Economics for Managers Test Questions
Course Introduction
Economics for Managers provides an essential foundation in economic concepts and analytical tools tailored for decision-making in business settings. The course explores core principles such as supply and demand, market structures, pricing strategies, cost analysis, and the impact of government policies, all within the context of managerial decision-making. Through case studies and real-world examples, students learn to apply microeconomic and macroeconomic theories to practical problems faced by managers, enabling them to assess market opportunities, optimize resource allocation, and anticipate the effects of economic trends and policy changes on their organizations.
Recommended Textbook
Economics Today The Macro View 18th Edition by Roger
LeRoy Miller
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6382 Verified Questions
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Chapter 1: The Nature of Economics
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Sample Questions
Q1) The slope of a nonlinear curve is ________ when the curve is rising, and ________ when the curve is falling.
A)negative, positive
B)negative, negative
C)positive, negative
D)positive, positive
Answer: C
Q2) The ceteris paribus assumption means
A)favors are returned in kind.
B)this is the proof of the matter.
C)from many, one.
D)other things are equal.
Answer: D
Q3) Economics is most precisely defined as
A)a study of what people need to survive.
B)a study of how culture evolves in different geographic areas.
C)the same as the study of finance and management.
D)the study of how people make choices.
Answer: D
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Chapter 2: Scarcity and the World of Trade-Offs
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Sample Questions
Q1) The fact that our wants are unlimited but our resources are limited implies that
A)we should limit our wants.
B)entrepreneurship has failed as an economic system.
C)we have to make choices.
D)the only way to make someone better off is to make someone else worse off.
Answer: C
Q2) Using productive resources to make capital goods requires that we
A)get everyone to agree on the best use of those resources.
B)get government approval of our plan to make capital goods.
C)forgo some level of current consumption.
D)prove that the existence of the capital goods will not cause any environmental damage.
Answer: C
Q3) The division of productive activities among persons and regions so that no one individual or area is totally self-sufficient is known as
A)advantage-taking.
B)comparative value.
C)specialization.
D)outsourcing.
Answer: C
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Chapter 3: Demand and Supply
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Sample Questions
Q1) A shift in the demand curve will occur when A)supply shifts.
B)the price of an input used to produce the good changes.
C)consumers' income changes.
D)the price of the product changes.
Answer: C
Q2) The price of a new textbook increased from $60 to $75 in one year, while the price of a used textbook increased by 25 percent. What happened to the relative price of a used textbook?
A)It increased by 25 percent.
B)It increased by 10 percent.
C)It remained constant.
D)It can't be determined without knowing the nominal price of the used textbook in at least one of the years.
Answer: C
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Chapter 4: Extensions of Demand and Supply Analysis
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Sample Questions
Q1) The price of a good always changes when
A)either a shortage or a surplus occurs.
B)quantity demanded and quantity supplied are constant.
C)there is an increase in demand and an increase in supply.
D)there is a decrease in demand and a decrease in supply.
Q2) Suppose the equilibrium quantity of ethanol has decreased. Which of the following could have caused this change?
A)a decrease in demand
B)an increase in supply
C)an increase in quantity demanded
D)an increase in quantity supplied
Q3) Rationing occurs for goods
A)that have a positive price.
B)that have a zero price.
C)that have a negative price.
D)that are not manufactured.
Q4) What are the effects of an increase in the minimum wage? Who would be most affected?
Q5) What are transaction costs? What are some ways in which society reduces transaction costs?
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Chapter 5: Public Spending and Public Choice
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Sample Questions
Q1) All of the following generate positive externalities EXCEPT
A)public health programs.
B)lower marginal tax rates.
C)requiring proof of inoculation before entering college.
D)requiring proof of inoculation before entering elementary school.
Q2) Refer to the above figures. Which of the panels would be consistent with the situation in which external costs exist?
A)Panel 1
B)Panel 2
C)Panels 1 and 2
D)neither panel
Q3) In public education, the value of the services provided is
A)greater than the value that parents and students place on the services.
B)equal to the value that parents and students place on the services.
C)less than the value that parents and students place on the services.
D)zero since they are a public good.
Q4) How does a government-sponsored good differ from a public good?
Q5) List and explain the four key assumptions in the theory of public choice.
Q6) What are the voting rules followed by the political system as opposed to the market system?
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Chapter 6: Funding the Public Sector
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Sample Questions
Q1) In what type of analysis will an increase in the tax rate always lead to an increase in tax revenues?
A)ad valorem taxation
B)excise taxation
C)dynamic tax analysis
D)static tax analysis
Q2) Suppose the tax amount on the first $10,000 income is $0; $2000 on the next $20,000; $4000 on the next $20,000; $6000 on the next $30,000; and 40 percent on any income over $80,000. Family A has income of $30,000 and Family B has income of $80,000. What is the marginal and average tax rate for each family?
A)Family A: marginal-10 percent; average-6.7 percent; Family B: marginal-30 percent; average-15 percent.
B)Family A: marginal-10 percent; average-20 percent; Family B: marginal-30 percent; average-23 percent.
C)Family A: marginal-10 percent; average-10 percent; Family B: marginal-40 percent; average-40 percent.
D)Family A: marginal-10 percent; average-15 percent; Family B: marginal-40 percent; average-20 percent.
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Page 8
Chapter 7: The Macroeconomy: Unemployment, Inflation, and Deflation
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Sample Questions
Q1) Distinguishing between stock measures and flow measures of the labor force, the stock measures are
A)the labor force only.
B)the number of people who lost their jobs and the number of people who found jobs only.
C)the total number of people who are unemployed only.
D)the total number in the labor force and the total number of people who are unemployed only.
Q2) Is it possible for the unemployment rate to rise at the same time that the number of people working increases?
A)no
B)yes, if the new workers are employed less than full time
C)yes, if labor force growth outpaces growth in the number of people working
D)yes, if established workers keep their jobs but no longer have the option of working overtime
Q3) What is a price index?
How do the CPI, the PPI, the PCE Index and the GDP deflator differ?
Q4) What is unemployment and what is the unemployment rate?
What are the costs of unemployment?
Page 9
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Chapter 8: Global Economic Growth and Development
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Sample Questions
Q1) Refer to the above table. Which country had the highest growth rate of real Gross Domestic Product (GDP)from 2014 to 2015?
A)A
B)B
C)C
D)D
Q2) Suppose two countries have per capita real GDP of $20,000 in 2012. Country A has a growth rate of 4 percent and Country B has a growth rate of 5 percent. By 2015, the per capita real GDPs for the two countries, respectively, are (rounded)
A)$21,630 and $22,050.
B)$22,400 and $23,000.
C)$22,500 and $23,150.
D)$25,000 and $26,500.
Q3) Institutions and laws, such as patent protection, that foster innovations lead to economic growth because they
A)allow the government control of the innovations.
B)give confidence to inventors that they will profit from their innovation.
C)give confidence to consumers that the products they buy are safe.
D)give businesses loans to buy new machinery.
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Page 10
Chapter 9: Real GDP and the Price Level in the Long Run
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Sample Questions
Q1) Aggregate demand reflects
A)planned total spending in the economy.
B)planned total production in the economy.
C)both spending and production in the economy.
D)planned demand for consumer goods only.
Q2) In the above figure, the long-run equilibrium real GDP is
A)$10 trillion.
B)$11 trillion.
C)$12.trillion
D)not displayed.
Q3) The total of all planned production for the entire economy is known as A)aggregate expenditures.
B)aggregate demand.
C)aggregate supply.
D)aggregate inflation.
Q4) What causes the aggregate demand curve to shift?
Q5) Explain how an economy can experience long-run economic growth and deflation at the same time.
Q6) What is the aggregate demand curve and what does it represent?
Q7) What is the real-balance effect of an increase in the price level?
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Chapter 10: Classical and Keynesian Macro Analyses
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Sample Questions
Q1) All items below will decrease short-run aggregate supply EXCEPT
A)a decrease in the marginal tax rates.
B)an increase in the prices of inputs.
C)a decrease in training and education.
D)a decrease in labor supply.
Q2) "According to Keynes, the economy is essentially a self-regulating system." Do you agree or disagree?
Why?
Q3) Economic growth due to labor force expansion or capital investments will result in I.
A leftward shift of short-run aggregate supply.
II. A rightward shift in long-run aggregate supply.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q4) The aggregate supply curve in the classical model is
A)horizontal.
B)vertical.
C)upward sloping.
D)downward sloping.
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Chapter 11: Consumption, Real GDP, and the Multiplier
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Sample Questions
Q1) In the above figure, point E represents the level of real GDP at which planned saving equals planned investment. At point A
A)unplanned inventories increase.
B)changes in inventories cannot be determined.
C)unused industrial capacity exists in the economy.
D)unplanned inventories decrease.
Q2) The ratio of the change in consumption to the change in disposable income is the A)marginal propensity to consume.
B)marginal propensity to save.
C)average propensity to consume.
D)average propensity to save.
Q3) The multiplier is the ratio of the
A)change in the equilibrium level of real GDP to the change in autonomous expenditures.
B)equilibrium level of real GDP to the change in induced expenditures.
C)change in induced expenditures to the change in autonomous expenditures.
D)change in autonomous expenditures to the change in the equilibrium level of real GDP.
Q4) What is the significance of the multiplier? What causes the multiplier to be larger or smaller?
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Page 13
Chapter 12: Fiscal Policy
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Sample Questions
Q1) If other factors are held constant, what happens when the federal government finances a growing budget deficit by increasing the amount it borrows from the private sector?
A)There will be an increase in the interest rate.
B)There will be a decrease in the interest rate.
C)The crowding out effect will be cancelled out.
D)There will be an increase in net exports.
Q2) To the extent that a direct expenditure offset results from an expansionary fiscal policy,
A)the stimulative effect will be less than anticipated.
B)the stimulative effect will be more than anticipated.
C)the fiscal policy will not be discretionary.
D)the time lags associated with the implementation of fiscal policy will shorten.
Q3) Refer to the above figure. A budget deficit occurs when real national income is A)Y .
B)Y .
C)Y .
D)None of the above: cannot be determined given the information.
Q4) Explain how indirect crowding out can offset expansionary fiscal policy.
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Chapter 13: Deficit Spending and the Public Debt
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Sample Questions
Q1) Are federal budget deficits related to trade deficits?
A)Yes. If U.S. consumers buy too many imported goods they don't have money to save and a budget deficit results.
B)No. The budget deficit is entirely a domestic matter while the trade deficit only affects U.S. citizens who travel abroad.
C)Yes. As deficit spending goes up, it is likely government borrowing will, too. Then foreign residents who lend funds to the U.S. government have less to spend on our goods, so U.S. exports will fall.
D)Yes, but only if the quality of U.S. goods and services is deteriorating.
Q2) What are the macroeconomic consequences of a budget deficit when the economy is operating at full employment?
Be sure to discuss the effects in the short-run and in the long-run.
Q3) If the economy is experiencing an inflationary gap in the short run, an increase in the budget surplus
A)will reduce the size of the inflationary gap.
B)will increase the size of the inflationary gap.
C)will cause an increase in inflation and increase aggregate supply.
D)will increase aggregate demand and will increase the price level.
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Chapter 14: Money Banking and Central Banking
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Sample Questions
Q1) Which of the following is NOT one of the functions of money?
A)medium of exchange
B)protection from increases in prices of goods and services
C)unit of accounting
D)store of value
Q2) Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of
A)critical mass.
B)deposit insurance.
C)investor selection.
D)moral hazard.
Q3) Which of the following would be considered the least liquid asset?
A)currency
B)checkable deposits
C)travelers checks
D)shares of stock
Q4) What is money?
Q5) Why does the money supply increase when the Fed buys a bond but does not change when a business buys a bond?
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Chapter 15: Domestic and International Dimensions of Monetary Policy
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Sample Questions
Q1) Interest rates typically rise when
A)bond prices increase.
B)bond prices decrease.
C)the coupon payout on existing bonds increase.
D)the maturity date on existing bonds extends farther into the future.
Q2) An indirect effect of monetary policy is that as the money supply
A)increases, interest rates fall, and borrowing and spending increase.
B)increases, interest rates rise, and borrowing and spending decrease.
C)decreases, interest rates fall, and borrowing and spending increase.
D)decreases, interest rates rise, and borrowing and spending increase.
Q3) According to both the equation of exchange and the quantity theory of money
A)an increase in the money supply will increase real Gross Domestic Product (GDP).
B)an increase in the money supply will decrease real Gross Domestic Product (GDP).
C)a decrease in the money supply will decrease the velocity of money.
D)a decrease in the money supply will decrease the price level.
Q4) Briefly describe the effects of an open market sale by the Federal Reserve, according to the interest-rate-based approach to the monetary policy transmission mechanism.
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Chapter 16: Stabilization in an Integrated World Economy
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Sample Questions
Q1) Available evidence about price adjustments across U.S. industries indicates that
A)prices are very flexible in all industries.
B)prices are very sticky in all industries.
C)prices are equally flexible in all industries.
D)there is considerable variation in price flexibility across industries.
Q2) According to the policy irrelevance proposition
A)monetary policy can effectively reduce the rate of unemployment in the short run.
B)workers are not rational in the long run.
C)the Phillips curve slopes upward, not downward as traditionally assumed.
D)expansionary monetary policy will only lead to a higher rate of inflation in the long run.
Q3) New Keynesian theory implies that which of the following reduces firms' incentive to adjust their prices?
A)a downward sloping aggregate demand curve
B)the required reserve ratio
C)menu costs
D)none of the above
Q4) Explain the rational expectations hypothesis.
Q5) What is the modern view of the Phillips curve?
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Chapter 17: Policies and Prospects for Global Economic Growth
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Sample Questions
Q1) A major contributor to a country's real rate of economic growth is its real GDP growth relative to its
A)inflation.
B)unemployment rate.
C)money growth.
D)none of the above.
Q2) Which organization functions as a lender of last resort for national governments?
A)the World Bank
B)the U.S. Treasury
C)the Federal Reserve Bank
D)the International Monetary Fund
Q3) Assume that in the economy real GDP grows at a constant rate. There has just been a decrease in the rate of growth of the population. This implies that the
A)rate of growth of per capita real GDP will decrease.
B)rate of growth of per capita real GDP will increase.
C)rate of growth of capital accumulation will decrease.
D)rate of growth of capital accumulation will increase.
Q4) What are the sources of private investments in foreign nations?
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Chapter 18: Comparative Advantage and the Open Economy
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Sample Questions
Q1) The argument that a tariff has to be imposed in order to protect any industry just getting started until it gets large enough to be competitive internationally is the
A)start-up industry argument.
B)infant industry argument.
C)baby industry argument.
D)fledgling industry argument.
Q2) A quota is
A)a government-imposed restriction on the quantity of a specific good that can be imported into a country.
B)a tariff imposed on goods that are dumped into the home country.
C)a tariff imposed on goods that are subsidized by their domestic governments and exported to other countries.
D)a tariff based on the value of the imported good.
Q3) Using trade restrictions to protect special interests such as the U.S. auto industry
A)results in lower prices for U.S. auto consumers.
B)raises the prices that U.S. consumers must pay for autos.
C)is a very cost-efficient way of dealing with trade problems.
D)is the best long-term solution for threatened U.S. jobs.
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Chapter 19: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) One problem associated with the gold standard was that
A)nations gave up control of their money supply.
B)there was an incentive for individuals to hold gold at all interest rates.
C)there was no fluctuation in exchange rates.
D)nations could not determine their current account balances.
Q2) The possibility that changes in the value of a nation's currency will result in variations in the market value of a business's assets is referred to as
A)hedge risk.
B)foreign exchange risk.
C)conversion risk.
D)transaction risk.
Q3) When the balance of trade is in balance, we know with certainty that
A)the value of all debit transactions equals the value of all credit transactions.
B)the value of exports of goods equals the value of imports of goods.
C)the value of capital exports equals the value of capital imports.
D)the value of exports of goods and services equals the value of imports of goods and services.
Q4) Explain the three categories of balance of payments transactions.
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