Economics I Mock Exam
Course Introduction
Economics I provides an introduction to the fundamental principles of microeconomics and macroeconomics. The course explores key economic concepts such as supply and demand, market equilibrium, consumer behavior, production and costs, and the role of government in the economy. Students will also examine basic macroeconomic topics including national income, economic growth, inflation, and unemployment. Through real-world examples and analytical tools, the course equips learners with a foundational understanding of how economic agents make decisions and how these decisions impact markets and the broader economy.
Recommended Textbook
ECON MACRO 5th Edition by William A. McEachern
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19 Chapters
2883 Verified Questions
2883 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) In a circular-flow model,households supply all of the following except:
A)labor.
B)goods and services.
C)capital.
D)entrepreneurial ability.
E)natural resources.
Answer: B
Q2) If a business produces and sells only one unit of a good,its profit would be the:
A)price received for the good.
B)price of the product minus the cost of the resources used to produce the product.
C)return paid to the firm's bank on its outstanding loans.
D)price of the product minus the wages paid for the labor used to produce it.
E)wages paid for the labor used to produce the product minus the price.
Answer: B
Q3) Most economists consider a theory a good one if it predicts well.
A)True
B)False
Answer: True
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3
Chapter 2: Economic Tools and Economic Systems
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) The law of comparative advantage states that the person who should produce a good is the person who:
A)has the lowest opportunity cost of producing that good.
B)can produce that good using the fewest resources.
C)will produce that good using the most expensive resources.
D)has the most desire for that good.
E)has produced that good in the past.
Answer: A
Q2) If Daniel produces one pair of shoes in 4 hours and Sarah produces one pair of shoes in 3 hours,then:
A)Sarah has a comparative advantage in shoemaking.
B)Daniel has a comparative advantage in shoemaking.
C)Sarah has an absolute and a comparative advantage in shoemaking.
D)Daniel has an absolute and a comparative advantage in shoemaking.
E)Sarah has an absolute advantage in shoemaking.
Answer: E
Q3) Absolute advantage is based on opportunity cost.
A)True
B)False
Answer: False
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Chapter 3: Economic Decision Makers
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Which of the following best defines foreign exchange?
A)A trade between two countries
B)The market where exporting and importing activities take place
C)The price of a currency relative to another currency
D)The currency of another country used for trading
E)The currency that the United States uses to buy goods from other countries
Answer: E
Q2) Raghib teaches mathematics at Camford University and receives $40,000 per year.His spouse,Noraini,works as a self-employed computer programmer and charges $40 per hour.Which of the following is true?
A)Raghib's income is personal interest; Noraini's is wages.
B)Raghib's income is a salary; Noraini's is personal interest.
C)Both Raghib and Noraini receive proprietor's income.
D)Both Raghib and Noraini receive wage or salary income.
E)Raghib's income is a salary,and Noraini's income is proprietor's income.
Answer: E
Q3) The personal income tax is based on the benefits-received principle of taxation.
A)True
B)False
Answer: False
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Chapter 4: Demand, supply, and Markets
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) For which of the following goods or services is the income effect of a price change likely to be the greatest?
A)Vitamin capsules
B)Gasoline
C)Laundry
D)Chocolates
E)College textbooks
Q2) The income effect of an increase in the price of backpacks,a normal good,is a(n):
A)decrease in the demand for backpacks.
B)decrease in the quantity of backpacks demanded.
C)decrease in the supply of backpacks.
D)increase in the quantity of backpacks demanded.
E)increase in the quantity supplied of backpacks.
Q3) Markets tend to increase the costs of time and information required for exchange.
A)True
B)False
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Chapter 5: Introduction to Macroeconomics
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) An example of a stock variable in economic theory will be:
A)the amount of money saved by an individual each week.
B)the amount of money spent on buying gasoline each month.
C)the weekly grocery bill of an average household.
D)the total value of the government bond held by an individual.
E)the total fiscal spending during a particular quarter.
Q2) An increase in government spending,other things constant,will 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)downward movement along the aggregate supply curve.
Q3) Due to the implementation of the Troubled Asset Relief Program and the American Recovery and Reinvestment Act,the Federal budget deficit _____.
A)doubled
B)tripled
C)stayed the same
D)decreased significantly
E)quadrupled
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Page 7
Chapter 6: Tracking the Useconomy
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Which of the following is true of the gross domestic product (GDP)of a nation?
A)It can be measured by the stock of consumer goods in a nation at a particular point in time.
B)It can be measured by the stock of capital goods in a nation at a particular point in time.
C)It can be measured either by calculating the total spending on production or the total income from that production.
D)It is the sum of total spending on production and total income from that production.
E)It can be measured from the stock of wealth in the nation.
Q2) Which of the following is an example of an injection into the circular flow of income and expenditure?
A)Government spending
B)Imports
C)Disposable income
D)Net taxes
E)Saving
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Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) The labor force consists of all adults who are currently employed.
A)True
B)False
Q2) Which of the following will most likely qualify for unemployment compensation benefits?
A)A new college graduate who cannot find work despite a desperate job search
B)An unemployed coal miner who has been receiving benefits for the past six months
C)A former retail clerk who quit her job because the boss was too demanding
D)A spot welder who has just gotten his first "pink slip" in the mail after ten years of continuous employment
E)An accountant who was fired from his last position for drinking alcohol on the job
Q3) A recent college graduate who is looking for her first job would be considered
A)a discouraged worker
B)underemployed
C)overemployed
D)unemployed
E)not in the labor force
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9
Chapter 8: Productivity and Growth
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150 Flashcards
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Sample Questions
Q1) One of the important points of criticism of industrial policy is that:
A)it can lead to stiff competition among the domestic firms in an economy.
B)small domestic firms will not be able to survive economic clustering.
C)government sponsored research will end up benefitting foreign countries.
D)it can prohibit regional innovations.
E)the knowhow in one firm will not spill over to other firms in an economy.
Q2) The per-worker production function illustrates the fact that as the amount of capital per worker increases,output per worker:
A)increases at an increasing rate.
B)increases then decreases.
C)decreases but at an increasing rate.
D)decreases.
E)increases but at a decreasing rate.
Q3) A small change in the rate of productivity growth will have:
A)a small impact on output in both the short run and the long run.
B)a large impact on output in both the short run and the long run.
C)a small impact on output in the short run but a large impact in the long run.
D)a large impact on output in the short run but a small impact in the long run.
E)no effect on output at all.
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Page 10
Chapter 9: Aggregate Demand
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150 Flashcards
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Sample Questions
Q1) The smaller the marginal propensity to save,other things constant,_____.
A)the smaller the marginal propensity to consume
B)the smaller the multiplier
C)the flatter the consumption function
D)the steeper the consumption function
E)the steeper the saving function
Q2) A higher interest rate will:
A)shift the consumption function upward.
B)shift the consumption function downward.
C)make the consumption function steeper.
D)make the consumption function flatter.
E)cause an upward movement along the consumption function.
Q3) Which of the following is an effect of an increase in the price level in an economy?
A)The real value of dollar-denominated assets will increase.
B)The aggregate expenditure line will shift upward.
C)The equilibrium real gross domestic product will decrease.
D)There will be downward movement along a particular aggregate demand curve.
E)The aggregate demand curve will shift rightward.
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11
Chapter 10: Aggregate Supply
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150 Flashcards
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Sample Questions
Q1) Identify the correct statement.
A)In periods of low inflation,real wages are constant but nominal wages decline.
B)If the price level increases,real wages will increase.
C)If the price level increases,nominal wages will fall.
D)In periods of high inflation,real wages change even if nominal wages remain constant.
E)If the inflation rate is high,real wages and nominal wages change by the same amount.
Q2) If the expected price level exceeds the actual price level in an economy,_____.
A)firms increase production in the short run
B)firms decrease production in the short run
C)firms maintain production in the short run but increase prices
D)firms maintain production in the short run but decrease prices
E)firms raise prices in the short run.
Q3) If the price level increases by 5 percent and the nominal wage increases by 3.5 percent,the real wage will decrease by 1.5 percent.
A)True
B)False
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Page 12
Chapter 11: Fiscal Policy
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Discretionary fiscal policy works by shifting the short-run aggregate supply curve.
A)True
B)False
Q2) Suppose the government reduces its budget deficit at the same time that energy prices rise sharply.Which of the following is most likely to happen?
A)The price level will rise,since higher energy prices increase the cost of production.
B)Real GDP will fall since both events will tend to cause an economic contraction.
C)The price level will fall because the aggregate demand curve has shifted leftward.
D)Real GDP will rise as less government spending leads to more opportunities for the private sector.
E)Both the price level and real GDP will fall.
Q3) A decrease in government purchases can close an expansionary gap by shifting the aggregate demand curve.
A)True
B)False
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13
Chapter 12: Federal Budgets and Public Policy
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Until 1980,the national debt was mostly the result of:
A)wartime borrowing.
B)inflation.
C)bad monetary policy.
D)wasteful Congressional spending.
E)Social Security obligations.
Q2) If the automatic stabilizers are creating budget deficits,the economy must be experiencing falling output.
A)True
B)False
Q3) Increasing U.S.trade deficits result in:
A)federal budget surpluses.
B)increased U.S.savings.
C)reduced purchases of U.S.government bonds by people in other countries.
D)accumulation of dollars overseas.
E)increased U.S.investment abroad.
Q4) Biennial budgets have replaced the annual budget process for the federal government.
A)True
B)False
Page 14
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Chapter 13: Money and the Financial System
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150 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 cannot be determined.
Q2) A government program that invested in financial institutions and automakers to help stabilize markets during the great recession of 2008 was the _____.
A)Troubled Asset Relief Program
B)Social Security System
C)Supplemental Security Income Program
D)Public Housing Assistance Program
E)Deposit Insurance Program
Q3) One advantage of a money market mutual fund account is that:
A)it is guaranteed for a larger amount than are FDIC-insured deposits.
B)it is a riskless asset.
C)its holders typically earn more interest than they can with a regular bank account.
D)it earns high interest and is liquid.
E)it is completely liquid and riskless.
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Page 15
Chapter 14: Banking and the Money Supply
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Lowering the discount rate:
A)encourages banks to borrow from the Fed,and they can more easily accommodate their customers' needs for loans.
B)encourages business customers to borrow directly from the Fed.
C)reduces the amount of reserves banks are required to keep.
D)automatically reduces excess reserves.
E)encourages banks to sell U.S.government securities and increase their cash reserves.
Q2) When a check is cleared against Bank A after being deposited at Bank B,_____.
A)both Bank A's and Bank B's liabilities increase
B)both Bank A's and Bank B's liabilities decrease
C)Bank A's liabilities increase and Bank B's liabilities decrease
D)Bank A's liabilities decrease and Bank B's liabilities increase
E)there is an increase in the liabilities of the Federal Reserve
Q3) A 2005 quarter is called token money because:
A)it is legal tender.
B)its metal value exceeds its face value.
C)there is less than a quarter's worth of metal in it.
D)it can be used in the subway.
E)it is generally not accepted in exchange.
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Page 16
Chapter 15: Monetary Theory and Policy
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150 Flashcards
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Sample Questions
Q1) Suppose the money demand curve shifts rightward.Which of the following is true about the alternative policy options available with the Fed?
A)The Fed can keep the interest rate from rising only if it increases the money supply.
B)The Fed cannot prevent the interest rate from rising.
C)The Fed can prevent the interest rate from rising without changing the money supply.
D)If the Fed expands the money supply,the interest rate will rise even further.
E)The Fed should reduce the money supply if it plans to prevent the interest rate from rising.
Q2) In the money market,if the money supply decreases,the opportunity cost of holding money:
A)decreases and the quantity of money demanded increases.
B)decreases and the quantity of money demanded falls.
C)increases and the quantity of money demanded falls.
D)increases but the quantity of money demanded remains unchanged.
E)increases and the quantity of money demanded also increases.
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17
Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) The theorists of the rational expectations school:
A)favor monetary rules because they believe individuals know too little about how the economy works.
B)favor monetary rules so that workers and firms do not get any unanticipated surprises from the Fed.
C)are those who favor an "active approach" to policy and reject monetary rules.
D)oppose any monetary rules because they believe rules impede the natural self-correcting mechanism of the economy.
E)do not believe in implementing discretionary policies.
Q2) If an economy's actual GDP exceeds its potential GDP,_____.
A)wages and prices must fall
B)self-correcting forces will shift the SRAS curve to the left
C)self-correcting forces will shift the AD curve to the left
D)inflation will occur when AD shifts to the left
E)unemployment is likely to be unusually high
Q3) Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.
A)True
B)False
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Page 18
Chapter 17: International Trade
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Sample Questions
Q1) Retaliation of trade restrictions can:
A)set off still greater trade restrictions,leading to an outright trade war.
B)recover the surplus lost during the period of trade barriers.
C)decrease rent-seeking activities in the economy.
D)increase the potential gains from trade through specialization.
E)lead to phasing out of tariffs and quotas.
Q2) International trade is most likely to occur whenever:
A)nations have an absolute advantage in the production of goods.
B)all of the trading nations are self-sufficient.
C)world production equals world consumption.
D)each of the trading nations gains from trade.
E)labor is cheaper abroad.
Q3) The declining industries argument was formulated as a rationale for protecting emerging domestic industries from foreign competition.
A)True
B)False
Q4) If a tariff increases,everybody loses except the government imposing the tariff.
A)True
B)False
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Chapter 18: International Finance
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150 Flashcards
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Sample
Questions
Q1) Suppose a basket of goods costs $400 in the United States and £200 in Britain.If the exchange rate is $1 per pound,which of the following statements is true according to the purchasing power parity theory?
A)Purchasing the basket of goods from the U.S.and selling it in Britain will lead to a profit.
B)An increase in the demand for pounds will lead to an increase in the price of pounds.
C)An increase in the demand for dollars will lead to an increase in the price of dollars.
D)An increase in the demand for dollars will lead to a decrease in the price of dollars.
E)An increase in the demand for pounds will lead to a decrease in the price of pounds.
Q2) Which of the following is not considered a unilateral transfer?
A)Income earned from foreign investments
B)Foreign aid
C)Personal gifts to friends or family abroad
D)Institutional charitable donations
E)Government transfers to foreign residents
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Chapter 19: Economic Development
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Sample Questions
Q1) A study by the World Bank suggests a strong link in Africa between governments that _____ special-interest groups and _____ rates of economic growth.
A)cater to; high B)cater to; moderate
C)cater to; low D)ignore; low E)ignore; moderate
Q2) Studies by the World Bank have emphasized that countries that have adopted trade liberalization policies have been successful.
A)True
B)False
Q3) In 2014,high-income economies with only about one-fifth of the world's population produced more than half of the world's output.
A)True
B)False
Q4) More than half the labor force in India is engaged in the manufacturing sector.
A)True
B)False
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