500,000 of excess reserves.
B) The bank has $600,000 of required reserves and $400,000 of excess reserves.
C) The bank has $400,000 of required reserves and $600,000 of excess reserves.
D) The bank has $200,000 of required reserves and $800,000 of excess reserves.
Q4) The value of the deposit multiplier is 1 divided by the required reserve ratio.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 32
Chapter 30: Monetary Policy: Conventional and
Unconventional
Available Study Resources on Quizplus for this Chatper
205 Verified Questions
205 Flashcards
Source URL: https://quizplus.com/quiz/15435
Sample Questions
Q1) Why do economists insist on emphasizing the difference between money and income? Why is this difference important in macroeconomics?
Q2) Personal consumption spending is the most sensitive component of aggregate demand to monetary policy.
A)True
B)False
Q3) The inflationary effect of an expansionary monetary policy depends on the slope of the aggregate supply curve.
A)True
B)False
Q4) Which of the following would indicate that the dollar amount being analyzed is money?
A) M money stock of $1.4 trillion at the end of 2010
B) Microsoft profits of $500 billion in 2010
C) The first quarter of 2002
D) Nominal GDP in 2010 of $14.7 trillion
Q5) Explain the linkages in the causal chain when the Fed conducts a contractionary monetary policy.What will be the ultimate effect on GDP?
To view all questions and flashcards with answers, click on the resource link above. Page 33
Chapter 31: The Financial Crisis and the Great Recession
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/15436
Sample Questions
Q1) Which of the following was not a lesson from the 2007-2009 financial crisis?
A) Financial regulations were too "light" prior to the crisis.
B) Excessive complexity made the financial system more fragile and dangerous.
C) Both monetary policy and fiscal policy are needed in order for the economy to recover.
D) Regulatory failures were based primarily on poor job performance.
Q2) Both monetary policy and fiscal policy were used in response to the recession of 2007-2009.
A)True
B)False
Q3) Mortgage-backed securities became a significant issue because I.Housing prices fell across all regions.
II.These securities were not as widely distributed as previously thought.
A) I above only
B) II above only
C) both I and II above
D) neither I nor II above
Q4) Subprime mortgages frequently featured small or zero down payments.
A)True
B)False
34
To view all questions and flashcards with answers, click on the resource link above.
Chapter 32: The Debate over Monetary and Fiscal Policy
Available Study Resources on Quizplus for this Chatper
214 Verified Questions
214 Flashcards
Source URL: https://quizplus.com/quiz/15437
Sample Questions
Q1) The Federal Reserve has policy instruments that it can aim directly at a specific category of asset price bubble.
A)True
B)False
Q2) In what year did the technology stock bubble burst?
A) 2000
B) 2006
C) 2007
D) 2008
Q3) Which of the following was not a criticism of the unconventional monetary policy used by the Fed in 2009 and 2010?
A) tendency towards higher unemployment
B) tendency towards higher inflation
C) usurping authority which should be allocated to Congress
D) determining which banks would be allowed to fail
Q4) Velocity is commonly calculated by which of the following formulas?
A) (Value of money stock)/(Value of nominal GDP)
B) (Value of transactions)/(money stock)
C) (Value of financial transactions)/(GDP)
D) (Value of output)/(Value of input)
To view all questions and flashcards with answers, click on the resource link above. Page 35
Chapter 33: Budget Deficits in the Short and Long Run
Available Study Resources on Quizplus for this Chatper
210 Verified Questions
210 Flashcards
Source URL: https://quizplus.com/quiz/15438
Sample Questions
Q1) Because the personal income tax is an automatic stabilizer,
A) inflationary gaps are impossible.
B) the budget deficit grows during a recession.
C) the deficit needed to cure a recessionary gap increases.
D) the structural deficit grows during a recession.
E) All of the above are correct.
Q2) Define the following terms and explain their importance to the study of macroeconomics:
a.structural budget deficit
b.monetize the deficit
c.crowding out
d.inflation accounting
e.mix of fiscal and monetary policy
Q3) A budget deficit will be most inflationary if the aggregate
A) demand curve is very steep.
B) demand curve is very flat.
C) supply curve is very flat.
D) supply curve is very steep.
Q4) Differentiate between "off-budget" deficit and the "on-budget" deficit.
Q5) Give some arguments for and against a balanced budget requirement.
Page 36
To view all questions and flashcards with answers, click on the resource link above.
Chapter 34: The Trade-Off between Inflation and Unemployment
Available Study Resources on Quizplus for this Chatper
214 Verified Questions
214 Flashcards
Source URL: https://quizplus.com/quiz/15439
Sample Questions
Q1) Who gains if inflation turns out to be higher than expected: the lender or borrower? What happens if inflation turns out to be lower than expected?
Q2) If the income tax system were indexed, a person whose nominal income went up from $30,000 to $33,000 in a year when the price index rose by 10 percent would pay
A) no increases in nominal income taxes.
B) no increases in real income taxes.
C) lower taxes in both real and nominal terms.
D) higher taxes in both real and nominal terms.
Q3) The theory of rational expectations says that
A) workers make excellent choices of places to work.
B) workers make the best possible forecasts of inflation.
C) economists make rational expectations of inflation.
D) economists expect workers to be rational.
Q4) The cure for inflation can come only from changes on the demand side. A)True B)False
Q5) An inflationary gap will eliminate itself through a process of price increases. A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 37
Chapter 35: International Trade and Comparative Advantage
Available Study Resources on Quizplus for this Chatper
226 Verified Questions
226 Flashcards
Source URL: https://quizplus.com/quiz/15440
Sample Questions
Q1) "I oppose a free trade agreement with Mexico because American workers will lose jobs to low-paid Mexican workers." Explain whether you agree or disagree with this statement.
Q2) When can a country gain a price advantage on imports by imposing a tariff?
A) when it is the largest country with absolute advantage in all goods
B) when it has a comparative advantage in the production of all goods
C) when it can do so without other countries retaliating with tariffs
D) when trade agreements prohibit quotas but permit tariffs
Q3) One of the major reasons why nations trade is that
A) nations choose to trade for largely unknown reasons.
B) resources are not equally distributed across the planet.
C) nations wish to exert cultural influence abroad.
D) nations wish to copy others, and need imports to study.
Q4) In Figure 18-7, CF has the same slope as BG.AB and CD are the production possibilities of Pestoland and Pastaland, respectively.If both countries are given the opportunity to trade at prices indicated by CF,
A) both will refuse trade.
B) both will agree to trade.
C) Pestoland will wish to trade, but Pastaland will not.
D) Pastaland will wish to trade, but Pestoland will not.
To view all questions and flashcards with answers, click on the resource link above. Page 38
Chapter
36: The International Monetary System: Order or Disorder?
Available Study Resources on Quizplus for this Chatper
213 Verified Questions
213 Flashcards
Source URL: https://quizplus.com/quiz/15441
Sample Questions
Q1) The current role of the International Monetary Fund is one of
A) supervising a system of fixed exchange rates.
B) providing assistance to countries with currency or debt problems.
C) setting exchange rates based on a gold exchange standard.
D) acting as a lender of last resort to central banks.
Q2) If a country has a balance of payments deficit and wishes to maintain the fixed value of its currency, it will generally
A) sell its own currency for foreign currencies.
B) buy its own currency with foreign reserves.
C) decrease taxes to increase domestic disposable income.
D) increase the money supply to keep interest rates down.
Q3) Differentiate between the current account balance and the capital account balance.
Q4) Of the graphs in Figure 19-1, which one shows the effects of an economic boom in the United States and a depreciation of the dollar?
A) 1
B) 2
C) 3
D) 4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 37: Exchange Rates and the Macroeconomy
Available Study Resources on Quizplus for this Chatper
214 Verified Questions
214 Flashcards
Source URL: https://quizplus.com/quiz/15442
Sample Questions
Q1) Under a floating exchange rate system with mobile international capital, it is always true that current account
A) deficit + capital account surplus = trade deficit.
B) surplus - capital account surplus = trade deficit.
C) surplus + capital account deficit = 0.
D) surplus - capital account surplus = 0.
Q2) An increase in the U.S.price level will increase U.S.net exports.
A)True
B)False
Q3) If European economies experience a period of sustained recession and the United States does not, what will happen in the United States?
A) an increase in aggregate supply
B) a decrease in aggregate supply
C) a decrease in aggregate demand
D) an increase in aggregate demand
Q4) In an open economy net exports must always be positive.
A)True
B)False
Q5) Discuss the opposing points of view on U.S.trade deficit.
To view all questions and flashcards with answers, click on the resource link above. Page 40