Economics for Business Exam Practice Tests
Course Introduction
Economics for Business introduces students to fundamental economic principles and their practical applications in the business environment. The course explores the dynamics of supply and demand, market structures, pricing strategies, and decision-making processes that firms use in response to economic trends. Students will analyze the impact of macroeconomic factors such as inflation, unemployment, and fiscal policy on businesses, and will learn how to interpret economic data to make informed managerial decisions. Emphasis is placed on real-world case studies, helping students develop a critical understanding of how economic concepts shape business strategies and operations in both local and global markets.
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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Chapter 1: The Art and Science of Economic Analysis
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) The expression "There's no such thing as a free lunch" means that:
A)services may be free,but goods are never free.
B)even if it has a price of zero,a good or service has a cost.
C)charitable organizations should not serve free lunches to the poor.
D)poor people are really the ones who pay for their allegedly free lunches.
E)someone has to pay the market price for a good or service.
Answer: B
Q2) Economic theory allows economists to predict the behavior of a specific person or firm.
A)True
B)False
Answer: False
Q3) A marginal adjustment only refers to a minor change.
A)True
B)False
Answer: False
Q4) Resources are used only in the production of goods,not services.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Economic Tools and Economic Systems
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) All of the following are evidences of specialization except:
A)a carpenter who builds an entire bedroom set without any help from others.
B)a restaurant that provides continental and oriental food in all its outlets.
C)the credits at the end of a movie.
D)professional mourners in Taiwan.
E)online sellers.
Answer: A
Q2) Recognizing the incentive power of property rights and markets,some of the most die-hard central planners are now allowing:
A)more influence from custom or religion.
B)family relations to play significant roles.
C)a role for markets.
D)communal ownership of property.
E)inefficient use of resources.
Answer: C
Q3) The bowed-out shape of the production possibilities frontier indicates increasing opportunity costs.
A)True
B)False
Answer: True
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Chapter 3: Economic Decision Makers
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) An external benefit is a benefit from an activity that falls on a third party which is not involved in the activity.
A)True
B)False
Answer: True
Q2) The Salvation Army is an example of a(n):
A)military organization.
B)not-for-profit organization.
C)partnership.
D)S corporation.
E)U.S.government agency.
Answer: B
Q3) A major disadvantage of the corporate form of business is limited liability.
A)True
B)False
Answer: False
Q4) The value of a country's imports cannot exceed the value of its exports.
A)True
B)False
Answer: False
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Chapter 4: Demand, supply, and Markets
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) A decrease in the price of peanut butter will cause a leftward shift of the supply curve of peanut butter.
A)True
B)False
Q2) Markets reduce transactions costs:
A)by decreasing the time spent searching for information about goods and services.
B)only when they have a highly structured set of rules like the New York Stock Exchange.
C)because each market uses the same set of rules for buying and selling goods and services.
D)only when the government coordinates the plans of many buyers and sellers.
E)when prices are set by the sellers and are not determined by negotiation between the buyers and the sellers.
Q3) A surplus of shoes will cause:
A)a decrease in the supply of shoes.
B)a decrease in the demand for shoes.
C)an increase in the price of leather.
D)a rightward shift of the supply curve of shoes.
E)a decrease in the price of shoes.
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Chapter 5: Introduction to Macroeconomics
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151 Flashcards
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Sample Questions
Q1) Which of the following financial institutions reported the largest bankruptcy in U.S.history in September 2008?
A)Morgan Stanley
B)Goldman Sachs
C)Lehman Brothers
D)JP Morgan Chase
E)Barclays Capital
Q2) Which of the following is true of a recessionary period?
A)It is usually accompanied by an improvement in the value of an economy's currency.
B)It is usually accompanied by low levels of inflation.
C)It is usually accompanied by a dramatic decline in the stock of inventories.
D)It usually lasts for a few months.
E)It leads to a drastic decline in government spending.
Q3) Macroeconomics simply focuses on the annual performance of a particular national economy and ignores its interactions with other national economies around the world.
A)True
B)False
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Chapter 6: Tracking the Useconomy
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Which of the following is an example of a final good or service?
A)Bricks purchased by a company for constructing houses
B)Wheat purchased by a bakery
C)Steel purchased by a company for manufacturing cars
D)A cup of coffee bought at a restaurant
E)A used car bought by a person
Q2) If the nominal gross domestic product (GDP)for a year is $5.4 trillion,and the real gross domestic product (GDP)for the same year is $3.6 trillion,the GDP price index is
A)0.667
B)150
C)66.67
D)50
E)33.33
Q3) Whenever there is inflation,increase in nominal gross domestic product (GDP)overstates the growth rate of the economy.
A)True
B)False
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8
Chapter 7: Unemployment and Inflation
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Ginger quits her job as personal secretary to the Vice President of HR Technologies because she cannot handle the stress.It takes her three weeks to find a job as a receptionist at Mariam Hotels and Resorts.Over these three weeks,she would be considered frictionally unemployed.
A)True
B)False
Q2) During periods of high inflation,people want to hold as much money as possible.
A)True
B)False
Q3) Suppose there is a 5 percent increase in the nominal wages of workers in an economy.The annual rate of inflation in the economy is about 2 percent.Which of the following is true in this case?
A)Real wage would fall by about 10 percent.
B)Real wage would increase by about 20 percent.
C)Real wage would fall by about 25 percent.
D)Real wage would increase by about 50 percent.
E)Real wage would increase by about 3 percent.
Q4) Most of the unemployment during the Great Depression was cyclical unemployment.
A)True
B)False
Page 9
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Chapter 8: Productivity and Growth
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150 Flashcards
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Sample Questions
Q1) Which of the following countries had the highest percentage of young adults with a college degree in 2012?
A)Norway
B)Canada
C)Japan
D)France
E)Italy
Q2) If per capita GDP growth exceeds labor productivity growth,then:
A)human capital must be increasing.
B)the labor-capital ratio must be decreasing.
C)employment must be growing faster than population.
D)population must be growing faster than employment.
E)physical capital must be increasing.
Q3) Workers displaced due to technological change usually find it difficult to get new jobs.
A)True
B)False
Q4) Per capita GDP in the United States has declined since 1950.
A)True
B)False
Page 10
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Chapter 9: Aggregate Demand
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Sample Questions
Q1) Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?
A)The level of saving in an economy
B)Unplanned inventory change
C)Planned investment undertaken in an economy
D)The marginal propensity to save
E)The marginal propensity to consume
Q2) Government outlays equal:
A)the difference between government expenditures and government revenues.
B)the sum of government expenditures and government revenues.
C)the sum of government purchases and transfer payments.
D)the difference between government purchases and transfer payments.
E)the ratio of government purchases to transfer payments.
Q3) The larger the marginal propensity to save,other things constant,_____.
A)the larger the marginal propensity to consume
B)the larger the multiplier
C)the flatter the consumption function
D)the flatter the saving function
E)the steeper the consumption function
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11
Chapter 10: Aggregate Supply
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150 Flashcards
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Sample Questions
Q1) Which of these is true of the expected price level in a labor market?
A)It is the equilibrium price level in the short run.
B)It determines the actual price level in the short run.
C)It determines the actual price level in the long run.
D)It allows firms and resource owners to make long-term wage agreements.
E)The difference between the expected and actual price levels is equal to the actual inflation rate.
Q2) An expansionary gap is closed in the long run by a(n):
A)rightward shift of the short-run aggregate supply curve.
B)leftward shift of the short-run aggregate supply curve.
C)movement to the right along a fixed short-run aggregate supply curve.
D)increase in aggregate demand.
E)decrease in aggregate demand.
Q3) If the actual price level is lower than the expected price level,the economy will contract in the short run.
A)True
B)False
Q4) In the long run,the price level is determined by aggregate supply.
A)True
B)False
Page 12
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Chapter 11: Fiscal Policy
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) The one-time tax cuts used by the Bush administration to stimulate the economy in 2008 proved to be very successful.
A)True
B)False
Q2) Keynes believed that the economy does not automatically move toward an equilibrium at full employment.
A)True
B)False
Q3) During economic contractions,transfer payments such as welfare benefits _____.
A)automatically increase,reducing income further.
B)automatically increase,reducing the impact of the contraction on disposable income.
C)automatically decrease because tax revenues fall and welfare benefits are no longer affordable.
D)are decreased as a discretionary move on the part of Congress to stimulate expansion.
E)are increased as a discretionary move on the part of Congress to cushion recipients against the negative effects of economic contraction.
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Page 13
Chapter 12: Federal Budgets and Public Policy
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Sample Questions
Q1) Because of automatic stabilizers,_____.
A)fiscal policy focuses on maintaining an annually balanced budget
B)planning discretionary fiscal measures to reduce economic fluctuations is easy
C)government budget deficits are zero if averaged out over the entire business cycle
D)policy makers should be concerned less with balancing the budget annually
E)government budget deficits are smaller during expansions and larger during contractions
Q2) Which of the following is not a legitimate reason for maintaining federal budget deficits?
A)Deficits boost domestic saving,which in the long run could promote economic growth.
B)Deficits help reduce the size and duration of recessions through automatic stabilizers.
C)Deficits are used to finance capital projects.
D)Public spending through deficit financing wins support from the voters.
E)A federal budget deficit stimulates aggregate demand.
Q3) The federal budget has been in deficit in all but 9 years since 1960.
A)True
B)False
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Page 14
Chapter 13: Money and the Financial System
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150 Flashcards
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Sample Questions
Q1) Barter was more feasible in primitive societies than in modern societies because:
A)there was no inflation in primitive societies.
B)there were many goods available for trade in primitive societies,so people could always find the goods that they wanted.
C)specialization was limited and thus there were few goods available for trade in primitive societies.
D)specialization was limited and thus there were many goods available for trade in primitive societies.
E)people in primitive societies had limited wants.
Q2) Specialization of labor means that:
A)production requires a special kind of labor.
B)the overall skill level of labor is increasing over time.
C)individuals produce goods that they are relatively good at producing and trade for those that they do not produce.
D)individuals achieve self-sufficiency in production by producing all the goods that they require.
E)exchange within the economy consists of trading in services.
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15
Chapter 14: Banking and the Money Supply
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150 Flashcards
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Sample Questions
Q1) Which of the following is not true of Federal Reserve notes?
A)They are fiat money.
B)They are a liability of the Fed.
C)They are redeemable for other Federal Reserve notes.
D)They are redeemable for gold.
E)They are counted as currency in the money supply.
Q2) If a bank has $1 million in assets and $50,000 in net worth,its liabilities must equal:
A)$50,000.
B)$1,050,000.
C)$50 million.
D)$1,000,000.
E)$950,000.
Q3) Many people prefer debit cards to checks because:
A)checkbooks are not required and direct payments are made.
B)checks are unsafe for use.
C)debit cards delay money payments.
D)using checks is time consuming.
E)debit cards help account holders get a loan from the card issuer.
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Chapter 15: Monetary Theory and Policy
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Sample Questions
Q1) Monetary policy will be effective in changing the gross domestic product of a nation only if:
A)planned investment expenditures are autonomous.
B)planned investment expenditures are sensitive to interest rates
C)interest rates are unresponsive to changes in money supply
D)interest rates are sensitive to changes in the price level
E)planned investment expenditures are sensitive to interest rates.
Q2) In the long run,an increase in aggregate demand:
A)increases the price level and real output,but the effect on the price level is larger.
B)increases the price level and real output,but the effect on output is larger.
C)affects only real output.
D)affects only the price level.
E)affects neither the price level nor real output.
Q3) The demand for money is a relationship between:
A)the price level and the amount of cyclical unemployment.
B)the price level and the actual output produced in an economy.
C)the interest rate and how much money people choose to hold.
D)the interest rate and how much money people earn during a certain time period.
E)the interest rate and the rate of inflation.
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Page 17
Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) The long-run Phillips curve suggests that changing the rate of unemployment in the economy has no impact on the inflation rate.
A)True
B)False
Q2) According to the rational expectations school,_____.
A)on average people have very little idea of what to expect from government policy makers
B)people form expectations by focusing only on the private sector
C)changes in the expected price level shift the aggregate demand curve
D)people do not consider likely government policies when forming expectations,choosing to remain rationally ignorant
E)people form expectations,in part,by considering the probable future actions of government policy makers
Q3) Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.
A)True
B)False
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Chapter 17: International Trade
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Sample Questions
Q1) In determining comparative advantage,the cost of producing a good is measured in terms of:
A)foreign currency.
B)domestic currency.
C)only gold.
D)marginal cost of the resources employed.
E)opportunities forgone.
Q2) Which of the following is true of international trade?
A)It allows a country to specialize in the production of certain goods and services.
B)It leads to a reduction in the world production of goods and services.
C)It allows a country to move to a lower consumption possibilities frontier.
D)It allows a country's consumption possibilities frontier to lie inside its production possibilities frontier.
E)It makes a country's production possibilities frontier a downward-sloping straight line.
Q3) The world price of a good refers to the quantity of one good exchanged for a unit of another good.
A)True
B)False
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19
Chapter 18: International Finance
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Sample Questions
Q1) The exchange rate is:
A)the price of foreign exchange determined by the interaction of supply and demand.
B)an interest rate for foreign loans determined by the interaction of supply and demand.
C)fixed by each government separately.
D)always fixed for any two currencies by the two nations involved,regardless of any agreements made with other nations.
E)fixed by GATT.
Q2) The Bretton Woods system:
A)established a worldwide gold standard.
B)established a worldwide system of fixed exchange rates.
C)established a worldwide system of flexible exchange rates.
D)harmonized tariff systems.
E)was restricted to industrialized nations.
Q3) If an American citizen is planning to visit wildlife reserves in Kenya,he will hope that the U.S.dollar appreciates against Kenyan shillings.
A)True
B)False
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Chapter 19: Economic Development
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Sample Questions
Q1) People can make better use of resources if they _____.
A)have inherited family wealth
B)are living in developed countries
C)are a part of the government
D)are educated
E)have invested in stocks and bonds in other nations
Q2) Foreign aid often becomes a source of discretionary funds that benefit poor people in developing countries and not the countries' leaders.
A)True
B)False
Q3) Export promotion provided infant industries with a protected market in many developing countries.
A)True
B)False
Q4) Countries with a high level of human capital can make up for other shortcomings,such as destruction caused due to war.
A)True
B)False
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Page 21