General Economics
Exam Materials
Course Introduction
General Economics introduces students to the fundamental principles and concepts that underpin economic theory and practice. The course covers key topics such as supply and demand, market structures, consumer behavior, production and costs, and the role of government in the economy. Students will explore both microeconomics and macroeconomics, gaining an understanding of how individual markets operate as well as how the overall economy functions. Through real-world examples and analysis, the course aims to develop critical thinking and decision-making skills that are essential for interpreting economic events and policies.
Recommended Textbook
Survey of Economics 8th Edition by Irvin B. Tucker
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27 Chapters
4541 Verified Questions
4541 Flashcards
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Page 2
Chapter 1: Introducing the Economic Way of Thinking
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Sample Questions
Q1) The factors of production are which of the following?
A) The outputs generated by the production process of transforming land, labor, and capital into goods and services.
B) The land resources, such as natural resources, that are unimproved by human economic activity.
C) Land (natural resources), labor (human capital, entrepreneurship), and capital (constructed inputs such as factories).
D) Labor and capital in industrialized countries, where natural resources are no longer used to produce goods and services.
Answer: C
Q2) The statement,"John buys more of good X as his income increases,Ceteris paribus," means:
A) John's income is being held constant.
B) John's purchases of good X are being held constant.
C) John's income and purchases of this good are being held constant.
D) the price of this good is being allowed to change.
Answer: D
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3
Chapter 1: A: Appendix: Applying Graphs to Economics
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Sample Questions
Q1) In Exhibit 1A-2,as X increases along the horizontal axis,corresponding to points C-D on the line,the Y values increase.The relationship between the X and Y variables is:
A) direct.
B) inverse.
C) independent.
D) variable.
Answer: A
Q2) Measured between two points on a curve,the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:
A) axis.
B) slope.
C) dependent curve.
D) independent curve.
Answer: B
Q3) A graph is one method of expressing a model.
A)True
B)False
Answer: True
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4
Chapter 2: Production Possibilities,Opportunity Cost,and Economic Growth
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Sample Questions
Q1) One source of economic growth is:
A) producing inside the production possibilities curve.
B) producing outside the production possibilities curve.
C) increasing capital.
D) discouraging profit-seeking entrepreneurs.
Answer: C
Q2) The opportunity cost of an economic decision is:
A) the best alternative that was sacrificed.
B) the amount of money needed to implement the decision.
C) any land, labor, and capital that are wasted.
D) all options that were lost due to scarcity.
Answer: A
Q3) Unemployment or underemployment of labor might explain why an economy would be operating inside its production possibilities curve (PPC).
A)True
B)False
Answer: True
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Page 5
Chapter 3: Part 1: Market Demand and Supply
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250 Flashcards
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Sample Questions
Q1) In economic terms,to say that there has been an increase in demand for a product means that:
A) the demand curve has shifted to the left.
B) the product's price has fallen and as a result consumers are buying a larger quantity of the product.
C) the product has become scarce for some reason.
D) consumers are now willing to purchase more of the product at each possible price.
Q2) A surplus occurs when the:
A) quantity demanded exceeds the quantity supplied.
B) price is below the equilibrium price.
C) price is at the equilibrium.
D) price is above the equilibrium.
Q3) Assuming that clothing is a normal good,an increase in consumer income,other things being equal,would:
A) increase the demand for clothing.
B) decrease the demand for clothing.
C) increase the quantity of clothing demanded.
D) decrease the quantity of clothing demanded.
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Chapter 3: Part 2: Market Demand and Supply
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Sample Questions
Q1) Market equilibrium occurs when the quantity supplied is greater than the quantity demanded.
A)True
B)False
Q2) Which of the following situations results from a ticket price to a concert set below the equilibrium price?
A) A long line of people wanting to purchase tickets to the concert.
B) No line of people wanting to buy tickets to the concert.
C) Tickets available at the box office, but no line of people wanting to buy them.
D) None of the above.
Q3) In Exhibit 3-16,assume that the market price of chairs is $15 each.This price is:
A) an equilibrium price.
B) not an equilibrium price, since there is an excess demand at a price of $10.
C) an equilibrium price, since suppliers can store inventories in their warehouses.
D) not an equilibrium price, since the rate at which chairs are being supplied is greater than the rate at which they are being demanded.
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Chapter 4: Markets in Action
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Sample Questions
Q1) Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from:
A) poor planning.
B) intentional damages.
C) excessive costs.
D) excessive losses.
E) the economic activity of others.
Q2) Suppose a price floor is set by the government above the market equilibrium price.Which of the following will result?
A) There will be a surplus.
B) The quantity demanded will exceed the quantity supplied.
C) The demand curve will shift to the left.
D) None of the above.
Q3) Which of the following would decrease the price of packaged hot dogs?
A) An increase in the price of hot dog buns, a complement to packaged hot dogs.
B) A decrease in the price of hamburger meat, a substitute for packaged hot dogs.
C) A technological advance that lowers the cost of producing packaged hot dogs.
D) All of the above.
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Chapter 5: Price Elasticity of Demand
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Sample Questions
Q1) In Exhibit 5-7,If promoters charge a price of $10 per ticket,then their total revenue is:
A) $240,000.
B) $300,000.
C) $333,333.
D) $800,000.
Q2) Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel.The price elasticity of demand in this range of the demand curve is:
A) elastic.
B) inelastic.
C) unitary elastic.
D) infinitely elastic.
Q3) If a 10 percent price increase causes the quantity demanded for a good to decrease by 5 percent,demand is elastic.
A)True
B)False
Q4) What happens to total revenue given a price increase and demand is inelastic? Why?
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9
Chapter 6: Production Costs
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Sample Questions
Q1) If a firm has total revenue of $200 million,explicit costs of $190 million,and implicit costs of $30 million,its economic profit is:
A) $200 million.
B) $70 million.
C) $10 million.
D) -$10 million.
E) -$20 million.
Q2) Payments to nonowners of a firm are called:
A) implicit costs.
B) accounting costs.
C) explicit costs.
D) economic costs.
Q3) As a fishing firm hires its first,second,and third workers,it could find that marginal product actually rises.The reason for this is:
A) diminishing returns have set in.
B) the division of labor creates greater productivity.
C) the firm has hired another boat.
D) all tasks are shared by all workers.
E) less qualified workers are becoming available.
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Page 10
Chapter 7: Perfect Competition
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Sample Questions
Q1) If the firm in Exhibit 7-14 minimizes its loss at 200 units of output,marginal cost is:
A) $75 per unit.
B) equal to marginal revenue.
C) $100 per unit.
D) $175 per unit.
Q2) A competitive firm maximizes its profits (or minimizes is losses)by producing the quantity where the market price equals the firm's:
A) marginal cost.
B) average total cost.
C) average variable cost.
D) average fixed cost.
Q3) Consider a firm with the following cost information: ATC = $15,AVC = $12,and MC = $14.If we know that this firm has decided to produce Q = 20 by following the rule to maximize profits or minimize losses,then the price of the output is:
A) $12.
B) $14.
C) $15.
D) $20.
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Chapter 8: Monopoly
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Sample Questions
Q1) A monopolist will earn economic profits as long as his price exceeds:
A) marginal revenue.
B) average fixed cost.
C) average variable cost.
D) average total cost.
Q2) There is only one gas station within hundreds of miles.The owner finds that when she charges $3 a gallon,she sells 199 gallons a day,and when she charges $2.99 a gallon,she sells 200 gallons a day.The marginal revenue of the 200th gallon of gas is:
A) $.01.
B) $1.
C) $2.99.
D) $3.
E) $600.
Q3) At the point where the marginal revenue equals zero for a monopolist facing a straight-line demand curve,total revenue is:
A) greater than 1.
B) maximum.
C) less than 1.
D) equal to zero.
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Page 12
Chapter 9: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) The automobile,steel,and oil markets are all examples of:
A) perfectly competitive markets.
B) monopolies.
C) monopolistically competitive markets.
D) oligopolies.
Q2) In a price leadership oligopoly model,
A) a cartel of leading firms determines price and industry output.
B) the industry in consortium with the government determines price and output.
C) one firm is the price leader and all other firms follow.
D) the firms abandon a profit-maximizing goal.
E) firms do not operate where MR = MC.
Q3) The demand curve in monopolistic competition slopes downward because of:
A) strong barriers to entry.
B) product differentiation.
C) the small number of firms.
D) government regulation.
E) the similarities of the businesses.
Q4) Oligopolies have few sellers and difficult entry.
A)True
B)False
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Chapter 10: Labor Markets and Income Distribution
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Sample Questions
Q1) Which of the following countries has the largest union membership measured as the percentage of civilian employees in unions?
A) The United States.
B) Japan.
C) The United Kingdom.
D) Sweden.
Q2) When a firm hires an additional unit of labor,the increase in a firm's total revenues is known as the marginal:
A) cost.
B) product.
C) utility product.
D) revenue product.
Q3) As a percentage of nonfarm workers,union membership in the United States grew most rapidly since 1945.
A)True
B)False
Q4) Wage discrimination means minority workers are paid unequal wages.
A)True
B)False
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Chapter 11: Gross Domestic Product
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Sample Questions
Q1) When depreciation is subtracted from:
A) Personal income, we get national income.
B) Gross Domestic Product, we get national income.
C) Gross Domestic Product, we get personal income.
D) Disposable Personal Income, we get Gross Domestic Product.
Q2) In Exhibit 11-7,personal income (PI)equals:
A) $3,472 billion.
B) $3,691 billion.
C) $4,291 billion.
D) $3,384 billion.
E) $3,175 billion.
Q3) Which of the following is included in GDP?
A) The value of "free" household services provided by at-home spouses rather than a paid cook, maid, and baby sitter.
B) The value of unpaid-for volunteer time.
C) The unpaid-for services provided by the natural environment, such as breathable air.
D) Net exports: (value of exports - value of imports).
Q4) Explain why GDP was never intended to be a measure of social well being.
Q5) Discuss the components of GDP using the expenditure approach.
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Chapter 12: Business Cycles and Unemployment
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Sample Questions
Q1) If real GDP declines for at least one-half year,the economy is experiencing a:
A) depression.
B) decline.
C) recession.
D) growth recession.
E) deflation.
Q2) Althea,a brilliant new Ph.D.in economics,has turned down many job offers because she hopes eventually to teach at one of the top 10 universities in her field.The type of unemployment she is experiencing is:
A) frictional.
B) structural.
C) seasonal.
D) cyclical.
E) underemployment.
Q3) A person who has lost his or her job because it is now performed by a robot is structurally unemployed.
A)True
B)False
Q4) What does the GDP gap measure?
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Chapter 13: Inflation
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Sample Questions
Q1) As the price of gasoline rose during the 1970s,consumers cut back on their use of gasoline relative to other consumer goods.This situation contributed to which bias in the consumer price index?
A) Substitution bias.
B) Transportation bias.
C) Quality bias.
D) Indexing bias.
Q2) Which of the following is true of inflation?
A) It is an increase in the general price level of goods and services.
B) The purchasing power of money increases as the result of inflation.
C) Inflation is similar to interest payments on future money income, such as pensions and receipts from outstanding loans.
D) Inflation has no effect on real income.
Q3) A sustained decrease in the price level is known as deflation.
A)True
B)False
Q4) Who is hurt and who benefits from inflation? Why?
Q5) People with fixed incomes fare best in an inflationary period.
A)True
B)False
Page 17
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Chapter 14: Aggregate Demand and Supply
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Sample Questions
Q1) In Exhibit 14-2,the change in equilibrium from E to E represents:
A) cost-push inflation.
B) demand-pull inflation.
C) price-push inflation.
D) wage-push inflation.
Q2) According to Keynesian theory,if equilibrium real GDP is below the full-employment level,then an increase in aggregate demand will result in which of the following changes in equilibrium?
A) Real GDP will rise, but the price level will remain constant.
B) Real GDP and the price level will both rise.
C) Real GDP will remain unchanged but the price level will rise.
D) None of the above.
Q3) Suppose the price level falls.The result is that the:
A) aggregate supply curve would shift to the right.
B) aggregate supply curve would shift to the left.
C) general price level would rise causing a movement up the aggregate demand curve.
D) aggregate demand curve would slope downward because of the real balances effect.
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18
Chapter 14: A: Appendix: The Self-Correcting Aggregate
Demand and Supply Model
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Sample Questions
Q1) One reason for the short-run aggregate supply curve (SRAS)is:
A) a fixed CPI market basket.
B) perfect knowledge of workers.
C) fixed-wage contracts.
D) the upward-sloping production function.
Q2) In Exhibit 14A-3,the intersection of AD with SRAS indicates:
A) a short-run equilibrium.
B) a long-run equilibrium.
C) that the economy needs policies to reduce unemployment.
D) that the economy is at full employment.
Q3) The long-run aggregate supply curve is:
A) upward sloping.
B) downward sloping.
C) vertical at full-employment real GDP.
D) horizontal at full-employment real GDP.
Q4) Economic growth is represented in Exhibit 14A-5 by a:
A) leftward shift in the long-run aggregate supply curve (LRAS).
B) inward shift of the production possibilities curve.
C) rightward shift in the long-run aggregate supply curve (LRAS).
D) movement along the long-run aggregate supply curve (LRAS).
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Chapter 15: Fiscal Policy
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Sample Questions
Q1) In Exhibit 15-6,if the aggregate demand curve is at AD ,the government should:
A) raise taxes to move to AD .
B) cut taxes to move to AD
C) cut taxes to move to AD .
D) cut spending to move to AD ..
E) not change its policy.
Q2) The greater the marginal propensity to consume (MPC)in the economy,the greater the spending multiplier.
A)True
B)False
Q3) If consumption is $800 when income is $1,000,the marginal propensity to consume (MPC)must be 0.80.
A)True
B)False
Q4) Find the tax multiplier if the MPC is 0.75.
A) -4.
B) -3.
C) 0.33.
D) 3.
E) 4.
Page 20
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Chapter 16: The Public Sector
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Sample Questions
Q1) A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n):
A) excise tax.
B) flat tax.
C) proportional tax.
D) progressive tax.
E) regressive tax.
Q2) Which of the following answers best reflects the ability-to-pay philosophy of taxation?
A) Property tax.
B) Progressive income tax.
C) Excise tax on gasoline.
D) Excise tax on cigarettes.
Q3) A progressive income tax means the percentage of income paid in taxes decreases as income increases.
A)True
B)False
Q4) The Social Security payroll tax tends to be regressive.
A)True
B)False
Page 21
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Chapter 17: Federal Deficits,Surpluses,and the National Debt
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Sample Questions
Q1) If the federal government has a budget surplus,then the national debt is:
A) reduced.
B) fully repaid.
C) negative.
D) interest-free.
Q2) Supply-side economists argue that less government spending:
A) will contract the productive side of the economy.
B) will result in more crowding out.
C) causes higher rates of unemployment and inflation.
D) would cause interest rates to increase dramatically.
E) would make more investment capital available at lower rates of interest to the private sector.
Q3) Between 1945 and 1980,the national debt as a percent of GDP:
A) decreased slightly.
B) decreased substantially.
C) remained about the same.
D) increased slightly.
E) increased substantially.
Q4) Does government borrowing crowd out private sector spending?
Q5) Are we passing the national debt burden on to our children?
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Chapter 18: Money and the Federal Reserve System
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Sample Questions
Q1) The exchange of one good for another,without the use of money,is known as:
A) acquisitive exchange.
B) liquidity.
C) volatility.
D) barter.
E) currency.
Q2) Which of the following forms of money is the least liquid?
A) Dollars.
B) Checking account deposits.
C) Passbook savings.
D) Certificates of deposit.
Q3) The Monetary Control Act of 1980:
A) allowed savings and loan associations to offer checking accounts.
B) allowed more institutions to offer checking account services.
C) created greater competition among various financial institutions.
D) all of the above.
E) none of the above.
Q4) Credit cards are money because they serve the three functions of money.
A)True
B)False
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Chapter 19: Money Creation
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Q1) Assume all banks in the system started with balance sheets as shown in Exhibit 19-3 and the Fed made a $100,000 open market purchase.The result would be a(n):
A) $500,000 expansion of the money supply.
B) $100,000 expansion of the money supply.
C) $20,000 contraction of the money supply.
D) infinite contraction of the money supply.
E) infinite expansion of the money supply.
Q2) If Matt Taylor gets his $800 loan from the Paris First National Bank in cash rather than in the form of a new checkable deposit,the:
A) Paris First National Bank will get $800 in new reserves.
B) Paris First National Bank will not get $800 in new reserves.
C) assets of the Paris First National Bank will increase by $800.
D) assets of the Paris First National Bank will decease by $88.
E) liabilities of the Paris First National Bank will increase by $800.
Q3) An increase in the discount rate by the Federal Reserve causes the money stock to expand.
A)True
B)False
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Page 24
Chapter 20: Monetary Policy
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Sample Questions
Q1) The precautionary demand for holding money is when people hold money:
A) instead of near money.
B) to transact purchases they expect to make.
C) as insurance against unexpected needs.
D) to speculate in the stock market.
E) to take advantage of changes in interest rates.
Q2) In Exhibit 20-6,a move from MS to MS :
A) increases the money supply, causing the interest rate to rise from i to i .
B) increases the money supply, causing the interest rate to fall from i to i .
C) decreases the money supply, causing the interest rate to rise from i to i .
D) decreases the money supply, causing the interest rate to fall from i to i .
E) has no effect on the money supply or the interest rate.
Q3) "Monetary instability has been the major cause of economic instability in this country.Expansion in the money supply has been the source of every major inflation.Every major recession has been either caused or perpetuated by monetary contraction." Who among the following would most likely adhere to this view?
A) Monetarists.
B) Keynesians.
C) Demand-side economists.
D) Quantity theorists.
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Chapter
Self-Correcting Aggregate Demand and Supply Model
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Sample Questions
Q1) Assume the economy is in short-run equilibrium at a real GDP above its potential real GDP.According to classical theory,which of the following policies should be followed?
A) The Federal Reserve should use open market operations and buy U.S. government securities.
B) The Federal Reserve should not follow a fixed rule.
C) The federal government should cut taxes.
D) Fiscal policy and monetary policy should not be activist.
Q2) If the economy is not operating at full-employment real GDP,classical economists prescribe a government policy of nonintervention.
A)True
B)False
Q3) In Panel (b)of Exhibit 20A-2,the economy is initially in short-run equilibrium at real GDP level Y and price level P .If the federal government or Fed decides to intervene,it would most likely:
A) decrease taxes.
B) increase the money supply.
C) increase the level of government spending for goods and services.
D) decrease the level of government spending for goods and services.
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Chapter 21: International Trade and Finance
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Sample Questions
Q1) Suppose the exchange rate changes so that more Japanese yen are required to buy a dollar.We could conclude that:
A) the Japanese yen has appreciated in value.
B) U.S. citizens will buy more Japanese imports.
C) Japanese will demand more U.S. exports.
D) U.S. citizens will buy less Japanese imports.
Q2) If the dollar appreciates:
A) imports to the United States become more expensive for foreigners.
B) exports from the United States become more expensive for foreigners.
C) imports become more expensive for U.S. citizens.
D) exports from the United States become cheaper.
E) the dollar will exchange for fewer units of a foreign currency.
Q3) If a hotel room priced at 120,000 Venezuela bolivar per night can be purchased for 80 U.S.dollars,the exchange rate is:
A) 9,600 bolivar per dollar.
B) 1,500 dollars per lira.
C) 1,500 bolivar per dollar.
D) .00066 bolivar per dollar.
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Chapter 22: Economies in Transition
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Q1) The freedom of consumers to cast their dollar votes to buy,or not to buy,at prices determined in competitive markets describes:
A) socialism.
B) communism.
C) consumer sovereignty.
D) the aspirations of Karl Marx.
Q2) A classless society and economic system where all the factors of production are owned by workers and people share production according to their needs describes:
A) capitalism.
B) communism.
C) the invisible hand.
D) a mixed economy.
Q3) Most real world economies are mixed economies.
A)True
B)False
Q4) What is the difference between socialism and communism? What are some examples of countries that are largely socialistic and some that are communistic?
Q5) Discuss the three basic types of economic systems.
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Chapter 23: Growth and the Less-Developed Countries
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Sample Questions
Q1) The vicious circle of poverty refers to the fact that in LDCs,
A) low living standards lead to declines in population growth.
B) too much spending leads to periods of recession.
C) people are poor because too much is spent on capital goods.
D) there are not enough people in the under-15 age groups.
E) poverty leads to low investment in capital goods.
Q2) Which of the following is true?
A) Nations achieve high rates of economic growth primarily because of their natural resource endowments.
B) Human and physical capital investments are largely irrelevant to economic growth.
C) Poor nations grow slowly because they do not have access to modern technology.
D) A favorable political environment attracts more investment in human and physical capital.
Q3) A country can develop without a large natural resource base.
A)True
B)False
Q4) Explain why the LDCs are unable to invest much in capital goods and human capital.
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