Global Economics Exam Questions
Course Introduction
Global Economics explores the dynamics of economic activity across countries and regions, examining how globalization, trade, finance, and international institutions shape economic outcomes worldwide. The course covers topics such as comparative advantage, exchange rates, international trade policies, capital flows, economic integration, and the impact of global economic trends on development and inequality. By analyzing both theoretical frameworks and current global events, students will gain an understanding of how interconnected economies influence each other and the challenges and opportunities presented by a rapidly changing global economic landscape.
Recommended Textbook
The Macro Economy Today 13th Edition by
Bradley Schiller Cynthia Hill
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21 Chapters
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Page 2
Chapter 1: Economics: The Core Issues
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Sample Questions
Q1) Output combinations that lie inside the production possibilities curve are characterized by efficient use of resources.
Efficient levels of production lie on the production possibilities curve.
A)True
B)False
Answer: False
Q2) With respect to factors of production,which of the following statements is not true?
A)Factors of production are also known as resources.
B)In order to produce any good or service,it is necessary to have factors of production.
C)Factors of production include land,labor,capital,and entrepreneurship.
D)Only those resources that are privately owned are counted as factors of production.
Answer: D
Q3) Opportunity cost is a theoretical concept with no practical application. Any activity requires that something be given up-an opportunity cost.
A)True
B)False
Answer: False
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Chapter 2: The Us Economy: A Global View
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Sample Questions
Q1) Differences in size of real GDP across countries are best explained by A)Population growth.
B)Human capital.
C)Large farming sector.
D)None of the choices are correct.
Answer: B
Q2) The government regulates monopolies in order to
A)Ensure that product quality meets minimum standards.
B)Prohibit mergers or acquisitions that would lessen competition.
C)Protect consumers from false advertising.
D)All of the choices are correct.
Answer: D
Q3) The relative decline in goods production compared to services produced means that we're producing fewer goods than in earlier decades. Not necessarily: the actual production can go up while the relative share of production declines.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Supply and Demand
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Sample Questions
Q1) In a market economy,the people who receive the goods and services produced are those who
A)Need the goods and services the most.
B)Want the goods and services the most.
C)Have the most political power.
D)Are willing and able to pay the market price.
Answer: D
Q2) Scalping is likely to appear when a price is set below equilibrium price by the seller. Scalpers will make a profit when they buy a product at a price below the equilibrium price and sell it at a higher price.So if a market price is set below equilibrium price,profit potential exists,which encourages scalping.
A)True
B)False
Answer: True
Q3) Land,labor,and capital are bought and sold in the product market. Land,labor,and capital are bought and sold in the factor market.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Role of Government
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Sample Questions
Q1) In response to the global recession of 2008 and 2009,governments around the world
A)Reduced public works spending.
B)Reduced income transfer programs.
C)Expanded income transfer programs but reduced public spending programs.
D)Expanded public works spending and income transfer programs.
Q2) A progressive tax system is one in which tax rates rise as incomes rise. A progressive tax system is one in which tax rates rise as incomes rise.
A)True
B)False
Q3) A public good
A)Is any good produced by the government.
B)Is overproduced by the market.
C)Causes government failure.
D)Experiences the free-rider dilemma.
Q4) When there is a decrease in the unemployment rate,
A)The economy moves closer to the production possibilities curve.
B)The production possibilities curve shifts outward.
C)The production possibilities curve shifts inward.
D)There is a movement along the production possibilities curve.
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Chapter 5: National Income Accounting
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Sample Questions
Q1) The increase in the market value of a good at a particular stage of production is known as
A)Profit.
B)Value added.
C)Cost based accounting.
D)The input price.
Q2) Disposable income is
A)The amount households have to spend or to save.
B)The amount the household sector earns in producing the GDP.
C)The amount households have left to spend after savings are subtracted.
D)Personal income plus income taxes.
Q3) GDP can be calculated by all of the following methods except
A)Adding up the spending on goods and services by business,government,households,and foreigners,and subtracting imports.
B)Adding up the "value added" at every stage of production in the economy.
C)Adding up all of the receipts of households,government,and business.
D)Adding up all income and expenses by consumers and businesses.
Q4) What are transfer payments,and how do they make their way into the GDP calculation?
Q5) Are there any measurement problems that occur with the GDP calculation? Explain.
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Chapter 6: Unemployment
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Sample Questions
Q1) In terms of the musical chairs analogy in the text,which of the following is a description of cyclical unemployment?
A)There are too few chairs.
B)There are too many chairs.
C)There are enough chairs,but some are not the right size.
D)There are enough chairs,but it takes time to find one.
Q2) A 30-year-old stay-at-home son tells his parent he is looking for work but cannot find a job.When the parent finds the son a job,he refuses to take it.The 30-year-old can best be classified as
A)A discouraged worker.
B)Phantom unemployed.
C)Structurally unemployed.
D)UnderemployeD.When one is not actively seeking work and not too excited about finding it,one may be considered phantom unemployed.
Q3) Unemployment was fairly low during
A)The Great Depression.
B)World War II.
C)The 1930s.
D)The recession of 1981-1982.
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Page 8
Chapter 7: Inflation
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Sample Questions
Q1) \(\begin{array}{rrrr}&\text { Nominal GDP }\\ &\text { (in billions of dollars) }&\text { GDP deflator }&\text { CPI }\\\hline
2002 & \$ 6,992.4 & 106.2 & 151.6 \\
2003 & 7,431.6 & 109.1 & 153.8 \\
2004 & 7,843.2 & 112.3 & 157.8 \end{array}\)
Table 7.1 GDP Based on Table 7.1,the real GDP for 2004 was
A)$4,970.3 billion.
B)$6,811.7 billion.
C)$6,584.2 billion.
D)$6,984.1 billion.
Q2) Income in constant prices is
A)Nominal income.
B)Real income.
C)Bracket creep.
D)Income effect.
Q3) What is the difference between demand-pull inflation and cost-push inflation?
Q4) Why did the Full Employment and Balanced Growth Act establish 3 percent inflation as the benchmark rather than zero inflation?
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Chapter 8: The Business Cycle
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Sample Questions
Q1) Which group of economists believes that there is a natural rate of output that is relatively immune to short-run fluctuations in aggregate demand?
A)Supply-siders.
B)Keynesians.
C)Monetarists.
D)Fiscal economists.
Q2) Ceteris paribus,the price level will decrease if the aggregate
A)Supply curve shifts to the left.
B)Demand curve shifts to the left.
C)Demand curve shifts to the right.
D)Supply and demand curves both shift to the right.
Q3) Say's Law states that
A)Supply creates its own demand.
B)Shifts of either supply or demand can achieve a given market equilibrium.
C)Wages and prices are inflexible,which prevents the achievement of market equilibrium.
D)Increased prices lead to increased supply.
Q4) Is equilibrium always at an optimal level of output? Explain your answer.
Q5) What are the differences between classical theory and what Keynes believed?
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Chapter 9: Aggregate Demand
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Sample Questions
Q1) What must the value of the average propensity to save (APS)be if the average propensity to consume (APC)is greater than 1? Why?
Q2) In a graph with disposable income on the horizontal axis and consumption on the vertical axis,the intersection of the 45-degree line with the
A)Consumption function indicates zero saving.
B)Aggregate spending curve indicates full employment.
C)Full-employment output indicates equilibrium (macro).
D)Aggregate demand curve indicates equilibrium.
Q3) APC is equal to
A)The change in total consumption divided by the change in total disposable income.
B)The change in total saving divided by the change in total disposable income.
C)Total consumption divided by total disposable income.
D)Total saving divided by total disposable income.
Q4) Which of the following is not a determinant of autonomous consumption?
A)The disposable income level.
B)Taxes.
C)The availability of credit.
D)The price level.
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Chapter 10: Self-Adjustment or Instability
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Sample Questions
Q1) If leakages are greater than injections,equilibrium output will be
A)Less than full-employment output,and a recessionary gap will occur.
B)Less than full-employment output,and an inflationary gap will occur.
C)More than full-employment output,and a recessionary gap will occur.
D)More than full-employment output,and an inflationary gap will occur.
Q2) Which of the following equations defines the multiplier?
A)1 - b
B)1 - (c ÷ Y<sub>D</sub>).
C)1 ÷ (1 - MPC).
D)1 ÷ APS.
Q3) Given the MPS = 0.40,with no government and no foreign trade,a $10 billion increase in investment will eventually result in an increase in
A)Consumption by $40 billion.
B)Total spending by $15 billion.
C)Consumption by $15 billion.
D)Total spending by $2.5 billion.
Q4) How can actual investment be greater than desired investment,and what type of gap is the economy experiencing when this occurs?
Q5) If consumers increase saving during a recession,what will this do and why?
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Chapter 11: Fiscal Policy
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Sample Questions
Q1) Fiscal policy formation causes a delay in implementation even though a recession can usually be recognized within a few weeks after it begins. A limitation on fiscal policy is time.In the real world it takes time to recognize that the economy is in trouble.A blip in the unemployment or inflation rate may not signal a trend.Before intervening,we may want to be more certain that a recessionary or inflationary GDP gap is emerging.
A)True
B)False
Q2) A simultaneous increase of government purchases by $50 billion and a tax hike of $50 billion should stimulate the economy by $50 billion. The balanced budget multiplier is equal to 1.In this case,a $50 billion increase in annual government expenditure combined with an equivalent increase in taxes increases aggregate demand by $50 billion per year.When government spending increases by $50 billion,the initial spending injection will $50 billion; the remainder of taxpayers' payments will come from savings.Accordingly,the increase in AD will be $50 billion when one uses the balanced budget multiplier.
A)True
B)False
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Page 13
Chapter 12: Deficits and Debt
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Sample Questions
Q1) External debt of the United States refers to
A)The ownership of nongovernment debt by the government.
B)Combined foreign debt held by sources outside the U.S.government.
C)The debt of nongovernment organizations.
D)U.S.government debt held by foreigners.
Q2) An increase in unemployment,ceteris paribus,
A)Leads to decreased government expenditures.
B)Leads to increased government revenues.
C)Reduces a budget surplus.
D)Reduces a budget deficit.
Q3) The structural deficit represents
A)Federal revenues minus federal expenditures at full employment under current fiscal policy.
B)Federal revenues minus expenditures under current fiscal policy at current output.
C)A measure of the size of recessionary or inflationary gaps.
D)The difference between expenditures at full employment and expenditures at cyclical unemployment.
Q4) Explain the difference between discretionary and automatic spending by the government.
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Chapter 13: Money and Banks
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Sample Questions
Q1) Deposit creation occurs when
A)A bank lends money.
B)A person takes money out of one bank and puts it in another bank.
C)A bank borrows dollars from the Federal Reserve.
D)A person takes money out of the banking system and holds it as cash.
Q2) Suppose a bank has $200,000 in deposits,a required reserve ratio of 15 percent,and total reserves of $100,000.Then it has excess reserves of A)$70,000.
B)$30,000.
C)Negative $100,000.
D)$200,000.
Q3) A bank may lend an amount equal to its A)Required reserves.
B)Total reserves.
C)Total assets.
D)Excess reserves.
Q4) Only the federal government can create money. Money can also be created through the banking system with the money multiplier. A)True
B)False
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Chapter 14: The Federal Reserve System
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Sample Questions
Q1) Why do banks typically maintain a low level of excess reserves?
Q2) Which of the following is not required to satisfy Fed minimum reserve requirements?
A)Commercial banks.
B)Most credit unions.
C)Pawn shops.
D)Savings and loans.
Q3) When the Fed buys bonds from the public,it decreases the flow of reserves to the banking system.
When the Fed buys bonds from the public,it increases the reserves of the banking system.
A)True
B)False
Q4) Increasing the reserve requirement reduces the money supply.
Increasing the reserve requirement forces banks to hold more reserves that cannot be lent out,thereby slowing the money creation process.
A)True
B)False
Q5) Is the Federal Reserve insulated from political pressures in any way? Explain.
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Chapter 15: Monetary Policy
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Sample Questions
Q1) Lower interest rates redistribute income from
A)Lenders to borrowers.
B)Spenders to savers.
C)Borrowers to lenders.
D)Businesses to banks.
Q2) According to Bernanke's policy guide,a full-point decrease in long-term interest rates results in a
A)$10 billion stimulus for the economy.
B)$20 billion stimulus for the economy.
C)$200 billion stimulus for the economy.
D)$1,000 billion stimulus for the economy.
Q3) A decrease in aggregate demand could be caused by
A)A decrease in the value of the domestic currency.
B)A booming economy.
C)Contractionary monetary policy.
D)Expansionary monetary policy.
Q4) The price of money is the nominal interest rate. Holding money involves forgoing the opportunity to earn interest.
A)True
B)False
Page 17
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Chapter 16: Supply-Side Policy: Short-Run Options
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Sample Questions
Q1) Supply-side tax cuts are designed to
A)Reduce marginal tax rates.
B)Increase the equity of the tax system.
C)Remove as much disposable income as possible from the economy.
D)Shift the Phillips curve to the right.
Q2) An increase in the misery index would definitely result from
A)A leftward shift of the Phillips curve.
B)A rightward shift of the Phillips curve.
C)A movement along the Phillips curve toward greater unemployment.
D)A movement along the Phillips curve toward greater inflation.
Q3) Stagflation refers to
A)Inflation resulting from lower unemployment rates.
B)The simultaneous occurrence of higher inflation and higher unemployment rates.
C)Negative inflation rates.
D)Simultaneous decreases in inflation rate and unemployment rate.
Q4) The trade-off between unemployment rates and inflation originates in the A)Vertical AS curve.
B)Downward-sloping AS curve.
C)Upward-sloping AD curve.
D)Upward-sloping AS curve.
Page 18
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Chapter 17: Growth and Productivity: Long-Run Possibilities
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Sample Questions
Q1) The growth rate of total output equals
A)Gross investment minus depreciation.
B)Real GDP per capita growth rate.
C)The growth rate of the labor force plus the growth rate of productivity.
D)Real GDP per worker.
Q2) Better short-run use of current capacity
A)Moves the economy closer to the production possibilities curve,while long-run growth shifts that curve outward.
B)Increases capacity,while long-run economic growth increases capacity utilization.
C)Shifts the aggregate supply curve outward,while long-run economic growth moves the economy up the aggregate supply curve.
D)And long-run growth both shift the aggregate supply curve outwarD.In the short run,the production possibilities curve is fixed,but in the long run,it can shift outward with economic growth.
Q3) What are some of the sources of long-run economic growth,and which is the greatest contributor to growth?
Q4) Explain the difference between short-run capacity utilization and long-run growth in terms of the PPC.
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Page 19
Chapter 18: Theory Versus Reality
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Sample Questions
Q1) The reason unemployment claims are a good leading indicator of economic activity is that they reflect
A)Orders for new goods.
B)Hours worked per week.
C)Automatic stabilizers.
D)Industry layoffs and hiring.
Q2) Fine-tuning involves the adoption of fixed policy rules regardless of the economic situation.
Fine-tuning involves the use of policy in response to changes in the economy to maintain full employment.
A)True
B)False
Q3) Politicians might hesitate to increase income and in-kind transfers to the poor because this could cause
A)A decrease in the budget deficit.
B)Private sector spending to overpower public sector spending.
C)Excessive demand for goods and services.
D)An increase in unemployment.
Q4) Do monetarists favor rules or discretionary policy? Why?
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Chapter 19: International Trade
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Sample Questions
Q1) An agreement to reduce the volume of trade in a specific good is
A)A voluntary restraint agreement.
B)A quota.
C)An embargo.
D)The terms of trade.
Q2) Trade restrictions designed to benefit the import-competing industries will benefit the entire country.
Trade restrictions will hurt domestic consumers who will end up paying higher prices.
A)True
B)False
Q3) A principal objective of the World Trade Organization is to
A)Protect import-competing producers.
B)Equalize income tax structures in various countries.
C)Assist in retraining workers displaced by imports.
D)Reduce barriers to trade.
Q4) Discuss the differences between a tariff and a quota.Explain why quotas are considered to be a greater threat to competition than tariffs.
Q5) Describe the pressures that discourage trade.
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Chapter 20: International Finance
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Sample Questions
Q1) The inflow of foreign investment into the United States
A)Signals a lack of confidence in the U.S.economy.
B)Diminishes production possibilities for the United States.
C)Has no effect on the U.S.economy.
D)Stimulates more economic growth for the United States.
Q2) Appreciation of the dollar refers to
A)A loss of foreign exchange reserves.
B)An increase in the dollar price of foreign currency.
C)Intervention in international money markets.
D)A fall in the dollar price of a foreign currency.
Q3) Which of the following could be responsible for the depreciation of a country's currency?
A)The country expands its tourist industry.
B)Speculators anticipate economic growth in that nation.
C)The country experiences a sudden drop in the rate of inflation while other nations do not.
D)The country defaults on bonds held by foreigners.
Q4) Explain the forces that can cause an exchange rate to change.
Q5) How can trade policy,fiscal policy,and monetary policy be used to support fixed exchange rates when there is a surplus of U.S.dollars?
Page 22
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Chapter 21: Global Poverty
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Q1) What is the U.N.'s goal for foreign aid to poor countries? Are most countries currently meeting this goal? Explain.
Q2) A World View article,"Glaring Inequalities," says that income inequality tends to diminish as a nation develops.The distribution of income answers the ________ question.
A)HOW MUCH
B)WHERE
C)FOR WHOM
D)WHY
Q3) The standard of living for poor countries will not increase if the population growth exceeds economic growth.
In the poorest countries,population is still increasing rapidly,making it difficult to raise living standards.Per capita (average)incomes decline in many poor countries (such as Zimbabwe and Haiti)when population growth is greater than economic growth.
A)True
B)False
Q4) What is human capital,and what factors contribute to human capital development?
Q5) What is microfinance,and how can it contribute to economic growth?
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