Course Introduction
Economics I Final Exam Questions
Economics I introduces students to the fundamental principles of microeconomics, focusing on how individuals and firms make decisions regarding the allocation of scarce resources. The course covers topics such as supply and demand, market equilibrium, consumer and producer behavior, elasticity, production costs, and the various market structures including perfect competition, monopoly, and oligopoly. Emphasizing both theoretical frameworks and real-world applications, the course equips students with analytical tools to understand how markets function and to critically assess economic policies and issues impacting society.
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Macroeconomics 11th Edition by Michael Parkin
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Page 2
Chapter 1: What Is Economics
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Q1) The slope of a line is the change in the y-axis variable divided by the change in the x-axis variable.
A)True
B)False
Answer: True
Q2) In the above figure,the relationship between the tax rate and tax revenue is positive and becoming less steep between tax rates of
A) 0 percent and 30 percent.
B) 30 percent and 100 percent.
C) 0 percent and 100 percent.
D) None of the above answers are correct.
Answer: A
Q3) The slope of the line shown in the above figure is A) 3/4.
B) 2/3.
C) 1 1/3.
D) 1 3/4.
Answer: C
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Page 3
Chapter 2: The Economic Problem
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Q1) An expansion of the production possibilities frontier is A) called economic growth.
B) proof that scarcity is not a binding constraint.
C) a free gift of nature.
D) something that has occurred only rarely in history.
Answer: A
Q2) Moving along a bowed-out PPF between milk and cotton,as more milk is produced the marginal cost of an additional gallon of milk A) rises.
B) does not change.
C) falls.
D) probably changes, but in an ambiguous direction.
Answer: A
Q3) Moving along a PPF,marginal cost is
A) the cost of producing the first unit of a good or service.
B) the total cost, less the production of the other good or service.
C) greater than the opportunity cost.
D) equal to the opportunity cost of producing one more unit of a good or service.
Answer: D
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Page 4
Chapter 3: Demand and Supply
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Q1) Pizza and hamburgers are substitutes for consumers.A fall in the price of a pizza ________ the price of a hamburger and ________ the quantity of hamburgers.
A) raises; increases
B) raises; decreases
C) lowers; increases
D) lowers; decreases
Answer: D
Q2) Which of the following statements is correct?
A) When demand decreases, both the price and the quantity increase.
B) When demand increases, both the price and the quantity decrease.
C) When supply increases, the quantity increases and the price falls.
D) When supply decreases, both the price and the quantity decrease.
Answer: C
Q3) An increase in the number of consumers
A) results only in a movement along the demand curve.
B) shifts the supply curve leftward.
C) shifts the demand curve rightward.
D) Both answers B and C are correct.
Answer: C
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Chapter 4: Measuring GDP and Economic Growth
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Q1) The sum of compensation to employees,rental income,corporate profits,net interest,and proprietors' income is
A) gross domestic product.
B) gross domestic income.
C) net domestic income at factor cost.
D) net domestic product.
Q2) In the circular flow model of an economy,households
A) receive income from buyers of goods and services.
B) receive income from the sale of factors in the goods markets.
C) pay firms for the use of their factors.
D) receive income from producers for the use of factors in the factor markets.
Q3) A business cycle is the pattern of short-run upward and downward movements in production and jobs.
A)True
B)False
Q4) The circular flow shows that aggregate spending is larger than aggregate income because people save.
A)True
B)False
Q5) Why does real GDP have limitations in determining economic welfare?
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Chapter 5: Monitoring Jobs and Inflation
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Sample Questions
Q1) In the table above,the number of marginally attached workers is ________.
A) 40 million
B) 6 million
C) 2 million
D) 4 million
Q2) The labor force is defined as the
A) number of people over 16 years of age.
B) number of people who are working.
C) sum of employed and unemployed people.
D) number of people in blue-collar jobs.
Q3) In the table above,what inflation rate belongs in space E?
A) 17.0 percent
B) 6.8 percent
C) 8.3 percent
D) 15.4 percent
Q4) Full-time students and prisoners are ________.
A) not in the labor force
B) in the labor force
C) counted as discouraged workers
D) counted as unemployed
Page 7
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Chapter 6: Economic Growth
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Sample Questions
Q1) Strategy to Address Dependence on Foreign Workers,Labour Market Demands The prime minister of Malaysia announced his government's "immediate focus would be to enhance skills development and improve the quality of education." By "the constant upgrading of skills of the country's workforce" he hoped to improve the country's "global competitiveness and raise average incomes of workers." The story describes
A) a plan increase physical capital.
B) improvements in Malaysia's incentive system.
C) a consequence of economic growth.
D) a plan to increase human capital.
Q2) If the price level increases,but workers' money wage rates remain constant,which of the following is TRUE?
I. The quantity of labor demanded will increase.
II. The real wage rate will decrease.
III. The demand for labor curve shifts rightward.
A) I only
B) I and II
C) II and III
D) I, II and III
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Chapter 7: Finance, Saving, and Investment
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Sample Questions
Q1) A fall in the real interest rate
A) results in a movement along the demand for loanable funds curve.
B) shifts the demand for loanable funds curve rightward.
C) shifts the demand for loanable funds curve leftward.
D) has no effect on the demand for loanable funds curve
Q2) In the above figure,technological progress that increases the expected profit will
A) shift the demand for loanable funds curve leftward.
B) shift the demand for loanable funds curve rightward.
C) have no effect on the demand for loanable funds curve.
D) make the demand for loanable funds curve become horizontal.
Q3) As the purchasing power of wealth increases,saving decreases. A)True B)False
Q4) Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer.
Q5) What is the approximate relationship among the real interest rate,the inflation rate,and the nominal interest rate?
Q6) How does the real interest affect households' decisions about saving?
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Chapter 8: Money, The Price Level, and Inflation
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Sample Questions
Q1) An open market operation occurs when the ________ buys or sells securities
A) Federal Reserve System; from or to the federal government
B) Federal Reserve System; in the open market
C) a commercial bank; from or to the federal government
D) a commercial bank; from or to the public
Q2) The Federal Open Market Committee (FOMC) is composed of
A) representatives from the governors of all 50 states.
B) Presidents of 5 Federal Reserve regional banks and the Board of Governors.
C) the 12 Presidents of the Federal Reserve regional banks.
D) the Board of Governors, the Vice-President of the United States, and the Secretary of Treasury for the United States.
Q3) The velocity of circulation is
A) equal to the price level multiplied by real GDP.
B) equal to the quantity of money multiplied by nominal GDP.
C) the average number of times a dollar bill is used in a year to buy the goods and services in GDP.
D) average quantity of money that exists during a year.
Q4) Are checks money?
Q5) Explain how the money market determines the equilibrium interest rate.
Page 10
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Chapter 9: The Exchange Rate and the Balance of Payments
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Q1) If the government sector is running a deficit of $120 million and the private sector is running a surplus of $200 million,net exports equals a
A) $80 million surplus.
B) $320 million surplus.
C) $80 million deficit.
D) $320 million deficit.
Q2) When you arrive at the airport in Paris and go to the bank window to exchange dollars into euros,you are
A) selling euros to the French.
B) avoiding the use of foreign exchange markets.
C) contributing to U.S. exports.
D) None of the above answers is correct.
Q3) Using the table above,if the current market value of the dollar is 110 francs,
A) investor A expects dollar appreciation, but B and C expect depreciation.
B) investor C expects dollar depreciation, but A and B expect appreciation.
C) all three investors expect the dollar to appreciate.
D) all three investors expect the dollar to depreciate.
Q4) What are the three balance of payments accounts?
Briefly describe them.What is the relationship among the three?
Page 11
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Chapter 10: Aggregate Supply and Aggregate Demand
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Q1) The table above gives the aggregate demand and aggregate supply schedules in Lotus Land.Lotus Land is in short-run macroeconomic equilibrium.In the long run,if aggregate demand does not change then Lotus Land will return to full-employment as
A) the money wage rate rises
B) the money wage rate falls
C) businesses cut their imports
D) the government cuts taxes
Q2) Explain the reasons why the AD curve slopes downward.
Q3) In the above figure,point B represents
A) a recessionary gap.
B) a full-employment equilibrium.
C) an inflationary gap.
D) a decrease in aggregate demand.
Q4) For movements along the short-run aggregate supply curve,
A) the money wage rate is constant.
B) the real wage rate changes.
C) potential GDP remains constant.
D) All of the above are correct.
Q5) What is the difference between a recessionary gap and an inflationary gap?
Page 12
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Chapter 11: Expenditure Multipliers
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Sample Questions
Q1) Which of the following makes the multiplier larger?
A) an increase in the marginal propensity to import
B) an increase in the tax rate
C) an increase in the marginal propensity to consume
D) an increase in the marginal propensity to save
Q2) With consumption expenditure on the vertical axis and disposable income on the horizontal axis,the consumption function intersects the 45-degree line at $8 trillion.This result indicates that
A) autonomous consumption spending is $8 trillion.
B) consumption spending is $8 trillion when disposable income is $8 trillion.
C) consumption spending is less than $8 trillion because taxes must be paid.
D) consumption spending is more than $8 trillion because taxes have been paid.
Q3) A change in which of the following changes the slope of the aggregate expenditure curve?
A) an increase in autonomous government expenditures
B) an increase in the marginal propensity to consume
C) a decrease in autonomous consumption expenditures
D) All of the above answers are correct because they all change the slope of the aggregate expenditure curve.
Q4) What is the relationship between the MPC and the slope of the AE curve?
Page 13
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Chapter 12: Inflation, Jobs, and the Business Cycle
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Q1) How do defenders of the real business cycle theory,(RBC theory) respond to critics of the theory?
Q2) In the short-run,an increase in the price of raw materials will ________ the price level and ________ real GDP.
A) raise; increase B) raise; decrease
C) lower; increase D) lower; decrease
Q3) Suppose that a shock causes the aggregate demand curve to shift rightward.If the Fed does nothing,
A) the economy will experience a temporary reduction in employment but will eventually return to full employment.
B) output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level.
C) the short-run aggregate supply curve will not shift leftward and there will be continued inflation.
D) eventually the short-run aggregate supply curve will shift leftward and there will be continued inflation.
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Chapter 13: Fiscal Policy
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Sample Questions
Q1) The stimulus package passed by Congress in 2009 is an example of A) automatic fiscal policy
B) discretionary fiscal policy
C) monetary policy
D) increased taxation
Q2) If tax revenue equal $1.5 billion and government outlays equal $1.6 billion,then the
A) government budget has a deficit of $0.1 billion.
B) government budget has a surplus of $0.1 billion.
C) government debt is equal to $0.1 billion.
D) government debt declines by $0.1 billion.
Q3) Government transfer payments ________ during expansions and ________ during recessions.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Q4) What does the Employment Act of 1946 specify?
Why is it an important economic milestone?
Q5) How does a tax on labor income affect potential GDP?
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Chapter 14: Monetary Policy
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Sample Questions
Q1) If the Fed raises the federal funds rate so that the exchange rate rises,then imports ________ and exports ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Q2) If the Fed wanted to stimulate the economy to limit the effects of a recessionary gap,then it should ________ the federal funds rate in order to ________ the real interest rate and thereby ________ investment.
A) lower; lower; increase
B) lower; raise; increase C) raise; raise; decrease
D) lower; lower; decrease
Q3) In the short run,if the Fed wants to fight a recession,should it buy or sell government securities?
Why?
Q4) The core inflation rate is more volatile than the total CPI inflation rate.
A)True B)False
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Chapter 15: International Trade Policy
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Sample Questions
Q1) In the figure above,with the tariff the United States imports ________ million shirts per year.
A) 24
B) 8
C) 32
D) 16
Q2) Give a brief description of the history of tariffs in the U.S.
Q3) A difference between a quota and a tariff is that with a quota the
A) person who has the right to import the good captures an extra gain.
B) exporting government collects an extra gain in the form of revenue.
C) importing government collects an extra gain in the form of revenue.
D) domestic consumers are not harmed.
Q4) The Smoot-Hawley Act introduced
A) opportunities for expanding U.S. foreign trade.
B) the highest tariffs set by the United States in the last 80 years.
C) a framework promoting international free trade.
D) revenue tariffs as a major source of U.S. government revenues.
Q5) Explain how governments restrict international trade and who benefits as well as who loses from the restrictions.
Q6) Explain the effects of a quota.
Page 17
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Chapter 16: Introduction
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Sample Questions
Q1) All economic questions arise because
A) of scarcity.
B) production possibilities are unlimited.
C) our wants are limited.
D) people are irrational.
Q2) Jelly beans and popcorn are substitutes.A fall in the price of a bag of jelly beans will ________ the demand for popcorn and the price of popcorn will ________.
A) increase; rise
B) increase; fall
C) decrease; fall
D) decrease; rise
Q3) Which of the following is NOT a factor of production?
A) mineral resources
B) money
C) a computer programmer
D) a commercial aircraft
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Chapter 17: Monitoring Macroeconomic Performance
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Sample Questions
Q1) In the United States,over time GDP
A) stays relatively constant with occasional increases.
B) increases most of the time and decreases occasionally.
C) increases and decreases roughly about the same amount.
D) decreases more often than it increases.
Q2) The labor force is defined as
A) all people aged 16 and over and not institutionalized.
B) the entire population.
C) those people employed and unemployed.
D) only those people with jobs.
Q3) GDP is defined as
A) gross demanded prices.
B) generally demanded product.
C) gross domestic product.
D) generally demanded prices.
Q4) In the expenditure approach to measuring GDP,the components of GDP are
A) consumption, investment, government expenditure, and net exports.
B) consumption, taxes, saving, and investment.
C) inflation, unemployment, saving, and investment.
D) frictional unemployment, structural unemployment, and cyclical unemployment.
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Chapter 18: Macroeconomic Trends
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Q1) The opportunity cost of holding money is the
A) price level.
B) real interest rate.
C) velocity of circulation.
D) nominal interest rate.
Q2) The demand for labor ________ and the accumulated skill and knowledge of human is called ________.
A) increases when productivity rises; technology
B) depends on the nominal wage rate; human capital
C) depends on the real wage rate; human capital
D) is independent of technology; the marginal product of labor
Q3) In the foreign exchange market,if the supply of dollars ________ and simultaneously the demand for dollars ________,then the exchange rate definitely ________.
A) increases; increases; depreciates
B) decreases; increases; depreciates
C) increases; decreases; depreciates
D) decreases; decreases; appreciates
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Chapter 19: Macroeconomic Fluctuations
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Q1) Long-run macroeconomic equilibrium occurs when
A) real GDP is equal to potential GDP.
B) real GDP is at a point along the short-run aggregate supply curve.
C) the unemployment rate is zero.
D) all able-bodied adults have jobs.
Q2) The growth rate of productivity is a major feature of
A) Keynesian and monetarist economists.
B) monetarist economists.
C) real business cycle economists.
D) why the marginal propensity to consume is less than 1.0.
Q3) The level of potential GDP
A) increases when the inflation rate rises.
B) rises and falls with the business cycle.
C) determines the location of the long-run aggregate supply curve.
D) changes when cyclical unemployment changes.
Q4) Keynesian economists believe that
A) the economy automatically adjusts towards full employment.
B) monetary policy causes business cycles.
C) there are no business cycles.
D) activist government policy is needed to get the economy to full employment.
Page 21
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Chapter 20: Macroeconomic Policy
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Sample Questions
Q1) Which of the following is true?
I. The quantity theory predicts that in the long run the inflation rate equals the money growth rate minus the growth rate of potential GDP.
II. If the Fed decreases the federal funds rate,aggregate demand increases.
III. The Fed's monetary policy works by shifting the short-run aggregate supply curve.
A) I and II
B) II and III
C) I and III
D) I, II and III
Q2) An income tax hike ________ potential GDP by ________.
A) increases; not crowding out investment
B) decreases; limiting the use of discretionary monetary policy
C) increases; offsetting the Barro-Ricardo effect
D) decreases; decreasing the supply of labor
Q3) When the Fed enacts monetary policy,in the short run it changes
A) the AD curve.
B) the SAS curve.
C) both the AD and SAS curves.
D) potential GDP.
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Page 22