Economics for Business Exam Review
Course Introduction
Economics for Business provides students with a comprehensive introduction to the fundamental principles of microeconomics and macroeconomics as they apply to real-world business decision-making. The course examines how markets operate, how resources are allocated, and how businesses respond to changes in economic variables such as supply, demand, pricing, and market structures. Students will also explore the broader economic environment, including the impact of government policies, inflation, unemployment, and global economic trends on businesses. Emphasis is placed on developing analytical skills and applying economic concepts to solve practical business problems and inform strategic decisions.
Recommended Textbook
Macroeconomics 5th Canadian Edition by N Gregory Mankiw
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14 Chapters
1476 Verified Questions
1476 Flashcards
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Chapter 1: The Science of Macroeconomics
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54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/76220
Sample Questions
Q1) Real GDP ______ over the long run and the growth rate of real GDP ______ in the short run.
A) grows; fluctuates
B) is steady; is steady
C) grows; is steady
D) is steady; fluctuates
Answer: A
Q2) The inflation rate in Canada averaged about:
A) zero between 1920 and 1945.
B) zero between 1945 and 2005.
C) 10 percent between 1920 and 1945.
D) 10 percent between 1945 and 2005.
Answer: A
Q3) Recessions are periods when real GDP:
A) increases slowly.
B) increases rapidly.
C) decreases mildly.
D) decreases severely.
Answer: C
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Page 3
Chapter 2: The Data of Macroeconomics
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) There are a number of measures of aggregate economic activity,such as GDP,GNP,national income,personal income,and disposable personal income.Each of these measures can be a good indicator depending on the issue under consideration.For each of the following issues,give your reasons for selecting one of the measures just mentioned as the best indicator to use in studying the issue:
a.The proportion of income households save
b.The relative share of earnings going to labour versus capital
c.The total output of new final goods and services.
Answer: a. Disposable personal income provides a measure of the income households have to use for either consumption or saving after they pay taxes.
b. National income provides a measure of the income going to the factors of production.
c. GDP is the most complete measure of the value of newly produced goods and services in the economy.In contrast,personal income includes transfer payments,which do not represent newly produced goods and services.
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Chapter 5: The Open Economy
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) Net capital outflow is equal to the amount that:
A) foreign investors lend here.
B) domestic investors lend abroad.
C) foreign investors lend here minus the amount domestic investors lend abroad.
D) domestic investors lend abroad minus the amount that foreign investors lend here.
Q2) I: The twin deficits prediction is the proposition that a country with a large government budget deficit is likely to have a large trade deficit.II: An increase in foreign interest rates will cause changes in a small open economy that are consistent with the twin deficits prediction.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.
Q3) A depreciation of the real exchange rate in the basic model of a small open economy could be the result of:
A) a domestic tax cut.
B) an increase in government spending.
C) an increase in the world interest rate.
D) the expiration of an investment tax-credit provision.
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Page 5
Chapter 6: Unemployment
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) Paying efficiency wages helps firms reduce the problem of moral hazard by:
A) generating additional profits that can be used to improve working conditions.
B) keeping labour unions from organizing workers in the firm.
C) encouraging unsupervised workers to maintain a high level of productivity.
D) providing an incentive for the best-qualified workers to remain with the firm.
Q2) Which of the following hypotheses is consistent with fewer hours worked per year in Europe than in the United States?
A) fewer mandated holidays in Europe than in the United States
B) higher employment-to-population ratios in Europe than in the United States
C) higher tax rates in Europe than in the United States
D) a smaller underground economy in Europe than in the United States
Q3) If the fraction of employed workers who lose their jobs each month (the rate of job separation)is 0.01 and the fraction of the unemployed who find a job each month is 0.09 (the rate of job findings),then the natural rate of unemployment is:
A) 1 percent.
B) 9 percent.
C) 10 percent.
D) about 11 percent.
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Chapter 7: Economic Growth I
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) In the Solow growth model of an economy with population growth but no technological progress,the steady-state amount of investment can be thought of as a break-even amount of investment because the quantity of investment just equals the amount of:
A) output needed to achieve the maximum level of consumption per worker.
B) capital needed to replace depreciated capital and to equip new workers.
C) saving needed to achieve the maximum level of output per worker.
D) output needed to make the capital per worker ratio equal to the marginal product of capital.
Q2) A reduction in the saving rate starting from a steady state with more capital than the Golden Rule causes investment to ______ in the transition to the new steady state.
A) increase
B) decrease
C) first increase,then decrease
D) first decrease,then increase
Q3) Compare and contrast the impact of a faster rate of population growth on the standard of living (output per worker)in the models by Solow,Malthus,and Kremer.
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Page 7
Chapter 8: Economic Growth II
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) Endogenous growth theory rejects the assumption of exogenous:
A) production functions.
B) rates of depreciation.
C) population growth rates.
D) technological change.
Q2) In the two-sector endogenous growth model,the saving rate (s)affects the steady-state:
A) level of income.
B) growth rate of income.
C) level of income and growth rate of income.
D) growth rate of the stock of knowledge.
Q3) The type of legal system in a country and the level of corruption in a country have been found to be:
A) unrelated to the rate of economic growth in a country.
B) significant determinants of the rate of economic growth in a country.
C) important topics for political discussion,but not economic explanations of growth.
D) important variables explaining the Golden Rule level of capital.
Q4) Suggest three explanations for the productivity slowdown experienced between 1972 and 1995.
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Chapter 9: Introduction to Economic Fluctuations
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Most economists believe that prices are:
A) flexible in the short run but many are sticky in the long run.
B) flexible in the long run but many are sticky in the short run.
C) sticky in both the short and long runs.
D) flexible in both the short and long runs.
Q2) Suppose that laws are passed banning labour unions and that resulting lower labour costs are passed along to consumers in the form of lower prices.Use the aggregate demand-aggregate supply model to illustrate graphically the impact in the short run and the long run of this favourable supply shock.Be sure to label:
i.the axes
ii.the curves
iii.the initial equilibrium values
iv.the direction the curves shift
v.the short-run equilibrium values
vi.the long-run equilibrium values.State in words what happens to prices and output in the short run and the long run.
Q3) Monetary policy can be either a stabilizing influence on the economy or a source of instability.Give an explanation for both possibilities.
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Chapter 10: Aggregate Demand I
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) According to the theory of liquidity preference,if the demand for real money balances exceeds the supply of real money balances,individuals will:
A) sell interest-earning assets in order to obtain non-interest-bearing money.
B) purchase interest-earning assets in order to reduce holdings of non-interest-bearing money.
C) purchase fewer goods and services.
D) be content with their portfolios.
Q2) Along any given IS curve:
A) tax rates are fixed,but government spending varies.
B) government spending is fixed,but tax rates vary.
C) both government spending and tax rates vary.
D) both government spending and tax rates are fixed.
Q3) According to the theory of liquidity preference,the supply of real money balances:
A) decreases as the interest rate increases.
B) increases as the interest rate increases.
C) increases as income increases.
D) is fixed.
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Chapter 13: Aggregate Supply and the Short-Run
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) (Exhibit: Short-run Phillips Curve)As the short-run Phillips curve shifts from A to B to C to D:
A) the expected rate of inflation is unchanged at every level of unemployment.
B) there is a lower-expected rate of inflation at every level of unemployment.
C) there is a higher-expected rate of inflation for every level of unemployment.
D) the natural rate of unemployment falls.
Q2) After examining international data,the economist Robert Lucas found that aggregate demand has the biggest effect on output in countries where aggregate demand:
A) and prices are most stable.
B) and prices are most variable.
C) is most stable but prices are most variable.
D) is most variable but prices are most stable.
Q3) Inflation inertia refers to the idea that inflation:
A) is always present in economies.
B) keeps on going unless something acts to stop it. C) cannot be reduced unless unemployment is increased. D) can be generated by either demand-pull or cost-push forces.
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11
Chapter 15: Stabilization Policy
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98 Flashcards
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Sample Questions
Q1) Following the recession of 2008-2009,the Bank of Canada embraced a policy of forward guidance.I.This policy was adopted because the short-term interest rate had fallen to almost zero.II.This policy can be of limited usefulness since households and firms understand that the time-inconsistency problem applies.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.
Q2) Advocates of passive policy argue that because monetary and fiscal policy lags are:
A) short and fixed; these policies should not be used to offset shocks.
B) long and variable; these policies should not be used to offset shocks.
C) short and fixed; these policies should be used to offset shocks.
D) long and variable; these policies should be used to offset shocks.
Q3) A monetary policy rule:
A) must specify money growth at a constant rate.
B) must specify an active policy.
C) must specify a passive policy.
D) may specify either an active or a passive policy.
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Chapter 16: Government Debt and Budget Deficits
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91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/76216
Sample Questions
Q1) The cyclically adjusted budget deficit:
A) adjusts the deficit for inflation.
B) estimates what the deficit would be if the economy were operating at the natural level of output.
C) accounts for assets as well as liabilities.
D) measures the impact of fiscal policy on the lifetime incomes of individuals of different ages.
Q2) If government debt reduction by a small open economy has no effect on its interest rate I: the benefits of debt reduction follow from the fact that future generations have smaller debt service payments to foreigners.II: the benefits of debt reduction will be charged by all workers since each worker has more capital to work with.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.
Q3) Finance Canada reports the budget deficit or surplus of the federal government.Give at least one reason why the measured budget deficit might overstate the "true" deficit and at least one reason the measured figure might understate the "true" deficit.
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Chapter 18: Investment
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103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/76215
Sample Questions
Q1) The standard model of business fixed investment is called the ______ of investment.
A) new classical model
B) neoclassical model
C) classical model
D) Keynesian model
Q2) Suppose it is an election year and the economy is in a recession.The opposition candidate proposes an investment tax credit to take effect next year after he takes office.If the public believes the opposition candidate has a good chance of winning,the effect of this promise will likely be to:
A) increase investment both this year and next year.
B) decrease investment both this year and next year.
C) increase investment this year and decrease it next year.
D) decrease investment this year and increase it next year.
Q3) As firms' profits increase during a boom,business fixed investment will increase because:
A) the marginal product of capital falls.
B) stock-out avoidance diminishes.
C) corporate tax payments decrease.
D) the high profit levels relax financing constraints.
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Chapter 19: Money Supply and Money Demand
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102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/76214
Sample Questions
Q1) The minimum amount of owner's equity in a bank mandated by regulators is called a ______ requirement.
A) reserve
B) margin
C) liquidity
D) capital
Q2) (Table: Bank Balance Sheet)Based on the table,what is the leverage ratio at the bank?
A) 3
B) 4.67
C) 5
D) 10
Q3) Deposit insurance in Canada I: insures all deposits in chartered banks up to a maximum of $100,000.II: would generate incentives for more desirable outcomes if it involved a small deductible that is not covered.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.
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Page 15
Chapter 20: The Financial System
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108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/76212
Sample Questions
Q1) To the extent that the undervaluation of the riskiness of mortgage-backed securities contributed to the financial crisis of 2008-2009 in the United States,blame for this mistake lies with:
A) mortgage brokers.
B) investment banks.
C) rating agencies.
D) government policymakers.
Q2) Funds flow directly between savers and investors in financial _____ and flow indirectly between savers and investors through financial _____.
A) stocks; bonds
B) intermediaries; markets
C) bonds; stocks
D) markets; intermediaries
Q3) What are the benefits of a well-functioning financial system? What are the costs of a financial crisis?
Q4) Suppose Bank A has a leverage ratio of 20 and Bank B has a leverage ratio of 10.Explain the meaning of these ratios and what would happen to each of these banks if the value of their assets fell by 6 percent.
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