Survey of Economics
Chapter Exam Questions
Course Introduction
Survey of Economics provides students with a comprehensive introduction to the fundamental principles and concepts of both microeconomics and macroeconomics. The course covers topics such as supply and demand, market structures, the role of government in the economy, fiscal and monetary policy, and basic international trade theory. Through real-world examples and case studies, students develop an understanding of how economic forces shape consumer behavior, business decisions, and broader societal outcomes. This course is designed for students from all disciplines seeking to gain a foundational grasp of economics to better understand current events, public policy, and global economic issues.
Recommended Textbook
Macroeconomics Principles and Applications 6th Edition by Robert E. Hall
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Chapter 1: What is Economics?
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Sample Questions
Q1) Microeconomics is the study of
A) government decisions
B) the federal government's budget
C) the economic behavior of entire nations
D) the economic behavior of individual decision makers
E) the overall economy
Answer: D
Q2) An economic model is a(n)
A) philosophical inquiry
B) set of numbers that describe a firm (e.g. ,profits and assets)
C) abstract representation of reality
D) concrete representation of reality
E) ideal to which economic entities are compared
Answer: C
Q3) If Sally purchases a particular compact disk,it is because the opportunity cost is higher than it would be for any other compact disk.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Scarcity, Choice, and Economic Systems
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Sample Questions
Q1) We say there is productive inefficiency in saving lives if
A) there is some way to save more lives
B) there is some way to save more lives without sacrificing any other goods or services
C) all resources are devoted to saving lives
D) no resources are devoted to saving lives
E) anyone dies before reaching his or her life expectancy
Answer: B
Q2) In a market economy,most of what we consume is obtained by A) a command system
B) greed
C) altruism
D) exchange
E) central planning
Answer: D
Q3) The production possibilities frontier is useful for demonstrating both scarcity and productive inefficiency.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Supply and Demand
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Sample Questions
Q1) If both the demand and supply curves for computers shift to the right,the price of computers may rise,fall,or remain unchanged.
A)True
B)False
Answer: True
Q2) The quantity demanded of a good
A) is the amount that would be purchased with an unlimited income
B) is the amount that would be demanded even if income were zero
C) is subject to the buyer's income constraints
D) is a fixed amount unaffected by the buyer's circumstances
E) must match the amount actually purchased in the market
Answer: C
Q3) When individuals come together to buy and sell goods and services,they form a(n) A) economy
B) market
C) production possibilities frontier
D) supply curve
E) demand curve
Answer: B
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Page 5
Chapter 4: Working With Supply and Demand
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Sample Questions
Q1) When analyzing the housing market,the supply curve
A) will be upward sloping because the higher the price of a house the more that will exist
B) will be horizontal to illustrate that the supply of housing is a stock variable
C) will be downward sloping;that is what went wrong with the housing market
D) will be vertical to illustrate that the supply of housing is a stock variable
E) could be horizontal,vertical or upward sloping depending upon the housing market in question
Q2) In what way is the result of an excise tax imposed on either demanders or suppliers similar to the result of a price ceiling?
A) The amount that consumers pay for the good will be less than they previously paid
B) The amount of the good that will be traded in the market will be less than previously traded
C) both price ceilings and excise taxes create excess demand
D) The amount that consumers pay for the good will be greater than they previously paid
E) both price floors and excise taxes create excess supply
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Chapter 5: What Macroeconomics Tries to Explain
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Sample Questions
Q1) Seemingly positive disagreements often have normative origins.
A)True
B)False
Q2) If two economists disagree on an issue and their disagreement is based on personal value judgments,then this controversy is a normative one.
A)True
B)False
Q3) Refer to Figure 5-1 above.If the economy goes from point A to point C on the graph,it is going through a(n)
A) peak
B) trough
C) expansion
D) business cycle
E) recession
Q4) The United States economy has achieved the target rate of unemployment,as set by the Full Employment and Balanced Growth Act (1978),for most years over the last few decades.
A)True
B)False
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Chapter 6: Production, Income, and Employment
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Sample Questions
Q1) Used car dealerships add nothing to GDP because the cars they sell were already recorded in GDP when they were new.
A)True
B)False
Q2) If a ship-building company purchases $250 million worth of steel in one year but does not use it,this is considered investment spending.
A)True
B)False
Q3) When we add the up value of all capital goods,we determine
A) private investment
B) the capital stock
C) a flow phenomenon
D) GDP
E) inventory
Q4) GDP is a flow variable because it measures the process of production and is independent of time.
A)True
B)False
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Page 8
Chapter 7: The Price Level and Inflation
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Sample
Questions
Q1) Suppose workers agreed to an indexed contract that increased their nominal wage by 4 percent plus 25 percent of any increase in the Consumer Price Index (CPI).If the CPI increased by 8 percent,what would be the change in the real wage?
A) 4 percent
B) -2 percent
C) 0 percent
D) -4 percent
E) 2 percent
Q2) Which of the following prices is least likely to be included in the Consumer Price Index?
A) The price of used bicycles
B) The price of a haircut
C) The price of imported South American grapes
D) The price of a steamroller
E) The price of a loaf of bread
Q3) The Bureau of :Labor Statistics has been compiling an experimental CPI for the elderly,called CPI-E.
A)True
B)False
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Page 9
Chapter 8:The Classical Long run Model
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Sample Questions
Q1) In the classical model,
A) markets do not automatically clear.
B) business demand for loanable fund exceeds business planned investment spending.
C) there is no government sector,only private consumption and planned investment.
D) businesses engage in interest-free borrowing.
E) the government's demand for funds is vertical.
Q2) John Maynard Keynes was the author of
A) An Economic History of the Great Depression.
B) The General Theory of Employment,Interest,and Money.
C) The Wealth of Nations.
D) The Principles of Political Economy and Taxation.
E) Macroeconomic Policy.
Q3) In a typical economy,the dollar value of the total output for a period will equal the sum of consumption spending,planned investment spending,government spending,and net tax revenue.
A)True
B)False
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Chapter 9: Economic Growth and Rising Living Standards
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Sample Questions
Q1) Everything else equal,an increase in the supply of loanable funds will
A) lower the interest rate and reduce investment spending
B) lower the interest rate and increase investment spending
C) increase the demand for funds
D) increase the interest rate and reduce investment spending
E) increase the interest rate and increase investment spending
Q2) Which of the following would cause the production function to shift upward?
A) A decrease in the capital stock
B) A decrease in human capital
C) An increase in population
D) An increase in human capital
E) Diminishing returns to labor.
Q3) Most of the growth in living standards over the last ten years can be attributed to growth in labor force participation.
A)True
B)False
Q4) Budget deficits cause interest rates to be high.
A)True
B)False
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Chapter 10: Economic Fluctuations
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Sample Questions
Q1) The reason a shock to one sector can spread to the whole economy is that
A) a decrease in production in one sector leads to an overall decrease in spending
B) firms will need to help bail out other firms that are having troubles
C) an increase in production in one sector will lead to an overall decrease in spending
D) most shocks are not sector-specific but economy-wide
E) workers laid off in the one sector will purchase more goods in another sector
Q2) One difficulty with any explanation of economic fluctuations based on a shift in labor supply is that
A) workers' preferences tend to change very quickly
B) labor supply shifts all the time without causing recessions or expansions
C) labor supply is difficult to measure
D) workers' preferences tend to change very slowly
E) the unemployment rate changes during economic fluctuations
Q3) The assumption that labor markets clear makes it very easy for the classical model to explain recessions.
A)True
B)False
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Page 12
Chapter 11: The Short-run Macro Model
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Sample Questions
Q1) The equilibrium level of GDP can be determined by finding the output level at which the unplanned change in inventories is
A) greater than aggregate expenditures
B) less than aggregate expenditures
C) zero
D) equal to government expenditures
E) equal to consumer spending
Q2) A movement along the consumption-function line would most likely be caused by a(n)
A) increase in net taxes
B) decrease in net taxes
C) increase in income
D) decrease in productivity
E) change in autonomous consumption
Q3) Which of the following would cause the consumption function to shift down?
A) A decrease in disposable income
B) A decrease in taxes
C) An increase in taxes
D) An increase in the marginal propensity to consume
E) None of the above
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Chapter 12: Fiscal Policy
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Sample Questions
Q1) A key tool of countercyclical fiscal policy is
A) the interest rate
B) the federal funds rate
C) the tax code
D) the regulatory code
E) Presidential executive orders.
Q2) If the marginal propensity to consume is 0.75 and autonomous consumption spending will decrease by $30 billion,by how much would net taxes need to decrease in order to have no change in output? (Ignore any timing issues. )
A) $60 billion
B) $30 billion
C) $90 billion
D) $120 billion
E) $40 billion
Q3) If the MPC is 0.75,what is the value of the government purchases multiplier?
A) -1.33
B) 3.0
C) -3.0
D) 4.0
E) -4.0
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Chapter 13: Money, Banks, and the Federal Reserve
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Sample Questions
Q1) Which of the following is the relationship among excess reserves,required reserves,and total reserves?
A) total reserves = required reserves - excess reserves
B) excess reserves = total reserves/required reserves
C) total reserves = excess reserves + required reserves
D) total reserves = excess reserves - required reserves
E) excess reserves = required reserves - total reserves
Q2) Which of the following policies would most likely increase the money supply?
A) Selling government bonds
B) Raising the discount rate
C) Lowering tax rates
D) Lowering the required reserve ratio
E) Decreasing the prime lending rate.
Q3) Which of the following is not an example of a commercial bank's liabilities?
A) Checking account deposits.
B) Any type of demand deposit.
C) Loans.
D) a and B
E)None of the above.
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Page 15
Chapter 14: The Money Market and Monetary Policy
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Sample Questions
Q1) Refer to Figure 14-4.If the interest rate is currently 12 percent,we would expect the
A) interest rate to fall to 10 percent
B) interest rate to remain at 12 percent
C) interest rate to fall to 6 percent
D) quantity of money held to decrease to $500 billion
E) money supply to increase to $700 billion
Q2) If real income increases,
A) there will be a rightward movement along a stationary money demand curve
B) there will be a leftward movement along a stationary money demand curve
C) the demand for money curve will shift rightward
D) the demand for money curve will shift leftward
E) there will be no movement of the demand curve for money and no movement along it
Q3) If the interest rate dropped,what would be the effect on spending?
A) Spending on automobiles would decrease.
B) Business spending on new capital would decrease.
C) Spending on consumer durables would decrease.
D) Business spending on new factories would increase.
E) Spending on new homes would decrease.
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Chapter 15: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Due to the multiplier effect,a decrease in investment spending
A) is greater than the resulting decrease in GDP
B) has a minimal impact on the economy
C) causes the money supply to increase
D) leads to an even larger decrease in output
E) results in increased autonomous consumption
Q2) Which of the following would lead to a rightward shift of the money demand curve?
A) A decrease in the price level
B) A decrease in output
C) An open market sale of bonds by the Fed
D) An increase in the price level
E) An open market purchase of bonds by the Fed.
Q3) Which of the following mechanisms helps output to return to potential after a supply shock?
A) A change in the nominal wage
B) Changes in business decision making strategies
C) Changes in the capital stock
D) The rigidity of the price level
E) Changes in inventories.
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Chapter 16: Inflation and Monetary Policy
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Sample Questions
Q1) Ongoing inflation means the Fed must respond to
A) an upward-shifting AS curve
B) a downward-shifting AS curve
C) changing interest rate targets
D) a depression
E) a lower real interest rate
Q2) Which of the following is an opportunity cost of cyclical unemployment?
A) A higher wage rate
B) A lower interest rate
C) Lower taxes paid by the employed
D) Costs of updating prices
E) Lost earnings of the unemployed.
Q3) In the long run,there is a tradeoff between inflation and unemployment.
A)True
B)False
Q4) The Fed generally intervenes very actively in specific asset markets in all kinds of circumstances.
A)True
B)False
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Chapter 17: Exchange Rates and Macroeconomic Policy
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Sample Questions
Q1) You see on the news that a recession has started in Saudi Arabia.Which of the following would happen in the market for Saudi riyals?
A) A decrease in the supply of riyals and an appreciation of the riyal.
B) An increase in the supply of riyals and a depreciation of the riyal.
C) A decrease in the supply of riyals and a depreciation of the riyal.
D) An increase in the supply of riyals and an appreciation of the riyal.
E) Cannot be determined without additional information.
Q2) If the dollars per pound exchange rate falls,there is a(n)
A) rightward movement along a single supply of pounds curve
B) leftward movement along a single supply of pounds curve
C) leftward shift of the supply of pounds curve
D) rightward shift of the U.S.supply of pounds curve
E) tendency for the U.S.supply of pounds curve to become steeper
Q3) The scenario in which the dollar plummets in value is called the
A) soft-landing scenario.
B) hard-landing scenario.
C) fair-trade scenario.
D) free-trade scenario.
E) cap-and-trade scenario.
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