Survey of Economics
Exam Answer Key
Course Introduction
Survey of Economics provides an overview of the fundamental principles of both microeconomics and macroeconomics. The course explores topics such as supply and demand, market structures, consumer behavior, production and costs, national income, unemployment, inflation, monetary and fiscal policy, and the role of government in the economy. Emphasis is placed on real-world applications, current economic issues, and developing an understanding of how economic concepts inform policy decisions and impact individuals, businesses, and societies. This course is designed for students of all majors seeking a broad-based introduction to economic reasoning and analysis.
Recommended Textbook
Foundations of Macroeconomics 5th Edition by Robin Bade
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19 Chapters
5019 Verified Questions
5019 Flashcards
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Chapter 1: Getting Started
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350 Verified Questions
350 Flashcards
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Sample Questions
Q1) Which of the following is true?
I.A rational choice is made on the margin.
II.Microeconomics is the study of the national economy while macroeconomics is the study of the global economy.
III.Economists try to understand how the economic world works by testing normative statements.
A) Only I
B) I and III
C) Only II
D) Only III
E) I and II
Answer: A
Q2) The horizontal axis in a graph
A) measures time on a scatter diagram.
B) measures the quality of a variable.
C) is named the y-axis.
D) is named the x-axis.
E) is called the origin.
Answer: D
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Chapter 2: The Usand Global Economies
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Sample Questions
Q1) Factors of production are the
A) goods that are bought by individuals and used to provide personal enjoyment.
B) goods that are bought by businesses to produce productive resources.
C) productive resources used to produce goods and services.
D) productive resources used by government to increase the productivity of consumption.
E) goods and services produced by the economy.
Answer: C
Q2) Computers and insurance coverage produced in the United States and sold to people in other nations are categorized as
A) U.S.consumption goods and services.
B) foreign capital goods.
C) U.S.government goods and services.
D) U.S.exports of goods and services.
E) U.S.imports of goods and services.
Answer: D
Q3) Label the flows in the simplified circular flow diagram that ignores the government.
Answer: 11ea5157_58a6_75c1_b971_21a8b1fdbe28_TB1454_00 The figure above shows the labeled flows.
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Page 4
Chapter 3: The Economic Problem
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Sample Questions
Q1) If Country A can produce an extra plane by giving up two boats, and Country B can produce an extra plane by giving up three boats, then
A) Country A has a comparative advantage over Country B in the production of planes.
B) Country B has a comparative advantage over Country A in the production of planes.
C) the two countries have no incentive to trade with one another.
D) Country A would like to trade with B, but B cannot gain by trading with A.
E) Country A has an absolute advantage in producing planes and a comparative advantage in producing boats.
Answer: A
Q2) Moving from one point to another on a production possibilities frontier implies A) increasing the production of both goods.
B) decreasing the production of both goods.
C) increasing the production of one good and decreasing the production of another.
D) holding the production levels of both goods constant.
E) changing the amount of factors of production that are employed.
Answer: C
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Chapter 4: Demand and Supply
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Sample Questions
Q1) The "law of demand" indicates that if the University of Maine increases tuition, all other things remaining the same
A) the demand for classes will decrease at the University of Maine.
B) the demand for classes will increase at the University of Maine.
C) the quantity of classes demanded will increase at the University of Maine.
D) the quantity of classes demanded will decrease at the University of Maine.
E) both the demand for and the quantity of classes demanded will decrease at the University of Maine.
Q2) Suppose that over the next few years the demand for dancing to country and western music decreases.Hence, at country and western dance clubs the equilibrium price of admission ________ and the equilibrium quantity of dancing ________.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
E) does not change; decreases
Q3) List the factors that change supply and shift the supply curve.Tell what happens to supply and the supply curve when there is an increase in the factor.
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Chapter 5: Gdp: a Measure of Total Production and Income
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Sample Questions
Q1) Investment is defined as
A) the purchase of a stock or bond.
B) financial capital.
C) what consumers do with their savings.
D) the purchase of new capital goods by firms.
E) spending on capital goods by governments.
Q2) The table above gives some data about GDP in a country for two years.Using these the chained-dollar method for calculating real GDP, real GDP increased by ________ percent between these two years.
A) 4
B) 5
C) 6
D) 10
E) 2
Q3) Leisure time is ignored when calculating GDP because leisure time
A) does not effect our standard of living.
B) has been declining over time.
C) is not an economic good.
D) is not bought in a market.
E) is not productive.
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Chapter 6: Jobs and Unemployment
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Sample Questions
Q1) The working-age population of people over the age of 16 can be divided into two groups, people
A) in the labor force and people looking for work.
B) in the labor force and people with a job.
C) looking for work and those in the U.S.Armed Forces.
D) in the labor force and people who are not in the labor force.
E) with a job and people actively seeking a job.
Q2) How would you best describe a manufacturing employee who has been fired because he was replaced by a robot (new technology) and does not have the skills necessary to help operate the robot?
A) job leaver
B) entrant/reentrant
C) cyclically unemployed
D) structurally unemployed
E) withdrawal
Q3) How does the unemployment rate change in a recession and in an expansion?
Q4) Why is there unemployment even when the economy is at "full employment"?
Q5) Can frictional unemployment ever be totally eliminated?
Explain your answer.
Q6) Define and give an example of how a spell of frictional unemployment can begin.
Page 8
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Chapter 7: The Cpi and the Cost of Living
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Sample Questions
Q1) Consumers in a country buy only two goods, sneakers and manicures.The prices and quantities purchased by urban households are in the table above.The reference base year is 2009.For these data, the CPI for 2010 is
A) 145.
B) 100.
C) 160.
D) 10.
E) 110.
Q2) The table above gives the purchases of an average consumer in a small economy.(These consumers purchase only loaves of bread and jugs of soda.) Suppose 2008 is the reference base period.
a. What quantities are in the CPI market basket?
b. What is the cost of the CPI market basket using 2008 prices?
c. What is the cost of the CPI market basket using 2009 prices?
d. What is the CPI in 2009?
Q3) If you have the cost of the CPI market basket at current prices and the cost of the CPI market basket at base period prices, how do you calculate the CPI?
Q4) Is the CPI a biased measure of the inflation rate?
Explain your answer.
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Chapter 8: Potential Gdp and the Natural Unemployment Rate
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207 Flashcards
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Sample Questions
Q1) Which of the following can result in job rationing?
i. minimum wage
ii. union wage
iii. diminishing returns
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
Q2) The increase in the average unemployment rate in the 1970s was the result of A) the reduction of overly generous unemployment benefits in the 1970s.
B) an increase in the birth rate in the early 1970s.
C) an increase in the birth rate in the late 1940s and early 1950s.
D) higher real wage rates.
E) repeated increases in the minimum wage.
Q3) Define potential GDP.Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?
Q4) For most years since 1980, the natural unemployment rate was higher in Canada than in the United States.What possible explanation for some of this difference has been suggested?
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Chapter 9: Economic Growth
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Sample Questions
Q1) What is the Rule of 70?
Q2) Real GDP is $9 trillion in the current year and $8.6 trillion in the previous year.The economic growth rate between these years has been
A) 10.31 percent.
B) 4.65 percent.
C) 5.67 percent.
D) 7.67 percent.
E) $0.4 trillion.
Q3) If it took 20 years for real GDP to double, what was the growth rate of real GDP?
A) 4.5 percent
B) 3.0 percent
C) 3.5 percent
D) 4 percent
E) 5 percent
Q4) A nation's population was 250 million last year and is 255 million this year.If its real GDP was $8.5 trillion last year and is $8.8 trillion this year, what is its growth rate of real GDP per person?
Q5) What policies can a government undertake to achieve faster economic growth?
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Chapter 10: Finance, Saving, and Investment
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Sample Questions
Q1) "When a company's depreciation is larger than its gross investment, net investment becomes negative and the firm's capital stock decreases." Is the previous statement correct or incorrect?
Explain your answer.
Q2) Which of the following shifts the supply of loanable funds curve?
A) change in the real interest rate
B) change in investment demand
C) change in disposable income
D) change in expected profit
E) change in "animal spirits"
Q3) If there is no Ricardo-Barro effect, a government budget surplus ________ the total supply of loanable funds and ________ the real interest rate.
A) increases; raises
B) increases; lowers
C) decreases; raises
D) decreases; lowers
E) does not change; does not change
Q4) What is the distinction between gross investment and net investment?
Q5) Is wealth the same thing as income?
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Chapter 11: The Monetary System
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361 Flashcards
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Sample
Questions
Q1) A new bank has reserves of $600,000, checkable deposits of $500,000, and government securities of $100,000.If the desired reserve ratio is 10 percent, the amount of loans this bank can make is
A) $50,000.
B) $60,000.
C) $540,000.
D) $550,000.
E) $600,000.
Q2) The monetary base does NOT include which of the following items?
i. Federal Reserve notes
ii. banks' reserves at the Federal Reserve
iii. U.S.government securities owned by the Federal Reserve
A) i only
B) ii only
C) iii only
D) Both i and ii
E) Both ii and iii
Q3) "Credit cards are considered money because they serve to purchase goods and services." Is the previous statement true or false?
Q4) List the Fed's main policy tools and briefly explain each one.
Page 13
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Chapter 12: Money, Interest, and Inflation
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261 Verified Questions
261 Flashcards
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Sample Questions
Q1) Nominal GDP is $9.6 million dollars, real GDP is $9 million, and velocity is 1.2.The quantity of money is ________ million.
A) $8
B) $11.52
C) $7.5
D) $10.8
E) $12
Q2) If the inflation rate increases,
A) the velocity of circulation increases.
B) potential GDP increases.
C) real GDP growth increases.
D) the nominal interest rate falls.
E) the real interest rate rises.
Q3) When the nominal interest rate falls, the opportunity cost of holding money
A) decreases and the demand for money curve shifts leftward.
B) decreases and there is a movement downward along the demand for money curve.
C) increases and there is a movement upward along the demand for money curve.
D) decreases and the demand for money curve shifts rightward.
E) increases and the demand for money curve shifts rightward.
Q4) Explain the "shoe-leather" costs of inflation.
Page 14
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Chapter 13: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) When OPEC nearly tripled the price of oil in late 1973
A) U.S.real GDP increased as profits by oil producers increased.
B) U.S.real GDP did not change although the price level rose.
C) the U.S.price level fell because production became too expensive.
D) the U.S.price level rose and real GDP decreased.
E) both U.S.real GDP and the price level increased.
Q2) In the late 1920s, the U.S.economy experienced a decrease in investment, which perhaps triggered the Great Depression.The decrease in investment
A) increased aggregate supply.
B) decreased aggregate supply.
C) increased aggregate demand.
D) decreased aggregate demand.
E) increased potential GDP.
Q3) A combination of declining real GDP and rising price level is referred to as A) an expansion.
B) a trough.
C) stagflation.
D) deflation.
E) a depression.
Q4) Can actual real GDP exceed potential GDP?
Page 15
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Chapter 14: Aggregate Expenditure Multiplier
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Sample Questions
Q1) The slope of the consumption function is
A) equal to the MPC and is less than 1.
B) equal to the MPC and is greater than 1.
C) equal to the MPC and is equal to 1.
D) not equal to the MPC and is equal to 1.
E) not equal to the MPC and is less than 1.
Q2) As real GDP ________, aggregate planned expenditure ________.
A) increases; increases
B) increases; decreases
C) decreases; remains the same, because it is independent from real GDP
D) increases; remains the same, because the increase in some components is precisely offset by the decrease in others
E) decreases; increases
Q3) Autonomous expenditure includes
A) investment, government expenditure for goods and services, and imports.
B) consumption expenditures, investment, and exports.
C) consumption expenditure, investment, and imports.
D) investment, government expenditure on goods and services, and exports.
E) consumption expenditure, investment, and net taxes.
Q4) Explain why the expenditure multiplier is greater than 1.
Page 16
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Chapter 15: The Short-Run Policy Tradeoff
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Sample Questions
Q1) An increase in the expected inflation rate
A) leads to a movement downward along the short-run Phillips curve.
B) leads to a movement upward along the short-run Phillips curve.
C) shifts the short-run Phillips curve rightward.
D) shifts the short-run Phillips curve leftward.
E) shifts the long-run Phillips curve rightward.
Q2) At full employment, the expected inflation rate is ________.
A) equal to the inflation rate
B) higher than the inflation rate
C) lower than the inflation rate
D) unrelated to the inflation rate
E) unknown
Q3) Okun's Law says that the difference between the unemployment rate and the natural unemployment rate determines
A) potential GDP.
B) real GDP.
C) the gap between potential GDP and real GDP.
D) the gap between the inflation rate and the unemployment rate.
E) the real interest rate.
Q4) What is Okun's Law?
Page 17
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Chapter 16: Fiscal Policy
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Sample Questions
Q1) What two parts of the government determine the federal budget?
A) the Federal Reserve and the FOMC
B) the President and the Federal Reserve
C) the Congress and the Federal Reserve
D) the Congress and the President
E) the U.S.Treasury and the Federal Reserve
Q2) When tax revenue exceed the government's outlays, the budget
A) has a deficit and the national debt is increasing.
B) is balanced and the national debt is decreasing.
C) has a surplus and the national debt is decreasing.
D) has a surplus and the national debt is increasing.
E) None of the above because by law tax revenue cannot exceed the government's expenditures.
Q3) Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic
A) taxes and expenditure.
B) discretionary taxes and expenditure.
C) government.
D) stabilizers.
E) discretionary policy.
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Chapter 17: Monetary Policy
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Sample Questions
Q1) The Fed decreases the quantity of money to counteract
A) a recessionary gap.
B) a federal budget deficit.
C) positive net exports.
D) an inflationary gap.
E) a rise in the unemployment rate.
Q2) To fight a recession, an appropriate monetary policy would be that the Fed conducts an open market operation that ________ government securities, ________ the federal funds rate, and ________ aggregate demand.
A) sells; raises; increases
B) sells; raises; decreases
C) buys; lowers; increases
D) buys; lowers; decreases
E) sells; lowers; increases
Q3) Explain how the Fed's response to inflation works its through the economy to ultimately affecting real GDP and the price level.
Q4) When the Fed lowers the federal funds rate and the real interest rate falls, what happens to the opportunity cost of investment? What happens to investment?
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Chapter 18: International Trade Policy
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Sample Questions
Q1) In the figure above, with international trade U.S.consumers buy ________ million T-shirts per year at ________ per T-shirt.
A) 60; $5
B) 40; $8
C) 20; $5
D) 40; $5
E) 60; $11
Q2) Which of the following methods of restricting trade does NOT create a deadweight loss?
A) a tariff
B) a quota
C) a voluntary export restraint
D) Both answers A and B are correct.
E) None of the above answers are correct because all the methods create a deadweight loss
Q3) How does an import quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?
Q4) How does the United States attempt to compensate losers from lower trade restrictions?
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Chapter 19: International Finance
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Sample Questions
Q1) If the current account balance is -$100 billion, net interest = $0, net transfers = $0, then
A) exports are greater than imports.
B) imports are greater than exports.
C) the capital account balance must be +$100 billion.
D) there was an increase in net foreign assets.
E) the country is loaning abroad.
Q2) Suppose that the U.S.government acquires more foreign currency.How does this change affect the balance of payments accounts?
A) The official settlements account balance is positive.
B) The official settlements account balance is negative.
C) The capital account is positive.
D) The capital account is negative.
E) The balance of payments account sum to a positive number equal to the value of the additional foreign currency the government has obtained.
Q3) During 2009, a country reports imports of $1,000 billion, exports of $1,100 billion, foreign investment in the country of $900 billion, investment abroad of $1,200 billion, net interest and net transfers of zero.What is the country's current account balance?
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