Introduction to Economics Exam Review
Course Introduction
Introduction to Economics provides students with a foundational understanding of economic principles and concepts that govern individual, business, and societal decision-making. Covering both microeconomics and macroeconomics, the course explores topics such as supply and demand, market structures, consumer behavior, production costs, economic efficiency, national income, inflation, unemployment, and the role of government in the economy. Students will examine real-world economic issues, learn to apply analytical tools to address economic problems, and develop a critical perspective on the impact of economic policies on society.
Recommended Textbook
ECON Macro Principles of Macroeconomics 1st Canadian Edition by Moir OShaughnessy
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20 Chapters
2444 Verified Questions
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Chapter 1: The Art and Science of Economic Analysis
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Which of the following is a fallacy of composition?
A) The composition of a complex product can be determined just by examining its exterior properties.
B) Consumer-durable goods today do NOT last as long as they did a generation ago.
C) Any production mistakes made on an assembly line will lead to a compounding of errors as the product moves down the line.
D) What is true for any individual component in a group is true for the group as a whole.
Answer: D
Q2) What do economists aim to achieve when they use the other-things-constant assumption?
A) to make useful predictions
B) to focus on the role of incentives
C) to focus only on consumers' decisions, and NOT on those of firms
D) to ignore reality, where things are constantly changing
Answer: A
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Chapter 2: Economic Tools and Economic Systems
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152 Flashcards
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Sample Questions
Q1) Suppose that an economy is operating inside its production possibilities frontier.Which statement best describes what is happening in this economy?
A) Some of the nation's resources are unemployed.
B) The production decisions are made by the government.
C) Unlimited resources must satisfy scarce desires.
D) Human resources are scarce relative to human wants, therefore society must have some mechanism for making choices.
Answer: A
Q2) Refer to the exhibit.Suppose a country's rate of immigration increases dramatically.Which graph best illustrates the impact on the production possibilities frontier?
A) graph a
B) graph b
C) graph c
D) graph d
Answer: A
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Chapter 3: Economic Decision Makers
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145 Flashcards
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Sample Questions
Q1) What part of federal government spending has grown the most rapidly in recent years?
A) redistribution
B) defence
C) interest on the public debt
D) all other outlays
Answer: A
Q2) Which term refers to the social cost of production being greater than the private cost?
A) positive externality
B) negative externality
C) public good
D) private good
Answer: B
Q3) Which of the following is a function of government?
A) determining prices in the market
B) providing economic stability
C) providing the economy's goods and services
D) producing private goods
Answer: B
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Chapter 4: Demand, Supply, and Markets
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203 Verified Questions
203 Flashcards
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Sample Questions
Q1) Suppose the wearing of fur hats becomes more fashionable.What would be expected regarding the price and quantity of fur hats?
A) Price and quantity will both decrease.
B) Price will increase and quantity will decrease.
C) Price will decrease and quantity will increase.
D) Price and quantity will both increase.
Q2) What is the most important characteristic of the equilibrium price?
A) It guarantees that producers earn profit.
B) It clears the market, leaving neither a surplus nor a shortage.
C) It maximizes the quantity demanded.
D) It minimizes the quantity demanded.
Q3) If pretzels are a normal good, what does the income effect of a price change in pretzels mean?
A) As income increases, the quantity demanded increases along the demand curve for pretzels.
B) As income increases, the demand curve for pretzels shifts rightward.
C) As income increases, the demand curve for pretzels shifts leftward.
D) As the price of pretzels increases, the real income of individuals who demand pretzels decreases, so the quantity demanded of pretzels decreases.
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Page 6
Chapter 5: Algebraic Approach to Demand, Supply, and Equilibrium
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12 Flashcards
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Sample Questions
Q1) Market demand is given as QD = 200 - 3P.Market supply is given as QS = 2P + 100.Which legally imposed price would constitute a binding price floor?
A) $10
B) $20
C) $50
D) $70
Q2) Refer to the exhibit.At the equilibrium price, what would consumer surplus be?
A) $480
B) $640
C) $1120
D) $1280
Q3) Market demand is given as Qd = 100 - 2P.Market supply is given as Qs = P + 10.In a perfectly competitive equilibrium, what will be price and quantity traded in the market?
A) Price will be $40, and quantity will be 30.
B) Price will be $35 and quantity will be 30.
C) Price will be $30, and quantity will be 40.
D) Price will be $25, and quantity will be 50.
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Page 7
Chapter 6: Introduction to Macroeconomics
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122 Flashcards
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Sample Questions
Q1) Which of the following best characterizes what an aggregate demand curve depicts?
A) the quantity of goods and services demanded during a given time period at different interest rates, other things held constant
B) the final quantity of goods and services actually produced by the economy during a given time period, other things held constant
C) the quantity of goods and services demanded at different price levels during a given time period, other things held constant
D) the quantity of goods and services that the economy is capable of producing during a given time period, other things held constant
Q2) Which of the following occurs simultaneously with a higher price level and leads to stagflation?
A) lower employment
B) higher aggregate output
C) federal budget deficits
D) federal budget surpluses
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Chapter 7: Tracking the Canadian Economy
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147 Flashcards
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Sample Questions
Q1) Which of the following describes the final market value of a good?
A) It is the sum of values added at all stages of production.
B) It is the value added at one stage of production.
C) It is greater than the sum of all the values added at all stages of production.
D) It is less than the sum of all the values added at all stages of production.
Q2) Which of the following is an injection into the spending stream?
A) planned investment
B) imports
C) indirect business taxes
D) disposable income
Q3) Jimmy Earl, a farmer, sells $20 worth of peanuts to a factory that turns them into peanut butter, which is then sold for $45.In terms of computing GDP, what is the total value added?
A) $20
B) $25
C) $45
D) $65
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Chapter 8: Unemployment and Inflation
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Suppose tastes and preferences change.As a result, newspaper journalists are laid off.What type of unemployment would this be classified as?
A) structural unemployment
B) frictional unemployment
C) seasonal unemployment
D) cyclical unemployment
Q2) Which of the following describes the labour force participation rates in Canada since the 1950s?
A) The rate for men has risen and the rate for women has risen.
B) The rate for women has fallen and the rate for men has risen.
C) The rate for men has fallen and the rate for women has increased.
D) The rate for men has fallen and the rate for women has fallen.
Q3) What does deflation refer to?
A) decreasing relative prices
B) a decreasing price level
C) a slowing down of the rate of inflation
D) a slowing down of the rate of relative price decreases
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Chapter 9: Productivity and Growth
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68 Flashcards
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Sample Questions
Q1) What does the phrase "rules of the game" refer to?
A) any factor that facilitates production and exchange, such as tax laws and property rights
B) a gradual but consistent change in the price level until a fair price is attained
C) the election laws which ensure that all elections are fair
D) the requirements placed on firms in earning a profit
Q2) Refer to the graph in the exhibit.Consider the movement from point A to point B.What might this movement illustrate?
A) the result of an increase in the capital stock relative to the work force
B) the result of an increase in the labour productivity growth rate
C) the result of an increase in labour productivity because of higher quality capital
D) the result of an increase in capital stock because of new-found natural resources
Q3) What does human capital represent?
A) the equipment that labour uses on the job to improve labour productivity
B) a direct method of measuring output per worker
C) the education, skills, and training embodied in workers
D) the technology, developed by humans, that is embodied in equipment
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Chapter 10: Aggregate Expenditure and Aggregate
Demand
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Sample Questions
Q1) Suppose the marginal propensity to consume is 4/5.What is the value of the simple multiplier?
A) 4/5
B) 5/4
C) 4
D) 5
Q2) Consider an economic model with no income taxes and no international trade.Suppose the marginal propensity to consume in Canada is 3/5, and the marginal propensity to save in India is 1/10.Which of the following characterizes how the Indian and Canadian economies would be affected?
A) Increases in government purchases would increase real GDP demanded more per dollar in India than in Canada.
B) Decreases in government purchases would increase real GDP demanded more per dollar in India than in Canada.
C) Increases in autonomous saving would increase real GDP demanded more per dollar in India than in Canada.
D) Real GDP demanded would be higher in India than in Canada.
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Page 12
Chapter 11: Aggregate Supply
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156 Flashcards
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Sample Questions
Q1) Who makes the billions of production decisions reflected in aggregate supply?
A) consumers
B) all households and firms
C) only the largest firms and the largest households
D) resource suppliers and firms
Q2) Refer to the graph in the exhibit.What is the term for the distance between Y and Y ?
A) an expansionary gap
B) a recessionary gap
C) an increase in potential output
D) the natural rate of unemployment
Q3) In the long run, how will an increase in aggregate demand affect price and output?
A) The price level will decrease, and the output level will decrease.
B) The price level will increase, and the output level will increase.
C) The price level will increase, and the output level will decrease.
D) The price level will increase, and the output level will remain the same.
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Chapter 12: Fiscal Policy
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167 Flashcards
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Sample Questions
Q1) Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.Suppose autonomous net taxes decreased by $100.What would the equilibrium real GDP be equal to?
A) $400
B) $500
C) $600
D) $700
Q2) Assume autonomous net taxes rise by $400, and the marginal propensity to consume equals 3/4.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, how will saving initially change?
A) It will fall by $400.
B) It will fall by $100.
C) It will rise by $100
D) It will rise by $300.
Q3) Which of the following assumptions is usually made about government purchases?
A) Government purchases vary directly with the interest rate.
B) Government purchases are autonomous.
C) Government purchases vary directly with the level of income.
D) Government purchases vary inversely with the level of income.
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Page 14
Chapter 13: Money and the Financial System
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95 Flashcards
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Sample Questions
Q1) Some financial institutions are known as financial intermediaries because they serve as go-betweens.Which parties are linked together by financial intermediaries?
A) savers and borrowers
B) employers and employees
C) firms and the government
D) firms and consumers
Q2) What is a mortgage-backed security?
A) It is another name for a mortgage.
B) It is insurance that backs up the value of a mortgage.
C) It is a set of mortgages that are bundled together based on credit scores.
D) It is another name for a subprime mortgage.
Q3) What is a subprime mortgage?
A) a mortgage in which the borrower gets an interest rate below the prime rate
B) a mortgage in which the interest rate is adjustable
C) a mortgage for which the home is valued below its true market value
D) a mortgage in which the borrower has a poor credit rating
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Chapter 14: Banking and the Money Supply
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144 Flashcards
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Sample Questions
Q1) What is the simple money multiplier equal to?
A) the reciprocal of the desired reserve ratio
B) a multiple of the desired reserve ratio
C) desired reserves plus excess reserves
D) total reserves minus required reserves
Q2) Refer to the table in the exhibit.What kind of transaction just took place at LeftBank?
A) LeftBank received a shipment of cash from the Bank of Canada.
B) A LeftBank customer deposited $10,000 cash in his account.
C) LeftBank sold a security to the Bank of Canada.
D) The Bank of Canada sold a security to LeftBank.
Q3) What is the term for the ability to convert a store of value into a medium of exchange with little loss of value?
A) arbitrage
B) solvency
C) liquidity
D) liability
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Page 16
Chapter 15: Monetary Theory and Policy in an Open Economy
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Refer to the graph in the exhibit.To bring the economy to its potential output level, what should the Bank of Canada do?
A) The Bank of Canada should do nothing, and the price level will fall to P .
B) The Bank of Canada should do nothing, and the price level will remain at its current level.
C) The Bank of Canada should increase the money supply and decrease the price level to P .
D) The Bank of Canada should decrease the money supply and decrease the price level to P .
Q2) How does a reduction in money supply affect the aggregate demand curve?
A) The curve shifts leftward, lowering real GDP and the price level.
B) The curve shifts leftward, raising real GDP and the price level.
C) The curve shifts rightward, lowering real GDP but raising the price level.
D) The curve shifts rightward, raising real GDP and the price level.
Q3) Which of the following is an example of an expansionary monetary policy?
A) Government purchases of goods and services decline.
B) Government purchases of goods and services increase.
C) The bank rate is lowered.
D) The bank rate is increased.
Page 17
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Chapter 16: Macro Policy Debate: Active or Passive
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Which of the following is NOT a time lag associated with using discretionary policy to correct an economic problem?
A) the time required to recognize the problem
B) the time required to decide how to handle the problem
C) the time required to set a policy change in action
D) the time required to coordinate monetary and fiscal policy
Q2) According to the passive policymaker's position, why would an expansionary gap be eliminated?
A) because the short-run aggregate supply shifts to the left
B) because the short-run aggregate supply shifts to the right
C) because rising prices shift the aggregate demand to the left
D) because wages fall relatively quickly
Q3) Suppose an economy is at an unemployment level that corresponds to the potential output level.Which curve would represent this situation?
A) the long-run Phillips curve
B) the short-run Phillips curve
C) the mid-term Phillips curve
D) the self-correcting Phillips curve
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Chapter 17: International Finance
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Sample Questions
Q1) Suppose a foreign currency becomes more expensive in Canada.How would Canadian exports likely be affected?
A) Canadian exports would likely increase.
B) Canadian exports would likely first increase, and then decrease.
C) Canadian exports would likely remain constant.
D) Canadian exports would likely decrease.
Q2) Suppose the exchange rate is such that in Toronto $1 equals 1, but in Paris $1 equals 0.9.Where would an arbitrageur buy and sell Canadian dollars and euros?
A) An arbitrageur would sell euros in Toronto and buy Canadian dollars in Paris.
B) An arbitrageur would sell euros in Paris and buy Canadian dollars in Toronto.
C) An arbitrageur would sell euros in Toronto while buying them in Paris.
D) An arbitrageur would sell euros in Paris while buying them in Toronto.
Q3) How would Canadian monetary authorities go about strengthening the dollar?
A) by selling dollars in the foreign exchange market
B) by buying dollars in the foreign exchange market
C) by declaring the dollar devalued
D) by selling dollars and buying only euros in the foreign exchange market
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Chapter 18: International Trade
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112 Flashcards
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Sample Questions
Q1) Which of the following best describes the effects of imposing tariffs and quotas?
A) Tariffs raise the price of a good, but quotas do NOT.
B) Tariffs reduce consumer and producer surplus, whereas quotas reduce domestic consumer surplus and increase domestic producer surplus.
C) Both tariffs and quotas increase the quantity demanded.
D) The revenue resulting from a tariff goes to the government, whereas the revenue resulting from a quota goes to whoever is awarded the right to sell the product.
Q2) What is an import quota?
A) a legal limit on the quantity of a good that can be imported per year
B) a legal requirement that a specified percentage of a final good's value must be produced domestically
C) a legal requirement that exports to a certain country must exceed a specified value before that country's product may be imported
D) a percentage tax on an imported product
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Chapter 19: Economic Development
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57 Flashcards
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Sample Questions
Q1) Which of the following resources is necessary to efficiently combine the other resources in order to produce goods and services?
A) natural resources
B) capital
C) labour
D) entrepreneurial ability
Q2) Which of the following best describes social capital?
A) the shared values and trust that promote cooperation in the economy
B) the buildings and equipment used to produce goods and services
C) a government regulation aimed at improving health and safety
D) the accumulated knowledge, skill, and experience of the labour force
Q3) Eddie is a skilled worker employed in a low-skill job.Which of the following terms can be used to describe him?
A) underemployed
B) unemployed
C) overemployed
D) fully employed
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21
Chapter 20: Understanding Graphs
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52 Flashcards
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Sample Questions
Q1) Refer to the exhibit.What does point c represent?
A) x = 30, y = 60
B) x = 60, y = 30
C) c = 90
D) x + y = 60
Q2) Refer to the exhibit.At x = 8, what is the value of y?
A) It is larger on curve A than on curve B.
B) It is smaller on curve A than on curve B.
C) It is the same on both curves.
D) It is tangent to both curves.
Q3) On a graph with x on the horizontal axis and y on the vertical axis, what is the origin?
A) the point where x = 0 and y = 0
B) any point where x = 0
C) any point where y = 0
D) any point where a curve intersects the vertical axis
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