Economics for Business Exam Bank
Course Introduction
Economics for Business offers an essential overview of core economic concepts and principles with direct applications to real-world business decisions. The course explores the fundamentals of microeconomics and macroeconomics, including supply and demand, market structures, pricing strategies, consumer behavior, and the impact of government policies on business operations. Students learn to analyze economic data, interpret economic indicators, and apply economic reasoning to solve common business challenges such as resource allocation, production planning, and market competition. By bridging theoretical frameworks and practical examples, this course equips future managers and entrepreneurs with the analytical tools needed for effective decision-making in a dynamic global marketplace.
Recommended Textbook
Economics Today The Macro View 5th Canadian Edition by Roger LeRoy Miller
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Chapter 1: The Nature of Economics
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Sample Questions
Q1) It is NOT rational to give money to a charitable organization if
A)you do not get an income tax deduction for the donation.
B)your income is below the Canadian average.
C)you would get greater satisfaction from spending the money on your family.
D)you are a college student living on a very tight budget.
Answer: C
Q2) In Figure 1A-2,the slope of the solid line passing through point B is A)1
B)1 2/3
C)- 1
D)0)6
Answer: A
Q3) In economics,things that are used to produce goods and services are known as A)resources.
B)money.
C)stocks.
D)aggregates.
Answer: A
Q4) The income that is earned by entrepreneurs is ________.
Answer: profit.
Page 3
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Chapter 2: Production Possibilities and Economic Systems
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Sample Questions
Q1) Consider the following production possibilities table for drill presses and corn.The table shows the maximum combination of drills and corn that can be produced when all resources are fully employed.
Drill Presses 10 20 30 40 50
Corn 150 140 120 90 50
Based on the information in the table,
A)the opportunity cost of producing 40 drill presses instead of 30 drills is 30 corn.
B)there is a constant trade-off between corn and drill presses.
C)the production possibilities curve for drill presses and corn will be a straight line.
D)the opportunity cost of producing 30 drill presses instead of 20 drills is 120 corn.
Answer: A
Q2) Three Ps of capitalism are
A)prices,performance,and progress.
B)prices,privilege,and profits.
C)privilege,production,and profits.
D)prices,profits,and private property.
Answer: D
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Chapter 3: Demand and Supply
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Sample Questions
Q1) If other things are held constant,an increase in wages earned by workers in the steel industry will cause
A)the demand for autos to decrease.
B)the supply of autos to decrease.
C)the quantity supplied of steel to decrease.
D)the quantity of autos supplied to decrease.
Answer: B
Q2) The "other things" constant when we examine the effects of prices on quantities demanded do NOT include
A)the price of the product itself.
B)the price of substitutes.
C)the price of complements.
D)consumer incomes.
Answer: A
Q3) An expected increase in the price of automobiles will lead to
A)no predictable impact on today's demand for automobiles.
B)a movement down the demand schedule for automobiles.
C)an outward shift in demand for automobiles today.
D)a reduction in the demand for gasoline today.
Answer: C
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Chapter 4: Introduction to Macroeconomics
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Sample Questions
Q1) Prices have been rising 6 percent a year for twenty years.The nominal rate of interest is 12 percent.The real rate of interest is
A)4 percent.
B)6 percent.
C)10 percent.
D)12 percent.
Q2) An unemployment rate of zero can not be expected since A)there are some people who do not want to work.
B)there will always be discouraged workers.
C)some portion of the labour force will always be between jobs.
D)aggregate demand can never create enough job vacancies.
Q3) Hidden unemployment describes individuals who A)goof-off on the job.
B)are employed by the federal government.
C)would like to work,but are discouraged from looking for a job.
D)do voluntary work.
Q4) Describe the pattern of business cycles.Explain fully and comment on the position of the Canadian economy at the present time.
Q5) What is meant by full employment? Why isn't the full employment rate zero?
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Chapter 5: Measuring the Economys Performance
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Sample Questions
Q1) Suppose net domestic product is $4.8 million,government and business transfer payments are $0.7 million,indirect business taxes are $0.4 million,and personal income taxes are $0.8 million.Then,national income equals
A)$2.9 million.
B)$3.6 million.
C)$4.4 million.
D)$5.1 million.
Q2) Which of the following would most likely be sold in the product market?
A)a new car
B)stocks and bonds
C)iron ore
D)entrepreneurial ability
Q3) Explain the two main methods used to measure GDP.
Q4) Goods that are used up entirely in the production of final goods are known as
A)durable goods.
B)value added goods.
C)intermediate goods.
D)consumer goods.
Q5) Explain how value added is used to compute GDP.
Q6) Describe in detail the "other" components of GDP and National Income Accounting.
Page 7
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Chapter 6: Modelling Real Gdp and the Price Level in the Long Run
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Sample Questions
Q1) A rise in the price level will have a direct effect on spending because
A)people like to spend more when prices are higher.
B)the real value of the money people have varies directly with the price level,and so does their spending.
C)the real value of the money people have decreases and they can buy less with it.
D)the more money they have the more it is worth and the more goods and services they can buy.
Q2) A price level increase tends to reduce net exports,thereby reducing the amount of real goods and services purchased in Canada.Economists refer to this phenomenon as
A)the wealth effect.
B)the barrier effect.
C)the open-economy effect.
D)the GDP effect.
Q3) In the long run,the level of production in the economy
A)is independent of the price level.
B)determines how much money is in the economy.
C)depends on the price level in the economy
D)does not determine the level level of potential output
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Chapter 7: Economic Growth and Development
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Sample Questions
Q1) What is labour productivity,and why is it important to economic growth?
Q2) Economic growth may overstate changes in the standard of living if A)people are retiring at a younger age.
B)the average work week is increasing.
C)the number of students attending college is increasing.
D)expected life spans are increasing.
Q3) Productivity is ________ if we produce the same output with fewer labour hours.
A)increasing
B)not changing
C)decreasing
D)proportional
Q4) If we produce the same output with fewer labour hours then A)we are working harder over time.
B)working longer over time.
C)productivity in increasing.
D)productivity in decreasing.
Q5) Why might population growth and immigration stimulate economic growth?
Q6) With the aid of diagrams,describe how an in crease in the population of a country will cause a rightward shift in the long-run aggregate supply curve.
Q7) Why are economic growth and saving related?
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Chapter 8: Modelling Real Gdp and the Price Level in the Short Run
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Sample Questions
Q1) Suppose real GDP is equal to potential GDP.Explain what happens if the aggregate demand curve shifts either rightward or leftward.
Q2) If the price level kept decreasing,the short-run aggregate supply curve would get flatter because
A)all the unemployed would eventually be hired.
B)we could hire any and all resources at the going rate without increasing prices or the price of inputs..
C)the rate at which capacity can be expanded increases indefinitely.
D)the long-run aggregate supply curve is horizontal.
Q3) An aggregate demand shock is generally referred to as
A)an unexpected event that causes the aggregate demand curve to shift inward or outward.
B)an expected event that causes the aggregate demand curve to shift inward or outward.
C)an unexpected event that causes the long-run aggregate supply curve to shift inward or outward.
D)an unexpected event that causes the short-run aggregate supply curve to shift inward or outward.
Q4) Distinguish between the short-run and long-run aggregate supply curves.
Page 10
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Chapter 9: Consumption, investment, and the Multiplier
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Sample Questions
Q1) A decrease in autonomous investment of $100 that occurs when MPS = 0.25 will lead to a decrease in national income of
A)$25.
B)$100.
C)$400.
D)$800.
Q2) Suppose when real disposable income is $5,000,planned real consumption is $4,000 and planned real saving is $1,000.When real disposable income increases to $6,000,planned real saving increases by $500.The new planned real consumption expenditures is
A)$5,000.
B)$4,500.
C)$6,000.
D)$3,500.
Q3) If the MPC out of real national income equals 0.75,then
A)for every $100 increase in consumption,real national income increases by $75.
B)consumption is always more than national income.
C)for every $100 increase in real national income,saving increases by $75.
D)for every $100 increase in real national income,saving and taxes paid increase by $25.
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Chapter 10: The Public Sector
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Sample Questions
Q1) The purpose of Canadian anticombines legislation is
A)to reduce unemployment.
B)to increase the power of monopoly.
C)to maximize employment for a given price level.
D)to reduce firms' monopoly power.
Q2) The tax rate in the highest income tax bracket reached by a taxpayer is the
A)average tax rate.
B)marginal tax rate.
C)effective tax rate.
D)efficient tax rate.
Q3) Suppose the income tax rate is 0 on the first $20,000,20 percent on the next $20,000,30 percent on the next $20,000,40 percent on the next $20,000,and 50 percent on all income over that.The Arm family has a taxable income of $80,000.The average tax rate for this family is ________%.
Q4) The legal system in Canada generally tends
A)to discourage the entry of new business firms.
B)to support monopolies.
C)to promote competition.
D)to actively discourage unionization.
Q5) What is the free-rider problem and how is it related to public goods?
Page 12
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Chapter 11: Fiscal Policy and the Public Debt
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Sample Questions
Q1) Three candidates for political office disagree over the benefits of enlarging the federal budget deficit.Candidate C says the stimulation package is needed to increase employment and national income;Candidate D says it will only cause higher prices;and Candidate F says it will have no real effect.How do the three candidates differ with respect to the condition of the economy and the effects of fiscal policy?
A)Candidate C thinks the simple Keynesian model is applicable,while D thinks the expansionary policy will crowd out private investment.F believes the economy is at full employment.
B)Candidate C thinks the simple Keynesian model is applicable;D thinks the short-run aggregate supply curve is upward sloping;and F thinks the expansionary policy will generate lower interest rates.
C)Candidate C thinks the economy is at less than full employment and that the short-run aggregate supply curve is horizontal.Candidate D believes the economy is at full employment,while Candidate F believes the expansionary policy will be offset completely.
D)Candidate C thinks the short-run aggregate supply curve is upward sloping;D thinks interest rates will rise;and F thinks the economy is at full employment.
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Chapter 12: Money and the Banking System
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Sample Questions
Q1) Savings deposits are
A)a liability to a commercial bank.
B)an asset to a commercial bank.
C)a liability to the household or firm that has the account.
D)an asset for the Bank of Canada.
Q2) The liquidity approach to measuring money stresses the role of money as a
A)medium of exchange.
B)unit of accounting.
C)store of value.
D)standard of deferred payment.
Q3) Given the list of assets below,which is the least liquid?
A)$500 worth of General Motors common stock
B)$500 worth of General Motors bonds
C)a $500 traveler's cheque
D)a Renoir painting.
Q4) Savings deposits are included in
A)M1+ only.
B)M2+ only.
C)M1 and M2.
D)savings balances only.
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Chapter 13: Money Creation and Deposit Insurance
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Sample Questions
Q1) A bank currently has $100 million in deposits,$6 million in cash in the vault,deposits with the Bank of Canada of $4 million,and other assets equal to $90 million.The desired reserve ratio is 10 percent.A new deposit is made of $1 million.What is the maximum sized loan the bank can now make?
A)$1.8 million
B)$1 million
C)$900,000
D)0
Q2) Using T-accounts,create an example of your own to show how banks create deposits and thus increase the money supply.
Q3) Bank runs are a possibility because
A)the CDIC is inefficient.
B)bankers are often poor business people.
C)in difficult times people want currency instead of demand deposits.
D)banks do not keep enough reserves to cover all their depository liabilities.
Q4) What are the maximum and minimum values the deposit multiplier can potentially take on.
Q5) Explain the process by which the banking system creates money
Q6) Why did the federal government set up CDIC?
Page 15
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Chapter 14: The Bank of Canada and Monetary Policy
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Sample Questions
Q1) As nominal national income rises,the transactions demand for money
A)increases and the money demand curve shifts to the left.
B)decreases and the money demand curve shifts to the left.
C)increases and the money demand curve shifts to the right.
D)remains constant and the money demand curve remains the same.
Q2) The velocity of money
A)is calculated as P/M.
B)indicates the number of times per year a dollar is spent on final goods and services.
C)is equal to 2k in the Cambridge equation.
D)indicates the speed with which the Canadian Treasury can mint new currency.
Q3) In Figure 14-4,let i3 represent any interest rate below the equilibrium interest rate of i2.Thus,when the economy is at i2,people will tend to
A)sell bonds so as to convert them into cash.
B)buy bonds so as to have a better store of value.
C)petition the Bank of Canada to tighten the money supply.
D)buy stocks,since stocks are more liquid than currency.
Q4) What does the demand curve for money look like? Why?
Q5) What effects does an expansionary monetary policy have on the trade balance? Why?
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Chapter 15: Issues in Stabilization Policy
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Sample Questions
Q1) Figure 15-3 indicates that,in the short run,an unexpected increase in aggregate demand would cause
A)the price level to fall.
B)the price level to rise.
C)the unemployment rate to rise.
D)real GDP to decrease.
Q2) Assume that the government decides to use fiscal or monetary policy to stimulate the economy,and that this action comes as a surprise to most individuals and businesses.In the short run,the result will be
A)a decrease in the average duration of unemployment and a decrease in the unemployment rate.
B)an increase in the average duration of unemployment and an increase in the unemployment rate.
C)a decrease in aggregated demand and a rise in the price level.
D)an increase in aggregate demand and a fall in the price level.
Q3) Explain what the Phillips curve is and how it is used in practical applications.
Q4) What is the main tenet(s)of the Real Business Cycle Theory?
Q5) Explain the rational expectations hypothesis.
Q6) Describe and explain the policy irrelevance proposition.
Page 17
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Chapter 16: Comparative Advantage and the Open Economy
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Sample Questions
Q1) In general,lower imports-to-GDP ratios are more likely,the
A)smaller the country.
B)larger the country.
C)richer the country.
D)more agricultural the country.
Q2) What must a government know for the infant industry argument to be a valid reason for imposing tariffs?
Q3) During the Great Depression,many industrial countries tried protecting domestic jobs by raising tariffs.Economic theory would suggest that the result would be
A)success for only the countries that raised tariffs first.
B)success for firms that had a comparative advantage in manufactured goods rather than agricultural goods.
C)reduced exports and volume of trade for everyone.
D)increased incomes in the countries that pursued this policy.
Q4) Dumping is
A)international price discrimination.
B)international monopolistic pricing.
C)collusive behaviour among producers in different countries.
D)selling goods produced with government approval.
Page 18
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Chapter 17: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) Suppose the exchange rate is $5 for a euro;suppose further that the exchange rate falls to $4 for a euro.We would then expect to see
A)more exports to Europe since the price of the euro has risen.
B)fewer exports to Europe since the price of the euro has risen.
C)more Canadian imports from Europe since the price of the euro has fallen.
D)more Canadian exports since the price of the dollar has fallen.
Q2) Many economists doubt that G-7 nations cannot "manage" exchange rates because
A)the central banks do not know how to intervene in the exchange rate markets.
B)the world economy is inherently unstable.
C)Japan does not abide by the rules of the IMF.
D)exchange rate interventions are trivial relative to the size of the foreign exchange market.
Q3) Special drawing rights (SDRs)are
A)a reserve asset created by the International Monetary Fund that countries can use to settle international payments.
B)a liability payment from a branch bank to a nation's central bank.
C)a country's surpluses in their fiscal budgets.
D)exchanges of gold between nations.
Q4) What are the pros and cons of a fixed exchange rate?
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