Principles of Economics Test
Questions
Course Introduction
Principles of Economics introduces students to the fundamental concepts and analytical tools used in economic reasoning. The course covers the basic principles of microeconomics, such as supply and demand, elasticity, consumer behavior, production, and market structures, as well as macroeconomic topics including national income, inflation, unemployment, fiscal and monetary policy, and economic growth. Emphasis is placed on understanding how individuals, businesses, and governments make decisions regarding the allocation of scarce resources, as well as the impact of these decisions on both domestic and global economic systems. This foundation prepares students to analyze real-world economic issues and evaluate policy choices critically.
Recommended Textbook
Economics for Today 4th Asia Pacific Edition by Allan Layton
Available Study Resources on Quizplus 19 Chapters
2245 Verified Questions
2245 Flashcards
Source URL: https://quizplus.com/study-set/1073
Page 2
Chapter 1: Thinking like an economist
Available Study Resources on Quizplus for this Chatper
89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/21216
Sample Questions
Q1) Which of the following goods are not capital goods?
A)An arrow.
B)A computer.
C)Energy.
D)A car.
Answer: C
Q2) 'An increase in the federal minimum wage causes an increase in unemployment among teenagers' is a:
A)statement of positive economics.
B)statement of normative economics.
C)testable value judgement.
D)fallacy of composition.
Answer: A
Q3) The most fundamental concepts underlying the discipline of economics are:
A)scarcity and choice.
B)supply and demand.
C)money, stocks and bonds.
D)inflation and unemployment.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Production possibilities and opportunity cost
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/21217
Sample Questions
Q1) The process through which an economy's production possibilities curve shifts outward is:
A)full-employment management.
B)investment.
C)resource renewal.
D)out-resourcing.
Answer: B
Q2) The production possibilities frontier shows different combinations of two goods:
A)that are able to be produced at a particular point of time with underemployment.
B)that are able to be produced at a particular point of time with resources available.
C)that are able to be produced with technology available in the future.
D)that will be produced at a particular point of time with or without full employment .
Answer: B
Q3) Increase in current consumption is necessary for economic growth.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Market demand and supply
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/21218
Sample Questions
Q1) An increase in the demand for a good quality steak,a normal good,can be caused by a/an:
A)decrease in consumer income.
B)increase in the price of steak.
C)increase in the price of tomato sauce.
D)increase in consumer income.
E)decrease in the price of sliced ham.
Answer: D
Q2) The supply curve reflects the:
A)inverse relationship between price and quantity offered.
B)positive relationship between demand and supply.
C)negative relationship between price and quantity bought.
D)positive relationship between price and quantity bought.
E)positive relationship between price and quantity offered.
Answer: E
Q3) An increase in income increases the supply of all goods.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Markets in action
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/21219
Sample Questions
Q1) Consider the market for apples.Assuming that apples and oranges are substitutes,an increase in the price of oranges will:
A)decrease the demand for apples, creating a lower price and a smaller amount of apples purchased in the market.
B)increase the demand for apples, creating a higher price and a greater amount of apples purchased in the market.
C)decrease the supply of apples, creating a higher price and a smaller amount of apples purchased in the market.
D)increase the supply of apples, creating a lower price and a greater amount of apples purchased in the market.
Q2) If the price of fish rises,then the demand for chips will: A)rise.
B)fall.
C)remain unchanged.
D)react unpredictably.
Q3) Assume a price floor is set above the equilibrium price.The result is a surplus.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Elasticity of demand and supply
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21220
Sample Questions
Q1) When the price of bread increases by 5 per cent,the quantity demanded of crackers increases by 2 per cent.The cross elasticity of demand between crackers and bread is:
A)0.67.
B)1.5.
C)2.5.
D)3.2.
E)0.4.
Q2) The most important determinant of price elasticity of demand is:
A)the availability of substitutes.
B)the higher the price of the good.
C)the more of the budget is spent on the good.
D)the longer the time the consumer has to adjust to price changes.
Q3) The cross elasticity between two goods,X and Y,is positive.From this,we can conclude that goods X and Y are:
A)substitute goods.
B)complementary goods.
C)unrelated goods.
D)inferior goods.
E)normal goods.
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Production costs
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/21221
Sample Questions
Q1) Economic profit is:
A)always zero.
B)always less than accounting profit.
C)always more than accounting profit.
D)only sometimes less than accounting profit.
Q2) Economic profit equals total revenue minus:
A)total explicit costs.
B)implicit costs.
C)total opportunity costs.
D)variable costs.
Q3) A farm can produce 10 000 bushels of wheat per year with five workers and 12 000 bushels with six workers.The marginal product of the sixth worker for this farm is:
A)10 000 bushels.
B)2000 bushels.
C)500 bushels.
D)23 000 bushels.
Q4) The marginal curve determines the L-shape of the AVC curve.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Perfect competition
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/21222
Sample Questions
Q1) At an output level of 500 units,ATC = $10,AVC = $5,MR = $3 and MC = $3,the result for the perfectly competitive firm will be:
A)making a loss of ($5 - $3) ´ 500 = $1000.
B)a decrease in output, so MC > MR.
C)making a short-run loss of $2500.
D)an increased output, so MR > MC.
E)unclear, as there is not enough information.
Q2) According to Exhibit 7-8,the results in the short run for this firm will be:
A)positive economic profits.
B)a normal profit.
C)a loss, but the firm will be able to cover its fixed cost.
D)such a big loss they will shut down.
E)indeterminate from the information given.
Q3) Perfectly competitive markets are characterised by:
A)a large number of small producers.
B)very strong barriers to entry and exit.
C)firms selling a quality product.
D)many different products.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Monopoly
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/21223
Sample Questions
Q1) A monopoly firm can sell its fourth unit of output for a price of $250.In order to sell more than five units,it must expect to receive a price:
A)equal to $250.
B)greater than $250.
C)less than $250.
D)equal to $340.
Q2) The only hairdresser in a small town is an example of:
A)monopsy.
B)luxury.
C)monopoly.
D)oligopoly.
E)competition.
Q3) Marginal revenue can be:
A)never negative.
B)always positive.
C)only zero.
D)zero, positive or negative.
Q4) Monopolies can charge any price they like and sell as much as they want. A)True
B)False
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Monopolistic competition and oligopoly
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21224
Sample Questions
Q1) When Pepsi is considering a price hike,it needs to consider how Coke may react.This situation is called:
A)mutual interdependence.
B)price leadership.
C)collusion.
D)monopolistic competition.
Q2) The entry of new firms into a monopolistically competitive industry will shift the:
A)market demand curve to the right.
B)market demand curve to the left.
C)existing firm's demand curve to the right.
D)existing firm's demand curve to the left.
E)market supply curve to the left.
Q3) The oligopoly market structure does not have which of the following characteristics?
A)Few sellers.
B)Homogeneous product.
C)Differentiated product.
D)Many small sellers.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Policy issues: resource taxes and climate change
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21225
Sample Questions
Q1) Which of the following is correct?
A)A per-tonne royalty in place results in a lower level of output, whereas a super profits tax results in more tax revenue.
B)A per-tonne royalty in place results in a higher level of output, whereas a super profits tax results in more tax revenue.
C)A per-tonne royalty in place results in a lower level of output, whereas a super profits tax results in less tax revenue.
D)A per-tonne royalty in place results in a lower level of emissions, whereas a super profits tax results in less output.
Q2) In Exhibit 10-3,if the 'cap' is set at 100 permits,the resulting market price of permits is:
A)$50.
B)$10.
C)$100.
D)$20.
Q3) Carbon tax was introduced in 2011 by the Gillard government.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Measuring the size of the economy
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21226
Sample Questions
Q1) GDP is not a perfect measure of economic welfare because it:
A)double-counts overall spending.
B)treats a dollar spent on exports the same as a dollar spent on imports.
C)double-counts the value of leisure time.
D)treats a non-market transaction as if it did not exist.
Q2) GDP understates national wellbeing because:
A)there is not enough data on working hours.
B)no allowance is made for leisure time.
C)people can afford leisure time now.
D)people are working more now than they did a century ago.
Q3) GDP ignores:
A)the value of mowing your lawn if you hired someone to do it.
B)the value of cleaning your clothes if you took them to the laundry.
C)the value of driving your kids to school if you hired a taxi to do it.
D)the value of the air quality in your neighborhood.
Q4) Gross national product is also known as:
A)gross international income.
B)net domestic goods and services.
C)gross national expenditure.
D)gross national income.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Business cycles and economic growth
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21227
Sample Questions
Q1) Which of the following is a coincident indicator?
A)CPI data.
B)Industrial production.
C)Building approvals.
D)Retail sales.
Q2) Economic growth is measured by the annual percentage increase in a nation's level of:
A)nominal GDP.
B)real GDP.
C)real GDP deflator.
D)economic indicators.
Q3) For a given state of unchanging production technologies without the technological change:
A)no further growth in living standards can be achieved at some point in time.
B)further growth in living standards can be achieved if investment is higher than consumption.
C)further growth in living standards can be achieved at some point in time.
D)further growth in living standards can be achieved if saving is higher than investment.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Inflation and unemployment
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/21228
Sample Questions
Q1) Cost-push inflation is a result of an increase in overspending.
A)True
B)False
Q2) The costs of hyperinflation on an economy are:
A)that people enjoy buying and reselling at higher prices.
B)that it can equate wealth between lenders and borrowers.
C)that it creates a continuous spending-price spiral.
D)that life insurance policies are jeopardised.
Q3) When OPEC raised the price of oil,it created:
A)demand-pull inflation.
B)cost-push inflation.
C)demand-push inflation.
D)cost-pull inflation.
E)cost-push deflation.
Q4) Suppose your nominal income this year is 5 per cent higher than last year.If the inflation rate for the period was 3 per cent,then your real income:
A)increased by 1.67 per cent.
B)increased by 2 per cent.
C)increased by 8 per cent.
D)declined by 0.6 per cent.
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: A simple model of the macro economy
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/21229
Sample Questions
Q1) More favourable aggregate supply conditions can cause:
A)a depression.
B)a recession.
C)real GDP and employment to rise.
D)unemployment to rise.
Q2) Real investment spending is _____ real personal consumption.
A)equal to B)greater than C)stable compared to D)highly volatile compared to E)less thanks to
Q3) If an economy is operating along the Keynesian section of the aggregate supply curve,then an increase in aggregate demand will result in:
A)an increase in inflation and an increase in real GDP.
B)no change in the price level and a decrease in unemployment.
C)a decrease in the price level and a decrease in unemployment.
D)no change in the price level and an increase in unemployment.
E)no change in the price level, but the effect on real GDP is indeterminate.
To view all questions and flashcards with answers, click on the resource link above.
16
Chapter 15: The monetary and financial system
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21230
Sample Questions
Q1) A decrease in the money supply:
A)raises the interest rate, causing an increase in investment and an increase in GDP.
B)lowers the interest rate, causing an increase in investment and an increase in GDP.
C)raises the interest rate, causing a decrease in investment and a decrease in GDP.
D)lowers the interest rate, causing a decrease in investment and an increase in GDP.
E)lowers the interest rate, causing a decrease in investment and a decrease in GDP.
Q2) The RBA will:
A)follow the federal government's instructions.
B)follow the Treasury Department's instructions.
C)consult the Australian Prudential Regulation Authority.
D)act as a banker to the federal government.
Q3) The opportunity cost of holding money is properly measured by the rate of interest on financial assets such as bonds.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Macroeconomic policy I: monetary policy
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21231
Sample Questions
Q1) Controlling the growth of the supply of money will have predictable effects on interest rates if:
A)the demand for money is unpredictable.
B)the growth in the demand for money can be predicted accurately.
C)the interest rates are volatile.
D)the interest rates are low.
E)the interest rates are high.
Q2) If the RBA wants to reduce inflation in the economy,it is likely to:
A)buy government securities to put banks' ESAs into surplus, thereby decreasing interest rates.
B)buy government securities to put banks' ESAs into deficit, thereby decreasing interest rates.
C)sell government securities to put banks' ESAs into surplus, thereby increasing interest rates.
D)sell government securities to put banks' ESAs into deficit, thereby increasing interest rates.
E)sell government securities to put banks' ESAs into deficit, thereby decreasing interest rates.
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Macroeconomic policy II: fiscal policy
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/21232
Sample Questions
Q1) The tariff reforms that Australia has undergone over the past 20 years are an example of:
A)demand-side fiscal policy.
B)demand-side monetary policy.
C)supply-side fiscal policy.
D)supply-side monetary policy.
E)labour market reform.
Q2) A Keynesian approach to fiscal policy would be for government budgets to consistently have a _____ role in the economy.
A)neutral
B)cyclical
C)countercyclical
D)contractionary
E)active
Q3) When the economy enters a prosperity phase,personal income tax collections:
A)fall and so disposable income and spending fall more slowly than real GDP.
B)fall and so disposable income and spending do not rise as rapidly as real GDP.
C)rise and so disposable income and spending do not rise as rapidly as real GDP.
D)rise and so disposable income and spending fall more slowly than real GDP.
E)fall and so disposable income and spending fall at the same rate as real GDP.
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: International trade and finance
Available Study Resources on Quizplus for this Chatper
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/21233
Sample Questions
Q1) In Exhibit 18-4,when the exchange rate is 3 dollars per pound:
A)there is an excess supply of 110 pounds.
B)there is an excess demand of 110 pounds.
C)there is an excess supply of 110 dollars.
D)there is an excess demand of 110 dollars.
E)the market is in equilibrium.
Q2) The balance of payments _____.
A)with some nations is different than it is with others
B)is always zero
C)can only be expanded when the government has foreign exchange reserves
D)is negative when the nation runs a trade deficit
Q3) Which of the following are expressed concerns over regional trade agreements?
A)They will ultimately have no real economic benefits.
B)It may make future multilateral agreements more difficult.
C)Some countries will gain, but many will lose.
D)They never involve the world's major trading nations.
Q4) Shifts in supply and demand for foreign exchange result from changes in relative price levels.
A)True
B)False
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Applying graphs to economics
Available Study Resources on Quizplus for this Chatper
37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/21215
Sample Questions
Q1) A direct relationship is a relationship between two variables in which they move in different directions (if one increases,the other decreases).
A)True
B)False
Q2) In Exhibit 1A-5,the slope of straight line A-D is:
A)positive.
B)zero.
C)negative.
D)variable.
Q3) Which of the following statements is not correct?
A)The slope is the ration of the rise to the run.
B)A direct relationship is one in which two variables change in the same direction.
C)Slope is the ratio of the change in variable on the horizontal axis to the change in the variable on the vertical axis.
D)An independent relationship is one in which two variables are unrelated.
Q4) A downward-sloping line has a negative slope.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
21