Economics for Business Managers
Exam Materials
Course Introduction
Economics for Business Managers introduces key economic principles and analytical tools relevant to decision-making within organizations. The course covers foundational concepts such as supply and demand, market structures, pricing strategies, and the impact of macroeconomic factors on business operations. Students will learn how to interpret economic data, assess the competitive environment, and apply economic reasoning to solve business problems. Through case studies and real-world examples, the course emphasizes practical application, equipping future managers with the skills needed to make informed strategic and operational decisions in a dynamic economic landscape.
Recommended Textbook
CoreMacroeconomics 3rd Edition by
Eric Chiang
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16 Chapters
4462 Verified Questions
4462 Flashcards
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Page 2
Chapter 1: Exploring Economics
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286 Verified Questions
286 Flashcards
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Sample Questions
Q1) To be useful,an economic model must include every detail possible and not be an abstraction.
A)True
B)False
Answer: False
Q2) (Figure: Graph Interpretation)In the graph,the equation for the line is:
A) R = 120 - 0.4S.
B) R = 120 - 300S.
C) R = 120 + 0.4S.
D) S = 300 + 120R.
Answer: A
Q3) Describe the ceteris paribus assumption and discuss how it might affect your purchase of fast-food meals this week.
Answer: To aid in model building,economists use the ceteris paribus assumption."Holding all other things equal" means that we hold some important variables constant.For example,to determine how many fast-food meals you might be willing to purchase in any given week,we would hold your weekly income constant.We then would change the prices of fast-food meals to see the impact on the number purchased.Fast-food businesses,such as McDonald's,use this information to set what they hope is an optimum price.
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Chapter 2: Production, Economic Growth, and Trade
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Sample Questions
Q1) Suppose that if the United States produced only oil,it could produce 25 million barrels,and if it produced only microchips it could produce 20 million chips.Suppose that if Mexico produced only oil,it could produce 16 million barrels,and if it produced only microchips,it could produce 8 million chips.Which of the following statements is then correct?
A) Mexico has a comparative advantage in producing both goods.
B) The United States has an absolute advantage over Mexico in producing both goods.
C) Mexico has an absolute advantage over the United States in producing both goods.
D) The United States has a comparative advantage in producing both goods.
Answer: B
Q2) What are the three basic economic questions each society must answer?
A) what to produce;how to produce;for whom to produce
B) how much to produce;what quality to produce;and what price to sell at
C) what to produce;how to much to produce,how to consume
D) how much goes to government;how much goes to consumers;how much is exported
Answer: A
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Chapter 3: Supply and Demand
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Sample Questions
Q1) (Figure: Market for Shoes)The graph represents:
A) an individual's willingness-to-pay.
B) the price system.
C) the law of supply.
D) the law of demand.
Answer: D
Q2) If the market price of Beanie Babies increases,then the supply curve of Beanie Babies will shift to the right.
A)True
B)False
Answer: False
Q3) Market forces are in balance (equilibrium)when the quantities demanded by consumers just equal quantities supplied by producers.
A)True
B)False
Answer: True
Q4) Markets form the foundation of all economic transactions.
A)True
B)False
Answer: True
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Chapter 4: Markets and Government
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Sample Questions
Q1) (Figure: Understanding Price Ceilings and Floors)In the graph,a price of $90 would allow for an effective price ceiling.
A)True
B)False
Q2) It would be difficult for a private firm to make a profit if it produced and sold:
A) health food.
B) river levees.
C) package delivery.
D) banking services.
Q3) If the price of a good is higher than the equilibrium price:
A) consumer surplus is decreased and deadweight loss is increased.
B) consumer surplus is increased and deadweight loss is decreased.
C) producer surplus is decreased and deadweight loss is increased.
D) producer surplus is decreased and deadweight loss is decreased.
Q4) The gap between the demand curve and the market price is called "consumer surplus."
A)True
B)False
Q5) Will producer surplus rise or shrink when prices rise above equilibrium?
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Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) Net exports in the United States over the past few decades have been a positive percentage of GDP.
A)True
B)False
Q2) Using the simple circular flow model,explain why the sum of income earned in an economy equals the sum of spending in the economy.
Q3) Joyce is an accountant.Sarah,her hair stylist,cuts and perms her hair in exchange for having her taxes done.This is an example of an economic transaction that is not included in the national income and product accounts.
A)True
B)False
Q4) Corporate profits are slightly less than 10% of GDP.
A)True
B)False
Q5) The national income and product accounts provide:
A) the ability to track business cycles.
B) the ability to account for nonmarket activities,such as car maintenance.
C) a comprehensive measure of domestic unemployment.
D) a comprehensive measure of domestic inflation.
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Chapter 6: Measuring Inflation and Unemployment
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Sample Questions
Q1) Last year,Megan's salary was $65,000.The consumer price index increased from 109 to 115.If Megan received a cost-of-living adjustment,what would her salary be?
A) $61,553
B) $61,320
C) $67,564
D) $68,578
Q2) Which of the following items is NOT included in the GDP deflator?
A) bubble gum
B) turbines
C) fire engines
D) imported mangoes
Q3) _____ is a reduction in the rate of inflation.
A) Disinflation
B) Deflation
C) Hyperinflation
D) The price level
Q4) The consumer price index measures private goods as well as public goods.
A)True
B)False
Q5) Describe the methods used for measuring inflation.
Page 8
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Chapter 7: Economic Growth
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Sample Questions
Q1) The Rule of 70 provides an exact estimate of compounded values over time.
A)True
B)False
Q2) Infrastructure is:
A) not important in a market-based economy.
B) a country's public capital.
C) typically better when provided by private companies.
D) unimportant for economic growth because the government provides it.
Q3) A country with a large population and centralized government cannot be a world leader in economic growth.
A)True
B)False
Q4) If the Bureau of Economic Analysis reports that the annualized U.S.growth rate was 2.5% for the second quarter,then the actual growth rate from the first quarter to the second quarter was:
A) 0.625%.
B) 2.5%.
C) 7.5%.
D) 10%.
Q5) How can an effective legal system facilitate economic growth?
Page 9
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Chapter 8: Aggregate Expenditures
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Sample Questions
Q1) If income is $3,000 and savings is $300,the average propensity to save is 0.01.
A)True
B)False
Q2) The increase in aggregate spending needed to bring an economy to full employment is called:
A) goal-oriented spending.
B) the inflationary gap.
C) gap closure spending.
D) the recessionary gap.
Q3) The multiplier works for increases in spending but not for cuts in spending.
A)True
B)False
Q4) As income increases,consumption ______
A) increases at a slower rate
B) increases faster
C) decreases at a slower rate
D) decreases faster
Q5) Changes in technology are a determinant of investment.
A)True
B)False
10
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Chapter 9: Aggregate Demand and Supply
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Sample Questions
Q1) In the short run,a decrease in market power (or monopolization):
A) will increase the price level.
B) will decrease the price level.
C) will not affect the price level.
D) will not affect output.
Q2) ________ taxes and ________ interest rates in the United States,along with ___________ incomes in other countries,will shift the U.S.aggregate demand curve to the right.
A) Decreasing;rising;rising
B) Increasing;falling,rising
C) Decreasing;falling,rising
D) Decreasing;falling,falling
Q3) Which of the following factors is NOT a determinant of aggregate supply?
A) income
B) taxes on business
C) input prices
D) regulation
Q4) Increased productivity leads to increased aggregate supply.
A)True
B)False
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Chapter 10: Fiscal Policy and Debt
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Sample Questions
Q1) Automatic stabilizers are initiated by acts of Congress.
A)True
B)False
Q2) Increasing taxes to fight inflation is an example of:
A) conservative fiscal policy.
B) contractionary fiscal policy.
C) expansionary fiscal policy.
D) demand-braking policy.
Q3) Public debt held by foreigners is known as ________ debt.
A) out-of-country
B) internally held
C) externally held
D) improper
Q4) Asset sales represent a large fraction of government finance in the United States.
A)True
B)False
Q5) Describe the role of the Federal Reserve in financing debt and deficits.Include in your explanation an analysis of the government's budget constraint.
Q6) Is it always wise for a country to pay off its debt?
Page 12
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Chapter 11: Saving, Investment, and the Financial System
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Sample Questions
Q1) Bonds are considered to be _____ than stocks because ____.
A) less risky;bondholders are less affected by a firm's bankruptcy
B) riskier;stockholders earn dividends and bondholders do not
C) less risky;bondholders earn dividends and stockholders do not
D) riskier;stockholders are less affected by a firm's bankruptcy
Q2) A teaser rate is an interest rate for a credit card that is temporarily low.
A)True
B)False
Q3) Which of the following assets is MOST liquid?
A) a house
B) a Picasso painting
C) a corporate bond
D) money
Q4) Which of the following items is NOT a function of money?
A) a medium of exchange
B) a unit of account
C) a method of making change
D) a store of value
Q5) Explain why households supply loanable funds to the market.
Q6) Explain the difference between a traditional IRA and a Roth IRA.
Page 13
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Chapter 12: Money Creation and the Federal Reserve
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Sample Questions
Q1) When money is deposited in a bank,why is the deposit both an asset and a liability?
Q2) If the Fed lowers the reserve requirement:
A) the money supply will fall.
B) the money multiplier will rise.
C) less money will be available for banks to lend.
D) the impact will be small but precise.
Q3) New deposits of $1 billion are placed in a bank.The reserve requirement is 20%.How much does the money supply increase,assuming no leakages?
A) $1 billion
B) $5 billion
C) $10 billion
D) $20 billion
Q4) How do banks reduce the risk of a solvency crisis?
Q5) The fractional reserve banking system allows banks to lend out all the money they receive as deposits.
A)True
B)False
Q6) What is the structure of the Federal Reserve System in the United States?
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Chapter 13: Monetary Policy
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Sample Questions
Q1) John has $100,000 in annual income but does not own his house or a car.Bob has $100,000 in annual income and owns two houses and four cars.Which theorist would predict that John spends a different proportion of his current income than Bob?
A) Milton Friedman
B) John Maynard Keynes
C) Irving Fisher
D) David Ricardo
Q2) Monetary targeting is setting a steady growth rate in:
A) employment.
B) GDP.
C) productivity.
D) the money supply.
Q3) Which economists believe that fiscal policy is ineffective,while monetary policy is effective?
A) monetarists
B) Keynesians
C) classical economists
D) Fisherites
Q4) Explain the liquidity trap.
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Chapter 14: Macroeconomic Policy: Challenges in a Global Economy
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Sample Questions
Q1) One of the trigger points for the financial crisis of 2008 was that Congress failed to balance the federal budget.
A)True
B)False
Q2) The original Phillips curve shows the relationship between the rate of change in wages and the unemployment rate.Why is the change in wages strongly correlated with inflation? What assumption does the Phillips curve relationship make about productivity?
Q3) What are the policy implications of the rational expectations model? Use an example and a graph to support your response.
Q4) Rational expectations theory suggests that the Fed and other policymakers must fool the public if their policies are to have short-term effects.
A)True
B)False
Q5) The risk of highly leveraged investments is that a small decrease in price can amplify one's losses.
A)True
B)False
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Chapter 15: International Trade
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Sample Questions
Q1) Free trade tends to make prices of many goods converge worldwide.
A)True
B)False
Q2) Which of these sectors is the largest component of U.S.exports?
A) consumer goods
B) capital goods
C) services
D) food and beverages
Q3) It takes Melissa eight hours to produce a bushel of corn and two hours to wash and polish a car.It takes Greg six hours to produce a bushel of corn and one hour to wash and polish a car.Therefore:
A) Greg has a comparative advantage in producing corn.
B) Greg has a comparative advantage in washing cars.
C) Melissa has an absolute advantage in producing corn.
D) Melissa has an absolute advantage in washing cars.
Q4) Barriers to free trade create inefficiencies in the allocation of foreign resources.
A)True
B)False
Q5) Explain how restricting imports will limit eventual exports.
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Chapter 16: Open Economy Macroeconomic
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Sample Questions
Q1) The balance on income equals:
A) income payments minus income received.
B) exports minus imports.
C) income received minus income payments.
D) imports minus exports.
Q2) The gold standard was characterized by all of the following EXCEPT:
A) a free flow of gold between individuals and countries.
B) the maintenance of fixed values of national currencies in terms of gold.
C) a system that tied interest rates to exchange rates.
D) the absence of an international coordinating agency.
Q3) The rate at which one currency is traded for another is called the:
A) transaction rate.
B) exchange rate.
C) trade rate.
D) parity rate.
Q4) A U.S.dollar appreciation may result when U.S.tastes and preferences shift toward foreign goods.
A)True
B)False
Q5) What is dollarization? What risk does a country eliminate when it dollarizes?
Page 18
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