Survey of Economics Exam Bank
Course Introduction
Survey of Economics provides an introduction to the fundamental principles of both microeconomics and macroeconomics. The course explores how individuals, businesses, and governments make choices about allocating scarce resources, and examines the functioning of markets, the role of supply and demand, price determination, and the impact of government policies. Macroeconomic topics include national income, economic growth, unemployment, inflation, and fiscal and monetary policy. Designed for students from various disciplines, this course offers a broad understanding of economic concepts, issues, and tools relevant to current events and everyday life.
Recommended Textbook
ECON MACRO4 4th Edition by William
A. McEachern
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Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) As a scientist, an economist's main professional objective is to become wealthy.
A)True
B)False
Answer: False
Q2) Secondary effects are consequences of economic actions that develop slowly over time as people react to events.
A)True
B)False
Answer: True
Q3) The assumption of rational self-interest means that economic decision makers
A)have no concern for the welfare of others
B)consider the welfare of others to be more important than their own happiness
C)know with certainty which choice will have the best result
D)make reasonable decisions based on their expectations of results
E)do not make incorrect decisions or bad choices
Answer: D
Q4) Profit is the payment made for land resources.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Understanding Graphs-Appendix
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Sample Questions
Q1) On a graph, the origin represents
A)the dependent variable
B)the variable that is the primary source of causation
C)a caption or explanatory description of the symbols, colors, and measurements used on the graph
D)the point at which the values of both variables are zero
E)ancestry
Answer: D
Q2) The slope of an inverted U-shaped curve is infinity at the top of the curve.
A)True
B)False
Answer: False
Q3) The slope of the straight line in Exhibit 1-5 is
A)greater at point a than at point b
B)the same at points a and b
C)zero because the line is straight
D)negative because an inverse relation is shown
E)positive because the line lies to the right of the y-axis
Answer: B
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Chapter 3: Economic Tools and Economics Systems
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Sample Questions
Q1) The law of comparative advantage says that
A)the individual with the lowest opportunity cost of producing a particular good should produce it
B)comparative advantage exists only when one person has an absolute advantage in the production of two goods
C)whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good
D)whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good
E)gains from trade are possible only when one person has the comparative advantage in producing both goods
Answer: A
Q2) Specialization can sometimes create problems such as boredom and repetitive motion injuries.
A)True
B)False
Answer: True
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Chapter 4: Economic Decision Makers
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Sample Questions
Q1) During recent elections, consumer groups in various states attempted to get the sales tax on all medicines and drugs removed. They argued that such a tax is "severely regressive." What is the economic interpretation of their statement?
A)The poor get ill more often than do the rich.
B)The poor pay higher prices for medicine and drugs than do the rich.
C)The poor pay a higher percentage of their income for medicine and drugs than do the rich.
D)All consumers pay too much money for medicine and drugs.
E)The sales tax discourages the poor from seeking medical treatment.
Q2) A cottage industry is one that
A)produces rural housing
B)takes advantage of the division of labor
C)uses highly specialized resources in a complex production process
D)produces cottage cheese
E)carries out production in workers' homes
Q3) Most economists assume that the goal of elected officials is to promote the public interest.
A)True
B)False
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Chapter 5: Demand, Supply, and Markets
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Sample Questions
Q1) If people believe that prices are going to be higher in the future then they are today, they will
A)wait until the future to purchase the things they wand
B)decrease their demand now
C)increase their demand now
D)increase their supply now
E)save more today so they have the income to buy more in the future
Q2) If the demand for bicycles increases,
A)the quantity demanded decreases
B)equilibrium price increases and equilibrium quantity decreases
C)equilibrium price decreases and equilibrium quantity increases
D)quantity supplied increases
E)quantity supplied decreases
Q3) If there is a shortage in the market for automobiles, then
A)producers' inventories will rise
B)the price should begin to rise
C)the demand curve will shift to restore equilibrium in the market
D)the supply curve will shift to restore equilibrium in the market
E)the price is expected to fall
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Chapter 6: Introduction to Macroeconomics
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Sample Questions
Q1) The Reagan administration's 1981 investment tax changes were designed to
A)stimulate aggregate demand and thereby reduce unemployment
B)stimulate aggregate demand and thereby increase economic growth
C)stimulate aggregate supply and thereby increase economic growth
D)decrease aggregate demand in order to reduce inflation
E)increase tax revenues to reduce the federal budget deficit
Q2) In combating stagflation, a government-induced
A)increase in aggregate demand would help reduce inflation but aggravate unemployment
B)decrease in aggregate demand would help reduce unemployment but aggravate inflation
C)increase in aggregate demand would help reduce unemployment but aggravate inflation
D)decrease in aggregate demand would help reduce both unemployment and inflation
E)increase in aggregate demand would help reduce both unemployment and inflation
Q3) An increase in wage rates, other things constant, would shift the aggregate supply curve upward.
A)True
B)False
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Chapter 7: Tracking the Us Economy
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Sample Questions
Q1) If nominal GDP increases by 4 percent, then
A)real output has increased by 4 percent
B)the price level has increased by 4 percent
C)consumer spending must have increased by 4 percent
D)it is possible that all of the increase was caused by an increase in the price level
E)net exports increased by 4 percent
Q2) A problem inherent in using value added to measure GDP is that the method does not avoid double counting.
A)True
B)False
Q3) Real GDP is measured in
A)current-year prices
B)base-year prices
C)nominal dollars
D)quality of goods produced
E)hours of employment
Q4) A firm run by a rational entrepreneur would want to hold inventories.
A)True
B)False
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Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Which of the following will most likely qualify for unemployment compensation benefits?
A)a new college graduate who cannot find work despite a desperate job search
B)an unemployed coal miner who has been receiving benefits for the past six months
C)a former retail clerk who quit her job because the boss was too demanding
D)a spot welder who has just gotten his first "pink slip" in the mail after ten years of continuous employment
E)an accountant who was fired from his last position for drinking alcohol on the job
Q2) Which of the following is true about inflation?
A)Inflation promotes social harmony by uniting people against the government.
B)Inflation is more damaging if it is anticipated than if it is not anticipated.
C)Accurate anticipation of inflation is possible for everyone who is well informed about economic events.
D)Those who have borrowed money at an interest rate below the rate of inflation will generally benefit.
E)If people anticipate inflation, their actions will prevent the inflation.
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Chapter 9: Productivity and Growth
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Sample Questions
Q1) Declining growth in productivity means that the standard of living has been falling over time.
A)True
B)False
Q2) Labor productivity tends to fall as the capital-labor ratio rises.
A)True
B)False
Q3) The process of adding more capital per worker is known as "capital deepening."
A)True
B)False
Q4) The term industrial policy refers to
A)the policy industries develop to promote growth
B)industry policy related to marketing strategies
C)the illegal activity that firms sometimes engage in to reduce competition
D)government policy arrived at enhancing our competitiveness with foreign industry
Q5) Industrial market countries make up about 16% of the world population but produce nearly 50% of the worlds output.
A)True
B)False
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Chapter 10: Aaggregate Expenditure and Agregate Demand
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Sample Questions
Q1) If investment is autonomous, which of the following is least likely to have an effect on the level of investment?
A)a change in the rate of interest
B)a change in the level of income
C)a change in the level of optimism or pessimism about the economy as a whole
D)a change in the expected profitability of investment projects
E)a change in the rate of inflation
Q2) An increase in real disposable income will
A)shift the autonomous net export function upward
B)shift the autonomous net export function downward
C)cause a rightward movement along the autonomous net export function
D)cause a leftward movement along the autonomous net export function
E)show no movement along or shift of the autonomous net export function
Q3) An increase in the interest rate, other things constant, decreases the amount of investment spending.
A)True
B)False
Q4) The main determinants of investment are the interest rate and expected profit.
A)True
B)False
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Chapter 11: Aggregate Expenditure and Aggregate Demand
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Sample Questions
Q1) According to the graph in Exhibit 10-6, if the price level decreases, the new equilibrium level of real GDP must be
A)less than $20
B)less than $100
C)unchanged
D)greater than $100
E)greater than $200
Q2) The aggregate demand curve illustrates a relationship between
A)interest rates and income levels
B)the price level and real GDP
C)the price level and interest rates
D)income levels and real GDP levels
E)income levels and nominal income levels
Q3) Which of the following is assumed constant along the aggregate expenditure line?
A)the price level
B)consumption
C)unintended inventory adjustment
D)actual investment
E)real GDP
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Chapter 12: Aggregate Supply
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Sample Questions
Q1) The aggregate supply curve reflects the relationship between the
A)price of a particular good and the quantity supplied by all firms producing that good
B)price of a particular good and the quantity supplied by the aggregate economy
C)price level and the quantity of all goods supplied in the economy
D)price level and the quantity purchased of all goods in the economy
E)price level and investment spending
Q2) If the actual price level is less than the expected price level reflected in long-term contracts,
A)firms will find production more profitable than they had expected and will increase the quantity of output supplied
B)firms will find production less profitable than they had expected and will decrease the quantity of output supplied
C)firms, because they are making less profit than they had expected, will increase the quantity of output supplied
D)resource owners, because they are making a lower profit than they had expected, will decrease the quantity of output supplied
E)unemployment will increase
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Chapter 13: Fiscal Policy
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Sample Questions
Q1) The introduction of an autonomous net tax will
A)have no effect on real GDP, since real GDP = C + I + G, which does not include taxes
B)affect consumption through a change in disposable income
C)affect consumption through its effect on investment
D)affect government spending, since the government levies the tax
E)increase real GDP, since it enables government to increase spending
Q2) The Golden Age of fiscal policy was
A)the years before the Great Depression
B)during the Great Depression
C)during World War II
D)during the Kennedy administration
E)during the Reagan administration
Q3) Which of the following is an example of an automatic stabilizer?
A)the Unemployment Compensation Program
B)the American Recovery and Reinvestment Act
C)a temporary elimination of the federal excise tax on gasoline
D)a federal income tax rebate
E)none of the above is an automatic stabilizer
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Chapter 14: Federal Budgets and Public Policy
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Sample Questions
Q1) If a budget is cyclically balanced, the government should run a surplus when the economy experiences a contractionary gap.
A)True
B)False
Q2) Crowding out refers to the effect that deficits have on private investment spending.
A)True
B)False
Q3) The President's budget is presented to Congress each year
A)in the Economic Report of the President
B)in a report followed shortly by the Economic Report of the President
C)at the beginning of the fiscal year
D)in a form that must be voted up or down within 60 days
E)and requires a two-third vote for ratification
Q4) Which of the following would decrease the size of a federal budget deficit?
A)a recession
B)an increase in defense spending
C)growth in real GDP
D)a decrease in taxes
E)an increase in transfer payments
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Chapter 15: Money and the Financial System
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Sample Questions
Q1) Whatever functions as money must be
A)authorized by the government
B)accepted for deposit by banks
C)backed by precious metals like gold or silver
D)completely indestructible
E)limited in supply
Q2) The Federal Deposit Insurance Corporation (FDIC) insures the total value of all deposits in banks that are members of the Fed.
A)True
B)False
Q3) In the United States economy which one of the following is not money?
A)a Susan B. Anthony $1 coin
B)a checking account at a bank
C)a 25-cent piece (i.e., a quarter)
D)a $20 Federal Reserve note
E)a $100 U.S. Government bond
Q4) Inflation is impossible in a commodity money system.
A)True
B)False
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Chapter 16: Banking and the Money Supply
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Sample Questions
Q1) Coins in the United States are manufactured and distributed by the A)Federal Reserve
B)U.S. Mint
C)U.S. Treasury
D)FBI
E)Controller of the Currency
Q2) When the Fed buys U.S. government securities from a bank, that bank's excess reserves and total reserves increase, but there is no change in required reserves.
A)True
B)False
Q3) Assume there are no excess reserves in the banking system when the reserve requirement is 20%. The purchase by the Fed of $10,000 in U.S. government securities from Academy National Bank has the potential of ultimately increasing the money supply by a total of
A)$2,000
B)$8,000
C)$10,000
D)$20,000
E)$50,000
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Chapter 17: Monetary Theory and Policy
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Sample Questions
Q1) As a result of expansionary monetary policy,
A)both aggregate expenditure and aggregate demand increase
B)both aggregate expenditure and aggregate demand decrease
C)aggregate expenditure increases and aggregate demand decreases
D)aggregate expenditure decreases and aggregate demand increases
E)aggregate expenditure remains unchanged; aggregate demand increases
Q2) In the aggregate demand-aggregate supply model, an increase in the money supply will cause in the short run a(n)
A)increase in both the price level and real GDP
B)decrease in both the price level and real GDP
C)increase in real GDP and a decrease in the price level
D)decrease in real GDP and an increase in the price level
E)increase in the price level only
Q3) Which of the following best explains why the demand for money depends upon the interest rate?
A)Money is an interest-earning asset.
B)Money is not an interest-earning asset.
C)The alternatives to holding money are not interest-earning assets.
D)The alternatives to holding money earn more interest than money does.
E)People must pay interest on loans.
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Chapter 18: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) Those who favor an active approach to policy and those who favor a passive approach disagree not only on how quickly the government can act but also on how stable the economy basically is.
A)True
B)False
Q2) Consider Exhibit 17-4. If the economy is initially at point c and aggregate demand increases, the economy will (in the long run)
A)move toward point a
B)move toward point b
C)stay at point c
D)move toward point d
E)move toward point f
Q3) According to those who favor an active approach to policy, how can the economy shown in Exhibit 17-2 attain equilibrium at potential output?
A)The SRAS curve will shift to the left.
B)The SRAS curve will shift to the right.
C)Either the money supply or government spending should be increased.
D)Either the money supply or government spending should be decreased.
E)Aggregate demand should be increased.
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Chapter 19: International Trade
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Sample Questions
Q1) The World Trade Organization (WTO)
A)members are required to eliminate tariffs and customs duties
B)supervises trade in merchandise and in services
C)supervises merchandise trade only
D)members are required to eliminate ad valorem tariffs but not specific tariffs
E)includes all nations with populations greater than 10 million, with the exception of North Korea and Cuba
Q2) In Exhibit 19-1, the opportunity cost of a ton of rice in the United States is
A)0
B)1/3 of a t-shirt
C)1/2 of a t-shirt
D)1 t-shirt
E)2 t-shirts
Q3) Low wages may be traceable to all of the following except one. Which is the exception?
A)low productivity
B)too much saving
C)unstable business climate
D)poor education and training
E)lack of adequate physical capital supplied to labor
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Chapter 20: International Finance
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Sample
Questions
Q1) Assume the United States has only one trading partner. The U.S. demand curve for foreign currency is drawn while holding constant all of the following factors except one. Which is the exception?
A)incomes of U.S. consumers
B)the exchange rate
C)the expected rate of inflation in the U.S.
D)the foreign prices of foreign goods
E)U.S. interest rates relative to foreign interest rates
Q2) Which of the following statements is true?
A)Foreigners owned $16.30 in U.S. assets
B)U.S. residents owned $13.8 trillion in foreign assets
C)U.S. residents owned $2.5 trillion more assets in the United States than foreigners owned abroad
D)Foreign purchases of assets in the U.S. subtract from America's productive capacity
E)Income from foreign-owned assets in the U.S. flows to Americans
Q3) Flexible exchange rates are more volatile than floating ones.
A)True
B)False
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Chapter 21: Economic Development
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Sample Questions
Q1) The bulk of exports from developing countries are
A)manufactured goods
B)primary products
C)servcies
D)consumer goods
E)raw sugar products
Q2) Output per capita is the most commonly used measure of the prosperity of a nation.
A)True
B)False
Q3) Which of the following is not a country that has more people over the age of 65 than under the age of 15?
A)Italy
B)Japan
C)Ethiopia
D)Germany
E)Portugal
Q4) In Zimbabwe, more than half the people are unemployed.
A)True
B)False
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