Foundations of Economics Test Preparation
Course Introduction
Foundations of Economics introduces students to the basic principles and concepts that underpin the field of economics. The course explores key topics such as supply and demand, market equilibrium, opportunity cost, scarcity, and the role of incentives in shaping economic behavior. Students will examine how individuals and firms make decisions, how markets function, and the impact of government policies on economic outcomes. Both microeconomic and macroeconomic perspectives are covered to provide a comprehensive understanding of how economies operate at different levels. This course lays the groundwork for further study in economics and equips learners with analytical tools to better understand real-world economic issues.
Recommended Textbook
Economics 4th Edition by R. Glenn Hubbard
Available Study Resources on Quizplus
30 Chapters
4273 Verified Questions
4273 Flashcards
Source URL: https://quizplus.com/study-set/3771 Page 2
Chapter 1: Economics: Foundations and Models
Available Study Resources on Quizplus for this Chatper
142 Verified Questions
142 Flashcards
Source URL: https://quizplus.com/quiz/75237
Sample Questions
Q1) Suppose the U.S.government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000.These doctors would be exemplifying the economic idea that A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: B
Q2) "An increase in the price of gasoline will increase the demand for hybrid vehicles." This statement is an example of a positive economic statement.
A)True
B)False
Answer: True
Q3) Productive efficiency is achieved when
A) firms add a low profit margin to the goods and services they produce.
B) firms produce the goods and services that consumers value most.
C) firms produce goods and services at the lowest cost.
D) there are no shortages or surpluses in the market.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter
Available Study Resources on Quizplus for this Chatper
152 Verified Questions
152 Flashcards
Source URL: https://quizplus.com/quiz/75226
Sample Questions
Q1) Scarcity
A) stems from the incompatibility between limited resources and unlimited wants.
B) can be overcome by discovering new resources.
C) can be eliminated by rationing products.
D) is a bigger problem in market economies than in socialist economies.
Answer: A
Q2) When you purchase a new pair of jeans you do so in the
A) factor market.
B) input market.
C) product market.
D) resource market.
Answer: C
Q3) In a two-good,two country world,if one country has an absolute advantage in the production of both goods,it cannot benefit by trading with the other country.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/75215
Sample Questions
Q1) Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant,how would this affect the market for Blu-ray players (a complement to LCD televisions)?
A) The supply of blu-ray players would increase and the equilibrium price of blu-ray players would decrease.
B) The demand for blu-ray players would increase and the equilibrium price of blu-ray players would increase.
C) The demand for blu-ray players would decrease because consumers could afford to buy fewer LCD televisions and blu-ray players.
D) The demand for blu-ray players would increase and the equilibrium price of blu-ray players would decrease.
Answer: B
Q2) A decrease in the price of GPS systems will result in
A) a smaller quantity of GPS systems supplied.
B) a larger quantity of GPS systems supplied.
C) a decrease in the demand for GPS systems.
D) an increase in the supply of GPS systems.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Economic Efficiency, government Price Setting, and Taxes
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/75213
Sample Questions
Q1) A ________ curve shows the marginal cost of producing one more unit of a good or service.
A) demand
B) supply
C) production possibilities
D) marginal benefit
Q2) Marginal cost is the additional cost to a firm of producing one more unit of a good or service.
A)True
B)False
Q3) Government intervention in agricultural markets in the U.S.began in the A) 1920s.
B) 1930s.
C) 1950s.
D) 1970s.
Q4) Refer to Figure 4-3.What is the value of the deadweight loss at a price of $18?
A) $100
B) $180
C) $660
D) $1,040
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Externalities, environmental Policy, and Public Goods
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/75212
Sample Questions
Q1) The 2005 European Union Emission Trading Scheme is an agreement among 24 European Union nations to
A) eliminate air pollution and greenhouse gases by the year 2020.
B) reduce carbon dioxide emissions.
C) provide fast growing developing countries such as India and China with the technology to reduce their carbon emissions.
D) impose a carbon tax by the year 2020 on all industries that emit carbon dioxide.
Q2) Goods differ on the basis of whether their consumption is rival and excludable.Explain the terms "rivalry" and "excludability" as they are used to define goods.List the four categories of goods,and define these categories in terms of rivalry and excludability.
Q3) Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.
Q4) Which of the following is an example of a common resource?
A) catfish in a private pond in Mississippi
B) impounded dogs in a dog pound
C) public health care services in the United States
D) sea otters in the coastal waters of the Pacific Ocean
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Elasticity: The Responsiveness of Demand and Supply
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/75211
Sample Questions
Q1) Linesha,a college student working part-time receives a wage increase.An avid movie buff,she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,
A) DVDs and Blu-ray discs are substitutes.
B) Blu-ray discs are normal goods and DVDs are inferior goods.
C) DVDs and Blu-ray discs are normal goods.
D) the cross-price elasticity between DVDs and Blu-ray discs is negative.
Q2) Price elasticity of supply is used to gauge
A) how responsive suppliers are to price changes.
B) how responsive suppliers are to changes in future prices.
C) how responsive suppliers are to a change in demand.
D) how responsive sales are to a change in input prices
Q3) Refer to Figure 6-6.A perfectly elastic supply curve is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.
Q4) List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: The Economics of Health Care
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/75210
Sample Questions
Q1) Over the past 160 years in the United States,life expectancy
A) has remained fairly constant.
B) has slightly declined.
C) has more than doubled.
D) increased up to the 1950s and then declined for the next 60 years.
Q2) On average,people in the United States spend a greater percentage of their income on health care than do people in most other countries.
A)True
B)False
Q3) If a doctor knows that an insurance company will pay for most of a patient's bill,the doctor has more of an incentive to require additional medical procedures and tests,even if the patient may not require them.This is an example of
A) moral hazard.
B) the principle-agent problem.
C) asymmetric information.
D) adverse selection.
Q4) Suggest three ways by which health insurance companies can reduce adverse selection?
Q5) What is adverse selection?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Firms, the Stock Market, and Corporate Governance
Available Study Resources on Quizplus for this Chatper
140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/75209
Sample Questions
Q1) Assume you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means a sole proprietorship
A) faces limited liability.
B) faces unlimited liability.
C) has little chance of succeeding.
D) is not a good type of business to set up.
Q2) Which type of business is the most difficult to set up?
A) sole proprietorship
B) partnership
C) corporation
D) There is no difference in the difficulty of establishment.
Q3) What takes place in the indirect finance market?
A) Part ownership of corporations is sold in the form of stocks.
B) Corporate and government bonds are sold to savers.
C) Deposits of savers are accepted and loans made to borrowers.
D) Government purchases of buildings and equipment are sold to the highest bidder.
Q4) Briefly describe the Sarbanes-Oxley Act and explain why it was passed.
Q5) What is a corporate bond and what does it specify?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Comparative Advantage and the Gains From International Trade
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/75208
Sample Questions
Q1) A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a
A) tariff.
B) quota.
C) quantity floor.
D) barricade.
Q2) Refer to Figure 9-2.The tariff revenue collected by the government equals the area
A) D + E + F.
B) E.
C) B + D + E + F.
D) C + D + E + F.
Q3) U)S.firms that sell products in foreign markets protested the "Buy American" provision in the 2009 stimulus bill,arguing that if the United States restricted imports from foreign firms,
A) foreign countries would likely retaliate by limiting U.S. exports.
B) foreign firms would stop selling all products in the United States.
C) U.S. firms would never be able to meet the increased demand for U.S.-produced goods.
D) eventually the government would demand price cuts from U.S. manufacturers.
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Consumer Choice and Behavioral Economics
Available Study Resources on Quizplus for this Chatper
154 Verified Questions
154 Flashcards
Source URL: https://quizplus.com/quiz/75236
Sample Questions
Q1) Refer to Figure 10-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q<sub>1</sub> to Q<sub>0</sub>.This change in quantity demanded is due to
A) the price and output effects.
B) the income and substitution effects.
C) the fact that marginal willingness to pay falls.
D) the law of diminishing marginal utility.
Q2) Suppose the consumer's income increases while the prices of the goods remain constant.Then the
A) budget constraint shifts inward parallel to the original budget constraint.
B) budget constraint shifts outward parallel to the original budget constraint.
C) indifference curves shift outward away from the origin.
D) indifference curves become flatter.
Q3) Consider a downward-sloping demand curve.When the price of a normal good decreases,the income and substitution effects
A) work in the same direction to increase quantity demanded.
B) work in the same direction to decrease quantity demanded.
C) work in opposite directions and quantity demanded increases.
D) work in opposite directions and quantity demanded decreases.
Q4) What is marginal utility and what is the law of diminishing marginal utility?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Technology, production, and Costs
Available Study Resources on Quizplus for this Chatper
174 Verified Questions
174 Flashcards
Source URL: https://quizplus.com/quiz/75235
Sample Questions
Q1) Which of the following costs will not change as output changes?
A) marginal cost
B) total variable cost
C) average variable cost
D) average fixed cost
E) total fixed cost
Q2) Red Stone Creamery currently hires 5 workers.When it added a 6th worker,its output actually fell.Which of the following statements is true?
A) The marginal product of the sixth worker must be negative.
B) The average product of the sixth worker is negative.
C) The sixth worker is not as skilled as the fifth worker.
D) The total product becomes negative.
Q3) Refer to Table 11-3.What is the variable cost of production when the firm produces 115 lanterns?
A) $1,556
B) $1,157
C) $956
D) $10.05
Q4) What are economies of scale? What are diseconomies of scale?
Q5) What is an isoquant? What is the slope of an isoquant?
Page 13
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: Firms in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
153 Verified Questions
153 Flashcards
Source URL: https://quizplus.com/quiz/75234
Sample Questions
Q1) Both individual buyers and sellers in perfect competition
A) can influence the market price by their own individual actions.
B) can influence the market price by joining with a few of their competitors.
C) have to take the market price as a given.
D) have the market price dictated to them by government.
Q2) A perfectly competitive industry achieves allocative efficiency because
A) goods and services are produced at the lowest possible cost.
B) goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.
C) it produces where market price equals marginal production cost.
D) firms carry production surpluses.
Q3) For a perfectly competitive firm,which of the following is not true at profit maximization?
A) Market price is greater than marginal cost.
B) Marginal revenue equals marginal cost.
C) Total revenue minus total cost is maximized.
D) Price equals marginal cost.
Q4) What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Monopolistic Competition: The Competitive
Model in a More Realistic Setting
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/75233
Sample Questions
Q1) Which of the following characteristics is common to monopolistic competition and perfect competition?
A) Firms produce identical products.
B) Entry barriers into the industry are low.
C) Each firm faces a downward -sloping demand curve.
D) Firms take market prices as given.
Q2) One reason why the coffeehouse market is competitive is that
A) demand for specialty coffee is very high.
B) it is trendy and therefore is likely to have a customer following.
C) barriers to entry are low.
D) consumption takes place in public.
Q3) If a firm faces a downward-sloping demand curve,
A) the demand for its product must be inelastic.
B) it can control both price and quantity sold.
C) it must reduce its price to sell more units.
D) it will always make a profit.
Q4) What are the most important differences between perfectly competitive markets and monopolistically competitive markets?
Page 15
Q5) What is the difference between zero accounting profit and zero economic profit?
Q6) What is the difference between the terms "marketing" and "advertising"?
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 14: Oligopoly: Firms in Less Competitive Markets
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/75232
Sample Questions
Q1) Suppose we want to use game theory to analyze how an oligopolist selects its optimal price.The cells of the payoff matrix show
A) the profit that each producer can expect to earn by pursuing a single strategy.
B) the profit that each producer can expect to earn from every combination of strategies by the firms in the market.
C) the strategy that a firm must pursue to earn various levels of profit.
D) the expected profits of rival firms.
Q2) The equilibrium in the prisoner's dilemma is a dominant strategy Nash equilibrium. A)True B)False
Q3) A market comprised of only two firms is called a A) competitive market. B) duopoly.
C) monopoly.
D) monopolistically competitive market.
Q4) Explain how collusion makes firms better off.Given the incentives to collude,briefly explain why every industry does not become a cartel.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Monopoly and Antitrust Policy
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/75231
Sample Questions
Q1) Refer to Figure 15-9.The profit-maximizing price is
A) P<sub>1</sub>.
B) P<sub>2</sub>.
C) P<sub>3</sub>.
D) P<sub>4</sub>.
Q2) Why does a monopoly cause a deadweight loss?
A) because it does not produce some output for which marginal benefit exceeds marginal cost
B) because it appropriates a portion of consumer surplus for itself
C) because it increases producer surplus at the expense of consumer surplus
D) because it does not produce some output for which demand exceeds supply
Q3) To maximize profit,a monopolist will produce and sell a quantity such that for the last unit sold,marginal revenue equals marginal cost,and charges a price given by the demand curve at that output level.
A)True
B)False
Q4) What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists?
Q5) Identify two ways by which the government controls monopolies?
Q6) Explain why the monopolist has no supply curve?
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Pricing Strategy
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/75230
Sample Questions
Q1) What is perfect price discrimination and why do economists believe that no firm is able to practice perfect price discrimination?
Q2) With perfect price discrimination there is A) no deadweight loss.
B) no producer surplus.
C) one single price.
D) an increase in consumer surplus.
Q3) Refer to Figure 16-2.What is the quantity sold to each group of customer and what is the total quantity sold?
A) quantity sold to students=Q<sub>b</sub>; quantity sold to non-students=Q<sub>b</sub>; total sales=Q<sub>a</sub>
B) quantity sold to students=Q<sub>c</sub>; quantity sold to non-students=Q<sub>b</sub>; total sales=Q<sub>b</sub>+Q<sub>c</sub>
C) quantity sold to students=Q<sub>c</sub>; quantity sold to non-students=Q<sub>e</sub>; total sales=Q<sub>e</sub>+Q<sub>c</sub>
D) quantity sold to students=Q<sub>c</sub>; quantity sold to non-students=Q<sub>d</sub>; total sales=Q<sub>d</sub>+Q<sub>c</sub>
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 17: The Markets for Labor and Other Factors of Production
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/75229
Sample Questions
Q1) If a firm is the sole employer of a factor of production,it is known as A) a monopoly.
B) a competitor.
C) a monopsony.
D) an economically discriminating firm.
Q2) Wage differences among workers of different races and gender could be due to all of the following except
A) differences in preferences for jobs.
B) differences in work experience.
C) differences in education.
D) labor unions.
Q3) Suppose that Hawaii legalizes casino gambling.By imposing a tax on casino revenues,the state government is able to eliminate the state income tax on wages.What is likely to be the effect on the labor supply curve in Hawaii?
Q4) A decrease in the wage rate causes
A) an increase in the quantity of labor demanded.
B) a rightward shift of the firm's labor demand curve.
C) a leftward shift of the firm's labor demand curve.
D) a decrease in labor's productivity.
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Public Choice, taxes, and the Distribution of Income
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/75228
Sample Questions
Q1) Suppose the equilibrium price and quantity of a 12-pack of Dr.Pepper are $5.00 and 10,000 12-packs,respectively,and the government decides to impose a $1.00 tax on every 12-pack of carbonated soft drinks.Draw two supply and demand graphs,one showing the excess burden of the tax when supply is less elastic and the other showing the excess burden of the tax when supply is more elastic.Identify the excess burden of the tax on each graph.On which graph is the excess burden the greatest?
Q2) The sales tax
A) is consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income people.
B) is not consistent with the ability-to-pay principle because low-income individuals tend to spend a larger fraction of their income than do high-income individuals.
C) is not consistent with the ability-to-pay principle because low-income individuals tend to purchase a smaller bundle of goods and services compared to high-income individuals.
D) is not consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income individuals, yet pay the same sales tax rate.
To view all questions and flashcards with answers, click on the resource link above.
Page 21
Chapter 19: GDP: Measuring Total Production and Income
Available Study Resources on Quizplus for this Chatper
135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/75227
Sample Questions
Q1) The GDP deflator is the
A) difference between real GDP and nominal GDP multiplied by 100.
B) difference between nominal GDP and real GDP multiplied by 100.
C) ratio of real GDP to nominal GDP multiplied by 100.
D) ratio of nominal GDP to real GDP multiplied by 100.
Q2) Which of the following is not a durable good?
A) furniture
B) automobile
C) clothing
D) refrigerator
Q3) The output of U.S.citizens who work in Canada would be included in the A) gross domestic product of Canada.
B) gross national product of Canada.
C) gross domestic product of the United States.
D) gross national product of Canada and the gross national product of the United States.
Q4) Is nominal GDP measured in terms of quantity or in terms of dollars? If dollars,the value of the dollar from what period? Is real GDP measured in terms of quantity or in terms of dollars? If dollars,the value of the dollar from what period?
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 20: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/75225
Sample Questions
Q1) Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students.This would cause
A) the unemployment rate to decrease.
B) the labor force participation rate to decrease.
C) the number of discouraged workers to increase.
D) no change in the unemployment rate.
Q2) Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?
A) unemployment rate
B) discouraged-worker ratio
C) labor force participation rate
D) the ratio of minimum wage to inflation
Q3) The inflation rate measures the average prices of goods and services in the economy.
A)True
B)False
Q4) Describe how inflation can be costly even if it is anticipated.
To view all questions and flashcards with answers, click on the resource link above.
Page 23
Chapter 21: Economic Growth, the Financial System, and Business Cycles
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/75224
Sample Questions
Q1) If real GDP grows by 3% in 2009,3.2% in 2010,and 2.5% in 2011,what is the average annual growth rate of real GDP?
A) 2.6%
B) 2.9%
C) 3.1%
D) 4.2%
Q2) Explain and show graphically how government deficits can "crowd out" private investment.
Q3) Which of the following is a correct statement?
A) Inflation is measured as the percent change in the CPI.
B) The CPI is a widely used measure of the inflation rate.
C) Real GDP is our best measure of economic growth.
D) The PPI measures inflation as experienced by producers.
Q4) From 1991 until 2001,the United States was in a period of A) expansion.
B) recession.
C) business cycle troughs.
D) business cycle peaks.
Page 24
Q5) Use the equations for public and private saving to demonstrate how total saving in the economy equals investment.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 22: Long-Run Economic Growth: Sources and Policies
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/75223
Sample Questions
Q1) Knowledge capital is nonrival in the sense that
A) two people can use the same knowledge to develop and produce a product.
B) firms do not compete to be the first to develop new technologies.
C) no single company can be excluded from the benefits of new technologies.
D) firms can benefit from the research and development of rival firms without paying for that benefit.
Q2) Which of the following explains the ability of the U.S.economy to avoid diminishing marginal returns and experience accelerating growth in the early to mid-20th century?
A) continuing technological change
B) immigration
C) additions of a greater amount of capital of the same quality
D) a decrease in the quality of labor
Q3) What features made England in the eighteenth century the place where the Industrial Revolution occurred?
Q4) Which of the following is not one of the three sources of technological change?
A) additional amounts of existing capital
B) better machinery and equipment
C) increases in human capital
D) better means of organizing and managing production
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 23: Aggregate Expenditure and Output in the Short Run
Available Study Resources on Quizplus for this Chatper
157 Verified Questions
157 Flashcards
Source URL: https://quizplus.com/quiz/75222
Sample Questions
Q1) Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400
A) -0.1
B) 0.1
C) 0.9
D) 2000
Q2) Refer to Figure 23-2.If the U.S.economy is currently at point N,which of the following could cause it to move to point K?
A) Households expect future income to decline.
B) Household wealth rises.
C) The firm's cash flow rises as profits rise.
D) Government expenditures increase.
Q3) The formula for aggregate expenditure is
A) AE = C + I + G.
B) AE = C + I + G - NX.
C) AE = C + I + G + NX.
D) AE = C + I + depreciation - NX.
To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 24: Aggregate Demand and Aggregate Supply Analysis
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/75221
Sample Questions
Q1) Proponents of the real business cycle model argue that the short-run aggregate supply curve is
A) flat.
B) positively sloped.
C) vertical.
D) negatively sloped.
Q2) Monetarism is a school of thought put forth by ________,who argued that the economy would most likely be at potential GDP.
A) Karl Marx
B) Milton Friedman
C) Finn Kydland and Edward Prescott
D) Robert Lucas and Thomas Sargent
Q3) If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?
A) This will move the economy up along a stationary aggregate demand curve.
B) This will move the economy down along a stationary aggregate demand curve.
C) This will shift the aggregate demand curve to the left.
D) This will shift the aggregate demand curve to the right.
Q4) Briefly describe monetarism and the monetary growth rule.
Page 27
To view all questions and flashcards with answers, click on the resource link above.
Chapter 25: Money, banks, and the Federal Reserve System
Available Study Resources on Quizplus for this Chatper
144 Verified Questions
144 Flashcards
Source URL: https://quizplus.com/quiz/75220
Sample Questions
Q1) What are the four functions of money? Can something be considered money if it does not fulfill all four functions?
Q2) One way investment banks differ from commercial banks is that investment banks
A) lend exclusively to households.
B) do not take in deposits.
C) only buy and sell mortgages.
D) trade only in foreign exchange markets.
Q3) A central bank like the Federal Reserve in the United States can help banks survive a bank run by
A) printing money.
B) acting as a lender of last resort.
C) raising the discount rate.
D) increasing the required reserve ratio.
Q4) Which of the following is not a consequence of the Fed changing the reserve requirement?
A) Changes in the ratio are easily incorporated into banks' routine management.
B) Decreasing the ratio will increase excess reserves.
C) Increasing the ratio will decrease the amount of reserves banks have to loan.
D) Changes in the ratio effectively places a tax on banks' deposit taking and lending activities.
To view all questions and flashcards with answers, click on the resource link above. Page 28
Chapter 26: Monetary Policy
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/75219
Sample Questions
Q1) Would the Federal Reserve respond more aggressively with interest rate cuts in a recession caused by a decrease in spending,as in the 2001 recession,than in a recession caused by an increase in oil prices,as in the 1974-75 recession?
Q2) Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Federal Reserve's open market sale of Treasury securities.
Q3) The Fed can simultaneously reduce the inflation rate and stimulate growth through lowering interest rates.
A)True
B)False
Q4) Your roommate is having trouble grasping how monetary policy works.Which of the following explanations could you use to correctly describe the mechanism by which the Fed can affect the economy through monetary policy? Increasing the money supply
A) lowers the interest rate, and firms increase investment spending.
B) causes people to spend more because they know prices will rise in the future.
C) raises the interest rate and consumers decrease spending on durable goods.
D) lowers the interest rate, raises the value of the dollar, lowers the prices of exports, and raises net exports.
To view all questions and flashcards with answers, click on the resource link above.
Page 29
Chapter 27: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
155 Verified Questions
155 Flashcards
Source URL: https://quizplus.com/quiz/75218
Sample Questions
Q1) What is expansionary fiscal policy? What is contractionary fiscal policy?
Q2) Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the president and the Congress to conduct expansionary fiscal policy.Briefly explain the condition of the economy and what the president and the Congress are attempting to do.
Q3) The double taxation problem occurs because households pay taxes on dividends and capital gains from stock and corporations pay taxes on corporate profits.
A)True
B)False
Q4) Refer to Figure 27-2.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue
A) expansionary fiscal policy.
B) contractionary fiscal policy.
C) expansionary monetary policy.
D) contractionary monetary policy.
E) contractionary automatic stabilizers.
To view all questions and flashcards with answers, click on the resource link above. Page 30
Chapter 28: Inflation, unemployment, and Federal Reserve Policy
Available Study Resources on Quizplus for this Chatper
135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/75217
Sample Questions
Q1) Refer to Figure 28-4.A supply shock,such as rising oil prices,would be depicted as a movement from ________.
A) A to D to C
B) C to B to A
C) C to D to A
D) C to E to B
E) A to B to C
Q2) If the current unemployment rate is 5%,under which of the following circumstances would you expect the Fed to use expansionary monetary policy?
A) if the natural rate of unemployment is below 5%
B) if the natural rate of unemployment is above 5%
C) if the inflation rate is above 5%
D) if the inflation rate is below 5%
Q3) The curve showing the short-run relationship between the unemployment rate and the inflation rate is called
A) the monetary policy curve.
B) the Phillips curve.
C) the Sargent curve.
D) the unemployment curve.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 29: Macroeconomics in an Open Economy
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/75216
Sample Questions
Q1) The balance of trade is defined as
A) the difference between the balance of the current account and the balance of the capital account.
B) the difference between the value of the goods and services a country exports and the value of the goods and services a country imports.
C) the difference between the value of the goods a country exports and the value of the goods a country imports.
D) the difference between the balance of the current account and the balance of the financial account.
Q2) Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?
Q3) If the United States has a net export surplus,which of the following must be true?
A) The balance on the financial account must equal the balance on the current account.
B) Net foreign investment must be positive as well.
C) Domestic private saving must be greater than net foreign investment.
D) Domestic public saving must be greater than net foreign investment.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 30: The International Financial System
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/75214
Sample Questions
Q1) How were exchange rates determined under the gold standard? How did the Bretton Woods system differ from the gold standard?
Q2) The current exchange rate system in the United States is best described as a A) silver standard.
B) managed float exchange rate system.
C) fixed exchange rate system.
D) gold standard.
Q3) Refer to Figure 30-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D<sub>2</sub>.After the shift,
A) there is a shortage of pounds equal to 600 million.
B) there is a surplus of pounds equal to 400 million.
C) there is a shortage of pounds equal to 400 million.
D) there is a surplus of pounds equal to 600 million.
E) there is a shortage of pounds equal to 200 million.
Q4) Managed float exchange systems were abandoned with the implementation of the gold standard.
A)True
B)False
Page 33
To view all questions and flashcards with answers, click on the resource link above.