Economics I Question Bank
Course Introduction
Economics I introduces students to the foundational principles of microeconomics and macroeconomics. The course covers basic economic concepts such as scarcity, opportunity cost, supply and demand, market equilibrium, and the role of governments in the economy. Students will explore how individuals and firms make decisions, how markets function, and the impact of fiscal and monetary policies on aggregate economic activity. Through real-world examples and introductory analytical tools, this course provides the essential framework needed to understand and analyze economic issues in societal and global contexts.
Recommended Textbook
Foundations of Macroeconomics 5th Edition by Robin Bade
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5019 Verified Questions
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Page 2
Chapter 1: Getting Started
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350 Flashcards
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Sample Questions
Q1) Decision making on the margin involves
A) comparing the marginal cost and marginal benefits when making a decision.
B) comparing the total cost and the total benefit when making a decision.
C) eliminating the additional cost when making a decision.
D) determining the total benefits of a decision.
E) comparing the benefits from the social interest to the benefits from the person's self-interest.
Answer: A
Q2) An independent relationship between two variables is shown in a graph by
A) an upward-sloping line.
B) a horizontal or a vertical line.
C) a downward-sloping line.
D) a steeply sloped line.
E) any straight line curve.
Answer: B
Q3) Define marginal cost and marginal benefit.
Answer: Marginal cost is the opportunity cost of a one-unit increase in an activity.Marginal benefit is the benefit of a one-unit increase in an activity.
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3
Chapter 2: The Usand Global Economies
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Sample Questions
Q1) The Colorado Ski Shop sold 60 ski jackets to a Belgium company's headquarters located in Paris, France.The ski jackets are a
A) U.S.export.
B) capital good.
C) government good.
D) U.S.consumption service.
E) U.S.import.
Answer: A
Q2) If there is a national debt, we can conclude that the federal government has A) borrowed in the past.
B) purchased more goods and services than were needed.
C) spent money foolishly.
D) loaned funds to U.S.taxpayers in the past.
E) loaned funds to other nations in the past.
Answer: A
Q3) What are the payments each factor of production receives?
Answer: Rent is paid for the use of land.Wages are paid for the services of labor.Interest is paid for the use of productive capital.Entrepreneurs earn a profit.
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Chapter 3: The Economic Problem
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Sample Questions
Q1) The above figure shows the production possibility frontier for a country. What is the opportunity cost per ton of rice to move from point D to E?
A) 3000 bottles of wine
B) 333 bottles of wine
C) 3 bottles of wine
D) 1/3 of a bottle of wine
E) None of the above answers are correct.
Answer: A
Q2) The table above shows a nation's production possibilities frontier.The opportunity cost of a robot between combination D and E is
A) 4 pizzas.
B) 34 pizzas.
C) 30 pizzas.
D) 1/4 of a pizza.
E) undefined because neither point is production efficient.
Answer: A
Q3) How is economic growth shown in a production possibilities frontier graph?
Answer: Economic growth is illustrated as an outward shift of the PPF.
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Chapter 4: Demand and Supply
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Sample Questions
Q1) If the price of tangerines increases, the price of oranges also rises because A) consumers consider the two goods complements and so sellers decreased the supply of oranges.
B) consumers consider the two goods substitutes and demand for oranges increases.
C) if the supply of tangerines decreased, then the supply of oranges also must decrease.
D) buyers must have expected a higher price for oranges and thus increased their demand for oranges.
E) buyers' incomes must have decreased and oranges are an inferior good.
Q2) Which of the following increases the supply of gasoline?
A) a situation where the quantity of gasoline demanded exceeds the quantity supplied B) an increase in the price of gasoline
C) a decrease in the price of a resource used to produce gasoline, such as crude oil
D) a decrease in the demand for gas-guzzling, sport utility vehicles
E) an increase in income if gas-guzzling, sport utility vehicles are a normal good
Q3) In the figure above, what is the equilibrium price and quantity?
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6
Chapter 5: Gdp: a Measure of Total Production and Income
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Sample Questions
Q1) The base year is 2008.A country only produces MP3 players.The price of an MP3 player in 2008 was $100.The price of an MP3 player was $90 in 2009.The quantity of MP3 players produced in 2008 was 10,000 units and in 2009 was 10,500 units.Real GDP in 2008 equals
A) $900,000.
B) $945,000.
C) $1,000,000.
D) $1,050,000.
E) an amount that cannot be determined without information about real GDP in 2007 .
Q2) Which of the following describe the United States economy in 2008 and 2009?
A) The economy was in an expansion.
B) The economy was in a recession.
C) Real GDP per person increased.
D) Real GDP reached a peak.
E) Real GDP reached a trough.
Q3) What would happen to measured GDP if more people started hiring workers to do house chores such as cooking and cleaning?
Q4) Is it possible for nominal GDP to increase while real GDP does not change?
Q5) Investment, as included in GDP, consists of what?
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Chapter 6: Jobs and Unemployment
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Sample Questions
Q1) Based on the above table, the labor force participation rate is
A) 71.4 percent.
B) 82 percent.
C) 53.6 percent.
D) 75 percent.
E) 64.3 percent.
Q2) Julie works part-time for economic reasons.She would be considered
A) an involuntary part-time worker.
B) a discouraged worker.
C) a job seeker.
D) not in the labor force.
E) unemployed as calculated by the Bureau of Labor statistics.
Q3) Structural unemployment usually lasts ________ period of time ________ unemployment
A) a longer ; than frictional
B) a shorter; than frictional
C) a shorter; than seasonal
D) a shorter; than cyclical
E) the same; as seasonal
Q4) What is the relationship over the business cycle of potential GDP and real GDP?
Page 8
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Chapter 7: The Cpi and the Cost of Living
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Sample Questions
Q1) If prices have increased since the base period, then
A) real GDP is smaller than nominal GDP.
B) real GDP is larger than nominal GDP.
C) real GDP is equal to nominal GDP.
D) there is no way to adjust nominal GDP so that it equals real GDP.
E) real GDP can no longer be compared to nominal GDP.
Q2) Define the nominal interest rate and the real interest rate.Discuss the relationship between the nominal interest rate and the real interest rate.
Q3) If the CPI is 170 at the beginning of the year and 181 at the end, and a bank is paying a nominal interest rate of 6 percent, we see that
A) the real interest rate is negative.
B) the interest nominal rate is negative.
C) the real interest rate is positive and is less than 1 percent.
D) the real interest rate is positive and is larger than 1 percent.
E) the real interest rate is equal to zero.
Q4) Explain the CPI bias and how it can distort private contracts and increase government outlays.
Q5) When the nominal price of a good increases over time, must its real price also increase?
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Chapter 8: Potential Gdp and the Natural Unemployment Rate
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Sample Questions
Q1) If the amount paid as unemployment benefits decreases, the opportunity cost of job search
A) rises and people would stay unemployed longer.
B) is not affected because unemployment benefits do not change job availability.
C) rises and people stay unemployed for a shorter time.
D) falls and people stay unemployed for a shorter time.
E) falls and people stay unemployed for a longer time.
Q2) A firm's demand for labor depends on the
A) nominal wage rate because it pays workers in dollars.
B) real wage rate, which equals the nominal wage divided by the price level.
C) real wage rate, which equals the nominal wage divided by the hours worked.
D) nominal wage rate, which equals the real wage divided by the price level.
E) supply of labor.
Q3) The real wage rate is $35 an hour.At this wage rate there are 100 billion labor hours supplied and 200 billion labor hours demanded.There is a
A) shortage of 300 billion hours of labor.
B) shortage of 100 billion hours of labor.
C) surplus of 100 billion hours of labor.
D) surplus of 300 billion hours of labor.
E) shortage of 200 billion hours of labor.
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Chapter 9: Economic Growth
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Sample Questions
Q1) Which of the following statements is likely to be made by someone who believes in the new growth theory?
A) Population growth will limit long-run gains in real GDP per person.
B) Competition will encourage discoveries of new ideas leading to greater economic growth.
C) Although technological changes increase real GDP, these changes are random and unexplainable.
D) Choices made by human capital are likely to be inefficient.
E) Economic growth will eventually slow.
Q2) The data show that in the long run, sustained growth in the quantity of labor will come from
A) continual increases in average hours.
B) constant increases in the labor force participation rate.
C) constant decreases in the unemployment rate.
D) increases in the population.
E) increases in labor productivity.
Q3) Define labor productivity.Discuss the relationship between labor productivity, human capital growth, and technology change.
Q4) List and explain the three factors that can increase labor productivity.
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Chapter 10: Finance, Saving, and Investment
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Sample Questions
Q1) A decrease in expected profit
A) lowers the equilibrium real interest rate.
B) raises the equilibrium real interest rate.
C) increases the demand for loanable funds.
D) decreases the supply of loanable funds.
E) increases the supply of loanable funds.
Q2) The Ricardo-Barro effect argues that the crowding-out effect
A) is the result of a government budget surplus and higher interest rates.
B) will not occur, because the private saving supply will change to offset any change in the government budget deficit.
C) is the result of the government budget deficit and higher interest rates.
D) will occur, because the private saving supply will change to offset any change in the government budget deficit.
E) is stronger when the government runs a budget surplus than when it runs a budget deficit.
Q3) Using the figure above, show the effect on the real interest rate and the quantity of loanable funds of an increase in expected profit.
Q4) Does a stock certificate or a bond represent ownership of a company and a claim on its profits?
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Chapter 11: The Monetary System
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Sample Questions
Q1) In order to influence the interest rate, the Federal Reserve System can immediately adjust the
A) reserves of the banking system.
B) inflation level.
C) unemployment rate.
D) taxes that citizens must pay.
E) amount the government borrows.
Q2) ________ increases the size of the money multiplier.
A) An increase in the currency drain
B) An open market purchase of government securities by the Fed
C) A reduction in the desired reserve ratio
D) An open market sale of government securities by the Fed
E) An increase in the size of open market operations
Q3) Regulating the amount of money in the United States is one of the most important responsibilities of the
A) State Department.
B) state governments.
C) Treasury Department.
D) Federal Reserve.
E) U.S.Mint.
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Chapter 12: Money, Interest, and Inflation
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Sample Questions
Q1) Which of the following shifts the demand for money curve?
i. change in the nominal interest rate
ii. change in real GDP
iii. change in the price level
A) i only
B) ii only
C) iii only
D) ii and iii
E) i, ii, and iii
Q2) The above table has the demand and supply schedules for money.If the Fed increases the quantity of money by $0.1 trillion, the new equilibrium nominal interest rate is
A) 8 percent.
B) 9 percent.
C) 7 percent.
D) 5 percent.
E) 6 percent.
Q3) "Because the nominal interest rate is the opportunity cost of holding money, the supply curve of money slopes downward." Is the previous statement correct or incorrect?
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Page 14
Chapter 13: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) A rise in the price level
A) raises the buying power of money.
B) decreases the prices of exports.
C) lowers the buying power of money.
D) increases aggregate demand.
E) makes the aggregate demand curve steeper.
Q2) When the price level rises, the real interest rate ________ and the quantity of real GDP demanded ________.
A) rises; increases
B) rises; decreases C) falls; increases
D) falls; decreases
E) does not change; does not change
Q3) How does an increase in the price level affect the aggregate quantity of goods and services demanded?
Q4) Suppose that during 2005, the actual real GDP of Chile was 3.5 billion pesos at the same time the potential GDP was 3.4 billion pesos.What sort of equilibrium existed in Chile?
Q5) What can lead to the shift illustrated in the figure above?
Q6) Define "stagflation" and explain how it can be created.
Page 15
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Chapter 14: Aggregate Expenditure Multiplier
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Sample Questions
Q1) The expenditure multiplier is equal to the change in ________ divided by the change in ________.
A) autonomous expenditure; equilibrium expenditure
B) dependent expenditure; autonomous expenditure
C) real GDP; equilibrium expenditure
D) equilibrium expenditure; autonomous expenditure
E) the price level; real GDP
Q2) If an increase of $10 billion of investment results in an increase in equilibrium expenditure of $40 billion, the expenditure multiplier equals
A) $10 billion × $40 billion = $400 billion.
B) $40 billion - $10 billion = $30 billion.
C) $40 billion ÷ $10 billion = 4.
D) $10 billion ÷ $40 billion = 0.25.
E) $10 billion - $40 billion = -$30 billion.
Q3) Explain why the expenditure multiplier is greater than 1.
Q4) A country reports that it has an unplanned inventory increase of $1.0 trillion.Discuss how the economy adjusts until it reaches an unplanned inventory change of $0.0 trillion.
Q5) Discuss the link between real GDP and imports.
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Chapter 15: The Short-Run Policy Tradeoff
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Sample Questions
Q1) In 1981, the Fed
A) created a surprise inflation reduction policy and created an expansion.
B) created a surprise inflation reduction policy and created a recession.
C) credibly announced an inflation reduction policy and created a recession.
D) credibly announced an inflation reduction policy and created an expansion.
E) took no action so that the inflation rate skyrocketed.
Q2) The short-run Phillips curve shows the relationship between the
A) natural unemployment rate and the expected inflation rate.
B) natural unemployment rate and the real interest rate.
C) inflation rate and the unemployment rate.
D) expected inflation rate and the unemployment rate.
E) inflation rate and the nominal interest rate.
Q3) In the long run, there is
A) a tradeoff between unemployment and inflation.
B) a tradeoff between unemployment and real GDP.
C) no tradeoff between fiscal policy and monetary policy.
D) no tradeoff between unemployment and inflation.
E) a tradeoff between unemployment and natural unemployment.
Q4) Discuss the relationship between the aggregate supply curve and the short-run Phillips curve.
Page 17
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Chapter 16: Fiscal Policy
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Sample Questions
Q1) When tax revenues minus outlays is i. positive, the government has a budget surplus.
Ii) negative, the government has a budget deficit.
Iii) zero, the government has a balanced budget.
A) i, ii, and iii
B) i and ii only
C) ii and iii only
D) i only
E) iii only
Q2) Needs-tested spending is defined as
A) spending by Congress on its own perks of office.
B) taxes paid by those qualified by their income.
C) spending on programs for people qualified to receive benefits.
D) spending by the President on the White House.
E) spending that increases in expansions and decreases in recessions.
Q3) Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions.What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?
Q4) Explain what fiscal policy actions could eliminate an inflationary gap.
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Chapter 17: Monetary Policy
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Sample Questions
Q1) Of the following, which is NOT a monetary policy rule the Fed could follow?
A) a gold price targeting rule
B) an unemployment rate targeting rule
C) an inflation targeting rule
D) a k-percent rule
E) a money targeting rule
Q2) By using open market operations, the Federal Reserve
A) adjusts the supply of reserves to keep the federal funds interest rate equal to its target.
B) adjusts the supply and demand of reserves to keep the federal funds interest rate equal to its target.
C) adjusts the demand of reserves to keep bank rates in line with the federal funds rate target.
D) controls banks' demand for reserves, thereby keeping the federal funds rate equal to its target.
E) None of the above answers is correct.
Q3) When would the Fed want to carry out a monetary policy that decreases aggregate demand?
Q4) Describe inflation targeting rule as a monetary policy.What are its benefits?
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Chapter 18: International Trade Policy
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Sample Questions
Q1) Imports are defined as the goods and services that we
A) produce and consume in the United States.
B) sell to other countries.
C) buy from other countries.
D) partially produce in both the United States and another country.
E) produce abroad using U.S.owned factories and then consume in the United States.
Q2) If a tariff is imposed on imports of shrimp into the United States, U.S.consumer surplus from shrimp will ________ and U.S.producer surplus from shrimp will
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
Q3) Three arguments used to promote trade barriers are the national security argument, the infant-industry argument, and the dumping argument.Explain each of these arguments and evaluate whether each one has any flaws.
Q4) What is "rent seeking"?
How does it apply to restricting imports?
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Chapter 19: International Finance
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Sample Questions
Q1) Which of the following is correct?
i. The private sector balance equals saving minus investment.
ii. Net exports is exports of goods and services plus imports of goods and services.
iii. Net exports equals the sum of the private sector balance plus the government sector balance.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Q2) Which of the following is true?
A) Most countries are net lenders.
B) Most countries are net borrowers.
C) A net borrower must be a debtor country.
D) A net lender must be a debtor nation.
E) A net lender must be a creditor nation.
Q3) Why can exchange rates be very volatile?
Q4) Name and briefly describe the three balance of payments accounts.
Q5) What balance of payment account records foreign investment between countries?
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