Economics for Business Exam Review
Course Introduction
Economics for Business introduces the fundamental principles of microeconomics and macroeconomics, emphasizing their application in real-world business contexts. The course covers topics such as supply and demand, market structures, consumer behavior, cost analysis, and the impact of government policies on business operations. Students will learn how economic theories inform business decisions, shape market outcomes, and influence strategic planning. Through case studies and practical examples, the course equips students with analytical tools to interpret economic data, assess markets, and make informed decisions in a dynamic economic environment.
Recommended Textbook
ECON MACRO4 4th Edition by
William A. McEachern
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21 Chapters
3789 Verified Questions
3789 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) One problem with rent controls is that policy makers often ignore its secondary effects.
A)True
B)False
Answer: True
Q2) Resources are divided into the following broad categories:
A)people, money, and machines
B)saving, spending, investment, and capital
C)human, technological, and government
D)natural resources, labor, capital, and entrepreneurial ability
E)free, scarce, abundant, and unlimited
Answer: D
Q3) A marginal adjustment only refers to a minor change.
A)True
B)False
Answer: False
Q4) Profit is the payment made for land resources.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Understanding Graphs-Appendix
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64 Flashcards
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Sample Questions
Q1) Moderate exercise is better than none, but excessive exercise is harmful. What is the shape of the graph of health benefits versus hours of exercise per week if health benefits are measured on the vertical axis and exercise is measured on the horizontal axis?
A)a positively sloped straight line
B)a negatively sloped straight line
C)a vertical straight line
D)a U-shaped curve
E)a hill-shaped curve
Answer: E
Q2) The slope of a horizontal line is
A)infinitely large
B)zero
C)positive
D)negative
E)infinitely small
Answer: B
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4
Chapter 3: Economic Tools and Economics Systems
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195 Verified Questions
195 Flashcards
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Sample Questions
Q1) A production possibilities frontier can shift outward for all of the following reasons except one. Which is the exception?
A)a decrease in the unemployment rate
B)an improvement in labor skills
C)an improvement in technology
D)a larger work force
E)a larger capital stock
Answer: A
Q2) If Evan has an absolute advantage in cleaning and bookkeeping when compared to Gloria, then
A)Evan must also have a comparative advantage in cleaning and bookkeeping
B)Evan must have a comparative advantage in cleaning
C)Evan must have a comparative advantage in bookkeeping
D)Gloria has a comparative advantage in neither activity
E)we can conclude nothing about comparative advantage
Answer: E
Q3) Comparative advantage is based on opportunity costs.
A)True
B)False
Answer: True
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Chapter 4: Economic Decision Makers
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200 Verified Questions
200 Flashcards
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Sample Questions
Q1) Externalities are defined as
A)any transaction external to the firm
B)costs or benefits that fall on third parties
C)policies that firms undertake to sell products outside the country
D)managers' dealings with stockholders outside the firm
E)costs of maintaining plant and equipment to avoid the scrutiny of external auditors
Q2) Gross Domestic Product is the market value of
A)all exchanges made during the course of a year
B)all final goods produced during the course of a year
C)all monetary transactions during the course of a year
D)all the goods produced during the course of a year over and above what is required to maintain the population and the stock of capital
E)all final goods sold during the course of a year
Q3) As the real wage increases, the opportunity cost of working outside the home increases.
A)True
B)False
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Chapter 5: Demand, Supply, and Markets
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232 Flashcards
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Sample Questions
Q1) In Exhibit 4-5, which of the following is true at the price ceiling, P?
A)The excess quantity supplied equals 300 gallons.
B)The excess quantity demanded equals 300 gallons.
C)The excess quantity supplied equals 500 gallons.
D)The excess quantity demanded equals 800 gallons.
E)Sales will be equal to 800 gallons.
Q2) The effect of a decrease in the price of personal computers, other things constant, is likely to be best represented by which of the following?
A)a leftward shift of the demand curve
B)a movement leftward along the demand curve
C)a rightward shift of the demand curve
D)a movement rightward along the demand curve
E)a rightward shift of the supply curve
Q3) The sum of the individual demands of all consumers in the market is called
A)individual demand
B)market demand
C)inferior good
D)market supply
E)quantity demanded
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Page 7
Chapter 6: Introduction to Macroeconomics
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Sample Questions
Q1) An increase in government spending, other things constant, would cause a
A)leftward shift of the aggregate supply curve
B)rightward shift of the aggregate supply curve
C)leftward shift of the aggregate demand curve
D)rightward shift of the aggregate demand curve
E)movement toward equilibrium, along curves that do not shift
Q2) Given the aggregate demand curve, an increase in aggregate supply would raise real GDP and reduce the price level.
A)True
B)False
Q3) If spending by the federal government exceeds tax revenues, aggregate demand decreases.
A)True
B)False
Q4) Suppliers have an incentive to increase aggregate output whenever the price level rises faster than the cost of production.
A)True
B)False
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Chapter 7: Tracking the Us Economy
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213 Flashcards
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Sample Questions
Q1) A problem inherent in using value added to measure GDP is that the method does not avoid double counting.
A)True
B)False
Q2) Which of the following actions would not increase GDP?
A)Tom's alarm clock breaks, so he buys a new one.
B)Tom buys a new alarm clock because he routinely sleeps through the first alarm.
C)Tom's alarm clock breaks; now he oversleeps long enough that he buys a cup of coffee on the way to work instead of making it for himself at home.
D)Tom gets fired for being late so often after his alarm clock breaks, so he moves off to the wilderness.
E)Tom sells his broken alarm clock and uses the revenue to buy some French fries.
Q3) Nominal GDP is a better measure of the growth in production than real GDP is.
A)True
B)False
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9
Chapter 8: Unemployment and Inflation
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202 Flashcards
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Sample Questions
Q1) If the nominal interest rate is 5 percent and there is no inflation,
A)the real interest rate exceeds 5 percent
B)the real interest rate is less than 5 percent
C)the real interest rate is 5 percent
D)there is not enough information to determine the real interest rate
E)the real interest rate is zero
Q2) The labor force consists of all adults who are currently employed.
A)True
B)False
Q3) An example of structural unemployment caused by a change in tastes and preferences is
A)newspaper journalists
B)administrative assistants
C)lifeguards
D)steelworkers during recessions
E)None of the answers is correct
Q4) It is difficult to compare unemployment rates across countries because methods of measuring unemployment are not standardized.
A)True
B)False
Page 10
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Chapter 9: Productivity and Growth
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Per capita GDP in the United States has declined since 1950.
A)True
B)False
Q2) The only way the standard of living can increase is for labor productivity to increase.
A)True
B)False
Q3) In the long run, changing technology on average has led to
A)lower employment and lower wage rates
B)higher employment and lower wage rates
C)lower employment with wage rates unchanged
D)higher employment with wage rates unchanged
E)higher incomes and more leisure time
Q4) An increase in the amount of capital per worker will
A)increase labor productivity but not capital productivity
B)increase capital productivity but not labor productivity
C)increase both labor and capital productivity
D)shift the per-worker production function upward
E)increase total output but not the productivity levels of individual workers
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11
Chapter 10: Aaggregate Expenditure and Agregate Demand
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179 Verified Questions
179 Flashcards
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Sample Questions
Q1) The slope of the consumption function equals the A)MPC
B)MPS
C)APC
D)APS
E)ratio of the APC to the APS (i.e., APC divided by APS)
Q2) Investment
A)is about as volatile as consumption, except during recession years
B)has averaged about one-sixth of GDP over the past decade
C)is about as volatile as GDP, except during recession years
D)is the largest component of aggregate spending
E)has averaged about two-thirds of GDP over the past decade
Q3) As domestic income rises, net exports
A)fall, since exports remain the same but imports increase
B)rise, since exports remain the same but imports fall
C)fall, since exports are lower and imports remain the same
D)rise, since exports are higher and imports remain the same
E)may either rise or fall, since exports and imports change in opposite directions
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Chapter 11: Aggregate Expenditure and Aggregate Demand
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Which of the following is not true?
A)When planned aggregate expenditure is greater than output, real GDP demanded will rise.
B)When planned aggregate expenditure is greater than output, real GDP demanded will fall.
C)When planned aggregate expenditure is increasing, disposable income and consumption are increasing.
D)When planned aggregate expenditure is increasing, consumption and saving are both increasing.
E)As long as planned aggregate expenditure is increasing, real GDP demanded does also.
Q2) What is the effect of an increase in the price level?
A)The real value of dollar-denominated assets will rise.
B)The aggregate expenditure line will shift downward.
C)The equilibrium level of output demanded will rise.
D)There will be downward movement along a particular aggregate demand curve.
E)The aggregate demand curve will shift rightward.
Q3) The larger the MPC, the greater the multiplier effect.
A)True
B)False
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Chapter 12: Aggregate Supply
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Sample Questions
Q1) In Exhibit 11-2, if P<sub>1</sub> is the prevailing price level, then
A)there is an expansionary gap
B)the price level will decrease
C)the expected price level is the same as the actual price level
D)the unemployment rate is below the natural unemployment rate
E)potential output is less than the actual level of output
Q2) If the price level rises by 5 percent and the nominal wage rises 3 percent, the real wage
A)falls by 2 percent
B)falls by 8 percent
C)rises by 2 percent
D)rises by 8 percent
E)remains constant
Q3) For the purpose of aggregate supply analysis, the long run is the period of time during which
A)aggregate supply adjusts to equal aggregate demand
B)excess aggregate supply is bought
C)excess aggregate demand is fulfilled
D)real wages are constant
E)all resource prices can be varied
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Chapter 13: Fiscal Policy
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240 Verified Questions
240 Flashcards
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Sample Questions
Q1) A progressive income tax ensures that during expansionary periods,
A)consumption will increase by more than the increase in disposable income
B)consumption will increase by more than the decrease in disposable income
C)disposable income will increase by more than the increase in GDP
D)disposable income will increase by less than the increase in GDP
E)disposable income will increase by more than the decrease in GDP
Q2) The American Recovery and and Reinvestment Act passed in February 2009, was the largest measure in US history.
A)True
B)False
Q3) It has been estimated that the marginal propensity to consume out of tax rebate money is around 1/3 which means the multiplier from just tax rebate programs will b about 3.
A)True
B)False
Q4) Temporary tax cuts tend to have little effect on household consumption spending.
A)True
B)False
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Chapter 14: Federal Budgets and Public Policy
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) Approximately what percentage of the U.S. federal budget was used for Welfare payments in 2013?
A)5 percent
B)10 percent
C)14 percent
D)20 percent
E)31 percent
Q2) With few exceptions, the U.S. federal government has historically run a balanced budget.
A)True
B)False
Q3) All of the following are possible implications of federal budget deficits except one. Which is the exception?
A)crowding out
B)increased interest rates
C)inflation
D)increased trade deficits
E)depreciation of the dollar
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Chapter 15: Money and the Financial System
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209 Verified Questions
209 Flashcards
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Sample Questions
Q1) Commodity money is something
A)that has no intrinsic value
B)that has an intrinsic value
C)that is based on a valuable metal
D)whose value never changes
E)whose value changes frequently
Q2) Under a fractional reserve banking system, banks may lend out only a fraction of their reserves.
A)True
B)False
Q3) The banking crisis of the 1980s was due, in part, to all of the following except one. Which is the exception?
A)the rising interest rates of the 1970s and early 1980s
B)the existence of deposit insurance
C)the deregulation of deposit rates that allowed unsafe banks to grow
D)the deregulation of lending practices
E)the highly concentrated U.S. banking industry, where big banks had branches in nearly every state
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17
Chapter 16: Banking and the Money Supply
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229 Flashcards
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Sample Questions
Q1) The Fed's most important monetary policy tool is
A)printing money
B)clearing checks
C)setting the required reserve ratio
D)setting the discount rate
E)conducting open market operations
Q2) Suppose a commercial bank's reserves increase by $3,000 and the bank, which holds no excess reserves, makes a loan of $2,400. What is the required reserve ratio?
A)0.10
B)0.20
C)0.25
D)0.75
E)4
Q3) The primary tool the Fed uses to control the money supply today is
A)the discount rate
B)the required reserve ratio
C)the discount window
D)chartering
E)open market operations
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Page 18
Chapter 17: Monetary Theory and Policy
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) An increase in aggregate demand will have a smaller long-run effect on real GDP if the
A)aggregate demand curve is flat
B)short-run aggregate supply curve is horizontal
C)economy is well below potential output
D)economy is already at potential output
E)aggregate demand curve is fairly steep
Q2) The velocity of money increases for all of the following reasons except
A)use of electronic transmission of funds
B)increased use of charge accounts
C)increased use of automatic teller machines
D)a rising inflation rate
E)decreased use of credit cards
Q3) Which of the following is an example of an expansionary monetary policy?
A)Government purchases of goods and services decline.
B)The discount rate is increased.
C)The Fed sells U.S. government securities in the open market.
D)The required reserve ratio is lowered.
E)The income tax is lowered.
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Page 19
Chapter 18: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) Discretionary policy advocates believe
A)both c and d
B)that self-correction forces work slowly
C)that rules are effective in changing output
D)in rational expectations
E)none of the above
Q2) The inflation associated with the oil embargoes of the 1970s illustrated the __________ of the downward-sloping Phillips curve in the long run, as unemployment
A)validity; fell
B)validity; rose
C)fallacy; rose
D)fallacy; fell
E)fallacy; did not change
Q3) Along the short-run Phillips curve, when the unemployment rate goes down,
A)unemployment benefit payments go up
B)prices go down
C)the Phillips curve shifts outward
D)the inflation rate goes up
E)there is no change in the rate of inflation
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Chapter 19: International Trade
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Sample Questions
Q1) Comparative advantage is determined by A)the amount of resources needed to produce a good B)the money cost of producing any good C)the opportunity cost of producing any good D)absolute advantage and production possibilities combined E)the level of demand for a good
Q2) The United States exports more raw materials than finished products.
A)True
B)False
Q3) If the United States has an absolute advantage in producing computer components, it should export them worldwide.
A)True
B)False
Q4) In Exhibit 19-1, the United States has a comparative advantage in the production of rice.
A)True
B)False
Q5) A tariff is a tax on either imports or exports.
A)True
B)False
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Chapter 20: International Finance
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231 Flashcards
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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 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) Which of the following is not a credit item (+) in the U.S. balance of payments?
A)imports of cars from Japan
B)any transaction that results in an inflow of dollars
C)a capital outflow
D)a U.S. firm's purchase of steel from a European steel mill
E)an increase in American vacations abroad
Q3) If the U.S. dollar appreciates, it becomes cheaper for Australians to visit their relatives in the United States.
A)True
B)False
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22
Chapter 21: Economic Development
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Sample
Questions
Q1) The country of Excludania can discourage foreign investment by
A)requiring foreign investors to find a local partner who must be granted controlling interest
B)setting different exchange rates for different categories of transactions
C)heavily restricting private international borrowing and lending
D)All the answers are correct
E)None of the answers is correct
Q2) Most of the labor force in developing countries work in the low wage manufacturing sector.
A)True
B)False
Q3) Labor productivity depends on the
A)the effectiveness of government
B)the size of the economy
C)the proportion of the labor force that is unionized
D)the amount of capital
E)All of the answers are correct
Q4) Successful management of resource wealth is a poverty trap
A)True
B)False
Page 23
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