Foundations of Economics Final Exam Questions
Course Introduction
Foundations of Economics offers an introduction to the fundamental principles and concepts that underpin economic analysis. The course explores the core ideas of microeconomics and macroeconomics, including supply and demand, market equilibrium, consumer and producer behavior, and the role of governments in the economy. Students will also examine broader economic issues such as inflation, unemployment, and economic growth. Through real-world examples and practical applications, this course lays the groundwork for further study in economics and equips students with essential analytical skills for understanding how economies function on both local and global scales.
Recommended Textbook
ECON MACRO 6th Edition by William A.
McEachern
Available Study Resources on Quizplus
19 Chapters
3854 Verified Questions
3854 Flashcards
Source URL: https://quizplus.com/study-set/1161 Page 2
Chapter 1: The Art and Science of Economic Analysis
Available Study Resources on Quizplus for this Chatper
203 Verified Questions
203 Flashcards
Source URL: https://quizplus.com/quiz/22937
Sample Questions
Q1) An economist's main professional objective is to:
A) become wealthy.
B) control the government's decision-making processes.
C) understand how the economy works.
D) discover which stock prices will decrease.
E) understand the psychology of participants in markets.
Answer: C
Q2) The determination of price and output in specific markets is studied in:
A) econometrics.
B) normative economics.
C) positive economics.
D) microeconomics.
E) macroeconomics.
Answer: D
Q3) Rational self-interest is equivalent to pure selfishness.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Economic Tools and Economic Systems
Available Study Resources on Quizplus for this Chatper
209 Verified Questions
209 Flashcards
Source URL: https://quizplus.com/quiz/22938
Sample Questions
Q1) Refer to Exhibit 2.5, which shows the production possibilities frontier (PPF) for capital goods and consumer goods. Which of the graphs best illustrates the impact on the production possibilities frontier of a decrease in unemployment?
A) a
B) b
C) c
D) d
E) b and d
Answer: D
Q2) It is possible for one person to have a comparative advantage in the production of all products.
A)True
B)False
Answer: False
Q3) The opportunity cost of going to college consists of more than just the tuition.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Economic Decision Makers
Available Study Resources on Quizplus for this Chatper
225 Verified Questions
225 Flashcards
Source URL: https://quizplus.com/quiz/22939
Sample Questions
Q1) What determines exchange rates?
A) the stock market
B) the import/export market
C) supply and demand for currencies
D) producers
E) consumers
Answer: C
Q2) Which of the following have their profits taxed twice?
A) sole proprietorship
B) partnership
C) corporation
D) nonprofit institutions
E) S corporations
Answer: C
Q3) If the value of the euro increases relative to the U.S. dollar, then French goods will be less expensive in the United States.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Demand, Supply, and Markets
Available Study Resources on Quizplus for this Chatper
205 Verified Questions
205 Flashcards
Source URL: https://quizplus.com/quiz/22940
Sample Questions
Q1) The slope of the demand curve for a normal good must be positive.
A)True
B)False
Q2) Refer to the market schedules for pizza in Table 4.4. What is quantity supplied at a price of $6?
A) $6 and 40 million pizzas
B) $8 and 20 million pizzas
C) $6 and 20 million pizzas
D) $2 and 10 million pizzas
E) $10 and 10 million pizzas
Q3) The relationship between the price of pizza and the quantity of pizza supplied is called _____
A) demand.
B) supply.
C) the law of demand.
D) the law of supply.
E) there is a market for pizza.
Q4) An increase in professors' salaries increases the supply of college education.
A)True
B)False
Page 6
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Introduction to Macroeconomics
Available Study Resources on Quizplus for this Chatper
201 Verified Questions
201 Flashcards
Source URL: https://quizplus.com/quiz/22941
Sample Questions
Q1) The economic policy based on the incorrect theory that a nation's economic objective should be to accumulate precious metals in the public treasury is called
A) laissez-faire
B) deficit financing
C) socialism
D) mercantilism
E) capitalism
Q2) Which of these statements correctly explains the shape of the aggregate demand curve?
A) As prices fall, nominal income rises and so does the demand for real goods and services.
B) Rising prices reduce people's wealth and thereby decrease spending.
C) With falling prices, government decides to spend less to increase the price level.
D) Businesses increase investment spending in response to higher interest rates caused by inflation.
E) As prices fall, domestically produced goods become more expensive relative to foreign goods, resulting in an increase in production.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Tracking the U S Economy
Available Study Resources on Quizplus for this Chatper
211 Verified Questions
211 Flashcards
Source URL: https://quizplus.com/quiz/22942
Sample Questions
Q1) Which of the following is not true about gross domestic product (GDP)?
A) It includes only final goods and services.
B) It reflects production in a particular year.
C) Intermediate goods and services are excluded to prevent double-counting.
D) It excludes purchases of financial assets.
E) It includes transfer payments such as Social Security.
Q2) Real gross domestic product (GDP) is measured in terms of _____
A) current-year prices.
B) base-year prices.
C) foreign currencies.
D) the quality of goods produced.
E) hours of employment.
Q3) The circular-flow model shows that _____
A) households are on the demand side of the resource market.
B) firms are on the demand side of both the product and resource markets.
C) households are on the supply side of the resource market and the demand side of the product market.
D) firms and governments are on the supply side of the loanable funds market.
E) governments are on the demand side of the product market and the supply side of the resource market.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
199 Verified Questions
199 Flashcards
Source URL: https://quizplus.com/quiz/22943
Sample Questions
Q1) An increase in unemployment insurance is likely to _____
A) reduce a person's incentive to look for work.
B) reduce the opportunity cost of remaining employed.
C) provide a better safety net for employed families.
D) decrease the tax imposed on consumers.
E) increase the need to accept the first job available after becoming unemployed.
Q2) If the inflation rate in an economy is higher than expected, which of the following groups in the society would be most likely to gain?
A) borrowers
B) lenders
C) persons holding large amounts of money
D) persons on fixed incomes
E) workers under contract without a cost-of-living adjustment
Q3) Typically, how is inflation measured?
A) daily
B) weekly
C) monthly
D) quarterly
E) annually
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Productivity and Growth
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/22944
Sample Questions
Q1) Which of the following does not contribute to an economy's standard of living in the long run?
A) increases in the amount and quality of resources, especially labor and capital
B) better technology and know-how
C) improvements in the rules of the game that facilitate production and exchange
D) a reliable and respected system of property rights, customs, and conventions that nurture productive activity
E) a reduction in productivity
Q2) From 2010 to 2016, U.S. labor productivity growth has _____
A) increased.
B) been constant, on average.
C) grown at about 0.9 percent per year.
D) grown at about 3 percent per year.
E) grown at about 5 percent per year.
Q3) Industrial policy involves governments using taxes, subsidies, and regulations to nurture the development of specific industries.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
10
Chapter 9: Aggregate Demand
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/22945
Sample Questions
Q1) If the marginal propensity to consume (MPC) is 0.75, the simple multiplier is _____
A) 25.
B) 75.
C) 5.
D) ¾.
E) 4.
Q2) Which of the following is true of government purchases?
A) They are positively related to current income.
B) They are negatively related to current income.
C) They include transfer payments.
D) They are decided by public officials.
E) They depend on the market rate of interest.
Q3) An increase in the price level in an economy will _____
A) shift the aggregate demand curve to the right.
B) shift the aggregate demand curve to the left.
C) increase the quantity of real gross domestic product (GDP) demanded.
D) decrease the quantity of real gross domestic product (GDP) demanded.
E) increase the aggregate expenditure.
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Aggregate Supply
Available Study Resources on Quizplus for this Chatper
202 Verified Questions
202 Flashcards
Source URL: https://quizplus.com/quiz/22946
Sample Questions
Q1) An increase in the federal minimum wage will shift the long-run aggregate supply curve to the left.
A)True
B)False
Q2) The actual price level is assumed to be constant along a given short-run aggregate supply curve.
A)True
B)False
Q3) If the actual price level is lower than the expected price level, an economy will contract in the short run.
A)True
B)False
Q4) Workers usually negotiate compensation in terms of the nominal wage because wage agreements are based on expected price levels.
A)True
B)False
Q5) An adverse supply shock generally decreases the price level and real GDP.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
202 Verified Questions
202 Flashcards
Source URL: https://quizplus.com/quiz/22947
Sample Questions
Q1) The American Recovery and Reinvestment Act, signed by President Obama in 2009, was intended to _____
A) increase tax revenues by increasing the tax rate.
B) balance the budget by increasing defense spending and increasing taxes.
C) stimulate the economy by increasing government spending in order to increase aggregate supply.
D) stimulate the economy by decreasing taxes in order to increase aggregate supply.
E) stimulate aggregate demand through tax benefits and spending programs.
Q2) In the 1970s, one of the causes of stagflation was _____
A) adverse supply shocks that shifted the aggregate supply curve left.
B) adverse supply shocks that shifted the aggregate supply curve right.
C) beneficial supply shocks that shifted the aggregate supply curve left.
D) beneficial supply shocks that shifted the aggregate demand curve right.
E) coordination failure.
Q3) The American Recovery and Reinvestment Act passed in February 2009 was the largest measure of discretionary fiscal policy in U.S. history.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Federal Budgets and Public Policy
Available Study Resources on Quizplus for this Chatper
203 Verified Questions
203 Flashcards
Source URL: https://quizplus.com/quiz/22948
Sample Questions
Q1) Which of the following is not a form of crowding out?
A) lower household spending due to higher interest rates
B) lower business spending due to higher interest rates
C) lower net exports due to higher interest rates
D) lower private spending due to higher taxes
E) lower private sector borrowing due to higher interest rates
Q2) In the short run, a surplus federal budget _____
A) reduces national saving.
B) reduces domestic saving.
C) stimulates aggregate demand.
D) inhibits economic growth in the long run.
E) reduces the federal debt.
Q3) What would have happened if the debt ceiling had not been raised in early 2011?
A) The U.S. government would have raised taxes.
B) The U.S. government would have been in default.
C) The U.S. government would have increased borrowings.
D) The U.S. government would have paid down debt.
Q4) The U.S. federal debt as a percentage of GDP is currently on the rise.
A)True
B)False
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Money and the Financial System
Available Study Resources on Quizplus for this Chatper
201 Verified Questions
201 Flashcards
Source URL: https://quizplus.com/quiz/22949
Sample Questions
Q1) While deposit insurance was designed to make the banking industry more stable, it contributed to the banking crisis of the 1980s because _____
A) the FDIC only insured commercial banks.
B) the ceiling on insured deposits was too low.
C) too many banks were insufficiently insured.
D) depositors became too complacent about the risks that the banks were taking.
E) unsafe banks were "kicked out" of the deposit insurance system.
Q2) The law that established the Federal Reserve System is the _____
A) Federal Reserve Act of 1913.
B) National Banking Act of 1863.
C) Banking Act of 1933.
D) National Banking Act of 1813.
E) Federal Reserve Act of 1963.
Q3) Inflation is impossible in a commodity money system.
A)True
B)False
Q4) The United States has a dual banking system consisting of state banks and national banks.
A)True
B)False
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Banking and the Money Supply
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/22950
Sample Questions
Q1) The narrow definition of money is _____
A) M0
B) M1
C) M2
D) M3
E) Mn
Q2) The immediate effect of a member bank's sale of U.S. government securities to the Fed is a(n) _____
A) increase in that bank's required reserves.
B) decrease in that bank's required reserves.
C) increase in that bank's excess reserves.
D) decrease in that bank's excess reserves.
E) decrease in the Fed's assets.
Q3) By reducing the required reserve ratio, the Fed can not only create excess reserves but also increase the money multiplier.
A)True
B)False
Q4) The Fed primarily uses the reserve requirement to control the money supply.
A)True
B)False
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Monetary Theory and Policy
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/22951
Sample Questions
Q1) The demand for money is based primarily on money's role as a(n) _____
A) measure of wealth.
B) medium of exchange.
C) standard of economic well-being.
D) interest-bearing asset.
E) non-interest-bearing asset.
Q2) In the long run, an increase in aggregate demand _____
A) increases the price level and real output, but the effect on the price level is larger.
B) increases the price level and real output, but the effect on output is larger.
C) affects only real output.
D) affects only the price level.
E) affects neither the price level nor real output.
Q3) The money demand curve will shift when there is a change in the _____
A) unemployment rate.
B) inflation rate.
C) money supply.
D) nominal interest rate.
E) price level.
To view all questions and flashcards with answers, click on the resource link above.
17
Chapter 16: Macro Policy Debate: Active or Passive?
Available Study Resources on Quizplus for this Chatper
198 Verified Questions
198 Flashcards
Source URL: https://quizplus.com/quiz/22952
Sample Questions
Q1) If workers and firms expect continued inflation, their wage agreements _____
A) are contingent on changes in policy.
B) are based on the weighted averages of previous inflation rates.
C) are based on the lowest historical inflation rate.
D) are based on present inflation rates.
E) reflect these inflationary expectations.
Q2) The curve has shifted out again because of higher unemployment in the wake of the Great Recession _____
A) in 2008.
B) in 2017.
C) during the 1970s.
D) during the 1980s.
E) during the 1990s.
Q3) _____ won the 1995 Nobel Prize in Economics for his studies of rational expectations.
A) George Akerlof
B) Paul Samuelson
C) Kenneth Arrow
D) Robert Lucas
E) Simon Kuznets
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: International Trade
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/22953
Sample Questions
Q1) Differences in tastes among nations _____
A) make gains from trade possible even in the absence of differences in resource endowments.
B) make gains from trade possible only when there are differences in resource endowments.
C) negate any potential gains from trade.
D) are caused by differences in the stock of capital.
E) occur only among countries with different population sizes.
Q2) If a country has an absolute advantage in producing a good, _____
A) the country is able to produce that good using fewer resources than other countries.
B) the opportunity cost of producing the good is the lowest in that country.
C) the productivity of workers in that country is lower than that in all countries.
D) the country produces as many units of the good as demanded domestically.
E) countries of the same size have the same opportunity cost of producing both goods.
Q3) In 2012, exports amounted to about 14 percent of U.S. GDP.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: International Finance
Available Study Resources on Quizplus for this Chatper
195 Verified Questions
195 Flashcards
Source URL: https://quizplus.com/quiz/22954
Sample Questions
Q1) Any decrease in the demand for foreign exchange, other things constant, will _____
A) reduce the number of foreign exchange units required to purchase dollars.
B) reduce the number of dollars required to purchase one unit of foreign exchange.
C) cause the dollar to depreciate.
D) cause the foreign currency to appreciate.
E) have no effect.
Q2) A rightward shift of a country's demand curve for foreign exchange will _____
A) decrease the price of foreign exchange in the country.
B) decrease the value of its currency.
C) increase the value of its currency.
D) make foreign goods less expensive in the domestic market.
E) make its goods more expensive in foreign markets.
Q3) Fixed exchange rates are more volatile than floating exchange rates. A)True
B)False
Q4) Since 1983, the United States has typically run a financial account surplus.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
20
Chapter 19: Economic Development
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/22955
Sample Questions
Q1) Which of the following is true of bilateral funding?
A) It is provided by the World Bank only.
B) It is tied to the purchase of goods and services from donor countries.
C) It includes grants and loans that are extended at very high interest rates.
D) It is provided by the International Monetary Fund only.
E) It is provided by philanthropic organizations.
Q2) Which of the following groups of countries is most likely to have a high number of telephone lines per 1,000 people?
A) high-income industrial countries
B) countries with high birth rates
C) countries that import capital from abroad
D) low-income countries
E) middle-income countries
Q3) Country-to-country aid is called _____
A) unilateral assistance.
B) multilateral assistance.
C) bilateral assistance.
D) remittance.
E) government transfer.
To view all questions and flashcards with answers, click on the resource link above.
Page 21