Principles of Economics Study Guide
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Principles of Economics is an introductory course that explores the fundamental concepts and theories underpinning the study of economics. Students will examine key topics such as supply and demand, market equilibrium, elasticity, consumer behavior, production costs, and the different market structures within both microeconomics and macroeconomics. The course also introduces the basics of national income, inflation, unemployment, and the role of government in the economy. Through case studies and real-world examples, learners will gain a foundational understanding of how economic principles influence decision-making by individuals, businesses, and governments.
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Economics 1st Edition by Dean Karlan
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35 Chapters
4514 Verified Questions
4514 Flashcards
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Page 2
Chapter 1: Economics and Life
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145 Flashcards
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Sample Questions
Q1) Which of the following is a positive incentive?
A)Discover credit cards offer 0 percent balance transfer rates for someone to open an account.
B)McDonalds decides to offer a white chocolate mocha.
C)A school teacher decides to retire and focus on gardening.
D)A business decides to leave the industry.
Answer: A
Q2) Which type of statement is most likely to include the word "should"?
A)Positive statement
B)Normative statement
C)Fair statement
D)Factual statement
Answer: B
Q3) People frequently confuse facts with judgments that are based on beliefs.This means that people have trouble making the distinction between:
A)political statements and non-political statements.
B)rational statements and irrational statements.
C)macroeconomics and microeconomics.
D)positive statements and normative statements.
Answer: D
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Chapter 2: Specialization and Exchange
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Sample Questions
Q1) Suppose that,given the same number of workers,the United States can produce two times as many TVs or 20 times as many potatoes as Chile.Which of the following statements is true?
A)Chile should trade with the United States for potatoes because the United States has an absolute advantage in the production of potatoes.
B)Chile should trade with the United States for TVs because the United States has an absolute advantage in the production of potatoes.
C)The United States can benefit from trading TVs but not potatoes with Chile.
D)None of these statements is necessarily true.
Answer: D
Q2) The concepts of comparative advantage,specialization,and trade:
A)can be useful in explaining why countries import and export certain goods.
B)can be useful in explaining why individuals typically work at one job,and buy the other goods and services they need.
C)can be useful in explaining why we allow ourselves to be interdependent on others.
D)All of the statements are true.
Answer: D
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Page 4
Chapter 3: Markets
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Sample Questions
Q1) Supply describes how much of something producers:
A)are willing and able to buy under certain circumstances.
B)want to buy under certain circumstances,although they may not be able to.
C)are willing and able to offer for sale under certain circumstances.
D)want to offer for sale under certain circumstances,although they may not be able to.
Answer: C
Q2) The demand curve:
A)represents consumers' willingness to buy.
B)shows the highest amount consumers will pay for any given quantity.
C)visually displays the demand schedule.
D)All of these statements are true.
Answer: D
Q3) The demand curve represents the relationship between:
A)price and quantity demanded with everything else held constant.
B)income and quantity demanded with everything else held constant.
C)consumer preferences and quantity demanded with everything else held constant.
D)income and price demanded with everything else held constant.
Answer: A
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Chapter 4: Elasticity
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Sample Questions
Q1) When a good has a lot of close substitutes available,it is likely to be:
A)more price elastic than goods without close substitutes available.
B)less price elastic than goods without close substitutes available.
C)more price elastic than those with a lot of complement goods available.
D)less price elastic than those with a lot of complement goods available.
Q2) When two goods are complements,we expect their cross-price elasticity of demand to:
A)be positive.
B)be negative.
C)be zero.
D)equal 1.
Q3) A pound of coffee is _________________ than a pound sugar of because ________________.
A)less price elastic;it is a larger portion of one's income
B)more price elastic;it is a larger portion of one's income
C)less price elastic;people will have a longer time to adjust to the change in its price
D)more price elastic;people will have a longer time to adjust to the change in its price
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Chapter 5: Efficiency
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Sample Questions
Q1) A seller's willingness to sell:
A)is the maximum price that a seller is willing to accept in exchange for a good or service.
B)is the minimum price that a seller is willing to accept in exchange for a good or service.
C)is their reserved minimum bid-price.
D)must always equal the buyer's willingness to buy.
Q2) When a market is efficient,
A)there is no exchange that can make anyone better off without someone becoming worse off.
B)a central planner must be involved.
C)only increased prices can benefit those involved.
D)None of these is true.
Q3) The market to buy and sell organs:
A)would increase the well being of those who interacted in it.
B)would not be considered "missing," since surplus could be gained from it.
C)would create negative surplus in those who could not afford an organ,but needed one.
D)would never exist because it is unfair.
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Page 7
Chapter 6: Government Intervention
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Sample Questions
Q1) The difference in the price the buyer pays and the price the sellers keep in the presence of a tax is called:
A)a tax wedge.
B)a tax differential.
C)the tax incidence.
D)the tax burden.
Q2) Would you expect a tax on cigarettes to be more effective over the long run or the short run?
A)Long run because demand becomes more elastic over time
B)Long run because demand becomes less elastic over time
C)Short run because demand becomes more elastic over time
D)Short run because demand becomes less elastic over time
Q3) Does a tax on buyers affect the demand curve?
A)Yes,it shifts down by the amount of the tax.
B)Yes,it shifts to the left by the amount of the tax.
C)Yes,it shifts up by the amount of the tax.
D)No,there is change in the quantity demanded,but the demand curve does not move.
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Chapter 7: Consumer Behavior
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Sample Questions
Q1) Sadie has just eaten a donut and received a utility of 6.If she chooses to eat another donut:
A)we can assume she will get at least a utility of 6.
B)we can assume she will get a utility of 6.
C)we can assume she will get less than a utility of 6.
D)we can assume Sadie's total utility will fall because of diminishing marginal utility.
Q2) Utility is:
A)useful in describing a person's preferences for one good over another.
B)useful in comparing different people's preferences for a particular good.
C)useful in predicting when to put an item on sale.
D)an interesting concept,but not really useful for anything.
Q3) Billy is deciding whether to watch TV at home or go spend time with his friends.If Billy decides to stay home,we can conclude that:
A)Billy is a homebody and never goes out.
B)Billy will get more utility from watching TV than spending time with his friends.
C)Billy will regret not spending more time with his friends.
D)Billy's revealed preference is to always be alone.
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Page 9
Chapter 8: Behavioral Economics: A Closer Look at Decision Making
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Sample Questions
Q1) Keith just got an iPhone 5 for his birthday,and he quickly switches his data over and throws his Iphone 4 in a drawer and forgets about it.Economists would say this behavior is ___________ and would use the concept of ________________ to explain this choice.
A)irrational;the implicit cost of ownership
B)rational;the implicit cost of ownership
C)irrational;ignoring sunk costs
D)rational;considering sunk costs
Q2) Installing software to limit screen time,forcing you to uninstall it every time you reach the limit,is an example of:
A)increasing the cost of a vice.
B)behavior that follows the law of demand.
C)can be explained through behavioral economics.
D)All of these are true.
Q3) Money is:
A)fungible,meaning it is easily exchangeable or substitutable.
B)not fungible,meaning it can be easily exchanged or substituted.
C)an alternative to implicit costs.
D)a proven cognitive bias.
Page 10
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Chapter 9: Game Theory and Strategic Thinking
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Sample Questions
Q1) For a commitment strategy to work:
A)the punishment must be so bad that it outweighs the incentive to defect in the game.
B)the punishment must be immediately after the game is played.
C)both players must agree to a punishment.
D)no player may have a dominant strategy.
Q2) Backward induction is a useful tool:
A)to finding an optimal strategy in a sequential game.
B)for analyzing the decision in a prisoner's dilemma-type game.
C)for finding an optimal strategy in a simultaneous game.
D)Backward induction can be used in any of these games.
Q3) Game theory is:
A)the study of how people behave strategically under different circumstances.
B)used by economists to evaluate behavior in a variety of settings.
C)a useful tool in predicting strategic behavior.
D)All of these statements are true.
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Chapter 10: Information
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Sample Questions
Q1) A landlord requiring potential tenants to provide a rental history is an example of:
A)screening.
B)signaling.
C)statistical discrimination.
D)building a reputation.
Q2) One effect of government mandating participation in the auto insurance market is it leads to:
A)lower premiums for all participants.
B)higher premiums for all participants.
C)the collapse of the market.
D)free coverage for some participants.
Q3) Adverse selection:
A)relates to unobserved characteristics of people or goods and occurs before the parties have entered into an agreement.
B)is about actions and occurs after the parties have voluntarily entered into an agreement.
C)is always present when moral hazard arises.
D)All of these statements are true.
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12
Chapter 11: Time and Uncertainty
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Sample Questions
Q1) Those who generally have low willingness to take on risk are said to be:
A)risk-averse.
B)risk-seekers.
C)low-risk players.
D)high-compensation players.
Q2) The process of accumulation that occurs when interest is paid on previously earned interest is called:
A)present valuation.
B)backdating.
C)compounding.
D)front loading.
Q3) In making decisions about insurance,a crucial piece of information to know is:
A)how likely is the event you're insuring against.
B)how easily you can reduce the risk of experiencing the event you're insuring against.
C)when the event you're insuring against is most likely to occur.
D)how many others will likely be affected by the event you're insuring against.
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13
Chapter 12: The Costs of Production
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Sample Questions
Q1) Suppose Larry's Lariats produces lassos in a factory,and uses nine feet of rope to make each lasso.The rope is put into a machine that automatically cuts it to the right length,then seals the ends to prevent fraying.The rope is then hand tied,dipped,and wound before being placed in a packaging machine to prepare it for retail sale.Which of the following would be considered a fixed cost for this company?
A)Employee wages
B)The cost of rope
C)The packaging material
D)None of these would be considered a fixed cost.
Q2) Economic profits are calculated as:
A)total revenue minus explicit costs.
B)total revenue minus all opportunity costs,explicit and implicit.
C)total revenue minus implicit costs.
D)None of these is true.
Q3) Which of the following would be considered an ongoing expense?
A)Employee salaries
B)Raw materials
C)Advertising
D)All of these could be considered ongoing expenses.
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Page 14
Chapter 13: Perfect Competition
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Sample Questions
Q1) In the long run,firms in a perfectly competitive market choose to produce a quantity:
A)that earns zero economic profits.
B)that does not cover minimum average variable costs.
C)where marginal costs are less than average variable costs.
D)All of these are true.
Q2) A competitive market is one in which:
A)fully informed price-taking buyers and sellers easily trade a standardized good.
B)few large sellers compete for a majority of the market share.
C)government oversees its operation.
D)None of these describe a competitive market.
Q3) In the long run,firms in a perfectly competitive market produce:
A)where average total costs are minimized.
B)at the most efficient scale.
C)where price equals marginal cost.
D)All of these are true.
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15
Chapter 14: Monopoly
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Sample Questions
Q1) For a monopolist,average revenues:
A)are always equal to price.
B)equal price only at the profit maximizing quantity.
C)are always zero at the profit maximizing quantity.
D)are maximized when total revenues are maximized.
Q2) When a monopolist chooses the level of output where marginal cost equals marginal revenue:
A)profits are maximized.
B)price is set at marginal revenue.
C)price is equal to average total costs.
D)All of these statements are true.
Q3) In general,with a monopolist's outcome:
A)consumers lose surplus.
B)monopolies earn profit.
C)deadweight loss occurs.
D)All of these statements are true.
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Chapter 15: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) The act of firms working together to make decisions about price and quantity is called:
A)collusion.
B)price discrimination.
C)bulk ordering.
D)promotion.
Q2) For an oligopoly,when the quantity effect outweighs the price effect,firms may have the incentive to:
A)increase output.
B)decrease output.
C)not change the level of output.
D)leave the industry.
Q3) Monopolistically competitive firms have an incentive to:
A)create products that are easily substituted for the competition's products.
B)create products that have a unique feature that makes it difficult to substitute.
C)create products that are exactly like the competitor's products.
D)None of these statements is true.
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Chapter 16: The Factors of Production
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Sample Questions
Q1) The labor supply could decrease when wages increase only if:
A)the price effect outweighs the income effect.
B)the income effect outweighs the price effect.
C)the substitution effect outweighs the income effect.
D)the price effect outweighs the substitution effect.
Q2) The factor of production called "capital" refers to:
A)manufactured goods that are used to produce new goods.
B)any piece of raw material that is used to produce goods and services.
C)any input that's not a human being or dirt.
D)None of these statements is true.
Q3) If the price effect outweighs the income effect of a wage increase,the labor-supply curve will:
A)slope downward.
B)slope upward.
C)be perfectly horizontal.
D)be perfectly flat.
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18
Chapter 17: International Trade
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Sample Questions
Q1) When each country specializes in producing the good for which it has a comparative advantage:
A)both countries can benefit.
B)both countries always enjoy equal gains from trade.
C)the country that is bigger will gain more surplus.
D)All of these are true.
Q2) Suppose a country,whose production and consumption of coffee is large relative to the world market,has just entered the global market.If the country is a net exporter of coffee,we would expect:
A)an increase in both world price and quantity of coffee.
B)an increase in world price and decrease in world quantity of coffee.
C)a decrease in both world price and quantity of coffee.
D)a decrease in world price,and increase in world quantity of coffee.
Q3) When we say that a country enjoys gains from trade,we mean:
A)everyone in that country benefits from the trade.
B)the net gain of surplus is positive for that country.
C)the total producer surplus increased in the country.
D)the total consumer surplus increased in the country.
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Page 19
Chapter 18: Externalities
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Sample Questions
Q1) The idea that individuals can reach an efficient equilibrium through private trades,even in the presence of an externality,is called:
A)the Coase theorem.
B)market failure.
C)trade quotas.
D)the invisible hand.
Q2) When positive externalities are present in a market,it means that:
A)private benefits are less than social benefits.
B)private benefits are less than external benefits.
C)social benefits are less than external benefits.
D)external benefits are equal to social benefits.
Q3) We call costs that fall directly on an economic decision maker:
A)private costs.
B)social costs.
C)external costs.
D)network costs.
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Page 20
Chapter 19: Public Goods and Common Resources
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Sample Questions
Q1) Bans or quotas that limit the use of common resources are straightforward public-policy approaches to solving the problem of overuse if:
A)countries have the resources to enforce them.
B)the community agrees to aid in its enforcement.
C)the community affected participates in setting the punishments for breaking the policy.
D)None of these statements is true.
Q2) Traffic lights would be considered:
A)a common resource.
B)a private good.
C)a public good.
D)an artificially scarce good.
Q3) Excludability matters because it:
A)allows owners to set an enforceable price on a good.
B)allows consumers to control the price of a good.
C)creates a perceived scarcity that allows the seller to keep the price artificially high.
D)creates a perceived scarcity that causes buyers to have an inelastic demand for the good.
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Chapter 20: Taxation and the Public Budget
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Sample Questions
Q1) When a tax is imposed,the surplus that is lost to buyers and sellers but converted into tax revenue is:
A)considered a cost of taxation.
B)part of deadweight loss.
C)the sole source of deadweight loss.
D)not part of deadweight loss.
Q2) If the ________ effect is greater than the ___________ effect,a tax cut will increase revenues.
A)quantity;price
B)price;quantity
C)quantity;income
D)income;price
Q3) When a tax alters consumers' incentives,it is:
A)sometimes a side effect of a tax designed to raise revenue.
B)always the explicit purpose of the policy.
C)called a sin tax.
D)meant to encourage increased consumption.
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22
Chapter 21: Poverty, Inequality, and Discrimination
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Sample Questions
Q1) Most of Europe has relatively _______ inequality,and much of Latin America and southern Africa has relatively _________ inequality.
A)low;high
B)low;low
C)high;high
D)high;low
Q2) If we compare income mobility in absolute terms,we would measure whether a person's income:
A)is higher than her parents' income.
B)places her higher up in the income distribution than her parents' income.
C)is higher at the end of her career compared to the beginning.
D)places her higher up in the income distribution over the course of her work-life.
Q3) Most countries in the world have Gini coefficients ranging from:
A)0.25 to 0.60.
B)0.20 to 0.85.
C)0.10 to 0.50.
D)0.30 to 0.40.
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Chapter 22: Political Choices
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Sample Questions
Q1) Historically,controlling who was able to vote was an important tool for those:
A)who wanted to keep other groups out of power.
B)to disincent some from participating in policy making.
C)to attract greater participation in the political system.
D)None of these is true.
Q2) At its extreme,the use of the powers of government by public officials to achieve personal gains is:
A)corruption.
B)collective action.
C)bribery.
D)a moral hazard.
Q3) Many countries use a proportional-representation system,which means that:
A)if a party gains a certain percentage of the popular vote,then they are awarded the same percentage of representative seats in the government.
B)smaller parties can carve out niches and still have political influence.
C)everyone's preference gets represented proportionately with everyone else's.
D)All of these are true.
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24
Chapter 23: Public Policy and Choice Architecture
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Sample Questions
Q1) By studying the effects of choice architecture,we can:
A)expand the simplifying assumption that people always make the choices that are best for themselves.
B)blend the ideas of psychology with core economic beliefs.
C)open the possibility that we can no longer tell if someone is making a mistake or choosing something that is maximizing their utility.
D)All of these statements are true.
Q2) When it comes to figuring out who wants to be an organ donor,the answer depends on:
A)how you ask the question.
B)the default rule.
C)whether presumed consent exists in the organ donation program.
D)All of these statements are true.
Q3) People's preferences about the present are ____________ with their preferences about the future,simply because the future choices are ____________.
A)inconsistent;more distant
B)consistent;more distant
C)inconsistent;harder to predict
D)consistent;easier to predict
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Page 25
Chapter 24: Measuring the Wealth of Nations
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Sample Questions
Q1) Clarence is a Japanese citizen working for Toyota at the manufacturing plant located in Tennessee.Clarence's work will contribute toward:
A)U.S.GDP since the location of the plant is in the U.S.
B)Japan's GDP since he's a Japanese citizen.
C)Japan's GDP since it's a Japanese firm.
D)both the U.S.and Japan's GDP.
Q2) A closed economy refers to an economy in which:
A)all goods are produced and sold domestically.
B)all goods are consumed domestically.
C)intermediate goods are sold domestically.
D)a country exports,but does not allow imports.
Q3) One of the most crucial ideas in macroeconomics is understanding that:
A)zero unemployment is the best way to achieve economic growth.
B)measuring total expenditures or total income both equal total production of an economy.
C)prolonging economic downturns can be prolonged by fiscal policy.
D)GNP is the most commonly used measurement of total production.
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26
Chapter 25: The Cost of Living
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Sample Questions
Q1) Suppose we want to know how much money your grandparents would have to earn now to have purchasing power equivalent to their income in 1969.We could:
A)translate their nominal income in 1969 into constant,real dollars of today.
B)translate their nominal income today into 1969 dollars.
C)take a ratio of their income today with their income from 1969.
D)None of these statements is true.
Q2) An example of a nontradable good is:
A)fire-protection services.
B)a Domino's pizza.
C)a double-decker bus tour of London.
D)All of these would be considered a nontradable good.
Q3) Regardless of the index we use:
A)inflation is measured as a percent increase in the index from one year to the next.
B)we get the same measurements for inflation,so each is equally useful.
C)the measurement of inflation is the same,so we use the one easiest to calculate.
D)All of these statements are true.
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Chapter 26: Economic Growth
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Sample Questions
Q1) The poorer a country is:
A)the more difficult it is to pay for things that will bring it out of poverty.
B)the less they have to give up for the basic things that will bring them out of poverty.
C)the easier it is to pay for things that will bring it out of poverty.
D)the more they can invest in all the components of productivity at once.
Q2) A country's income is:
A)dependent upon how productive its worker are.
B)difficult to measure given current macroeconomic data.
C)likely to increase if the country experiences high rates of inflation.
D)None of these is true.
Q3) The basic idea behind the convergence theory is:
A)that countries starting at low levels of will tend to grow at much faster rates than those starting with high levels of income.
B)each additional unit of capital provides larger gains when you're coming from behind.
C)also the basic idea behind the catch-up effect.
D)All of these are true.
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28
Chapter 27: Unemployment and the Demand for Labor
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Sample Questions
Q1) During times of recession,the labor force participation rate typically:
A)rises,as more people need work.
B)rises,as more incomes per household are needed to make ends meet.
C)falls,as more people give up and stop looking for work.
D)falls,as more people cannot find work,they stay in jobs that aren't a good fit.
Q2) In the United States,to count as unemployed,you must:
A)be younger than 65 years old.
B)want to work.
C)be skilled enough to hold a job.
D)All of these are true.
Q3) One way for governments to try and minimize the effects of structural unemployment is to:
A)subsidize retraining programs.
B)increase unemployment benefits.
C)mandate employers cannot fire anyone.
D)All of these are ways that would minimize the effects of structural unemployment.
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Chapter 28: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) There is a general overall __________ relationship between the price level and ____________.
A)negative;aggregate expenditures on GDP
B)positive;aggregate expenditures from the government
C)negative;nominal expenditures from the government
D)positive;nominal expenditures from households
Q2) If the government does not react to a recession:
A)the economy will remain out of its long-run equilibrium indefinitely.
B)the economy will recover,but much more slowly.
C)voters and consumers are likely to be happy with less government interference.
D)None of these is true.
Q3) The relationship between the price level and net exports is:
A)negative.
B)positive.
C)perfectly correlated.
D)uncorrelated.
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Chapter 29: Fiscal Policy
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Sample Questions
Q1) As of 2010,which country in the world is the only one to be debt-free?
A)Brunei
B)Greece
C)Japan
D)All of these countries have public debt.
Q2) The American Recovery and Reinvestment Act of 2009:
A)is more commonly known as the "stimulus plan."
B)cost nearly $800 billion.
C)included tax cuts and increased government spending.
D)All of these are true.
Q3) If interest rates increase,the government debt becomes:
A)more expensive to pay.
B)less expensive to pay.
C)more volatile.
D)less of a burden.
Q4) If the government were to increase its spending,it would expect:
A)aggregate demand to shift to the right.
B)aggregate demand to shift to the left.
C)aggregate supply to shift to the right.
D)aggregate supply to shift to the left.
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Chapter 30: The Basics of Finance
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Sample Questions
Q1) Buying assets like stocks and bonds is a way to:
A)save.
B)invest.
C)spend.
D)be a market maker.
Q2) In an economy without government or trade,it must be true that:
A)savings equals investment.
B)consumption equals savings plus investment.
C)consumption plus savings equal investment.
D)consumption plus investment equal national savings.
Q3) The financial system:
A)brings together savers and borrowers in a set of interconnected markets where people trade a variety of financial products.
B)connects the government to those truly in need of public services.
C)is used to help individuals keep track of the general price level.
D)gathers information about the economy in an effort to inform the public.
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Chapter 31: Money and the Monetary System
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Q1) Commodity-backed money is:
A)any form of money that can be legally exchanged into a fixed amount of an underlying commodity.
B)money created by rule.
C)money used for the exchange of large commodities.
D)None of these is true.
Q2) One of the difficulties in implementing monetary policy is:
A)the time it takes to pass new monetary policy once the Fed has decided action is needed.
B)the time it takes monetary policy to have an effect in the economy once enacted.
C)the time it takes to enact monetary policy once the Fed has decided action is needed.
D)All of these make monetary policy difficult to implement.
Q3) Contractionary monetary policy involves:
A)actions that reduce the money supply in order to decrease aggregate demand.
B)actions that increase the money supply in order to decrease aggregate demand.
C)actions that reduce the money supply in order to increase aggregate demand.
D)actions that increase the money supply in order to increase aggregate demand.
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Chapter 32: Inflation
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Q1) According to the quantity theory of money,if the economy were facing inflation,the Fed could combat it by:
A)decreasing the supply of money.
B)increasing the supply of money.
C)cutting taxes.
D)increasing taxes.
Q2) The velocity of money is:
A)the number of transactions a typical dollar is used in during a given period.
B)the number of goods a typical dollar can buy in a given period.
C)how quickly money is created through the financial system.
D)None of these statements is true.
Q3) ________ inflation is more stable than __________ inflation,because it excludes food and gasoline prices.
A)Core;headline
B)Headline;core
C)Core;nominal
D)Nominal;core
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34
Chapter 33: Financial Crisis
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Sample Questions
Q1) When the Fed injected newly made money into the economy by buying bonds,it:
A)was practicing quantitative easing.
B)was trying to avoid a deflationary period similar to Japan.
C)inserted over $1 trillion of new money into the economy.
D)All of these statements are true.
Q2) The basic human tendency to overvalue recent experience when trying to predict the future is called:
A)tulip mania.
B)the leverage effect.
C)herd instinct.
D)the recency effect.
Q3) Historically,household debt in the U.S.:
A)had been rising steadily since the Great Depression until the early 2000s,when it accelerated.
B)had been rising steadily since the Great Depression until the early 2000s,when it declined.
C)had been fairly constant since the Great Depression until the early 2000s,when it accelerated.
D)had been fairly constant since the Great Depression until the early 2000s,when it declined.
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Chapter 34: Open-Market Macroeconomics
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Q1) The market for buying and selling foreign currencies is often referred to as the:
A)market for foreign exchange.
B)market for loanable funds.
C)market for international trade.
D)market for direct foreign investment.
Q2) The real exchange rate:
A)expresses the value of goods in one country in terms of the same goods in another country.
B)is the nominal exchange rate adjusted for purchasing power parity.
C)uses the price level in each country to convert the exchange rate into a value that is in "real" terms.
D)All of these statements are true.
Q3) When Pierre in Paris,France buys stock in Disney,Inc. ,he is contributing to:
A)capital outflow for the U.S.
B)capital inflow for the U.S.
C)domestic investment in the U.S.
D)private savings in the U.S.
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Chapter 35: Development Economics
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Q1) Something that would not be considered a tool in pursuit of industrial policy would be:
A)incentives for foreign portfolio investment.
B)investment in research.
C)incentives for foreign direct investment.
D)All of these are examples of industrial policies.
Q2) National health care programs are not as effective as they could be because:
A)public health care clinics often run out of important drugs.
B)traditional Western medicine is largely untrusted in most parts of the developing world.
C)many doctors in clinics do not have sufficient knowledge to properly diagnose patients.
D)All of these statements are true.
Q3) A country that has had success with export-led growth policy is:
A)North Korea.
B)South Korea.
C)Russia.
D)Liberia.
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