Economics II
Chapter Exam Questions
Course Introduction
Economics II builds upon the foundational concepts introduced in introductory economics by exploring more advanced topics in both microeconomics and macroeconomics. The course examines theories of market structures, including monopoly and oligopoly, factor markets, and the role of government in addressing market failures. On the macroeconomic side, it delves into economic growth, inflation, unemployment, monetary and fiscal policies, and open economy issues such as exchange rates and balance of payments. Emphasis is placed on applying analytical tools to real-world economic problems, interpreting data, and evaluating the impact of economic policies on individuals and society.
Recommended Textbook
Macroeconomics 10th Edition by Stephen Slavin
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Chapter 1: A Brief Economic History of the United States
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Sample Questions
Q1) Statement I.In the future the bulk of our food will be grown on huge corporate farms. Statement II.The primary purpose of price-support payments to farmers was to save the family farm.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Answer: C
Q2) What was the most important consequence of suburbanization?
A)It made people less dependent on their cars.
B)It was very bad for the construction industry.
C)It left the cities with large concentrations of poor people.
D)It raised the tax bases of most cities.
Answer: C
Q3) Which statement best compares our economic condition in 1933 and today?
A)We were much better off in 1933.
B)We are much better off today.
C)Economic conditions were about the same.
Answer: B
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Chapter 2: Resource Utilization
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Sample Questions
Q1) Assuming the inner curve is our current production possibilities frontier,points J,N and K represent
A)an inefficient use of resources.
B)an output that is not possible to produce.
C)points of unemployed resources.
D)points of fully employed resources.
Answer: D
Q2) Statement I.Labor and capital are resources. Statement II.Scarcity has been largely eliminated from our economy.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Answer: A
Q3) If our unemployment rate is 25 percent and our capacity utilization rate is 50 percent,our economy would be in the midst of a ____________.
Answer: depression
Q4) Place point A on the graph to indicate where our economy operated in 1938.
Answer: 11ea7a6b_5295_ce9e_89bd_fb64f50e2dc6_TB5853_00
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Chapter 3: The Mixed Economy
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Sample Questions
Q1) Statement I: In a centrally planned economy the government sets the prices and decides how much of each good is to be produced.
Statement II: In a market economy,the interaction of buyers and sellers sets prices and determines how much of each good is to be produced.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Answer: C
Q2) Adam Smith believed that people are guided by
A)the principle "let your conscience be your guide." B)greed.
C)the public good.
D)an innate sense of fairness.
Answer: B
Q3) In the year _______ the communist governments in eastern Europe were swept out of power.
Answer: 1989
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Chapter 4: Supply and Demand
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Q1) If the equilibrium price of corn is $3 a bushel and the government imposes a floor of $4 a bushel,the price of corn will _______________________.
A)increase to $4
B)remain at $3
C)rise to about $3.50
D)be impossible to determine
Q2) If price were $12,there would be _____ (shortage or surplus)of about _____.
Q3) If you are willing to buy a particular good,you still won't buy it unless you happen to _____.
Q4) If the government set a price $24,there would be a price ___________,that would cause a ___________ of ______ units.
A)floor,shortage,10
B)floor,surplus,10
C)ceiling,shortage,10
D)ceiling,surplus,10
Q5) When supply rises and demand remains the same,equilibrium price ______ and equilibrium quantity ________.
Q6) The price system is constantly sending __________ and ___________ thousands of signals.
Page 6
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Chapter 5: The Household Consumption Sector
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Sample Questions
Q1) Calculate the MPS.
Q2) When disposable income is 4000,APS is about A).45.
B).34.
C).23.
D).12.
E).01.
Q3) 1 - APC = ________________.
Q4) During and/or the recessions of 1990-91,2001,and 2007-2008:
A)consumption rate of consumers increased.
B)consumption and savings rates stayed the same.
C)savings rate increased.
D)consumers borrowed using credit cards.
Q5) How much is induced consumption when disposable income is $400 billion?
A)0
B)$100 billion
C)$200 billion
D)$300 billion
E)Cannot be determined
Q6) How much is autonomous consumption when disposable income is $800 billion?
Page 7
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Chapter 6: The Business Investment Sector
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Sample Questions
Q1) Gross Investment fell by __________ percent from 1929 to 1932.
Q2) Practically speaking,how much money would it take to control it?
Q3) Gross investment refers to
A)private investment plus public investment.
B)net investment plus replacement investment.
C)net investment after it has been "inflated" for changes in the price level.
D)net investment plus net exports.
Q4) When disposable income is 1,000,C + I is
A)500
B)750
C)1,000
D)1,250
E)1,750
Q5) When disposable income is 1,000,C + I is
A)950
B)1,000
C)1175
D)775
Q6) When disposable income is 1,500,how much is C?
Q7) Why or why not?
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Chapter 7: The Government Sector
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Sample Questions
Q1) Raul Castro has a taxable income of $4,500,000.What is his marginal tax rate?
Q2) Statement I: Most poor people have an average tax rate of 10 percent.
Statement II: In 1992 the maximum federal personal income tax rate was 31 percent.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q3) For a progressive tax the
A)average tax rate exceeds the marginal tax rate as income rises.
B)marginal tax rate declines as income increases.
C)average and marginal tax rates are equal.
D)marginal tax rate exceeds the average tax rate as income rises.
Q4) If you had $1,000 of taxable income you would have to pay _____ in federal income tax.
A)0
B)$100
C)$150
D)Between $150 and $280
E)$280
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Chapter 8: The Export-Import Sector
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Sample Questions
Q1) Our trade deficit in 2009 was _______.
Q2) If more foreign tourists visited the United States,this would
A)lower our merchandise trade imbalance.
B)lower our overall trade imbalance.
C)raise our merchandise trade imbalance.
D)raise our overall trade imbalance.
Q3) After World World II,the United States produced about ______ percent of the world's oil,much of which we exported.
A)40
B)50
C)60
D)70
Q4) In 2009,___________ exceeded Germany in value of exports becoming the world's largest exporter.
A)China
B)Japan
C)Canada
D)Germany
Q5) The ______________________ which was set up in 1995,was the successor to GATT.
10
Q6) The world trade agreement that was drafted in 1947 was known as
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Chapter 9: Gross Domestic Product
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Sample Questions
Q1) Suppose that our GDP fell from one year to the next.
A)The GDP deflator definitely fell.
B)Real GDP definitely fell.
C)Both real GDP and the GDP deflator definitely fell.
D)None of the choices are correct.
Q2) Real GDP is the
A)amount of goods and services available to each individual per period of time.
B)change in the number of goods and services produced over two periods of time.
C)value of the goods and services worn out in the production process during one year.
D)value of production of final output in one year after adjusting for changes in prices during the same perioD.
E)the value of goods and services produced as of a particular point in timE.
Q3) National income
A)minus depreciation equals NDP.
B)plus depreciation plus indirect business taxes equals GDP.
C)minus inflation equals real GDP.
D)plus transfer payments equals personal income.
Q4) Using the expenditures approach,GDP consists of four things: (1)____________; (2)_______; (3)_______;and (4)___.
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Chapter 10: Economic Fluctuations, unemployment, and Inflation
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Q1) The prosperity phase of a three-phase cycle sets in after the _____ phase.
Q2) If the unemployment rate for whites was 5%,then the unemployment rate for blacks would be around
A)3%.
B)5%.
C)7%.
D)10%.
E)15%.
Q3) Suppose there are 8 million unemployed workers seeking jobs.After a period of time,2 million of them become discouraged over their job prospects and cease to look for work.As a result of this,the official unemployment rate would A)increase in the short run but eventually decline.
B)increase.
C)decline.
D)be unchangeD.
Q4) Business cycle troughs are always followed by the _____ phase.
Q5) Given the following information,compute the unemployment rate: 9 million unemployed;119 million employed.
Q6) The _____ phase of the business cycle ends at the peak.
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Chapter 11: Classical and Keynesian Economics
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Sample Questions
Q1) John Maynard Keynes argued that
A)downward nominal-wage rigidity prevented the classical self-correction mechanism from working to end recessions.
B)the automatic forces of the market would restore the economy to full employment very quickly.
C)the classical macroeconomists' argument that government spending should be used in recessions would not eliminate a recession.
D)fluctuations in aggregate supply were the primary causes of recessions.
Q2) According to Keynes,aggregate supply and aggregate demand will be equal only if A)savings equals investment.
B)savings exceeds investment.
C)investment is larger than savings in the economy.
D)is not related to the relationship between savings and investment.
Q3) Equilibrium GDP can be depicted graphically as that point where the _________ and _________ cross.
Q4) The foreign purchases effect states that when our price level increases,this tends to _____.
Q5) Demand pull inflation occurs in the ______________ range of the aggregate supply curve.
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Chapter 12: Fiscal Policy and the National Debt
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Sample Questions
Q1) A list of automatic stabilizers in the United States economy would NOT include A)income taxes.
B)unemployment compensation.
C)agricultural support payments.
D)defense spending.
Q2) The time required for Congress to pass bills out of committee,vote on bills,and the President to sign the new law to effectively deal with a recession is called the A)political lag
B)education lag
C)recognition lag
D)decision lag
Q3) If the multiplier is 10,the MPC is A)0.
B).1.
C).5.
D).9.
E)1.0.
Q4) In 2010 the national debt was over $________.
Q5) If the MPC is .9,how much is the multiplier?
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Chapter 13: Money and Banking
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Sample Questions
Q1) Which of these is NOT money in the United States?
A)M1
B)Currency
C)Credit cards
D)None of the choices/statements are true (i.e. ,each is money).
Q2) The largest United States bank in 2010 was
A)BankAmericA.
B)Citigroup.
C)J.P.Morgan Chase.
D)Security Pacific.
Q3) The demand for money schedule shows that the quantity of money that people want to hold
A)rises as income rises.
B)falls as income rises.
C)falls as the interest rate rises.
D)falls as the real price of money rises.
Q4) The dividing line between small CDs and large CDs is $_______.
Q5) Unless money can perform its job as a ______,it doesn't matter that much if it performs its other jobs that well.
Page 16
Q6) About _____ out of every ten dollars in our money supply consists of currency.
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Chapter 14: The Federal Reserve and Monetary Policy
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Sample Questions
Q1) Statement I: When the Fed sells U.S.government securities on the open market,excess reserves are increased.
Statement II: Banks try to carry large balances of excess reserves.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q2) If the required reserve ratio was lowered
A)banks would be prompted to reduce their lending.
B)the size of the monetary multiplier would increase.
C)the actual reserves of banks would increase.
D)None of the choices are correct.
Q3) A bank can eliminate its negative excess reserves by doing each of the following except
A)borrowing in the Federal Funds market.
B)borrowing at the discount window.
C)buying United States government securities.
D)not renewing loans.
Q4) The main reason that banks borrow from the Fed is that they _________.
Q5) An increase in the reserve ratio ______ the size of the monetary multiplier.
Page 17
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Chapter 15: A Century of Economic Theory
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Sample Questions
Q1) In order for the crude quantity theory to be valid,______ and ______ need to be constant.
Q2) If P were 7 and Q were 1,200,how much would MV be?
Q3) According to Keynes,which is the most accurate statement?
A)Most workers would be willing to accept a pay cut during a recession if doing so would prevent layoffs of some of their co-workers.
B)American economic markets are purely competitive.
C)Wages are downwardly inflexible.
D)During a recession,most workers are given the choice of accepting lower wages or being laid off.
Q4) The classical economists espoused
A)the crude version of the quantity theory of money
B)the sophisticated version of the quantity theory of money
C)both the crude and sophisticated quantity theories of money
D)neither the crude nor sophisticated quantity theories of money
Q5) Keynesian economists believe that the private sector of the economy is inherently ______.
Q6) The main proponent of monetarism has been _____________.
Q7) The Laffer curve supports a basic contention of the ___________ school.
Page 18
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Chapter 16: Economic Growth and Productivity
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Sample Questions
Q1) Our health care costs are about _____ percent of our GDP.
A)5
B)11
C)17
D)20
E)24
Q2) Which workers in the following countries worked the least amount of hours in 2008?
A)The United States
B)Japan
C)Germany
D)France
Q3) Between the years 1000 to 1800,growth in world output averaged ______ percent.
Q4) Which of the following slowed the rate of economic growth in the United States in the 1970s?
A)Pollution regulations and requiring pollution reduction
B)Health and safety regulations
C)Rising energy costs
D)All of the choices slowed the rate of economic growth in the U.S.in the 1970s.
Q5) The age of mass consumption arrived in the decade of the _______.
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Chapter 30: Income Distribution and Poverty
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Sample Questions
Q1) The most important reason for why some people have higher income than others is
Q2) Most of the poverty in this country can be traced to
A)the recession that began in 1990.
B)the heritage of slavery.
C)five decades of social and economic change.
D)the War on Poverty.
Q3) Statement I: A single mother with two children could raise her family out of poverty by working full-time at the minimum wage.
Statement II: 1 of every 5 children is poor.
A)Statement I is true and statement II false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q4) In 2008 about __________% of all Americans lived above the poverty line. A)12
Page 20
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Chapter 31: International Trade
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Sample Questions
Q1) The United States can gain from international trade if
A)it imports goods for which it is a high-opportunity cost producer and exports those for which it is a low-opportunity cost producer.
B)the dollar appreciates in value.
C)the dollar is overvalued in the currency market.
Q2) Statement I: Most economists support the concept of free trade. Statement II: Trade helps some nations and hurts others.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q3) Tariffs lead to
A)the contraction of relatively efficient industries.
B)an over allocation of resources to relatively efficient industries.
C)an increase in the foreign demand for domestically produced goods.
D)an under allocation of resources to relatively inefficient industries.
Q4) What is the domestic exchange equation of Germany?
Q5) What is Sweden's domestic exchange equation?
Q6) What is Spain's domestic exchange equation?
Q7) A tariff,unlike a _________,provides revenues to the government.
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Chapter 32: International Finance
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Q1) Statement I: Our balance of trade is part of our current account balance. Statement II: Our balance of payments is part of our balance of trade.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q2) The gold standard
A)worked well until World War II.
B)will not work well when the world's gold supply increases as fast as the world's need for money.
C)fell apart as the Great Depression spread,as nation after nation devalued its currency. D)makes monetary policy more effective.
Q3) Which of the following is NOT a negative item in our balance of payments?
A)Balance of trade
B)Net investment income
C)Net unilateral transfers abroad
D)Balance on capital account
Q4) An increase in foreign demand for U.S.exports will _________________ demand for the dollar,causing the dollar to _________________.
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