Introduction to Economics Test
Bank
Course Introduction
Introduction to Economics provides students with a foundational understanding of how economies function at both the individual and collective levels. The course explores key concepts such as supply and demand, market structures, opportunity cost, resource allocation, and the role of government in economic decision-making. Students will examine how individuals, businesses, and governments make choices in the face of scarcity, and how these choices affect the production, distribution, and consumption of goods and services. Through real-world examples and case studies, the course aims to equip students with analytical tools to interpret economic issues and events, preparing them for further study in the field.
Recommended Textbook
Macroeconomics 10th Edition by William Boyes
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21 Chapters
2257 Verified Questions
2257 Flashcards
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Chapter 1: The Wealth of Nations: Ownership and Economic
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Labor resources include:
A) skilled workers but not unskilled workers.
B) unskilled workers but not skilled workers.
C) a robot.
D) education and training of workers.
E) coffee breaks.
Answer: D
Q2) What accounts for specialization?
A) People specialize in the activity in which their opportunity costs are at a maximum.
B) People specialize in the activity in which their opportunity costs are lowest.
C) People do not specialize in any activity.
D) People specialize in the activity that pays the highest wage.
E) People specialize in the activity that they enjoy the most, no matter what the salary is.
Answer: B
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Chapter 2: Scarcity and Opportunity Costs
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Sample Questions
Q1) Which of the following is an assumption made while constructing a production possibilities frontier [PPF]?
A) Dynamic technological know-how
B) Flexible resource quality
C) Fixed resource quantity
D) Full and efficient use of resources
E) Flexible money supply
Answer: D
Q2) Refer to Figure 2.2. If there is an increase in the education level of the population, graph(s) _____ best illustrate(s) what will happen to the production possibilities curve [PPC].
A) A
B) B
C) C
D) A and C
E) A and B
Answer: C
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Chapter 3: The Market and Price System
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96 Flashcards
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Sample Questions
Q1) Which of the following is true of a price floor?
A) A price floor allows supply and demand to function effectively.
B) A price floor is set such that the price is not allowed to increase above a certain level.
C) A price floor is beneficial to buyers in a market.
D) A price floor usually creates a shortage of a good in a market.
E) A price floor is set such that the price is not allowed to decrease below a certain level.
Answer: E
Q2) Refer to Table 3.1. If Quantity Demanded 1, Quantity Demanded 2, and Quantity Demanded 3 are market demand schedules, then the change from Quantity Demanded 1 to Quantity Demanded 2 may have been due to:
A) an increase in price.
B) a decrease in the number of sellers.
C) an increase in the number of buyers.
D) a decrease in price.
E) an increase in the price of a complementary good.
Answer: C
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Chapter 4: The Aggregate Economy
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Sample Questions
Q1) A person obtains income by selling the services of the resources that he or she owns.
A)True
B)False
Q2) Which of the following does not constitute a household consumption item?
A) A pair of jeans
B) A bottle of Beck's beer
C) A haircut
D) A steam turbine electric generator
E) A packet of breakfast cereal
Q3) The government sector sells resource services to households and buys goods and services from firms.
A)True
B)False
Q4) According to Scenario 4-1, country A has net exports of:
A) $18 million.
B) $8 million.
C) $13 million.
D) $9 million.
E) $6 million.
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Chapter 5: National Income Accounting
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Sample Questions
Q1) The market basket of goods and services used to calculate the consumer price index [CPI] by the Department of Labor in the U.S. changes only every two years.
A)True
B)False
Q2) The total expenditure on goods and services in a country must be the same as the total income earned from selling goods and services because:
A) the government's annual budget has to balance.
B) net exports in an economy is usually zero.
C) one sector's expenditures are another sector's income.
D) total investment in an economy always equals total saving.
E) the sum of consumption spending and saving is zero.
Q3) To avoid double counting in the calculation of GDP,
A) net exports should be excluded.
B) the value of intermediate goods and services should be excluded.
C) the capital consumption allowance should be excluded.
D) business investment should be excluded.
E) government purchases should be excluded.
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Chapter 6: An Introduction to the Foreign Exchapterange
Market and the Balance of Payments
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Sample Questions
Q1) Suppose an economics professor receives a $10,000 royalty check from a foreign publishing company and deposits the amount in a local bank. This transaction would be recorded as:
A) a $10,000 credit entry in the domestic services account.
B) a $20,000 debit entry in the domestic capital account.
C) a $10,000 credit entry in the domestic capital account.
D) a $10,000 debit entry in the domestic services account.
Q2) A majority of international transactions involve the buying and selling of _____.
A) bank deposits denominated in foreign currency
B) currency notes
C) traveler's checks
D) stocks denominated in domestic currency
E) bills of exchange
Q3) A country that is running a current account deficit will have:
A) zero net exports.
B) zero investments.
C) negative net investments.
D) positive net exports.
E) negative net exports.
Page 8
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Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) Variable-rate mortgages decrease the risks associated with unexpected inflation.
A)True
B)False
Q2) A coincident indicator will change before a recession begins.
A)True
B)False
Q3) Refer to Figure 7.2. The difference between potential and actual GDP consistently widens between points:
A) A and B.
B) B and D.
C) A and D.
D) B and C.
E) C and D.
Q4) Which of the following could contribute to cost-push inflation?
A) Greater demand for exports
B) Lower income taxes
C) An increase in consumption demand
D) Higher government spending
E) Higher wage demands by trade unions
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Chapter 8: Macroeconomic Equilibrium: Aggregate
Demand and Supply
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Sample Questions
Q1) A rightward shift in the aggregate supply curve is generally associated with a reduction in resource prices.
A)True
B)False
Q2) The positive slope of the AS curve is a _____ phenomena, when the _____ are held constant.
A) long-run; business profits
B) short-run; government expenditures
C) short-run; costs of production
D) long-run; commodity prices
E) long-run; aggregate expenditures
Q3) A decrease in the relative price of economics textbooks will raise the aggregate quantity of an economy's goods and services demanded.
A)True
B)False
Q4) The purchase of fifty new food-processing machines by the Campbell Soup Corporation would be classified as investment spending.
A)True
B)False
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Chapter 9: Aggregate Expenditures
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Sample Questions
Q1) Refer to Table 9.1. The income level of $18,000 coincides with:
A) the origin of the graph.
B) the point where the consumption function touches the vertical axis.
C) the point where the MPC equals 1.00.
D) the point where the APC equals 1.00.
E) the point where the consumption function crosses the 45-degree line.
Q2) If a household experiences a $880 increase in consumption with a $1,100 increase in disposable income, what is the slope of that household's saving function?
A) 0.20
B) 2.0
C) 0.80
D) 0.08
E) 0.25
Q3) When disposable income is zero, consumption is also zero.
A)True
B)False
Q4) Households in America tend to consume more and more as they grow older.
A)True B)False
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Chapter 10: Income and Expenditures Equilibrium
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Sample Questions
Q1) Refer to Figure 10.5. If the target or potential level of real GDP is $1,200, then at an equilibrium real GDP level of $900:
A) the GDP gap is zero.
B) there exists a recessionary gap that could be closed by a $200 decrease in planned aggregate expenditures.
C) the GDP gap is $200.
D) actual real GDP exceeds potential real GDP by $300.
E) there exists a recessionary gap that could be closed by a $200 increase in autonomous investment spending.
Q2) Assume that the marginal propensity to consume equals 0.75 and the marginal propensity to import equals 0.10. By how much does spending on domestic goods increase if income increases by $300?
A) $195
B) $225
C) $30
D) $300
E) $75
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Chapter 11: Fiscal Policy
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Sample Questions
Q1) If crowding out exists, the expansionary effect of government spending will be:
A) smaller than intended.
B) negative.
C) infinite.
D) larger than intended.
E) zero.
Q2) National debt can be defined as:
A) the total money supply in the economy.
B) the total stock of government bonds outstanding.
C) the difference between real GDP and potential GDP.
D) the change in fiscal deficit that results from an increase in government spending.
E) the total volume of private investment in the country.
Q3) Which of the following taxes are more easier to collect in industrial countries than in developing countries?
A) Sales tax
B) Capital gains tax
C) Personal income tax
D) Business tax
E) Export tax
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Page 13
Chapter 20: International Trade Restrictions
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Sample Questions
Q1) A customs union is an organization of nations whose members:
A) have impenetrable trade barriers among themselves but impose no trade barriers on nonmembers.
B) have no trade barriers among themselves but impose common trade barriers on nonmembers.
C) have no trade barriers among themselves but each member country chooses its own trade policies toward nonmember countries.
D) retaliate each other by raising reciprocal tariffs.
E) neither have trade barriers among themselves nor impose any restriction on the nonmember countries.
Q2) In a free trade area, member nations have no trade barriers among themselves but are free to set their own trade policies toward nonmembers.
A)True
B)False
Q3) When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.
A)True
B)False
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22
Chapter 21: Exchapterange Rates and Financial Links
Between Countries
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Sample Questions
Q1) When the U.S. dollar depreciates in relation to the Swiss franc:
A) a U.S. importer will need more dollars to pay for an invoice denominated in Swiss francs.
B) a Swiss exporter will receive more Swiss francs for an invoice denominated in the exporter's currency.
C) Swiss imports of U.S. goods will fall.
D) the Swiss franc is now worth less in terms of the U.S. dollar.
E) a U.S. exporter will receive fewer dollars for an invoice denominated in Swiss francs.
Q2) A country on a gold standard was able to maintain people's confidence in the value of its currency by:
A) printing more and more paper money.
B) restricting international exchange of goods and services.
C) ensuring the convertibility of paper money into gold.
D) maintaining a fixed stock of foreign currencies.
E) ensuring balance of payment surplus.
Q3) The World Bank was created to help finance economic development in poor countries.
A)True
B)False
Page 23
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