Global Economics Test Preparation
Course Introduction
Global Economics examines the interconnectedness of economies worldwide, focusing on the flows of goods, services, capital, and labor across borders. The course explores major economic theories related to international trade and finance, analyzes the impact of globalization on economic growth and income distribution, and investigates the role of multinational corporations and international institutions. Students will also study current global economic challenges, such as trade disputes, currency fluctuations, and the effects of economic policies on development and inequality. Through case studies and data analysis, the course equips students with the tools to understand and critically assess economic events in a global context.
Recommended Textbook
Macroeconomics 11th Edition by Michael Parkin
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20 Chapters
5952 Verified Questions
5952 Flashcards
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Chapter 1: What Is Economics
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479 Verified Questions
479 Flashcards
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Sample Questions
Q1) On a graph,an upward-sloping curve that is flatter as you move away from the origin indicates a
A) positive relationship with an increasing slope.
B) positive relationship with a decreasing slope.
C) negative relationship with an increasing slope.
D) negative relationship with a decreasing slope.
Answer: B
Q2) In the above figure,the relationship between income and expenditures is A) positive.
B) negative.
C) independent.
D) random.
Answer: A
Q3) When graphed,variables that are unrelated are shown by either a horizontal or a vertical line.
A)True
B)False
Answer: True
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Chapter 2: The Economic Problem
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439 Flashcards
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Sample Questions
Q1) If an economy is operating at a point inside the production possibilities frontier,then
A) society's resources are being inefficiently utilized.
B) the PPF curve will shift inward.
C) society's resources are being used to produce too many consumer goods.
D) economic policy must retard further growth of the economy.
Answer: A
Q2) Which of the following does NOT help organize trade?
A) property rights
B) markets
C) the production possibilities frontier
D) None of the above because all these answers given help organize trade.
Answer: C
Q3) Households are buyers in factor markets and sellers in goods markets.
A)True
B)False
Answer: False
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Chapter 3: Demand and Supply
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Sample Questions
Q1) Consider the demand curves for soft drinks shown in the figure above.A movement from point a to point c represents
A) a decrease in quantity demanded.
B) an increase in demand.
C) an increase in quantity demanded.
D) a decrease in demand.
Answer: C
Q2) The above figures show the market for hamburger meat.Which figure(s) shows the effect of an increase in the number of people who eat hamburger meat?
A) Figure A
B) Figure B
C) Figure C
D) Figures A and C
Answer: A
Q3) When does a surplus occur?
Answer: A surplus occurs when the price is above the equilibrium price.When the price exceeds the equilibrium price,the quantity supplied is greater than the quantity demanded.
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5
Chapter 4: Measuring GDP and Economic Growth
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Sample Questions
Q1) If Ford sells 200 Explorers for a total of $400,000 to Germany,while the United States imports 100 BMWs for a total of $500,000 from Germany,
A) U.S. GDP increases because it sells more Explorers.
B) U.S. GDP decreases because net exports are negative.
C) Germany's GDP decreases.
D) U.S. net exports is positive.
Q2) Which of the following items is NOT part of government expenditure on goods and services in the GDP accounts?
A) gasoline purchases for government car pools
B) Social Security expenditures
C) new computer hardware for use by the IRS
D) drapes to brighten up the president's office
Q3) Net exports of goods and services equal the
A) exports of goods and services divided by the imports of goods and services.
B) exports of goods and services plus the imports of goods and services.
C) exports of goods and services minus the imports of goods and services.
D) imports of goods and services minus the exports of goods and services.
Q4) Why does real GDP have limitations in determining economic welfare?
Q5) Explain how GDP is measured according to the expenditure and income approaches.
Page 6
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Chapter 5: Monitoring Jobs and Inflation
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407 Flashcards
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Sample Questions
Q1) The ________ is the total number of people aged 16 years and older (and not in jail,hospital or institutional care) while the ________ is the number of people employed and the unemployed.
A) labor force; working-age population
B) labor force participation rate; labor force
C) working-age population; labor force
D) working-age population; labor force participation rate
Q2) In the above table,the number of marginally attached workers is
A) 40 million.
B) 55 million.
C) 15 million.
D) 100 million.
Q3) Suppose there are currently 100 people unemployed,1500 people employed,1600 people in the labor force,and 2000 people in the working age population.The unemployment rate equals 100 times
A) 100/1500.
B) 100/1600.
C) 100/2000.
D) 1500/2000.
Q4) Give an example of a cyclically unemployed person.
Page 7
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Chapter 6: Economic Growth
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Sample Questions
Q1) Countries or regions in which real GDP per person has not grown as fast as in the United States since 1960 include
A) Japan.
B) countries in Africa.
C) Hong Kong.
D) Canada.
Q2) The figure above shows the U.S.production function.From 1986 to 2008 the United States experienced major advances in technology as well as an increase in the working-age population.The combined effect can best be shown by a
A) movement from point W to point X.
B) movement from point Y to point Z.
C) movement from point Y to point X.
D) movement from point W to point Z.
Q3) Workers who pursue an education directly increase their
A) financial capital.
B) physical capital.
C) human capital.
D) saving.
Q4) What happens to the real wage rate and potential GDP if population increases?
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Chapter 7: Finance, Saving, and Investment
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240 Flashcards
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Sample Questions
Q1) A decrease in disposable income shifts the ________.
A) demand for loanable funds curve rightward
B) demand for loanable funds curve leftward
C) supply of loanable funds curve leftward
D) supply of loanable funds curve rightward
Q2) If the real interest rate rises,people
A) save more.
B) save less.
C) earn a higher real wage rate.
D) decrease their expected future income.
Q3) In January 2013,Tim's Gyms,Inc.owned machines valued at $1 million. During the year,the market value of the equipment fell by 30 percent. During 2013,Tim spent $200,000 on new machines.During 2013,Tim's net investment totalled
A) $1 million.
B) -$300,000.
C) $200,000.
D) -$100,000.
Q4) If Ann's disposable income increases,her saving decreases.
A)True
B)False
Page 9
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Chapter 8: Money, The Price Level, and Inflation
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Sample Questions
Q1) Which of the following is an asset of the Fed?
A) loans to depository institutions
B) Federal Reserve notes
C) banks' deposits
D) Both answers B and C are correct.
Q2) M1 is a measure of
A) money and includes both currency and checking deposits.
B) liquidity and in which the most liquid asset is money.
C) money and includes both savings deposits and currency.
D) money and includes both savings deposits and money market mutual funds.
Q3) Which of the following is NOT considered a function of money?
A) It facilitates exchange.
B) It acts as a means of payment.
C) It can be held and exchanged for future goods and services.
D) It allows banks to lend out funds.
Q4) Whenever a bank's actual reserves exceed its desired reserves,the bank
A) can lend out additional funds.
B) needs to call in loans.
C) will go out of business.
D) must increase the amount of its required reserves by obtaining more cash.
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Chapter 9: The Exchange Rate and the Balance of Payments
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Sample Questions
Q1) "The current account records foreign investment in a nation minus investment abroad." Is the previous statement correct or incorrect?
Q2) Suppose the target exchange rate set by the Fed is 100 yen per dollar.If the demand for dollars temporarily increases,to maintain the target exchange rate,the Fed can A) sell dollars.
B) buy dollars.
C) violate interest rate parity.
D) violate purchasing power parity.
Q3) Which of the following are included in the U.S.current account balance?
I. exports to Japan
II. interest payments made to Canada
III. transfer payments made to Israel
A) I only
B) I and II
C) I and III
D) I, II and III
Q4) How will an increase in the expected future exchange rate affect the current supply and demand curves for dollars?
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Chapter 10: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) The level of output when there is full employment is called actual GDP.
A)True
B)False
Q2) The aggregate demand curve shows total expenditures at different levels of national income.
A)True
B)False
Q3) The table above gives the aggregate demand and aggregate supply schedules in Lotus Land.With no changes in aggregate demand or long-run aggregate supply,in long-run macroeconomic equilibrium,the price level will be ________ and real GDP will be ________.
A) 120; $400
B) 110; $500
C) 90; $400
D) 100; $600
Q4) In the short run,a supply shock that shifts the short-run aggregate supply curve leftward raises the price level and decreases real GDP.
A)True
B)False
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Chapter 11: Expenditure Multipliers
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454 Flashcards
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Sample Questions
Q1) In the above figure,autonomous expenditure along AE equals
A) $3 trillion.
B) $6 trillion.
C) $12 trillion.
D) an amount not given in the above answers.
Q2) If the MPC equals 0.75,then
A) for every $100 increase in consumption expenditure, disposable income increases by $75.
B) consumption expenditure is always more than disposable income.
C) for every $100 increase in disposable income, saving increases by $75.
D) for every $100 increase in disposable income, saving increases by $25.
Q3) In general,the flatter the aggregate expenditure curve,the
A) greater the autonomous expenditure.
B) larger the marginal propensity to consume.
C) larger the multiplier.
D) smaller the multiplier.
Q4) If the price level is constant,a change in investment has a multiplied impact on real GDP.
A)True
B)False
Page 13
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Chapter 12: Inflation, Jobs, and the Business Cycle
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401 Flashcards
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Sample Questions
Q1) Compare and contrast the Keynesian and Monetarist business cycle theories.
Q2) Demand-pull inflation starts with
A) an increase in aggregate demand.
B) a decrease in aggregate demand.
C) an increase in short-run aggregate supply.
D) a decrease in short-run aggregate supply.
Q3) The real business cycle theory views fluctuations in the quantity of money as the main source of business cycles.
A)True
B)False
Q4) The monetarist theory of the business cycle regards ________ as the factor that leads to business cycles.
A) unexpected increases in aggregate demand
B) changes in the growth rate of the quantity of money
C) volatility in the interest rate
D) volatility in the demand for money
Q5) When the natural unemployment rate changes,what happens to the short-run Phillips curve?
To the long-run Phillips curve?
Q6) What is the impulse in the real business cycle theory of the business cycle?
Page 14
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Chapter 13: Fiscal Policy
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Sample Questions
Q1) Suppose the economy is at a short-run equilibrium with real GDP greater than potential GDP.Which of the following fiscal policies would decrease real GDP and the price level?
A) an increase in government expenditure
B) a decrease in taxes
C) an increase in taxes
D) None of the above answers is correct.
Q2) A report on the EU economic stimulus plan suggested that "...Governments must consider ...cutting VAT [value added tax] and labor taxes ..." The VAT is similar to a sales tax.If governments follow the suggestions,there will be ________ according to the supply-side view.
A) an increase in labor supply and a decrease in the tax wedge
B) an upward shift in the aggregate production function
C) an increase in the labor supply and an increase in the tax wedge
D) an increase in saving and an increase in the tax wedge
Q3) Federal government expenditures as a percentage of GDP are currently equal to approximately 10 percent.
A)True
B)False
Q4) How does a tax on labor income affect potential GDP?
Page 15
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Chapter 14: Monetary Policy
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Sample Questions
Q1) The federal funds rate is the interest rate
A) banks charge each other on overnight loans.
B) on the 3-month Treasury bill.
C) on the 30-year treasury bond.
D) also known as the prime rate.
Q2) In order to combat a recession,the Fed will ________ the federal funds rate thereby ________ the quantity of money.
A) raise; increase
B) lower; increase
C) raise; decrease
D) lower; decrease
Q3) If the Fed lowers the federal funds rate,aggregate demand decreases.
A)True
B)False
Q4) To lower the federal funds rate,the Federal Reserve should
A) buy government securities.
B) raise the Treasury bill rate.
C) raise the exchange rate.
D) decrease bank reserves.
Q5) Describe how open market operations change the quantity of money.
Page 16
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Chapter 15: International Trade Policy
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Sample Questions
Q1) An import quota directly restricts ________ and are designed to protect domestic
A) exports; consumers
B) exports; producers
C) imports; consumers
D) imports; producers
Q2) Economics demonstrates that opening up unrestricted free international trade is beneficial to all nations.However,are there any losers from such a policy change?
Q3) In 2006,European Union tariff on imported bananas from Latin America was 176 a ton. Suppose 2.5 million tons of bananas were imported in 2006 but then the tariff decreased to 152 a ton in 2007 and as a result,3 million tons were imported in 2007. What is the change in tariff revenue between 2006 and 2007?
A) 1,000,000
B) 440,000,000
C) 445,000,000
D) - 1,000,000
Q4) Why do nations engage in international trade?
Q5) How does a tariff affect the government's revenue? How does a quota affect the government's revenue?
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Chapter 16: Introduction
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Sample Questions
Q1) Shoes are a normal good and people's incomes rise.Simultaneously the number of companies making shoes decreases.As a result,the equilibrium price of a pair of shoes ________ and the equilibrium quantity ________.
A) definitely rises; might increase, decrease, or not change
B) definitely rises; definitely increases
C) might rise, fall, or not change; might increase, decrease, or not change
D) None of the above answers is correct.
Q2) If the wood used to produce houses rises in price,then the ________ houses
A) demand for; increases
B) demand for; decreases
C) supply of; increases
D) supply of; decreases
Q3) Shoes are a normal good and people's incomes rise.As a result,the equilibrium price of a pair of shoes ________ and the equilibrium quantity ________.
A) rises; increases
B) rises; decreases C) falls; increases
D) falls; decreases
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Page 18
Chapter 17: Monitoring Macroeconomic Performance
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Sample Questions
Q1) The difference between nominal GDP and real GDP is that real GDP eliminates the effects from
A) depreciation.
B) inflation.
C) the unemployment rate.
D) changes in productivity.
Q2) In the United States over the past 40 years,the
A) labor force participation rate has remained relatively constant and the unemployment rate has trended upwards.
B) both the unemployment rate and real GDP have tended to increase.
C) labor force participation rate has fallen and real GDP has increased.
D) unemployment rate has fluctuated and the labor force participation rate has risen.
Q3) GDP is defined as
A) gross demanded prices.
B) generally demanded product.
C) gross domestic product.
D) generally demanded prices.
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Chapter 18: Macroeconomic Trends
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Sample Questions
Q1) If the Fed makes an open market ________ of securities,in the quantity theory M ________ and V ________.
A) purchase; increases; increases
B) sale; increases; decreases
C) purchase; does not change; does not change
D) sale; decreases; does not change
Q2) ________ increases real GDP.
A) A fall in the price level
B) An increase in employment
C) An increase in the natural rate of unemployment
D) A decrease in government spending
Q3) An increase in the productivity will ________ potential GDP,________ employment,and ________ the real wage.
A) decrease; increase; raise
B) increase; increase; raise
C) increase; decrease; lower
D) increase; increase; lower
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Chapter 19: Macroeconomic Fluctuations
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Sample Questions
Q1) The impulse leading to business cycles in the Keynesian model is changes in
A) the structural deficit.
B) open market operations.
C) business confidence.
D) the expected future price level.
Q2) Long-run macroeconomic equilibrium occurs when
A) real GDP is equal to potential GDP.
B) real GDP is at a point along the short-run aggregate supply curve.
C) the unemployment rate is zero.
D) all able-bodied adults have jobs.
Q3) A recessionary gap occurs when
A) the short-run aggregate supply curve shifts rightward.
B) real GDP is less than potential GDP.
C) the economy is at its long-run equilibrium.
D) government interferes with the economy.
Q4) Business cycles result when
A) aggregate demand grows faster than potential GDP.
B) the labor force participation rate changes.
C) aggregate supply and aggregate demand change at an uneven pace.
D) real GDP equals potential GDP.
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Chapter 20: Macroeconomic Policy
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Sample Questions
Q1) An economy has real GDP of $300 billion and potential GDP of $240 billion.To move the economy to potential GDP,the government should ________ taxes and/or ________ government expenditure.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Q2) An increase in taxes I. violates the Taylor rule.
II) decreases real GDP.
III) forces the Fed to change its instruments.
A) I only
B) II only
C) I and III
D) I and II
Q3) The Fed can change the federal funds rate
A) lowering taxes.
B) increasing spending.
C) purchasing government securities.
D) increasing aggregate demand.
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Page 22