Fundamentals of Economics Exam Practice Tests
Course Introduction
Fundamentals of Economics introduces students to the core principles and concepts that shape economic thinking and decision-making. The course covers topics such as scarcity, supply and demand, market equilibrium, consumer and producer behavior, and the role of government in economic systems. Students will also explore macroeconomic issues including inflation, unemployment, and economic growth, as well as the basics of international trade and finance. Through real-world examples and analytical tools, the course provides a strong foundation for understanding how economies function and the factors that influence economic outcomes at both individual and societal levels.
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) The expression "there's no such thing as a free lunch" means that:
A) services may be free, but goods are never free.
B) even if a good or service has a price of zero, it has a cost.
C) charitable organizations should not serve free lunches to the poor.
D) poor people are really the ones who pay for their allegedly free lunches.
E) someone has to pay the market price for a good or service.
Answer: B
Q2) Behavioral assumptions:
A) make economic models more complex than if these assumptions were removed.
B) pertain only to consumers.
C) hold all other things constant.
D) are ways to test a hypothesis.
E) describe what motivates decision makers.
Answer: E
Q3) Economists often focus on average behavior because it is easier to predict.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
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) The law of comparative advantage does not apply to _____
A) entire nations.
B) natural resources.
C) individuals.
D) firms.
E) the regions of a country.
Answer: B
Q2) If Sam can chop more carrots per minute than Joe can, then _____
A) Joe has an absolute advantage in carrot chopping.
B) Joe must have a comparative advantage in carrot chopping.
C) Sam has an absolute advantage in carrot chopping.
D) Sam must have a comparative advantage in carrot chopping.
E) we can conclude nothing about absolute advantage.
Answer: C
Q3) One flaw of pure capitalism is that a person who owns no resources could starve.
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) Externalities can occur as a result of either production or consumption activities.
A)True
B)False
Answer: True
Q2) Which of the following is true of high marginal tax rates?
A) People who make more money pay less total taxes.
B) They can reduce people's incentives to work and invest.
C) The percentage of income paid in taxes decreases as income increases.
D) People who are poor receive the proceeds of the tax.
E) The percentage of income paid in taxes increases as income decreases.
Answer: B
Q3) Public goods are both rival and nonexclusive.
A)True
B)False
Answer: False
Q4) As real wage increases, the opportunity cost of working in the home increases.
A)True
B)False Answer: True
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) Refer to Exhibit 4.1 for the demand curves of baby formula. Which of the following changes will be caused by the discovery that breast milk provides more protection against a life-threatening disease than baby formula?
A) a shift of the demand curve from D to D
B) a movement along the demand curve D from point a to point b
C) a shift of the demand curve from D to D
D) a movement along the demand curve D from point d to point c
E) a movement from point b on the demand curve D to point c on the demand curve D
Q2) Suppose the market for a good is initially in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good increases during a particular point in time?
A) The equilibrium price will increase.
B) The equilibrium price will decrease.
C) The equilibrium quantity will increase.
D) The equilibrium quantity will decrease.
E) Both the equilibrium price and equilibrium quantity will decrease.
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) How much more output did the U.S. economy produce in 2016 compared to 1929?
A) 8 times more output
B) 10 times more output
C) 12 times more output
D) 14 times more output
E) 16 times more output
Q2) The recession that set in after December 2007 can be attributed to _____
A) an increase in the expenditure on war.
B) a decline in home prices and an increase in foreclosures.
C) an increase in terrorist activities.
D) crop failures around the world.
E) an increase in oil prices in the international market.
Q3) Which of the following concepts is not included in the study of macroeconomics?
A) the unemployment level
B) the inflation rate
C) real income
D) the profit-maximizing condition
E) the role of government
To view all questions and flashcards with answers, click on the resource link above.
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) If the price of a good increases compared to the base year, then the price level also increases.
A)True
B)False
Q2) Huge quantities of data collected from a variety of sources across the United States are organized under which system?
A) the budget deficit of the federal government
B) the stock of capital goods (machinery) in the nation
C) the national income accounting system
D) the balance of trade with other nations
E) the value of the final goods and services produced in the nation
Q3) A GDP price index of 100 for a year implies that _____
A) there has been no inflation during the year.
B) the price level is three times what it was in the base year.
C) the price level is one hundred times what it was in the base year.
D) the price level is double what it was in the base year.
E) the inflation rate has been 100 percent per year since the base year.
Q4) The value-added method to measure GDP does not avoid double-counting.
A)True
B)False
Page 8
To view all questions and flashcards with answers, click on the resource link above.
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) The nominal interest rate is equal to the real interest rate minus the anticipated inflation rate.
A)True
B)False
Q2) In recent times, there has been a decline in the sale of newspapers in the United States as people prefer to read the news on the internet. This has caused many newspaper journalists to lose their jobs. This is an example of _____
A) structural unemployment.
B) frictional unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) underemployment.
Q3) Cyclical unemployment results from _____
A) a mismatch of skills.
B) being in the wrong geographical location.
C) the monetary cost and the time it takes to find the best job.
D) seasonal decreases in the demand for labor.
E) a prolonged decline in business activity.
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) Research and development is most likely to have an impact on the _____
A) quantity of labor available.
B) quantity of capital goods available.
C) quality of labor available.
D) quality of capital goods available.
E) use of energy.
Q2) An increase in the production of capital goods and a reduction in the production of consumer goods would most likely lead to a faster rate of future economic growth.
A)True
B)False
Q3) Which of the following factors can influence the production possibilities frontier in the future?
A) the amount of capital produced
B) a fall in the rate of inflation
C) a decrease in consumption in an economy
D) an increase in the tax rate
E) a legal reform that increases transaction costs
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) Refer to Table 9.3, which shows the real gross domestic product (GDP), consumption, and planned investment in an economy. The marginal propensity to save (MPS) in the economy is _____
A) 0.
B) 0.1.
C) 0.2.
D) 0.8.
E) 20.
Q2) Expectations that the price level will decrease in the future will _____
A) make the current consumption function flatter.
B) shift the current consumption function downward.
C) result in an upward movement along the current consumption function.
D) result in a downward movement along the current consumption function.
E) make the current consumption function steeper.
Q3) The smaller the marginal propensity to save, other things constant, _____
A) the smaller the marginal propensity to consume.
B) the smaller the multiplier.
C) the flatter the consumption function.
D) the steeper the consumption function.
E) the steeper the saving function.
To view all questions and flashcards with answers, click on the resource link above. Page 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) Refer to Exhibit 10.3, which shows an aggregate demand-aggregate supply model. The shift from AS to AS' is likely to occur when _____
A) the actual price level is higher than expected.
B) the actual price level is lower than expected.
C) the unemployment rate is lower than the natural rate.
D) the actual output is more than the potential output.
E) the aggregate demand curve intersects the short-run aggregate supply curve at the potential output.
Q2) Wage rates are typically flexible upward but "sticky" downward.
A)True
B)False
Q3) The actual price level is assumed to be constant along a given short-run aggregate supply curve.
A)True
B)False
Q4) Refer to Exhibit 10.2. The short-run equilibrium output in the economy is Y .
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) Which of the following is an automatic stabilizer?
A) unemployment insurance
B) government spending
C) net taxes
D) the interest rate
E) the minimum wage set by the government
Q2) If the economy is already producing at its potential, _____
A) the spending multiplier equals 1/(1 MPC) in the long run.
B) the spending multiplier is less than 1/(1 MPC) in the long run.
C) the spending multiplier is more than 1/(1 MPC) in the long run.
D) the spending multiplier equals zero in the long run.
E) the aggregate demand curve is horizontal.
Q3) The American Recovery and Reinvestment Act was financed by _____
A) decreasing the federal budget surplus spending by decreasing interest on borrowings.
B) increasing the federal budget deficit spending by increasing borrowings.
C) increasing aggregate supply.
D) Increasing aggregate demand.
E) Increasing potential GDP.
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) Among the following cases, the opportunity cost of crowding out is the smallest when the government spends dollars _____
A) staffing the Internal Revenue Service hotline.
B) printing stationery for new members of Congress.
C) placing photographs of the new president in government and diplomatic offices worldwide.
D) on Social Security benefits.
E) on new interstate highways.
Q2) Nearly half of the publicly held U.S. federal debt is held by foreigners.
A)True
B)False
Q3) A possible budget reform involves _____
A) adopting a quadrennial budget.
B) breaking down the budget into increasingly small budget lines.
C) appointing agency heads with different priorities than those of elected representatives.
D) simplifying the budget document by concentrating only on major groupings and eliminating line items.
E) eliminating the operating budget.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
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) Coins are minted with serrated edges _____
A) to make it obvious that they are made of cheap alloys.
B) so that cheaper metals do not have to be used.
C) to allow words to be printed on the border.
D) to prevent the coins from being clipped.
E) to make them jingle less when they are rubbed together.
Q2) Thrift institutions encountered serious difficulties in the 1970s because _____
A) money market mutual funds became serious competitors for their deposits.
B) the U.S. Treasury deposited larger sums of money than the thrift institutions could effectively manage.
C) the interest rates they had to pay on deposits began to fall.
D) each of the largest banks increased the pressure on the thrifts by building a nationwide network of branch banks.
E) the FDIC increased the reserve requirement for thrifts.
Q3) Paper money is a good example of commodity money.
A)True B)False
Q4) The only money that can be used as a standard of value is fiat money.
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) Which of the following is a disadvantage of using debit cards?
A) Debit cards are unsafe for use.
B) Debit cards do not provide a grace period between a purchase and required payment.
C) Debit cards delay payments.
D) Debit cards are not easy to use.
E) Debit cards make purchases more expensive than they actually are.
Q2) In the United States, paper money is redeemable for gold.
A)True
B)False
Q3) Which of the following enables commercial banks to create money?
A) required reserves
B) excess reserves
C) state and local government securities
D) U.S. government securities
E) net worth
Q4) If banks choose not to lend out their excess reserves, the money supply will not expand.
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) Exhibit 15.2 shows equilibrium in a money market. Which of the following will be observed if the money supply curve shifts from S to S* while the rate of interest remains at "r"?
A) There will be an excess demand for money.
B) There will be an excess supply of money.
C) The Fed will sell U.S. Treasury securities.
D) The money market equilibrium will move from point B to point C.
E) The money market equilibrium will move from point C to point A.
Q2) When the Fed is targeting the money supply, it has complete control over the interest rate.
A)True
B)False
Q3) Recent history shows that velocity has been neither stable nor predictable, so the quantity theory is _____
A) an accurate guide to inflation in the short run.
B) not an accurate guide to inflation in the short run.
C) an accurate guide to inflation in the long run.
D) not an accurate guide to inflation in the long run.
E) no longer accepted.
To view all questions and flashcards with answers, click on the resource link above.
Page 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) Those who favor a passive approach to policy believe that _____
A) discretionary monetary policy can be used to help an economy since monetary policy lags are short.
B) discretionary fiscal policy can be used to help an economy since fiscal policy lags are short.
C) lags associated with implementing policies are too long and unstable for discretionary policy to be effective.
D) despite the lags involved, implementing discretionary policy is preferable to inaction.
E) automatic stabilizers cannot be used to help an economy since monetary policy lags are short.
Q2) The time it takes for a new policy to register its full impact on an economy after it has been put in force is known as the _____
A) activity lag.
B) decision-making lag.
C) effectiveness lag.
D) implementation lag.
E) recognition lag.
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) If the United States has an absolute advantage in producing computer components, it should export them worldwide.
A)True
B)False
Q2) The United States is a major exporter of _____
A) diamonds.
B) bananas.
C) coffee.
D) corn.
E) gold.
Q3) Exports account for _____ of the gross domestic product (GDP) in Germany, Sweden, and Switzerland.
A) one-sixth
B) one-third
C) one-quarter
D) half
E) two-thirds
Q4) An import quota is a tax on imports.
A)True
B)False
Page 19
To view all questions and flashcards with answers, click on the resource link above.
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) Spending on U.S. merchandise imports is a _____ in the balance-of-payments account.
A) credit
B) debit
C) payment
D) investment
E) unilateral transfer
Q2) The Bretton Woods agreement was reached _____
A) immediately after the Civil War.
B) just before World War I.
C) just after World War I.
D) just after the Great Depression.
E) toward the end of World War II.
Q3) In the balance-of-payments account, the receipts from the rest of the world are entered as _____.
A) credits.
B) debits.
C) payments.
D) investments.
E) unilateral transfers.
To view all questions and flashcards with answers, click on the resource link above. Page 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) Private international borrowing and lending is freely allowed by governments of developing countries.
A)True
B)False
Q2) Erbia, a small developing country, needs funds to develop their communication networks. Erbia is likely to approach _____ for assistance.
A) the World Bank
B) the International Monetary Fund (IMF)
C) the United Nations Children's Fund (UNICEF)
D) the World Health Organization (WHO)
E) the World Trade Organization (WTO)
Q3) Which of the following is likely to be a characteristic of a developing country?
A) a high rate of illiteracy
B) a low rate of population growth
C) a high rate of economic growth
D) the export of only manufactured goods
E) the efficient use of labor
Q4) Wages are high in poor countries because businesses are run efficiently.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 21