Economics for Business Test Questions
Course Introduction
Economics for Business provides an introduction to the fundamental concepts of microeconomics and macroeconomics as they apply to the business environment. The course explores how individuals and firms make decisions regarding resource allocation, production, pricing, and consumption within various market structures. Students will examine the role of economic forces in shaping business strategies, understand the impact of government policies on business operations, and analyze real-world case studies to develop practical skills for interpreting economic data and trends. This course equips students with the foundational economic knowledge necessary for making informed business decisions in a dynamic global marketplace.
Recommended Textbook
Exploring Macroeconomics 3rd canadian Edition by Robert L. Sexton
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15 Chapters
2208 Verified Questions
2208 Flashcards
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Chapter 1: The Role and Method of Economics
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288 Verified Questions
288 Flashcards
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Sample Questions
Q1) Which of the following does the term "opportunity cost" refer to?
A)the price paid for the opportunity to buy stock in an initial public offering
B)the finder's fee paid to a job placement agency for locating employment for workers
C)the dollar price paid for a good
D)the value of the best forgone alternative
Answer: D
Q2) Economists believe that people respond to incentives in predictable ways.Therefore,if the government imposed a tax on each child born,what would an economist expect to happen?
A)Families would have the same number of children, but spaced further apart.
B)Families would have the same number of children, but wait longer to begin having them.
C)Fewer children would be born.
D)More children would be born, but spaced further apart.
Answer: C
Q3) The opportunity cost of a decision is the value of the best forgone alternative.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Scarcity, trade-Offs, and Production Possibilities
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166 Flashcards
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Sample Questions
Q1) Assume the economy moves from a situation with full employment to one in which the unemployment rate is higher.How can this be portrayed on the production possibilities curve?
A)an outward shift of the curve
B)an inward shift of the curve
C)a movement from a point on the curve to a point inside the curve
D)a movement from a point inside the curve to a point closer to the curve
Answer: C
Q2) Refer to Figure 2-3.An economy is operating at full employment,and then workers in the bread industry are laid off.How is this change portrayed on the production possibilities curve?
A)as a movement from A to B
B)as a movement from B to E
C)as a movement from C to F
D)as a movement from G to F
Answer: C
Q3) High economic growth can eventually eliminate the problem of scarcity.
A)True
B)False
Answer: False
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Chapter 3: Supply and Demand
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Sample Questions
Q1) Which of the following is NOT a characteristic of competitive markets?
A)numerous sellers
B)fixed market prices
C)numerous buyers
D)similar products
Answer: B
Q2) Increasing opportunity costs is one explanation for the law of supply.
A)True
B)False
Answer: True
Q3) Which of the following statements about the demand for a normal good is the most accurate?
A)It decreases when price rises.
B)It decreases when income falls.
C)It increases when income falls.
D)It increases when price rises.
Answer: B
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Chapter 4: Bringing Supply and Demand Together
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Sample Questions
Q1) Refer to Table 4-3.Assuming the market for gasoline is initially in equilibrium and that sport utility vehicles have very high fuel consumption,what is likely to happen when there is a significant decrease in the price of sport utility vehicles?
A)The market price for gasoline will increase and the quantity demanded will decrease.
B)Both the market price and quantity of gasoline demanded will increase.
C)The market price of gasoline will decrease and the quantity demanded will increase.
D)The market price and quantity of gasoline will both decrease.
Q2) If the market for peaches is in equilibrium at $2.99 per pound,a decrease in the supply of peaches will cause a surplus of peaches at that price.
A)True
B)False
Q3) Refer to Table 4-5.What is the equilibrium price?
A)$14
B)$15
C)$16
D)$17
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Chapter 5: Introduction to the Macroeconomy
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170 Flashcards
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Sample Questions
Q1) Which of the following statements about inflation is the most accurate?
A)It can increase the real income of unionized workers.
B)It can cause a redistribution of income from borrowers to creditors.
C)It may encourage investment and economic growth.
D)It can decrease the value of a nation's currency relative to other nations.
Q2) Unanticipated deflation will benefit creditors at the expense of debtors.
A)True
B)False
Q3) What do economists consider persons who do NOT hold jobs,but are actively seeking work?
A)unemployable, and not counted in official statistics.
B)unemployed
C)underemployed
D)out of the labour force
Q4) The economy reaches full employment when the unemployment rate equals zero. A)True
B)False
Q5) Another name for the contractionary phase of a business cycle is recession.
A)True
B)False
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Chapter 6: Measuring Economic Performance
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Sample Questions
Q1) What does GDP calculate?
A)the total revenue received by corporations for goods produced during a given period
B)the market value of all final goods and services produced during a given period
C)the value of a nation's total assets
D)the total dollar value of all sales transactions of final goods and services during a given period
Q2) If Canada imported $1.5 billion worth of goods and services and sold $2.9 billion worth of goods and services outside its borders,what would its net exports equal?
A)$-4.4 billion
B)$-1.4 billion
C)$1.4 billion
D)$4.4 billion
Q3) How do pollution and crime affect GDP?
Q4) Inflation that causes an increase in the prices of goods and services will,other things being equal,tend to decrease nominal GDP.
A)True
B)False
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8
Chapter 7: Economic Growth in the Global Economy
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) What annual growth rate will result in a country roughly doubling its GDP in 20 years?
A)2.5 percent
B)3.5 percent
C)7.5 percent
D)12 percent
Q2) What will cause the standard of living to decline?
A)if the rate of population growth is less than the rate of growth of real GDP
B)if the nominal GDP grows at a slower rate than real GDP
C)if the rate of population growth exceeds the rate of growth of real GDP
D)if the nominal GDP grows at a faster rate than real GDP
Q3) Which of the following will NOT cause the production possibilities curve to shift outward?
A)a very low birth rate
B)increased educational opportunities
C)increased entrepreneurial activity
D)improvements in the stock of land
Q4) A nation's prosperity is sometimes measured in terms of real GDP per capita.
A)True
B)False
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Chapter 8: Aggregate Demand
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Sample Questions
Q1) Which of the following will NOT increase the investment demand curve?
A)the introduction of new technology offering profitable investment opportunities
B)business expectations of higher future sales and profits
C)a decrease in the real interest rate
D)business inventories that have fallen far below desired levels
Q2) If private consumption in Canada was 67 percent of GDP,investment was 16 percent,government purchases were 13 percent,exports were 12 percent,and imports were 8 percent,what is the net exports percentage of GDP?
A)-20 percent
B)-4 percent
C)4 percent
D)20 percent
Q3) What would increase the supply of national savings curve?
A)a decrease in expected future earnings
B)an increase in real interest rates
C)a decrease in disposable income
D)an increase in expected future earnings
Q4) What are the major factors that determine investment,and what impact do each have on aggregate demand?
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Chapter 9: Aggregate Supply and Macroeconomic
Equilibrium
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Sample Questions
Q1) How does the misperception effect explain why a short-run aggregate supply curve is upward sloping?
A)Because the costs of production rise as the price level rises.
B)Because of fixed wage labour contracts.
C)Because people mistake changes in aggregate demand for changes in the demand for their goods relative to other goods and services.
D)Because profit margins fall as the price level rises.
Q2) What impact would a year of unusually bad weather for agriculture have on the SRAS and LRAS curves?
A)It would increase SRAS but not LRAS.
B)It would decrease SRAS but not LRAS.
C)It would increase SRAS and LRAS.
D)It would decrease SRAS and LRAS.
Q3) What impact will an increase in aggregate demand have on real output?
A)It will not increase real output in either the short run or the long run.
B)It will increase real output in both the short run and long run.
C)It will increase real output only in the short run.
D)It will increase real output only in the long run.
Q4) How precise is the aggregate supply and demand model?
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Chapter 10: Fiscal Policy
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140 Flashcards
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Sample Questions
Q1) If a foreign trading partner of Canada increases its budget deficit,raising interest rates in that country,what will the effect on Canadian exports and AD be?
A)Canadian exports will increase but AD will be unchanged.
B)Canadian exports and AD will both tend to rise.
C)Canadian exports and AD will both tend to fall.
D)There will be an indeterminate effect on Canadian exports and AD.
Q2) What will be the impact on AD and the budget deficit if there is initially a federal budget deficit and taxes rise,while transfer payments fall?
A)AD increases and the budget deficit increases.
B)AD decreases and the budget deficit increases.
C)AD increases and the budget deficit decreases.
D)AD decreases and the budget deficit decreases.
Q3) Under which of the following circumstances does an increase in a government budget deficit have a larger effect on AD?
A)the more sensitive investment is to a change in interest rates
B)the more money demand shifts as a result
C)the less money demand shifts as a result
D)the smaller the government expenditures exceed tax revenue
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Chapter 11: Money and the Banking System
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164 Flashcards
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Sample Questions
Q1) Which of the following statements about a gold standard is the most accurate?
A)It is a measurement of the importance of gold and it indicates high quality.
B)It is the basis for monetary exchange internationally.
C)It is an internationally recognized means for defining currency exchange rates.
D)It is a system where currency (e.g., the dollar) is defined as equivalent in value to a certain amount of gold.
Q2) What is an important effect of fractional reserve banking?
A)Bankers always turn every dollar of excess reserves into loans.
B)A new bank deposit allows a bank to extend loans of the same amount to borrowers.
C)The commercial banking system has complete control over total reserves.
D)Bankers' choices about how much to lend can affect the money supply.
Q3) Why is barter inefficient when compared to using money for trading?
A)Potential buyers may not have appropriate items of value to sellers with which to barter.
B)The government cannot tax the barter system.
C)It cannot be done over long distances.
D)Buyers and sellers don't always agree on value.
Q4) What is fiat money? Why is fiat money important in Canada today?
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Page 13
Chapter 12: The Bank of Canada
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Sample Questions
Q1) If the amount of money in circulation is $50 million and nominal GDP is $150 million,what is the velocity of money?
A)0.33
B)2
C)3
D)5
Q2) What does the Bank of Canada do when it wants to expand the money supply through open market operations?
A)It sells government securities to foreign investors.
B)It purchases government securities from the government.
C)It sells government securities to investment dealers.
D)It purchases government securities from investment dealers.
Q3) If money supply increases,P will rise as long as V and Q remain constant.
A)True
B)False
Q4) If nominal GDP is $1200 billion and M2 is $150 billion,what is velocity?
A)0.5
B)2
C)4 D)8
Page 14
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Chapter 13: Monetary Policy
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81 Flashcards
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Sample Questions
Q1) To what extent should monetary policy be used to fine-tune the economy?
Q2) Your roommate has just run into the room in a panic.Her study group asked her about monetary policy tools.Since she knew you were studying for a midterm exam in your class with Dr.Sexton,briefly outline to her the policy choices for contractionary and expansionary options of the Bank of Canada.
Q3) A one-percentage-point change in the desired reserve ratio would change the money supply by roughly one percent,other things being equal.
A)True
B)False
Q4) If the unemployment rate and the inflation rate both increase simultaneously,what curve will shift right?
A)the Phillips curve
B)the SRAS
C)the LRAS
D)the AD
Q5) The SRAS becomes steeper as the economy approaches the full employment level.
A)True
B)False
Q6) What affects the demand for money?
Page 15
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Chapter 14: International Trade
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Sample Questions
Q1) Mexico is a member of NAFTA.
A)True
B)False
Q2) Which of the following is NOT a result we would expect from a tariff on leather shoes?
A)Domestic producers would sell fewer shoes at the higher prices.
B)The price of leather shoes in Canada would increase.
C)The amount of shoes imported into Canada would decline.
D)Fewer pairs of shoes would be sold in Canada.
Q3) Relative to a no-international-trade initial situation,if Canada exported wine,what would happen to the Canadian domestic price and output of wine?
A)Domestic price would rise and domestic output would rise.
B)Domestic price would rise but domestic output would fall.
C)Domestic price would fall and domestic output would fall.
D)Domestic price would fall but domestic output would rise.
Q4) Generally,restrictions limiting imports will also help domestic producers who are exporters.
A)True
B)False
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Page 16
Chapter 15: International Finance
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Sample Questions
Q1) Margaret,who lives in Sault Ste.Marie,has been saving for years in order to take a trip to England this summer.She would be happy if the dollar suddenly depreciates in value against the pound.
A)True
B)False
Q2) Under a dirty float system,if governments believe that their currency is undervalued or falling too fast,which action might they take?
A)use foreign reserves to buy their currency off the exchange market
B)reduce short-term interest rates
C)sell some of their currency in exchange markets
D)raise short-term interest rates
Q3) In foreign exchange markets,how is the supply of dollars determined?
A)solely by the level of Canadian merchandise imports
B)by the level of Canadian imports and the demand for foreign assets by Canadian citizens and the Canadian government
C)solely by the level of Canadian merchandise exports
D)by the levels of Canadian merchandise exports and merchandise imports
Q4) What factors will shift the supply and demand for currency?
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Page 17