Principles of Economics
Test Preparation
Course Introduction
Principles of Economics introduces students to the foundational concepts and theories that explain how individuals, businesses, governments, and societies make choices about allocating scarce resources. The course covers key topics such as supply and demand, market structures, opportunity cost, elasticity, and the role of incentives. Students will explore both microeconomic and macroeconomic perspectives, examining the behavior of consumers and firms, the functioning of markets, and the factors influencing economic growth, unemployment, and inflation. By developing critical thinking and analytical skills, students will gain a comprehensive understanding of how economic principles apply to real-world issues and policy decisions.
Recommended Textbook
Economics 5th Edition by R. Glenn Hubbard
Available Study Resources on Quizplus
30 Chapters
9264 Verified Questions
9264 Flashcards
Source URL: https://quizplus.com/study-set/3652 Page 2
Chapter 1: Economics: Foundations and Models
Available Study Resources on Quizplus for this Chatper
444 Verified Questions
444 Flashcards
Source URL: https://quizplus.com/quiz/72679
Sample Questions
Q1) Consider the following economic agents: a. the government
B. consumers
C. producers
Who, in a market economy, decides what goods and services will be produced with the scarce resources available in that economy?
A) the government
B) producers
C) consumers
D) consumers and producers
E) the government, consumers and producers
Answer: D
Q2) As recently as 2000, ________ percent of doctors were in private practice and by 2013, ________ percent of doctors were in private practice.
A) only 20; more than 70
B) nearly 60; less than 40
C) about 50; about 50
D) over 80; less than 15
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
Available Study Resources on Quizplus for this Chatper
498 Verified Questions
498 Flashcards
Source URL: https://quizplus.com/quiz/72668
Sample Questions
Q1) Refer to Table 2-14. What is Ireland's opportunity cost of producing one guitar?
A) 0.2 motorcycle
B) 5 motorcycles
C) 8 motorcycles
D) 32 motorcycles
Answer: A
Q2) Refer to Figure 2-19. Which two arrows in the diagram depict the following transaction: Myrna earns $450 for working at HempHill's Drug Store.
A) J and M
B) K and G
C) K and M
D) J and G
Answer: A
Q3) In economics, the term "free market" refers to a market where no sales tax is imposed on products sold.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
Available Study Resources on Quizplus for this Chatper
475 Verified Questions
475 Flashcards
Source URL: https://quizplus.com/quiz/72657
Sample Questions
Q1) The demand by all the consumers of a given good or service is the ________ for the good or service.
A) market demand
B) quantity demanded
C) law of demand
D) scheduled demand
Answer: A
Q2) According to a recent study, "Stricter college alcohol policies, such as raising the price of alcohol, or banning alcohol on campus, decrease the number of students who use marijuana." On the basis of this information, how would you describe alcohol and marijuana?
A) The two goods are substitutes in consumption.
B) There is no relationship between the two goods.
C) The two goods are complements in consumption.
D) They are both luxury goods.
Answer: C
Q3) A surplus occurs when the market price is lower than the equilibrium price.
A)True
B)False
Answer: False
Page 5
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Available Study Resources on Quizplus for this Chatper
419 Verified Questions
419 Flashcards
Source URL: https://quizplus.com/quiz/72655
Sample Questions
Q1) Refer to Figure 4-3. If the market price is $3.50, what is Kendra's consumer surplus?
A) $9.00
B) $7.50
C) $3.50
D) $0
Q2) Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the price of cowboy hats increases from $38 to $46,
A) consumers will buy no cowboy hats.
B) the marginal cost of producing the third cowboy hat will increase to $46.
C) producer surplus will rise from $22 to $46.
D) there will be a surplus of cowboy hats.
Q3) Refer to Figure 4-3. What is the total amount that Kendra is willing to pay for 3 ice cream cones?
A) $2.50
B) $7.50
C) $9.00
D) $13.50
Q4) What is a black market?
Page 6
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Externalities, Environmental Policy, and Public Goods
Available Study Resources on Quizplus for this Chatper
266 Verified Questions
266 Flashcards
Source URL: https://quizplus.com/quiz/72654
Sample Questions
Q1) According to ________, in a market with an externality, private parties would voluntarily negotiate an efficient outcome without government intervention.
A) A. C. Pigou
B) Adam Smith
C) Ronald Coase
D) John Maynard Keynes
Q2) Assume that production from an electric utility caused acid rain and that the government imposed a tax on the utility equal to the cost of the acid rain. This is an example of
A) a transaction cost.
B) a Pigovian tax.
C) a Pigovian subsidy.
D) the Coase Theorem.
Q3) A carbon tax which is designed to reduce pollution is an example of a
A) command-and-control policy.
B) government administrative rule.
C) noneffective incentive.
D) market-based policy.
Q4) State the Coase theorem.
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Elasticity: the Responsiveness of Demand and Supply
Available Study Resources on Quizplus for this Chatper
295 Verified Questions
295 Flashcards
Source URL: https://quizplus.com/quiz/72653
Sample Questions
Q1) The U.S. government's focus on supply reduction efforts in its "war on drugs" has been relatively unsuccessful at addressing illegal drug use. Some economists believe that a successful anti-drug program must concentrate on reducing demand; for example, through drug education and voluntary treatment programs for addicts.
a. Suppose the price elasticity of demand for cocaine is -0.5. What will happen to the equilibrium price, quantity and total revenue from cocaine sales if the government succeeds in its efforts to reduce demand? What is likely to happen to the incentive to sell cocaine?
b. Suppose the government continues to concentrate its efforts on supply reduction and is able to reduce the supply of cocaine. As a result of the reduction in supply the price of cocaine increases by 25 percent. If the price elasticity of demand is -0.5, what is likely to happen to the incentive to sell cocaine?
c. Based on your answers, explain why one approach might be preferred over the other.
Q2) Suppose that at a price of $55, 100 units were sold while at a price of $33, 153 units were sold. Without calculating the price elasticity value, can you determine whether demand is elastic, unit-elastic, or inelastic? Explain your answer.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: The Economics of Health Care
Available Study Resources on Quizplus for this Chatper
334 Verified Questions
334 Flashcards
Source URL: https://quizplus.com/quiz/72652
Sample Questions
Q1) Which of the following is not part of the "taxes" provision of the Patient Protection and Affordable Care Act (ACA)?
A) Pharmaceutical firms and health insurance firms will pay new taxes.
B) Investors earning more than $200,000 will pay a new tax on their investment income.
C) Beginning in 2018, all taxes on employer-provided health insurance plans will be reduced or eliminated.
D) Workers earning more than $200,000 will have their share of the Medicare payroll tax increase.
Q2) When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of
A) moral hazard.
B) adverse selection.
C) asymmetric information.
D) economic irrationality.
Q3) How can changes over time of the average height of the people in a country help to indicate the standard of living in a country?
Q4) What is moral hazard?
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Firms, the Stock Market, and Corporate Governance
Available Study Resources on Quizplus for this Chatper
278 Verified Questions
278 Flashcards
Source URL: https://quizplus.com/quiz/72651
Sample Questions
Q1) When someone takes out a mortgage loan to buy a house, the mortgage lender can take possession of the house and sell it if the borrower defaults by failing to make payments on the loan because the house is being pledged as ________ for the loan.
A) goodwill
B) a liability
C) insurance
D) collateral
Q2) Traditionally, Wall Street investment banks had been organized as partnerships, but by 2000 they had converted to being publicly traded companies. As partnerships, the principal-agent problem is ________ because there is ________ separation of ownership from control.
A) reduced; much
B) reduced; little
C) increased; much
D) increased; little
Q3) How does the principal-agent problem extend to managers and employees?
Q4) How do firms raise external funds through indirect finance?
Q5) What type of business has the potential for double taxation of profits and why?
Q6) Define a partnership.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Comparative Advantage and the Gains From International Trade
Available Study Resources on Quizplus for this Chatper
379 Verified Questions
379 Flashcards
Source URL: https://quizplus.com/quiz/72650
Sample Questions
Q1) Refer to the Article Summary. The protectionism being granted to Russian firms is likely to cause
A) exporting countries to retaliate by placing trade barriers on Russian imports.
B) Russian manufacturers to become more efficient.
C) Russian consumers to pay lower prices for a wider variety of products.
D) most countries to reduce their own trade barriers to be able to better compete with Russian imports at home.
Q2) A consequence of increasing marginal costs of producing digital music players in Japan is
A) Japan will not export digital music players.
B) Japan will stop short of complete specialization in the production of digital music players.
C) Japan will import digital music players from countries that don't experience increasing marginal costs.
D) Japan will likely impose trade restrictions on imported digital music players.
Q3) How have U.S. imports and exports, as a fraction of GDP, changed from 1970 to the present?
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Consumer Choice and Behavioral Economics
Available Study Resources on Quizplus for this Chatper
302 Verified Questions
302 Flashcards
Source URL: https://quizplus.com/quiz/72678
Sample Questions
Q1) What must be true in terms of the income effect, the substitution effect, and the type of good for the good's demand curve to be upward sloping?
Q2) If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe A) is maximizing total utility.
B) should buy more apples and fewer oranges.
C) should buy more oranges and fewer apples.
D) should buy fewer oranges and fewer apples.
Q3) Refer to Figure 10-5. Suppose the price of pizza increases while the price of hamburger remains constant. Then, the consumer's
A) indifference curve becomes more concave away from the origin.
B) indifference curve becomes straighter.
C) budget constraint moves inward toward the origin on the pizza axis while the hamburger intercept remains the same.
D) budget constraint moves outward away from the origin on the pizza axis while the hamburger intercept remains the same.
Q4) Explain the endowment effect.
Q5) Explain the concept of network externalities.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Technology, Production, and Costs
Available Study Resources on Quizplus for this Chatper
330 Verified Questions
330 Flashcards
Source URL: https://quizplus.com/quiz/72677
Sample Questions
Q1) Refer to Table 11-7. What is the marginal cost per unit of production when the firm produces 100 lanterns?
A) $420
B) $32
C) $11.10
D) $8.10
Q2) Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?
A) $2.00
B) $2.40
C) $4.40
D) $6.80
Q3) As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?
Q4) What is the difference between between total costs, variable costs, and fixed costs?
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Firms in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
298 Verified Questions
298 Flashcards
Source URL: https://quizplus.com/quiz/72676
Sample Questions
Q1) The price of a seller's product in perfect competition is determined by A) the individual seller.
B) a few of the sellers.
C) market demand and market supply.
D) the individual demander.
Q2) Refer to Figure 12-4. What is the amount of its total fixed cost?
A) $1,080
B) $1,440
C) $2,520
D) It cannot be determined.
Q3) Refer to Figure 12-6. To maximize his profit, Jason should produce the rate of output indicated by point
A) a.
B) b.
C) e.
D) d.
Q4) What is the difference between "shutting down temporarily" and "exiting the industry"?
Q5) What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?
14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
Available Study Resources on Quizplus for this Chatper
276 Verified Questions
276 Flashcards
Source URL: https://quizplus.com/quiz/72675
Sample Questions
Q1) Discuss the role of product differentiation and advertising in monopolistic competition.
Q2) Refer to Figure 13-6. Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2. Dell will maximize profits if it produces ________ notebook computers per month.
A) 100,000
B) 200,000
C) 300,000
D) Not enough information is given to determine the profit-maximizing quantity.
Q3) Brand management refers to
A) picking a brand name for a new product that will attract attention.
B) the efforts to maintain the differentiation of a product over time.
C) efforts to reduce the cost of production.
D) selling the right to use a brand name in a particular market.
Q4) Which of the following is not a characteristic of monopolistic competition?
A) Firms are price takers.
B) There are many buyers and sellers.
C) Barriers to entry are low.
D) Firms sell similar, but not identical, products.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Oligopoly: Firms in Less Competitive Markets
Available Study Resources on Quizplus for this Chatper
262 Verified Questions
262 Flashcards
Source URL: https://quizplus.com/quiz/72674
Sample Questions
Q1) For years economists believed that market structure explained the ability of some firms to earn economic profits. For example, firms in industries with little competition and high barriers to entry would earn higher profits than firms in competitive industries with low entry barriers. Which of the following has caused economists to question this explanation and seek other explanations for why firms are profitable?
A) Studies have shown that, on average, firms in competitive industries earn higher profit rates than firms in industries with little competition.
B) In recent years new technologies have increased the potential entry of new firms in industries with high entry barriers.
C) Studies have shown that firms in industries that have little competition and high entry barriers are not very profitable. Economists conclude from this that some competition is necessary in order to force firms to lower their costs and develop products that satisfy new consumer demands.
D) The market structure explanation fails to explain how firms in the same industry can have very different levels of profit.
Q2) Explain why OPEC is caught in a prisoner's dilemma?
Q3) Firms in an oligopoly are said to be interdependent. What does this mean?
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Monopoly and Antitrust Policy
Available Study Resources on Quizplus for this Chatper
271 Verified Questions
271 Flashcards
Source URL: https://quizplus.com/quiz/72673
Sample Questions
Q1) The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed. Which of the following statements regarding the value of the Index for a given industry is true?
A) If a merger would result in an Index value less than 1,000, the merger would not be challenged.
B) If a merger would result in an Index value of 1,000 or more, the industry would be considered a monopoly and the merger would be challenged.
C) If a merger resulted in an Index of between 1,000 and 1,800, the industry would be considered competitive and the merger would not be challenged.
D) If a merger would increase the Index by 100, the industry would be considered a monopoly and the merger would be challenged.
Q2) Refer to Figure 15-12. If the firm maximizes its profits, the deadweight loss to society due to this monopoly is equal to the area
A) ABF.
B) ABEG.
C) ACE.
D) EFG.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Pricing Strategy
Available Study Resources on Quizplus for this Chatper
263 Verified Questions
263 Flashcards
Source URL: https://quizplus.com/quiz/72672
Sample Questions
Q1) Cost-plus pricing may be a reasonable way to determine price when
A) marginal cost and average fixed cost are roughly equal.
B) marginal cost and average cost are about the same.
C) marginal cost differs significantly from average cost.
D) marginal cost is very low.
Q2) Which of the following undermines a firm's ability to engage in price discrimination?
A) the seller's market power
B) the inability to prevent resale of the product from one market segment to another C) buyers having different elasticities of demand for the product
D) the seller's ability to segment the total market
Q3) Refer to Table 16-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay. What is the value of consumer surplus by her customers?
A) $39
B) $28
C) $11
D) $0
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: The Markets for Labor and Other Factors of Production
Available Study Resources on Quizplus for this Chatper
286 Verified Questions
286 Flashcards
Source URL: https://quizplus.com/quiz/72671
Sample Questions
Q1) Consider the market for nurses in a given city. In each of the following cases, explain what happens to the equilibrium wage rate and the quantity of nurses hired.
a. One of the major hospitals in the city closes.
b. A record number of students graduate with bachelor's degrees in nursing.
c. Traditionally, nursing is a field that attracts women. However, changes in access to education and to the labor force participation rate by women have led to a greater demand for the services of women in a wide range of occupations. The demand for nurses, however, does not change.
d. Advances in medical technology reduce the amount of time physicians must spend with patients in intensive care and increase the time that nurses spend with patients.
Q2) All of the following will shift the labor supply curve except
A) an increase in labor force participation rate among women.
B) an increase in the average age of retirement.
C) an increase in the wage rate.
D) a change in a country's immigration policy.
Q3) What are the five most important variables that cause the market demand curve for labor to shift?
Q4) What is personnel economics?
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Public Choice, Taxes, and the Distribution of Income
Available Study Resources on Quizplus for this Chatper
258 Verified Questions
258 Flashcards
Source URL: https://quizplus.com/quiz/72670
Sample Questions
Q1) The poverty rate is defined as the percentage of the
A) labor force that is poor according to the federal government's definition of poverty.
B) population that is exempt from paying federal income taxes.
C) population who qualify to receive welfare payments and food stamps.
D) population that is poor according to the federal government's definition of poverty.
Q2) Economist Kenneth Arrow has shown mathematically that no system of voting will consistently represent the underlying preferences of voters. This finding is called
A) the Arrow impossibility theorem.
B) Arrow's median voter model.
C) Arrow's Amendment to the public choice model.
D) Arrow's majority vote paradox.
Q3) What is rent seeking and how is it related to regulatory capture?
Q4) Logrolling refers to attempts by individuals to use government action to make themselves better off at the expense of others.
A)True
B)False
Q5) What is the difference between the poverty line and the poverty rate?
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: GDP: Measuring Total Production and Income
Available Study Resources on Quizplus for this Chatper
266 Verified Questions
266 Flashcards
Source URL: https://quizplus.com/quiz/72669
Sample Questions
Q1) Scott is a woodworker and charges $125 an hour for his time manufacturing custom-made wood products. For his wife's birthday, he designs and creates an intricate birdseye maple jewelry box that takes him 15 hours to complete. By how much and in what direction does GDP change as a result of his efforts?
A) GDP rises by $1,875.
B) GDP is not affected by Scott's production of the jewelry box.
C) GDP rises by $125.
D) GDP falls by $1,875.
Q2) Which of the following would increase GNP in the United States?
A) an increase in the production of U.S.-owned General Motors cars made in Mexico
B) an increase in the production of Japanese-owned Toyota cars in Mexico
C) an increase in the production of Japanese-owned Toyota cars in the U.S.
D) an increase in the production of Mexican-owned Grupo Minsa corn in the U.S.
Q3) Refer to Table 19-11. Real GDP for Tyrovia for 2013 using 2005 as the base year equals A) $1,140.
B) $880.
C) $690.
D) $560.
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
292 Verified Questions
292 Flashcards
Source URL: https://quizplus.com/quiz/72667
Sample Questions
Q1) Refer to Table 20-4. Assume the market basket for the consumer price index has two products - meat and potatoes - with the following values in 2006 and 2013 for price and quantity: The Consumer Price Index for 2013 equals
A) 125.
B) 129.
C) 135.
D) 141.
Q2) The most widely used measure of inflation is based on which of the following price indices?
A) the producer price index
B) the consumer price index
C) the GDP deflator
D) the wholesale price index
Q3) The unemployment rate tends to be higher in the European Union as compared to the United States.
A)True
B)False
Q4) What effect does the payment of government unemployment insurance have on the unemployment rate?
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Economic Growth, the Financial System, and Business Cycles
Available Study Resources on Quizplus for this Chatper
257 Verified Questions
257 Flashcards
Source URL: https://quizplus.com/quiz/72666
Sample Questions
Q1) During the expansion phase of the business cycle, which of the following eventually increases?
A) production
B) employment
C) income
D) all of the above
Q2) At the end of an expansion, wages of workers are usually rising faster than prices.
A)True
B)False
Q3) Inflation usually increases during a recession and decreases during an expansion.
A)True
B)False
Q4) Economic growth depends more on technological change than on increases on capital per hour worked.
A)True
B)False
Q5) What factors increase potential GDP? Include a definition of potential GDP in your answer.
Page 23
To view all questions and flashcards with answers, click on the resource link above.
Chapter 22: Long-Run Economic Growth: Sources and Policies
Available Study Resources on Quizplus for this Chatper
268 Verified Questions
268 Flashcards
Source URL: https://quizplus.com/quiz/72665
Sample Questions
Q1) Between 1960 and 2010, deaths among children have A) declined in most high-income countries and have risen in most low-income countries.
B) declined in nearly all countries, including most low-income countries.
C) remained relatively unchanged in most high-income countries and have declined in most low-income countries.
D) declined in most high-income countries and have remained relatively unchanged in most low-income countries.
Q2) Refer to Figure 22-4. Many countries in Africa strongly discouraged and prohibited foreign direct investment in the 1950s and 1960s. By doing so, these countries were essentially preventing a moment from
A) B to A.
B) E to B.
C) A to E.
D) D to B.
Q3) According to new growth theory, firms accumulate the efficient level of both physical and knowledge capital.
A)True
B)False
24
To view all questions and flashcards with answers, click on the resource link above.
Chapter 23: Aggregate Expenditure and Output in the Short Run
Available Study Resources on Quizplus for this Chatper
306 Verified Questions
306 Flashcards
Source URL: https://quizplus.com/quiz/72664
Sample Questions
Q1) Why do economists care about aggregate expenditures?
Q2) National income =
A) Consumption + Saving - Taxes
B) Consumption - Saving - Taxes
C) Consumption - Saving +Taxes
D) Consumption + Saving + Taxes
Q3) If the consumption function is defined as C = 5,500 + 0.9Y, what is the marginal propensity to consume?
A) 0.1
B) 0.9
C) 5.5
D) 6.1
Q4) Refer to Figure 23-2. Suppose that the level of GDP associated with point K is potential GDP. If the U.S. economy is currently at point N,
A) firms are operating below capacity.
B) the economy is at full employment.
C) the economy is in an expansion.
D) the level of unemployment is above the natural rate.
To view all questions and flashcards with answers, click on the resource link above. Page 25
Q5) What is the difference between aggregate expenditure and aggregate demand?
Chapter 24: Aggregate Demand and Aggregate Supply Analysis
Available Study Resources on Quizplus for this Chatper
284 Verified Questions
284 Flashcards
Source URL: https://quizplus.com/quiz/72663
Sample Questions
Q1) In September of 2007, the Federal Reserve Board Open Market Committee voted to lower interest rates for the first time that year. Explain how lower interest rates affect the aggregate demand curve.
Q2) Refer to Figure 24-3. Which of the points in the above graph are possible short-run equilibria?
A) A and B
B) A and C
C) A and D
D) A, B, C, and D
Q3) Full-employment GDP is also known as A) realized GDP.
B) potential GDP.
C) politico-economic GDP.
D) balanced-budget GDP.
Q4) Using the aggregate supply and demand model, illustrate what happens in the long run when the economy suffers a supply shock. Begin your analysis by assuming the economy has suffered the supply shock in the short run, but has not yet adjusted to it in the long run.
Q6) Briefly describe monetarism and the monetary growth rule. Page 26
Q5) What are sticky prices, and how can contracts make them "sticky"?
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 25: Money, Banks, and the Federal Reserve System
Available Study Resources on Quizplus for this Chatper
280 Verified Questions
280 Flashcards
Source URL: https://quizplus.com/quiz/72662
Sample Questions
Q1) Paper currency is a
A) commodity money.
B) fiat money.
C) barter money.
D) bond.
Q2) According to the quantity theory of money, the inflation rate equals
A) the money supply minus real output.
B) the growth rate of the money supply minus the growth rate of real output.
C) real output minus the money supply.
D) the growth rate of real output minus the growth rate of the money supply.
Q3) Money is
A) an asset that people are willing to accept in exchange for goods and services.
B) a liability that people are willing to accept in exchange for goods and services.
C) the income one earns over a period of time.
D) one's assets net of one's liabilities at any point in time.
Q4) The Fed has complete control over the money supply.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 26: Monetary Policy
Available Study Resources on Quizplus for this Chatper
277 Verified Questions
277 Flashcards
Source URL: https://quizplus.com/quiz/72661
Sample Questions
Q1) An argument in favor of the Federal Reserve adopting inflation targeting is that in the long run, the Fed can have an impact on inflation but not on real GDP.
A)True
B)False
Q2) By the height of the housing bubble in 2005 and early 2006, lenders had greatly loosened the standards for obtaining a mortgage loan, with many mortgages being granted to sub-prime borrowers ________ and "Alt-A" borrowers ________.
A) with flawed credit histories; who did not document their incomes
B) who borrowed money at rates below the prime interest rate; who had AAA credit ratings
C) who borrowed more than 120 percent of the value of the house; with no proof of U.S. citizenship
D) who purchased homes in depressed housing markets; who purchased homes which were repossessed by government agencies.
Q3) In reality, the Fed is unable to use monetary policy to keep real GDP exactly at its potential level.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 27: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
303 Verified Questions
303 Flashcards
Source URL: https://quizplus.com/quiz/72660
Sample Questions
Q1) An economic expansion tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments
A) increase; rise; falls
B) increase; fall; rises
C) decrease; rise; falls
D) decrease; fall; rises
Q2) The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of
A) automatic stabilizers.
B) discretionary fiscal policy.
C) discretionary monetary policy.
D) automatic monetary policy.
Q3) To complement actions by the Fed to reduce inflation, Congress and the President can cut spending and/or raise taxes.
A)True
B)False
Q4) What is the difference between federal purchases and federal expenditures?
To view all questions and flashcards with answers, click on the resource link above. Page 30
Chapter 28: Inflation, Unemployment, and Federal Reserve Policy
Available Study Resources on Quizplus for this Chatper
257 Verified Questions
257 Flashcards
Source URL: https://quizplus.com/quiz/72659
Sample Questions
Q1) Can the Federal Reserve achieve both low inflation and low levels of unemployment? Explain.
Q2) Which of the following would increase the natural rate of unemployment?
A) an increase in the number of younger, less skilled workers in the economy
B) a reduction in the generosity of unemployment insurance programs
C) restrictions on the ability of unions to negotiate wage changes with companies
D) an increase in government-sponsored programs that train unemployed workers so they can find new jobs quickly
Q3) What impact does expansionary monetary policy have on the short-run Phillips curve if consumers and firms expect the expansionary monetary policy to increase inflation?
A) The short-run Phillips curve shifts down.
B) The short-run Phillips curve shifts up.
C) The short-run Phillips curve becomes the long-run Phillips curve.
D) The short-run Phillips curve is not affected by expansionary monetary policy.
Q4) Why do most economists believe that it is important for a country's central bank to be independent of the rest of the country's central government?
Q5) What does it mean to say that workers and firms have rational expectations?
Page 31
To view all questions and flashcards with answers, click on the resource link above.
Chapter 29: Macroeconomics in an Open Economy
Available Study Resources on Quizplus for this Chatper
278 Verified Questions
278 Flashcards
Source URL: https://quizplus.com/quiz/72658
Sample Questions
Q1) If the exchange rate changes from $2.00 = 1 euro to $1.98 = 1 euro then
A) the dollar has depreciated.
B) the dollar has appreciated.
C) the euro has appreciated.
D) the euro has stayed constant in value.
Q2) How might a budget deficit affect the balance of trade?
A) A budget deficit raises interest rates, which raises exchange rates and increases the balance of trade.
B) A budget deficit raises interest rates, which raises exchange rates and reduces the balance of trade.
C) A budget deficit reduces interest rates, which raises exchange rates and reduces the balance of trade.
D) A budget deficit reduces interest rates, which reduces exchange rates and reduces the balance of trade.
Q3) National saving equals
A) income - taxes - consumption.
B) taxes - government spending.
C) income - consumption - government spending.
D) private saving + public saving - net foreign investment.
To view all questions and flashcards with answers, click on the resource link above.
Page 32
Chapter 30: The International Financial System
Available Study Resources on Quizplus for this Chatper
262 Verified Questions
262 Flashcards
Source URL: https://quizplus.com/quiz/72656
Sample Questions
Q1) An increase in a fixed exchange rate from $2.00 per pound to $2.10 per pound is called a(n) ________ of the pound.
A) devaluation
B) depreciation
C) appreciation
D) revaluation
Q2) If a country's currency is "pegged" to the dollar, its exchange rate is
A) floating.
B) flexible.
C) fixed.
D) undervalued.
Q3) Because the value of the euro is determined by factors that affect the entire euro zone, during the recession of 2007-2009, individual countries using the euro
A) were unable to have their exchange rates depreciate.
B) were more insulated from unemployment increases than most countries.
C) experienced a greater increase in exports than did most countries.
D) were able to use expansionary monetary policy to lessen the impact of the recession.
Q4) Why might a country raise interest rates in the face of an exchange rate crisis?
To view all questions and flashcards with answers, click on the resource link above. Page 33