Survey of Economics
Chapter Exam Questions
Course Introduction
Survey of Economics provides an introduction to the core concepts of both microeconomics and macroeconomics, equipping students with a broad understanding of how economic systems operate at the individual, firm, national, and global levels. The course examines fundamental principles such as supply and demand, market structures, fiscal and monetary policy, income distribution, and international trade. Students will analyze real-world economic issues, interpret economic data, and explore the implications of economic decisions on markets and society, preparing them for further study or informed participation in economic discussions.
Recommended Textbook
Macroeconomics 12th Edition by Roger A.
Arnold
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Page 2
Chapter 1: What Economics Is About
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Sample Questions
Q1) In every economy people vie for the economy's rationing device,a process called A)competition.
B)entrepreneurship.
C)marginal benefit.
D)positive economics.
Answer: A
Q2) If scarcity didn't exist,neither would
A)rationing devices.
B)competition.
C)labor.
D)capital.
E)a and b
Answer: E
Q3) Economists use the word utility to describe the satisfaction one receives from a good.
A)True
B)False
Answer: True
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Chapter 2: Production Possibilities Frontier Framework
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Sample Questions
Q1) The PPF between goods X and Y will be a downward-sloping
A)straight line if increasing opportunity costs exist.
B)straight line if decreasing opportunity costs exist.
C)curve that is bowed outward if increasing opportunity costs exist.
D)curve that is bowed outward if constant opportunity costs exist.
Answer: C
Q2) Economic growth causes the PPF to
A)shift leftward.
B)shift rightward.
C)remain constant.
D)go from a straight line to a curve.
Answer: B
Q3) Refer to Exhibit 2-3.If PPF<sub>1</sub> is the relevant production possibilities frontier,society may move to PPF<sub>2</sub> as a result of
A)an increase in resources.
B)a decrease in resources.
C)an increase in technology.
D)both a and c
E)both b and c
Answer: D
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Chapter 3: Supply and Demand: Theory
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Sample Questions
Q1) One point on a market supply curve represents $4 and 100 units quantity supplied.If there are three suppliers,and at a price of $4 one of the suppliers supplies 23 units,then which of the following combinations of price and quantity supplied might hold for the other two suppliers?
A)At $4,quantity supplied could be 40 units for one supplier and 27 for the other.
B)At $4,quantity supplied could be 33 units for one supplier and 27 for the other.
C)At $4,quantity supplied could be 40 units for one supplier and 37 for the other.
D)At $4,quantity supplied could be 77 units for one supplier and 10 for the other.
E)There is not enough information to answer this question.
Answer: C
Q2) Which of the following will not shift a supply curve?
A)a change in the price of relevant resources
B)a change in the good's own price
C)a change in the number of sellers
D)a change in per-unit costs brought about by a change in taxes
Answer: B
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Chapter 4: Prices: Free, controlled, and Relative
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Sample Questions
Q1) The minimum wage is an example of a A)price door.
B)price wall.
C)price floor.
D)price ceiling.
Q2) A price ceiling set below the equilibrium price will A)clear the market for the good.
B)result in a shortage of the good. C)result in a surplus of the good.
D)induce new firms to enter the industry.
Q3) Refer to Exhibit 4-7.The number of unskilled workers who want to work at the minimum wage is
A)N<sub>3</sub>.
B)N<sub>1</sub>.
C)N<sub>2</sub>.
D)N<sub>2</sub> - N<sub>1</sub>.
Q4) List and describe the two major jobs performed by price.
Q5) What condition is necessary for a price floor to have an impact on a market? Describe two effects that a price floor can have on a market.
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Chapter 5: Supply,demand,and Price: Applications
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Sample Questions
Q1) Using supply and demand analysis,explain why there is sometimes a surplus of seats to watch a television show being taped and other times there is a shortage of such seats.Assume that tickets to view the taping of a television show are free of charge.
Q2) If the purchase and sale of marijuana becomes legalized
A)the equilibrium price and quantity will both rise.
B)the equilibrium price will fall,but the change in equilibrium quantity depends upon whether the demand curve shifts rightward more or the supply curve shifts rightward more.
C)the equilibrium quantity will rise,but the change in equilibrium price depends upon whether the demand curve shifts rightward more or the supply curve shifts rightward more.
D)the equilibrium price and quantity will both fall.
Q3) Colleges and universities use such things as grade point averages and standardized test scores as
A)a measure of consumer utility.
B)non-price rationing devices.
C)a means to shift the supply curve for a college education.
D)solely to frustrate prospective students.
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Chapter 6: Macroeconomic Measurements, part I: Prices and Unemployment
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Q1) If a person did any work as a paid employee during the Bureau of Labor Statistics survey reference week,how is she classified?
A)as an employed person
B)as not in the labor force
C)as an unemployed person
D)as part of the labor force
E)a and d
Q2) If the Bureau of Labor Statistics considers Jessica to be a discouraged worker,then she is not counted as unemployed for purposes of computing the official unemployment rate.
A)True
B)False
Q3) If we subtract the number of persons not in the labor force from the civilian noninstitutional population,we get the number of people in the
A)ranks of the unemployed.
B)civilian labor force.
C)ranks of the employed.
D)ranks of discouraged workers.
E)none of the above
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Chapter 7: Macroeconomic Measurements, part II: GDP and Real GDP
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Sample Questions
Q1) Capital consumption allowance refers to
A)capital goods being used up in production through natural wear,obsolescence,and accidental destruction.
B)people sending money between countries.
C)the purchase of used factories.
D)the purchase of goods that allow households to consume more services.
Q2) In the calculation of national income,dividends paid to stockholders are part of A)compensation of employees.
B)proprietors' income.
C)rental income.
D)net interest.
E)corporate profits.
Q3) In the definition of GDP,the words "total market value" refer to total A)dollar value at base prices.
B)dollar value at current prices.
C)subjective value.
D)objective value.
E)a and d
Q4) List and explain the two different approaches used to measure GDP.
Q5) Explain why GDP figures do not necessarily measure happiness or well-being.
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Chapter 8: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Refer to Exhibit 8-1.If we assume that the unemployment rate and Real GDP are inversely related,which of the points on this graph is most likely representative of the lowest unemployment rate?
A)A
B)B
C)C
D)D
Q2) If velocity is rising,an increase in one spending component can occur without requiring other spending components to decline.
A)True
B)False
Q3) Starting from short-run equilibrium,the following occurs: personal income taxes rise and foreign real national income rises.What is the effect on the price level and Real GDP in the short run?
A)The price level rises and Real GDP falls.
B)The price level falls and Real GDP falls.
C)The price level rises and Real GDP rises.
D)The price level falls and Real GDP rises.
E)There is not enough information to answer this question.
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Chapter 9: Classical Macroeconomics and the
Self-Regulating
Economy
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Q1) A recessionary gap exists if (actual)Real GDP is __________ Natural Real GDP. A)less than B)greater than C)equal to D)b and c
E)none of the above
Q2) Explain the policy implications of the classical economists' beliefs.
Q3) When the current state of the economy is such that Real GDP is less than Natural Real GDP,the economy is in a(n)____________________ gap.In this situation,the (actual)unemployment rate is ___________ than the natural unemployment rate,and there is a ________________ in the labor market.
A)recessionary;greater;shortage
B)inflationary;less;shortage
C)inflationary;greater;surplus
D)recessionary;greater;surplus
E)recessionary;less;shortage
Q4) All economists agree that the economy is self-regulating.
A)True
B)False
Page 11
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Chapter 10: Keynesian Macroeconomics and Economic
Instability: a Critique of the Self-Regulating Economy
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Sample Questions
Q1) Which statement is consistent with what Keynes believed about consumption and disposable income?
A)Consumption depends upon disposable income and falls as disposable income rises.
B)Consumption rises by the same amount as disposable income rises.
C)Consumption rises by less than disposable income rises.
D)Disposable income depends upon consumption.
Q2) In Keynes' view,labor unions would resist wage cuts,but individual employees would go along with wage cuts initiated by his/her employer.
A)True
B)False
Q3) Refer to Exhibit 10-5 When TE is $700 billion,what state is the economy in?
A)TE < TP,individuals are buying less output than firms produce.
B)TE > TP,individuals are buying more output than firms produce.
C)TE = TP,the economy is in equilibrium.
D)TE < TP,individuals are buying more output than firms produce.
E)TE > TP,individuals are buying less output than firms produce.
Q4) Discuss how the Great Depression contributed to the development of Keynesian economics.
Page 12
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Chapter 11: Fiscal Policy and the Federal Budget
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Sample Questions
Q1) Tax revenues can be found by
A)multiplying the tax base by the (average)tax rate.
B)dividing the tax base by the (average)tax rate.
C)summing the tax base and the (average)tax rate.
D)multiplying taxable income by the marginal tax rate.
Q2) Which piece of evidence is consistent with zero crowding out?
A)Government purchases rise and Real GDP does not change.
B)Government purchases rise and investment spending declines.
C)Government purchases rise and net exports decline.
D)Government purchases rise and consumption declines.
E)none of the above
Q3) The AD curve shifts to the left with a __________ in government purchases (G)or a __________ in taxes.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall
Q4) A value-added tax (VAT)is a less visible form of a sales tax.
A)True
B)False
Page 13
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Chapter 12: Money,banking,and the Financial System
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Sample Questions
Q1) If checkable deposits in Bank A total $620 million and the required reserve ratio is 9 percent,then required reserves at Bank A equal
A)$564.2 million.
B)$468 million.
C)$28.8 million.
D)$55.8 million.
E)$558 million.
Q2) Asymmetric information exists when
A)both parties to an exchange have all relevant facts about that exchange.
B)a good that is either nonrivalrous or nonexcludable is being sold on a market.
C)the two parties to an exchange differ in what they know about the good being exchanged.
D)neither party to an exchange is knowledgeable about the quality of the good being exchanged.
Q3) Which of the following is true?
A)Reserves = required reserves - excess reserves.
B)Reserves - required reserves = excess reserves.
C)Reserves = required reserves + excess reserves.
D)b and c
E)a and b
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Chapter 13: The Federal Reserve System
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Sample Questions
Q1) The smaller the required reserve ratio,the larger the simple deposit multiplier.
A)True
B)False
Q2) When the Fed purchases securities from a bank,it __________ reserves and ____________ the money supply.
A)decreases;decreases
B)increases;increases
C)decreases;increases
D)increases;decreases
E)has no impact on;has no impact on
Q3) Which of the following statements is false?
A)The Fed has the legal authority to create money out of thin air.
B)There is a direct relationship between the money supply and the required reserve ratio.
C)The Fed can cause money to disappear into thin air.
D)The federal funds market is a market in which banks can borrow money from other banks.
Q4) List and describe five of the eight major functions or responsibilities of the Fed.
Q5) Explain the major differences between the Federal Reserve and the U.S.Treasury.
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Chapter 14: Money and the Economy
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Sample Questions
Q1) According to the equation of exchange,if Real GDP is $3 trillion and the money supply is $0.5 trillion,then velocity
A)must be 6.
B)must be 1/6.
C)must be 4 trillion.
D)must be 1/4 trillion.
E)cannot be determined without knowing what the price level is.
Q2) The change in the interest rate brought on by a change in Real GDP is referred to as the __________ effect.
A)liquidity
B)expectations
C)income
D)nominal
Q3) In the equation of exchange,"PQ" stands for A)GDP.
B)Real GDP.
C)nominal investment.
D)real investment.
Q4) Describe the expectations (or Fisher)effect.
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Chapter 15: Monetary Policy
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Sample Questions
Q1) Changes in the money market have an impact upon the bond market.
A)True
B)False
Q2) In the monetarist transmission mechanism,changes in the money market directly affect aggregate demand.
A)True
B)False
Q3) Suppose that there is a financial crisis,and people choose to spend less.As a result,velocity drops by 5 percent.According to market monetarists,if the GDP target growth rate is 3 percent,the Fed would need to increase the money supply by ______________ percent in order to achieve their GDP target.
A)8
B)2
C)4
D)5
Q4) The price of old (or existing)bonds and interest rates have an inverse relationship.
A)True
B)False
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Chapter 16: Expectations Theory and the Economy
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Q1) Under new Keynesian theory,a correctly anticipated decrease in aggregate demand will lead to __________ in Real GDP and __________ in the price level.
A)a decrease;a decrease
B)no change;an increase
C)no change;no change
D)an increase;an increase
E)an increase;no change
Q2) Two key assumptions of new Keynesian theory include:
A)(1)people hold rational expectations,and (2)wages and prices are not completely flexible in the short run.
B)(1)people hold adaptive expectations,and (2)wages and prices are inflexible.
C)(1)people hold rational expectations,and (2)wages and prices are flexible.
D)(1)people hold neither adaptive nor rational expectations and (2)prices are inflexible. E)none of the above
Q3) Rational expectations theory is also known as the Friedman fooling theory.
A)True
B)False
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Chapter 17: Economic Growth: Resources, technology, ideas, and Institutions
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Sample Questions
Q1) Neoclassical growth theory placed emphasis on two resources:
A)capital and entrepreneurship.
B)natural resources and capital.
C)capital and labor.
D)labor and entrepreneurship.
E)labor and natural resources.
Q2) Examples of physical capital include _______________________.Examples of human capital include ______________________________.
A)knowledge one picks up through education and training;factories and computers
B)machines and factories;chairs and desks
C)knowledge one picks up through education and experience;factories and machines
D)machines and factories;knowledge one picks up through education and training
Q3) Describe new growth theory.Explain how it differs from neoclassical growth theory.
Q4) Using the production function Real GDP = T (L,K),and the LRAS curve,describe the process by which a decline in taxes on the returns to capital impacts economic growth.
Q5) List and describe four factors that can contribute to economic growth.
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Chapter 18: The Financial Crisis of 2007-2009
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Q1) In the 1990s and early 2000s,mortgage lending standards ______________ in the United States.In general,there was a move _____________ traditional lending practices during this period.
A)declined;away from B)declined;towards more C)became more strict;away from D)became more strict;towards more
Q2) During a time of rising asset values,a bank can increase its returns by engaging in regulatory capital arbitrage.
A)True
B)False
Q3) Describe the differences between traditional and nontraditional lending practices.Under which category do subprime loans belong?
Q4) The downside to a bank having a high leverage ratio is that a decline in asset value magnifies losses.
A)True
B)False
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Chapter 19: Debates in Macroeconomics Over the Role and Effects
of Government
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Q1) The process whereby votes are exchanged to gain support for legislation is referred to as
A)logrolling.
B)rational ignorance.
C)simple majority voting.
D)special interest voting.
E)a and d
Q2) Which of the following is a prediction of the median voter model for a two person political race?
A)Candidates will try to present themselves as extremists.
B)Candidates who are behind in the polls will try to move closer to the position of their opponents.
C)Candidates will try to label their opponents as "too middle-of-the-road."
D)Candidates will try to be specific and clear about their own programs and the means of achieving them.
Q3) People will be more likely to vote if they believe that their vote will determine the outcome of the election.
A)True
B)False
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Chapter 20: Public Choice and Special-Interest-Group
Politics
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Q1) Which of the following statements is false?
A)A theory should be judged based upon whether or not it tells us the things we want to hear.
B)Scientists are interested in finding out when their theories are wrong or right.
C)Scientists are interested in building theories that can be refuted.
D)If evidence is consistent with a theory's predictions,we state that the evidence fails to reject the theory.
Q2) A person tends to be ______________ likely to lose her temper with a boss than with a friend because the opportunity cost of losing her temper with her boss tends to be _____________ than the opportunity cost of losing her temper with her friend.
A)less;higher
B)more;higher
C)less;lower
D)more;lower
Q3) If a theory gives a scientist results that she does not want,then she should not believe in that theory.
A)True
B)False
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Chapter 21: Building Theories to Explain Everyday Life: From
Observations to Questions to Theories to Predictions
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Q1) Which of the following is not an argument for trade restrictions?
A)the national defense argument
B)the infant industry argument
C)the comparative advantage argument
D)the antidumping argument
Q2) Refer to Exhibit 34-8.Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports).The government collects tariff revenues on sugar imports in the amount of __________ million.
A)$500
B)$1,000
C)$1,500
D)$2,000
E)none of the above
Q3) Consumers receive more consumers' surplus when __________.
A)tariffs exist.
B)tariffs and quotas do not exist.
C)quotas exist.
D)a and c
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Chapter 22: International Trade
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Q1) A "devaluation" occurs when
A)the official price of a currency is raised.
B)the official price of a currency is lowered.
C)a nation's currency depreciates under a flexible exchange rate system.
D)a nation's currency appreciates under a flexible exchange rate system.
E)none of the above
Q2) The answer is: "A geographic area in which exchange rates can be fixed or a common currency used without sacrificing domestic economic goals." What is the question?
A)What is a flexible exchange rate system?
B)What is a managed float area?
C)What is a purchasing power parity area?
D)What is an optimal currency area?
Q3) If world markets change so that the U.S.dollar is no longer the primary reserve currency,the exchange rate value of the dollar would rise.
A)True
B)False
Q4) One example of an optimal currency area is the states within the United States. A)True
B)False
Page 24
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Chapter 23: International Finance
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Q1) Harvard University admits a larger percentage of applicants than does India's Indian Institute of Technology.
A)True
B)False
Q2) When the United States moves upward along the J-curve,it is because a depreciation of the dollar is having the _____________ effect of _____________ the number of dollars spent on imports.
A)long-run;increasing B)long-run;reducing C)short-run;increasing D)short-run;reducing
Q3) In a two-country world,the depreciation of the domestic currency shifts
A)the AD curve rightward and the SRAS curve leftward.
B)the AD curve leftward and the SRAS curve rightward.
C)both the AD curve and the SRAS curve rightward.
D)both the AD curve and the SRAS curve leftward.
E)the AD curve rightward and does not affect the SRAS curve.
Q4) When World War II ended,the new era of globalization began.
A)True
B)False
Page 25
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Chapter 24: Globalization and International Impacts on the Economy
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Q1) A divisive society is a nonexcludable public _____________ because it comes with ____________.
A)good;utility
B)bad;disutility
C)bad;utility
D)good;disutility
Q2) Which of the following statements is true?
A)Special interest groups are more likely to push for policies that increase the size of the economic pie than to increase their slice of the pie.
B)Special interest groups are likely to push for policies that increase the size of their slice of the economic pie even if it means that the overall size of the economic pie will shrink.
C)Special interest groups are more likely to favor policies that increase the size of their slice of the economic pie than policies that favor economic growth.
D)a and c
E)b and c
Q3) In making the case against government,discuss the two main points about special interest groups.
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Chapter 25: The Economic Case for and Against
Government: Five Topics Considered
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Q1) When you buy a corporate bond,you are
A)borrowing funds from the corporation.
B)lending funds to the corporation.
C)selling an ownership right in the corporation.
D)acquiring an ownership right in the corporation.
E)b and d
Q2) When a person buys a bond of the XYZ Corporation,he or she can expect to
A)pay the corporation a certain amount of money each quarter of the year.
B)receive the face value of the bond each year and the face value of the bond when the bond matures.
C)receive the coupon rate times the face value of the bond each year and the face value of the bond when the bond matures.
D)receive the face value of the bond each year in perpetuity.
Q3) The interest paid on corporate bonds is not subject to federal taxes.
A)True
B)False
Q4) A bear market is one in which prices are expected to rise.
A)True
B)False
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Chapter 26: Stocks, bonds, futures, and Options
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Q1) Refer to Exhibit 39-1.Given the target price P<sub>T</sub>,the total deficiency payment made by the government is the area of A)0P<sub>1</sub>CQ<sub>2</sub>. B)0P<sub>T</sub>BQ<sub>2</sub>.
C)P<sub>T</sub>BCP<sub>1</sub>.
D)P<sub>T</sub>BEP<sub>2</sub>.
Q2) Increased productivity in the agricultural sector in conjunction with an inelastic demand curve for agricultural goods has caused a(n)__________ in output,a(n)__________ in price,and __________ revenues for farmers.
A)increase;decrease;higher B)increase;decrease;lower C)decrease;increase;higher D)decrease;increase;lower E)increase;increase;higher
Q3) Explain how the purchase of futures contracts can help to insure a farmer against adverse swings in the prices of the crops that he grows.
Q4) An agricultural price support is an example of a price ceiling. A)True B)False
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