Course Introduction
Economics 101
Textbook Exam Questions
Economics 101 introduces students to the foundational principles of economics, exploring both microeconomic and macroeconomic concepts. Topics include supply and demand, market structures, consumer and producer behavior, the role of government in the economy, national income, inflation, unemployment, and monetary and fiscal policies. By analyzing real-world examples and engaging in critical thinking exercises, students gain an understanding of how economic decisions impact individuals, businesses, and societies, preparing them for more advanced studies in economics and related fields.
Recommended Textbook
ECON MACRO 5th Edition by William A. McEachern
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19 Chapters
2883 Verified Questions
2883 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) An economic model is useful if it:
A)includes every detail of reality.
B)involves no unproven assumptions.
C)is expressed in equations.
D)makes accurate predictions.
E)is simple enough to be understood by a child.
Answer: D
Q2) Economists generally believe that:
A)buyers and sellers have all the information they can use.
B)additional information is costly to acquire.
C)decision makers have complete knowledge of all the alternatives available.
D)economic decisions result from random behavior.
E)decision makers never make mistakes.
Answer: B
Q3) Secondary effects are consequences of economic actions that develop slowly over time as people react to events.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Economic Tools and Economic Systems
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154 Flashcards
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Sample Questions
Q1) In one week,Mohammed can knit 5 sweaters or bake 240 cookies.In one week,Aisha can knit 15 sweaters or bake 480 cookies.Aisha's opportunity cost of baking one cookie is:
A)5 sweaters.
B)15 sweaters.
C)32 sweaters.
D)1/32 of a sweater.
E)480 sweaters.
Answer: D
Q2) Adam Smith believed that people's pursuit of their own self-interests:
A)tended to promote general welfare.
B)required the government's "invisible hand" to keep the economy running smoothly.
C)might cause aggregate demand to be greater than aggregate supply.
D)would increase the wealth of a nation,which was the quantity of gold and silver it owned.
E)would decrease the wealth of a nation,which was its ability to produce goods and services.
Answer: A
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4
Chapter 3: Economic Decision Makers
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174 Flashcards
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Sample Questions
Q1) Trade restrictions can take any of the following forms except one.Which is the exception?
A)Tariffs
B)Free trade agreements
C)Quotas
D)Voluntary trade restrictions
E)Health and safety restrictions
Answer: B
Q2) Which form of business organization is the most common in the United States?
A)Sole proprietorship
B)Partnership
C)Corporation
D)Nonprofit organization
E)S corporation
Answer: A
Q3) The partnership is the least common form of business organization in the United States.
A)True
B)False Answer: True
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Chapter 4: Demand, supply, and Markets
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Sample Questions
Q1) Identify the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles,for a given demand curve.
A)An increase in both equilibrium price and equilibrium quantity
B)A decrease in both equilibrium price and equilibrium quantity
C)An increase in equilibrium price and a decrease in equilibrium quantity
D)A decrease in equilibrium price and an increase in equilibrium quantity
E)An increase in equilibrium price but no change in equilibrium quantity
Q2) Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes.Identify a likely impact on the equilibrium price and quantity of potatoes if such attempts are successful,all other things remaining constant.
A)The equilibrium price will increase and the equilibrium quantity will decrease.
B)The equilibrium price will decrease and the equilibrium quantity will increase.
C)Both equilibrium price and quantity will decrease.
D)Both equilibrium price and quantity will increase.
E)There will be no change in the equilibrium price and quantity.
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Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) If the price level in the U.S.increases,aggregate output demanded:
A)decreases because U.S.products become cheaper relative to foreign products.
B)decreases because U.S.products become more expensive relative to foreign products.
C)increases because U.S.products become cheaper relative to foreign products.
D)increases because U.S.products become more expensive relative to foreign products.
E)decreases because household wealth and spending increase.
Q2) The demand for _____ is most severely affected by a recession.
A)medicines
B)automobiles
C)breakfast cereals
D)haircuts
E)gasoline
Q3) For a given aggregate supply curve,an increase in aggregate demand will:
A)decrease the real interest rate.
B)increase real GDP.
C)decrease the price level.
D)increase the real exchange rate.
E)decrease real GDP.
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Chapter 6: Tracking the Useconomy
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Sample Questions
Q1) Suppose the respective prices of yogurt,candy bars,and popcorn in Year 1 are $1,$2,and $3.In Year 2,the unit prices of each are $2,$3,and $4 respectively.Which of the following statements is true of the price level between Year 1 and Year 2?
A)It decreased by 20 percent.
B)It increased by 33 percent.
C)It increased from $6 to $9.
D)It decreased at a rate between 20 percent and 50 percent.
E)It increased at a rate between 33 percent and 100 percent.
Q2) Which of the following is true of exports and imports?
A)Both imports and exports are added to a nation's gross domestic product (GDP).
B)Both imports and exports are subtracted from a nation's gross domestic product (GDP).
C)Imports are added and exports are subtracted from a nation's gross domestic product (GDP).
D)Exports are added and imports are subtracted from a nation's gross domestic product (GDP).
E)Neither imports nor exports are included in a nation's gross domestic product (GDP).
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Page 8
Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) Which of the following people would be counted among the unemployed?
A)A new college graduate selling newspaper advertisements part time while looking for other work
B)A new college graduate selling newspaper advertisements full time while looking for other work
C)A new college graduate selling newspaper advertisements part time and not looking for other work
D)A new college graduate who gets tired of selling newspaper advertisements and takes off on a motorcycle trip to Alaska
E)A new college graduate not qualified for any of the jobs available in his small town
Q2) Which type of unemployment is likely to increase the most during an economy's recession?
A)Frictional unemployment
B)Seasonal unemployment
C)Structural unemployment
D)Cyclical unemployment
E)Underemployment
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) Joe runs a pizzeria at a busy place in a city.Around 125 customers visit every day and they each buy 3 pizzas on average.Joe has employed 20 laborers to make pizzas.The productivity of one laborer per day in the pizzeria is equal to _____.
A)6.25 pizzas per worker
B)18.75 pizzas per worker
C)6.67 pizzas per worker
D)41.67 pizzas per worker
E)20.75 pizzas per worker
Q2) Human capital represents:
A)the equipment that labor uses on-the-job to improve labor productivity.
B)the ratio of capital to labor.
C)the education,skill,and training embodied in workers.
D)the technology developed by humans that is embodied in equipment.
E)the social institutions created by people which promote the accumulation of equipment for production.
Q3) Basic research is conducted primarily by manufacturing industries.
A)True
B)False
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Chapter 9: Aggregate Demand
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Sample Questions
Q1) Which of the following will not shift the consumption function?
A)A change in household wealth
B)A change in the price level
C)A change in household disposable income
D)A change in the level of unemployment
E)A change in the rate of interest
Q2) An aggregate demand curve can be drawn by:
A)shifting the 45-degree line.
B)letting changes in autonomous spending shift the aggregate expenditure line.
C)letting changes in the price level shift the aggregate expenditure line.
D)letting changes in the level of income shift the aggregate expenditure line.
E)letting changes in real GDP shift the aggregate expenditure line.
Q3) The smaller the marginal propensity to save,other things constant,_____.
A)the smaller the marginal propensity to consume
B)the larger the marginal propensity to consume
C)the smaller the multiplier
D)the flatter the consumption function
E)the steeper the saving function
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Chapter 10: Aggregate Supply
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Sample Questions
Q1) In the short run,there is a positive relationship between:
A)inflation and unemployment.
B)inflation and real GDP.
C)the actual price level and the aggregate quantity supplied.
D)the actual price level and unemployment.
E)the actual price level and consumption spending.
Q2) Potential output depends on all of the following except one.Which is the exception?
A)The supply of labor
B)Labor productivity
C)Household choices regarding labor and leisure
D)The technology in current use
E)The number of consumers in the market
Q3) Which of the following is most likely to shift the potential output of an economy to the right?
A)A decline in the length of the average workweek
B)An increase in the supply of educated and skilled workers
C)A drought
D)An increase in aggregate demand
E)An increase in the minimum wage received by workers
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Page 12
Chapter 11: Fiscal Policy
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Sample Questions
Q1) The U.S.federal income tax is progressive,which means that _____.
A)tax receipts grow at the same rate that income does
B)tax receipts grow at the same rate that government spending does
C)middle-income individuals pay more in taxes than either high-income or low-income individuals
D)the tax rate decreases with increases in income.
E)high-income individuals are taxed at a higher rate than low-income individuals
Q2) The only way by which government can affect aggregate demand is through changes in its own purchases.
A)True
B)False
Q3) People will be likely to spend a higher percentage of any additional income when _____.
A)they believe that the increase is permanent
B)they believe that the increase is temporary
C)the increase is large
D)the increase is small
E)interest rates on savings accounts are rising
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13
Chapter 12: Federal Budgets and Public Policy
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Sample Questions
Q1) In the 1980s,tax rates were cut,government revenues fell below expectations,and there was a then-historic peacetime deficit.
A)True
B)False
Q2) If U.S.interest rates are higher than the world interest rates,we would expect the U.S.dollar to appreciate.
A)True
B)False
Q3) In 2016,national defense accounted for almost _____ of federal outlays.
A)25 percent
B)15 percent
C)40 percent
D)54 percent
E)60 percent
Q4) State and local governments issue bonds to fund capital projects,such as schools and infrastructure.
A)True
B)False
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Page 14
Chapter 13: Money and the Financial System
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Sample Questions
Q1) Paper money is a good example of commodity money.
A)True
B)False
Q2) The first step in the evolution of money involved the use of _____.
A)physical commodities
B)barter
C)pieces of paper representing claims on physical commodities
D)pieces of paper with no intrinsic value
E)electronic entries representing claims on pieces of paper with no intrinsic value
Q3) The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of _____.
A)anchoring bias
B)self-serving bias
C)moral hazard
D)hazard pay
E)banker's lobbying
Q4) The only money that can be used as a standard of value is fiat money.
A)True
B)False
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Chapter 14: Banking and the Money Supply
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Sample Questions
Q1) Decreasing the required reserve ratio is an expansionary policy because it increases the amount of excess reserves in the banking system.
A)True
B)False
Q2) If the Fed purchases government securities in the open market,_____.
A)the money supply will decrease
B)the money supply will increase only if the seller of those securities is a commercial bank
C)the money demand will increase immediately
D)the money demand will decrease immediately
E)the money supply will increase through the commercial banking system regardless of who the seller is
Q3) Which of the following essential factors enables commercial banks to create money?
A)Required reserves
B)Excess reserves
C)State and local government securities
D)U.S.government securities
E)Net worth
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Page 16
Chapter 15: Monetary Theory and Policy
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Sample Questions
Q1) At a given point in time,if the demand for money increases:
A)the interest rate will fall.
B)there will be a movement downward along the money demand curve.
C)there will be a movement upward along the money demand curve.
D)there will be a rightward shift of the money demand curve.
E)there will be a leftward shift of the money demand curve.
Q2) A decrease in the money supply in the short run will cause an increase in planned investment spending.
A)True
B)False
Q3) Which of the following is true of the equation of exchange?
A)It states that the product of the price level and velocity of money is equal to real GDP.
B)It states that aggregate demand in an economy is equal to total investment spending.
C)It states that money supply times velocity of money equals real GDP.
D)It states that velocity of money is equal to the ratio of nominal GDP and money supply.
E)It changes to the quantity theory of money if the price level is assumed to be constant.
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Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) An increase in price expectations shifts the long-run Phillips curve,but not the short-run Phillips curve.
A)True
B)False
Q2) The long-run Phillips curve is located at the natural rate of unemployment.
A)True
B)False
Q3) The selection of a new policy takes place during a period of time known as the
A)activity lag
B)decision-making lag
C)effectiveness lag
D)implementation lag
E)recognition lag
Q4) An economy that self-corrects an expansionary gap will experience stagflation.
A)True
B)False
Q5) The effectiveness lag for monetary policy is short.
A)True
B)False
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Chapter 17: International Trade
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Sample Questions
Q1) Differences in tastes among nations:
A)make gains from trade possible even in the absence of differences in resource endowments.
B)make gains from trade possible only when there are differences in resource endowments.
C)negate any potential gains from trade.
D)are caused by differences in resource endowments.
E)occur only among countries whose people are of different religions.
Q2) Unless there are barriers to prevent free international trade,a country becomes an importer:
A)when the world price exceeds the domestic price.
B)when the domestic price exceeds the world price.
C)when there is an excess supply in the domestic market.
D)when it wants to expand its scale of operation.
E)when the opportunity cost of producing a good is lower relative to other countries.
Q3) An import quota is a tax on imports.
A)True
B)False
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19
Chapter 18: International Finance
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Sample Questions
Q1) If the U.S.dollar appreciates,it becomes cheaper for Australians to visit their relatives in the United States.
A)True
B)False
Q2) The exchange rate is the:
A)ratio of exports to imports.
B)interest rate the U.S.government charges on international loans.
C)percentage of domestic goods that are exported.
D)cost of one nation's currency in terms of another nation's currency.
E)rate that central banks charge each other for currency exchanges.
Q3) Flexible exchange rates do not allow for discretionary monetary policy.
A)True
B)False
Q4) The purchasing power parity (PPP)theory suggests the prices of identical items will equalize internationally.An illustration that supports this theory is the fact that the price of a McDonald's "Big Mac" is the same around the world.
A)True
B)False
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Chapter 19: Economic Development
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Sample Questions
Q1) The newly industrialized Asian economies have developed by adopting the latest technology and investing in _____.
A)human capital
B)the agricultural sector
C)defense equipment
D)public infrastructure like roads,communication,and transport
E)developing consumer-oriented products.
Q2) Which of the following is likely to be a characteristic of a developing economy?
A)A high rate of illiteracy
B)A low rate of growth of population
C)A high rate of economic growth
D)The export of manufactured goods
E)The efficient use of labor
Q3) The International Monetary Fund providing assistance to a country to improve that country's balance of payments is an example of multilateral assistance.
A)True
B)False
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