Survey of Economics Exam Bank
Course Introduction
Survey of Economics provides an overview of fundamental economic principles and concepts, including both microeconomics and macroeconomics. The course examines how individuals, businesses, and governments make decisions regarding the allocation of scarce resources, the functioning of markets, the role of prices, and the impact of supply and demand. Students will also explore topics such as production, consumption, competition, fiscal and monetary policy, and international trade. Emphasis is placed on applying economic reasoning to real-world issues and current events, helping students better understand how economic forces shape society.
Recommended Textbook
Economics Principles and Policy 13th Edition by William
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7778 Verified Questions
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Page 2
J. Baumol
Chapter 1: What Is Economics
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232 Verified Questions
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Sample Questions
Q1) A ray through the origin always has a slope of one.
A)True
B)False
Answer: False
Q2) A diagram is a good example of a(n)
A)hypothesis.
B)abstraction.
C)theory.
D)concept.
E)instrumentation.
Answer: B
Q3) One problem with the European Union's choice regarding equality versus efficiency is that it may inadvertently shrink the size of its "economic pie".
A)True
B)False
Answer: True
Q4) Statistical correlation always implies causation.
A)True
B)False
Answer: False
Page 3
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Chapter 2: The Economy: Myth and Reality
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Sample Questions
Q1) Most American workers
A)are employed in the goods-producing sector.
B)are employed by government.
C)are employed in the service-producing sector.
D)are employed in the agricultural sector.
Answer: C
Q2) A mixed economy is one in which
A)a mixture of businesses exist and function.
B)there is a mixture of public influence over government.
C)government plays a dominant role, and private markets are secondary.
D)there is some public influence over free markets.
Answer: D
Q3) The United States produces ____ of what it consumes, and consumes ____ of what it produces.
A)little, little
B)little, most
C)most, little
D)most, most
Answer: D
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Page 4
Chapter 3: The Fundamental Economic Problem: Scarcity and Choice
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Sample Questions
Q1) A society which is inside its production possibilities frontier is efficient.
A)True
B)False
Answer: False
Q2) Opportunity cost is the value of the next best alternative that is given up.
A)True
B)False
Answer: True
Q3) If you discover that the opportunity cost of raising your economics grade is zero, you A)are studying too hard and receiving a higher grade than is optimal for you.
B)must be on the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods.
C)must be inside the production possibilities frontier that describes your trade-offs between producing high grades and producing other goods.
D)must be producing more of other goods than is optimal for you.
Answer: C
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Chapter 4: Supply and Demand: an Initial Look
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Sample Questions
Q1) The position of a demand curve is unaffected by changes in the price of the good.
A)True
B)False
Q2) A shortage will tend to occur at which price in Figure 4-21?
A)P
B)P
C)P
Q3) A surplus will tend to occur at which price in Figure 4-21?
A)P
B)P
C)P
Q4) The laws of supply and demand did not apply to elephant tusks.
A)True
B)False
Q5) Rent controls are most often designed to protect the investment made by apartment building owners.
A)True
B)False
Q6) List some of the problems that may arise when prices are controlled.
Page 6
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Chapter 5: Consumer Choice: Individual and Market Demand
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Sample Questions
Q1) Any point on the lowest indifference curve is preferable to a point on a higher indifference curve.
A)True
B)False
Q2) The slope of the budget line
A)always equals 1.
B)equals income divided by price.
C)equals the ratio of the prices.
D)decreases as we move from left to right.
Q3) As a general rule, consumers have
A)limited income.
B)unlimited desires for goods.
C)many choices of goods facing them.
D)All of the above are correct.
E)None of the above are correct.
Q4) The slope of the budget line is the amount of one commodity that a consumer must give up in order to obtain an additional unit of the other commodity.
A)True
B)False
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Chapter 6: Demand and Elasticity
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Sample Questions
Q1) How might a market research analyst use measures of elasticity-price, cross, and income-in her work?
Explain.
Q2) A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.
A)True
B)False
Q3) Suppose that elasticity has been reliably measured as 1.55 and the unit price decreases from $20 to $17.50.How much will quantity demanded increase?
Q4) If the demand curve in Figure 6-5 is unit elastic, then total expenditure at A is ____ total expenditure at B.
A)greater than
B)less than
C)equal to
D)less elastic than
Q5) If demand is unit elastic, then a 10 percent increase in the price will lead to a 10 percent increase in quantity demanded.
A)True B)False
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Chapter 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis
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Sample Questions
Q1) Total fixed cost
A)increases as output increases.
B)declines as output increases.
C)is always zero.
D)remains constant even if the firm shuts down.
Q2) If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm should
A)reduce the labor used and increase the machinery used if labor costs half as much as machinery.
B)reduce the labor used and increase the machinery used if labor and machinery cost the same amount.
C)reduce the labor used and increase the machinery used only if labor costs more than twice as much as machinery.
D)reduce the labor used and increase the machinery used only if labor costs exactly twice as much as machinery.
Q3) The long run is a period long enough so that one of the firm's commitments ends.
A)True
B)False
Q4) Differentiate between the short run and the long run.
Page 9
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Chapter 8: Output, Price, and Profit: the Importance of Marginal Analysis
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Sample Questions
Q1) Define the following terms completely and concisely.
a.marginal revenue
b.average revenue
c.optimal decision
d.satisficing
e.marginal profit
Q2) A firm that decides to make a price cut assumes that marginal profit is negative.
A)True
B)False
Q3) If the output of a firm is increased by one unit, the revenue addition is called
A)total revenue.
B)average revenue.
C)marginal revenue.
D)economic profit.
Q4) In the case study discussed in the chapter, the electronics firm was actually enhancing its profits by selling calculators at a price that was below average cost.
A)True
B)False
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Chapter 9: Securities: Business Finance and the Economy:
the Tail That Wags the Dog
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Sample Questions
Q1) In the traditional view, stocks are ____ than bonds to the firm that issues them and ____ than bonds to the investor who purchases them.
A)less risky; less risky
B)less risky; riskier
C)riskier; less risky
D)riskier; riskier
Q2) Unlimited liability is a distinct advantage of the proprietorship.
A)True
B)False
Q3) For a corporation, issuing bonds is riskier than issuing stock.
A)True
B)False
Q4) A bond and stock differ in that a stock is an IOU for a fixed amount and a bond is a portion of ownership.
A)True
B)False
Q5) Corporations obtain funds when their previously issued stock is traded.
A)True
B)False
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Chapter 10: The Firm and the Industry Under Perfect Competition
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Sample Questions
Q1) Why do economists consider perfect competition to be the most efficient market structure?
Q2) A market
A)may be an organized exchange.
B)refers to a set of sellers and buyers whose actions affect a commodity's price.
C)is that area in which buyers and sellers compete to affect a product price.
D)All of the above are correct.
Q3) Subsidizing firms that pollute will reduce pollution in the long run.
A)True
B)False
Q4) In Figure 10-6, the price at long-run equilibrium is
A)$5.
B)$10.
C)$20.
D)$35.
Q5) A firm sells in a competitive market in which price is $12.Its marginal cost is 6 + .25Q.Determine the profit-maximizing level of output.
Page 12
Q6) Explain how the short-run supply curve of the competitive firm is derived.
Q7) Why study perfect competition, if it rarely exists?
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Chapter 11: Monopoly
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Sample Questions
Q1) A monopolist's profit per unit is shown by the difference between price and average cost per unit.
A)True
B)False
Q2) The key element in preserving a monopoly is keeping rivals out of the market.
A)True
B)False
Q3) A monopolist in the radio industry has two radio-making plants.The marginal cost of radio production by Plant A is $4Q (where Q is the number of radios produced) and the marginal cost of radio production by Plant B is always $16.If the demand curve for radios is downward sloping, the monopolist will
A)never produce radios at Plant A.
B)always produce four times as many radios at Plant B as at A.
C)never produce more than four radios at Plant A.
D)produce radios at Plant A only as a last resort.
Q4) In the long run, a profit-maximizing monopolist
A)earns zero economic profit.
B)produces the same amount as a perfectly competitive industry.
C)receives a higher price for his output than a perfectly competitive firm.
D)produces at the output level that minimizes his long-run average total cost.
Page 13
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Chapter 12: Between Competition and Monopoly
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Sample Questions
Q1) In Figure 12-3, according to economic theory, the kink in the demand curve will occur at point
A)E.
B)A.
C)C.
D)D.
Q2) Oligopolist A cuts price in an attempt to enlarge his share of the market.His competitors fail to retaliate with price cuts.In this case, in Figure 12-3, oligopolist A will move from point A to which point?
A)B
B)C
C)D
D)E
Q3) The key difference between oligopoly and other market structures is the interdependence among producers.
A)True
B)False
Q4) Economists tend to be concerned about entry barriers.Why are entry barriers so important?
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Chapter 13: Limiting Market Power: Regulation and Antitrust
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Sample Questions
Q1) Changes in the rate charged by electric power companies are subject to government control because
A)the electric power companies are government enterprises.
B)consumer ignorance makes it impossible to know what rates are fair.
C)the electric power companies are monopolies of a service that is important to buyers.
D)cutthroat competition would probably occur if the government did not intervene.
Q2) Under a tying contract,
A)the price a buyer must pay for a good is tied to the size of his purchase.
B)a customer agrees as a condition of buying a good to purchase one or more additional goods from the same seller.
C)a firm agrees to allow members of its competitors' boards of directors to sit on its board.
D)a firm agrees to pay an intermediary for having arranged a business deal for the firm.
Q3) Microsoft has been accused of violating an antitrust law pertaining to bundling. A)True B)False
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Chapter 14: The Case for Free Markets: the Price System
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Sample Questions
Q1) When the invisible hand is at work,
A)the price system will sometimes give incorrect cost signals to consumers.
B)the price system will allocate resources based only on consumer need.
C)all prices will be set equal to marginal costs.
D)there will be some shortages and surpluses that cannot be avoided.
Q2) Government-imposed limits on price movements are likely to
A)increase economic efficiency.
B)decrease economic efficiency.
C)leave economic efficiency unchanged.
D)promote economic growth in the economy.
Q3) Which of the following functions is not performed by prices in a free market?
A)guiding the allocation of resources
B)conveying information about the marginal cost of production
C)making the distribution of income more equitable
D)replacing the need for governmental supervision of production
Q4) The allocation of resources is efficient under an idealized free market system.
A)True
B)False
Q5) Is an efficient market allocation fair?
Explain.
Page 16
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Chapter 15: The Shortcomings of Free Markets
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Sample Questions
Q1) A good is most likely to be inefficiently priced if
A)some of the resources used in its production are scarce.
B)the good is private property.
C)some of the resources used in its production are free.
D)a corporation produces the good.
Q2) Government can deal with externalities through the use of taxes and subsidies.
A)True
B)False
Q3) A monopoly price reflects a good's marginal utility.
A)True
B)False
Q4) The interest rate is determined purely by market forces, and not by government involvement.
A)True
B)False
Q5) Asymmetric information generally leads to efficient resource allocation.
A)True
B)False
Q6) Explain why government, rather than private firms, is required for efficient mosquito eradication programs.
Page 17
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Chapter 16: Externalities, the Environment, and Natural Resources
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Sample Questions
Q1) China, the last large communist society,
A)has proved that a command economy has far less pollution problems than capitalist economies.
B)has urban smog levels higher than Los Angeles.
C)has the world's most sophisticated pollution-control devices.
D)has lowered its level of pollution dramatically since 1980.
Q2) Dwindling resources encourage the development of substitute products.
A)True
B)False
Q3) One of the conclusions of A.C.Pigou was that
A)a system of mandatory controls is the only effective means to control pollution.
B)a system of charges can be an effective means to control pollution.
C)pollution will wither away if a socialist system is in place.
D)pollution cannot be adequately addressed in a price system.
Q4) If a resource is in fact becoming scarcer, then one should expect
A)the price of the resource to rise.
B)less demand for the resource as people try to conserve.
C)greater supply as people reduce inventories before it is all gone.
D)all of the above.
Page 18
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Chapter 17: Taxation and Resource Allocation
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Sample Questions
Q1) Examples of indirect taxes are
A)income taxes levied by some states.
B)sales taxes and property taxes.
C)poll taxes.
D)corporate profits taxes.
Q2) The most important indirect taxes in the United States are
A)federal and state income taxes.
B)inheritance taxes.
C)corporate profits taxes.
D)sales and property taxes.
Q3) Which of the following is exempt from taxation (a tax exemption)?
A)interest on a home mortgage
B)interest from municipal bonds
C)rent
D)property taxes
Q4) The benefits principle states that the users of a service should pay for that service.
A)True
B)False
Q5) Describe the U.S.Social Security system and explain how it is funded.
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Chapter 18: Pricing the Factors of Production
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Sample Questions
Q1) Economic profit can be viewed as
A)a reward for bearing risks.
B)an undeserved "reward" for exercising monopoly power.
C)a reward for innovation.
D)All of the above are correct.
Q2) Interest is the payment for the use of funds.
A)True
B)False
Q3) What is the distinction between innovation and invention?
Q4) In Japan, the market value of the land is approximately four times that of all the land in the United States, even though Japan is only about the size of California.The most likely explanation for this fact is
A)greater demand for land in Japan relative to the supply than in the United States.
B)land is very productive in Japan.
C)land is not fixed in supply in the United States.
D)Japanese workers are very productive.
Q5) The demand curve for any input is the MP curve.
A)True B)False
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Chapter 19: Labor and Entrepreneurship: the Human Inputs
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Sample Questions
Q1) Workers in American industry are more productive than those in many other countries because of
A)the large supplies of machinery available.
B)abundant natural resources.
C)technical know-how.
D)All of the above contribute to American worker productivity.
Q2) In general, an increase in wages will lead to some reaction in line with
A)the income effect but not the substitution effect.
B)the substitution effect but not the income effect.
C)both the income and substitution effect.
D)neither the income effect nor the substitution effect.
Q3) What type of cost is not relevant to the process of research and development or invention in general?
A)fixed cost
B)marginal cost
C)variable cost
D)social cost
Q4) Globalization was much more pervasive in the 1800s than it is today.
A)True
B)False
21
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Chapter 20: Poverty, Inequality, and Discrimination
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Sample Questions
Q1) A minority candidate may not have the same chances as a white candidate for a job simply based on an employer's misconceptions about minorities.
A)True
B)False
Q2) Consider the economy described by the income distribution in Table 21-1.From this table, we can conclude that the
A)poorest quarter of the population earns 15 percent of the income.
B)"middle" fifth of the population earns 32 percent of the income.
C)poorest quarter of the population earns 19 percent of the income.
D)richest fifth of the population earns 49 percent of the income.
Q3) Death taxes, both state and federal, account for about _____ percent of total tax revenue.
A)1%
B)2%
C)3%
D)10%
Q4) Tax loopholes increase the progressivity of the federal income tax.
A)True
B)False
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Chapter 21: Is Useconomic Leadership Threatened
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Sample Questions
Q1) Life expectancy in the U.S.:
A)is the highest in the world
B)is the lowest in the world
C)ranks about 100th in the world
D)ranks about 40th in the world
Q2) In 2013, which of the following countries spent the most on Research and Development?
A)China
B)Germany
C)Japan
D)the U.S.
Q3) The best hope for continued growth of the U.S.economy probably lies in:
A)a return of manufacturing to the U.S.
B)innovation
C)patents
D)decreasing poverty
Q4) The cost of a hospital stay has been going down slowly.
A)True
B)False
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Chapter 22: An Introduction to Macroeconomics
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Sample Questions
Q1) If the government uses stabilization policies to reduce inflation, the economy may have to suffer
A)higher rates of real GDP growth.
B)higher rates of unemployment.
C)lower rates of unemployment.
D)higher rates of price level growth.
Q2) Phoebe and Rachel quit running in Central Park and join a health club to run on treadmills.This decision
A)has no effect on GDP.
B)increases GDP.
C)decreases GDP.
D)increases nominal but not real GDP.
Q3) Which of the following is counted in GDP?
A)the cost of the reconstruction and cleanup following September 11, 2001.
B)the value of leisure time
C)the value of a househusband's work at home
D)the value of your do-it-yourself work
Q4) Gross Domestic Product includes the sale of intermediate goods and services.
A)True
B)False
Page 24
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Chapter 23: The Goals of Macroeconomic Policy
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Sample Questions
Q1) According to economists, one of the signs of an unhealthy economy is a(n)
A)rising labor productivity.
B)increasing real GDP.
C)declining real GDP.
D)declining unemployment.
Q2) The incentive to lend increases as the real rate of interest decreases.
A)True
B)False
Q3) If the capital stock increases, then the economy can produce ____ output with the ____ amount of labor.
A)same, same
B)less, same
C)more, same
D)less, less
Q4) The nominal rate of interest is the difference between the real rate and the expected rate of inflation.
A)True
B)False
Q5) Distinguish between real rate of interest and nominal rate of interest.
Q6) High unemployment is socially wasteful.Why?
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Chapter 24: Economic Growth: Theory and Policy
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Sample Questions
Q1) Foreign direct investment generally leads to technological advancements in poorer countries.
A)True
B)False
Q2) When the economy devotes more of its resources to investment goods, it must devote fewer resources to consumer goods.
A)True
B)False
Q3) A country's level of productivity determines its
A)productivity growth rate.
B)rate of population growth.
C)current standard of living.
D)future income potential.
Q4) The productivity speed-up in the United States could be explained by A)improvements in labor force quality.
B)falling energy prices.
C)rising rates of domestic saving.
D)advances in information technology.
Q5) Define the following terms:a.Human capitalb.Investmentc.Capital formationd.Property rights
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Chapter 25: Aggregate Demand and the Powerful Consumer
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Q1) GDP can be calculated by the value-added approach, which
A)is useful in avoiding double counting.
B)includes only the value-added portion from the sale of goods and services.
C)includes the revenue a firm receives from selling a product minus the amount paid for goods purchased from other firms.
D)All of the above correct.
Q2) Which of the following will most likely cause movement along the consumption function?
A)a change in disposable income
B)a change in interest rates
C)a change in tastes
D)a change in consumers' expectations
Q3) If personal taxes are increased by $10 billion, we can expect that consumers will reduce
A)spending by $10 billion.
B)spending by more than $10 billion.
C)spending by less than $10 billion.
D)saving by $10 billion.
E)saving by more than $10 billion.
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Q4) Define investment?The meaning of investment is different for economists.Explain.
Chapter 26: Demand-Side Equilibrium: Unemployment or Inflation
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Sample Questions
Q1) If, at the full employment level of income, the amount that businesses plan to invest is greater than the amount that consumers plan to save, then
A)there will be an inflationary gap.
B)there will be a deflationary gap.
C)total demand will fall short of potential GDP.
D)the economy will suffer from increasing unemployment.
Q2) One of the primary functions of markets could be labeled A)stimulation.
B)coordination.
C)planification.
D)decentralization.
Q3) The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.
A)True
B)False
Q4) The expenditure schedule includes the consumption function. A)True
B)False
Q5) Why does the aggregate demand curve slope downward?
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Chapter 27: Bringing in the Supply Side: Unemployment and Inflation
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Sample Questions
Q1) The existence of an inflationary gap should cause A)wages to fall.
B)prices to fall.
C)unemployment to rise.
D)net exports to rise.
Q2) If the price level in Figure 10-1 were 100, A)firms would have to lower their prices.
B)inventories would be accumulating.
C)shortages of goods would exist.
D)aggregate quantity demanded would exceed aggregate quantity supplied.
E)both c and d would occur.
Q3) A statement issued by the president's economic advisors stating that growth can continue without price increases indicates that they believe the relevant aggregate supply curve is
A)vertical.
B)horizontal.
C)downward sloping.
D)upward sloping.
Q4) Using the aggregate demand/aggregate supply model, explain the difference in the employment prospects of the graduates of 2007 and 2009.
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Chapter 28: Managing Aggregate Demand: Fiscal Policy
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Sample Questions
Q1) One objection to supply-side tax cuts is that demand-side changes
A)are smaller than supply-side changes.
B)and supply-side changes are about equal.
C)are more unpredictable than supply-side changes.
D)are larger than supply-side changes.
Q2) Supply-side policy is based on the assumption that people's economic behavior is not affected by taxes.
A)True
B)False
Q3) If President Obama wanted to decrease aggregate demand, which of the following would he tend to favor?
A)An increase in government spending, because it will increase the size of the public sector.
B)A decrease in government spending, because it keeps the public sector small.
C)An increase in transfer payments, because it has a larger multiplier than tax changes.
D)An increase in taxes, because it would not make the public sector smaller.
Q4) Supply-side tax cuts also tend to reduce aggregate demand and promote recession.
A)True
B)False
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Chapter 29: Money and the Banking System
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Q1) Inflation increases the use of money as a store of value.
A)True
B)False
Q2) The most common form of trading goods for goods is
A)bilateral trade.
B)government commodity distribution.
C)status-based trades.
D)barter.
E)payments in kind.
Q3) A banker operating under a system of fractional reserves
A)is exposed to potential bank runs.
B)must keep a prudent level of reserves.
C)must lend money carefully.
D)All of the above are correct.
Q4) The one disadvantage of paper money is that it is easier to A)duplicate and counterfeit.
B)carry.
C)divide.
D)store and use at a later time.
Q5) Why are credit cards not considered part of the money supply?
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Chapter 30: Monetary Policy: Conventional and
Unconventional
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Q1) The actual control of the Federal Reserve System resides in the A)Congress of the United States.
B)member banks.
C)Senate Banking Committee.
D)Board of Governors.
Q2) An open market sale of T-bonds by the Fed causes the money supply to
A)fall and bond prices to fall.
B)rise and bond prices to fall.
C)rise and bond prices to rise.
D)fall and bond prices to rise.
Q3) If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?
A)It will give the bank new reserves.
B)It will write the bank a check.
C)It will transfer cash to the bank's vault.
D)It will take reserves from another bank.
Q4) Open market operations generally involve the purchase and sales of
A)government securities.
B)stocks and bonds.
C)coins and currency.
D)Federal Reserve notes.
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Chapter 31: He Financial Crisis and the Great Recession
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Q1) The Lehman Brothers bankruptcy triggered a financial panic that featured
A)an increase in Treasury interest rates and an increase in most other interest rates.
B)an increase in Treasury interest rates and a decrease in most other interest rates.
C)a decrease in Treasury interest rates and an increase in most other interest rates.
D)a decrease in Treasury interest rates and a decrease in most other interest rates.
Q2) Which of the following are not valid arguments against the effectiveness of the fiscal stimulus bill?
A)Employment continued to fall into early 2010.
B)Without stimulus recessions come to an end naturally.
C)State and local government spending increased.
D)Monetary policy played a large role in stimulating the economy.
Q3) The monetary and fiscal stimulus response to the Great Recession resulted in an immediate increase in real GDP.
A)True
B)False
Q4) Name some important lessons learned from the financial crisis.
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Chapter 32: The Debate Over Monetary and Fiscal Policy
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Q1) An employee of Macro.com Corporation is paid $5,000 a month, which she spends regularly throughout the month until she has a zero balance in her checking account at the end of the month.If the corporation changes to a semi-monthly payroll schedule, how will the employee's average cash balance change?
Assume she does not change her spending pattern when she is now paid twice a month.
A)It changes from $5,000 to $2,500 per month.
B)It changes from $2,500 to $1,250 per month.
C)It changes from $1,250 to $625 per month.
D)It changes from $500 to $250 per month.
Q2) Both M1 and M2 are monetary values much larger than nominal GDP. A)True
B)False
Q3) President George W.Bush's tax cut in 2001 was a rare example of A)timely monetary policy.
B)timely fiscal policy.
C)the slow response of policy to events.
D)the inability of Congress to react to policy needs.
Q4) How do lags affect stabilization policy?
Your answer should include three specific types of lags.
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Chapter 33: Budget Deficits in the Short and Long Run
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Q1) Until 1983, almost all U.S.national debt stemmed from financing wars or from the loss tax revenues that accompany recession.
A)True
B)False
Q2) The principal difference between conventional accounting and economic analysis of inflation is that
A)accountants adjust nominal values for inflation.
B)accountants adjust real values for inflation.
C)economists adjust nominal values for inflation.
D)economists adjust real values for inflation.
Q3) Describe the particular policy mix that accounts for the favorable economic conditions of the late 1990s.Be sure to specify the fiscal and monetary policies pursued during this period.
Q4) A chart of the ratio of national debt to GDP from 1915 to 2014 would show
A)significant increases from 1945 to 1975.
B)significant increases during World Wars I and II.
C)a larger value in 1975 compared to 1945.
D)significant increases from 1995 to 2003.
Q5) Differentiate between "off-budget" deficit and the "on-budget" deficit.
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Chapter 34: The Trade-Off Between Inflation and Unemployment
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Q1) Some economists argue that there is no such thing as a short-run Phillips curve.Who are these economists and what is their argument?
Q2) If the short-run Phillips curve is steep, the inflationary costs of using expansionary policy to reduce unemployment would be substantial.
A)True
B)False
Q3) Which of the following is true about the economy depicted in Figure 17-1?
A)It is experiencing supply-side inflation.
B)Policy makers have chosen to fight inflation rather than unemployment.
C)The increase in aggregate demand has increased prices but not real GDP.
D)The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation.
Q4) The long-run Phillips curve in Figure 17-6 (b) would include which of the following points?
A)g, e, m
B)g, e, r
C)j, e, r
D)j, e, m
Q5) What is the effect of supply-side inflation on the short-run Phillips curve?
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Chapter 35: International Trade and Comparative Advantage
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Q1) Are there impediments to international movement of labor and capital?
A)Yes, but they apply to labor only, capital mobility is almost completely free.
B)Yes, although these apply to capital, and not to labor.
C)Yes, there are significant (often prohibitive) restrictions on labor and capital mobility.
D)No, these have been removed with the passage of recent trade legislation.
Q2) A complicating factor in international trade is that
A)barter is the basis for trade between countries; money is not used.
B)gold is used for payments; there are no international payments without gold.
C)many other countries prefer to use the U.S.dollar as currency, causing monetary shortage in the United States.
D)trade between countries requires different currencies rather than one currency.
Q3) Quotas increase the profits of importers but decrease the profits of exporters.
A)True
B)False
Q4) How can tariffs lead to a situation in which all parties to a trade lose?
Q5) Baumol and Blinder offer some reasons why countries trade with each other.List three of the reasons, and give an example of each to illustrate the reason.
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Chapter 36: The International Monetary System: Order or Disorder
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Q1) The price of a currency will decrease when quantity demanded is less than quantity supplied.
A)True
B)False
Q2) Which of the following do most economists consider to be the most basic measure of a nation's international transactions?
A)balance on current account
B)balance on capital account
C)balance of merchandise trade
D)balance on long-term capital
Q3) A country with an undervalued currency
A)will have a balance of payments deficit.
B)will accumulate reserves of foreign currencies.
C)will suffer losses of foreign reserves.
D)must intervene in the foreign exchange market to buy its own currency.
Q4) The recent experience in Greece, Portugal, and Ireland make the euro
A)seem very unlikely to fail because of decreasing debt levels.
B)seem very unlikely to fail because of increasing interest rates.
C)seem somewhat likely to fail because of increasing debt levels.
D)seem somewhat likely to fail because of increasing interest rates.
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Chapter 37: Exchange Rates and the Macroeconomy
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Q1) Compare the effectiveness of fiscal policy in an open economy with mobile international capital to fiscal policy in a closed economy.Why is it different?
Use an appropriate diagram to illustrate your answer.
Q2) If European economies experience a period of sustained recession and the United States does not, what will happen in the United States?
A)an increase in aggregate supply
B)a decrease in aggregate supply
C)a decrease in aggregate demand
D)an increase in aggregate demand
Q3) Which of the following explains the movements in Figure 20-2?
A)an increase in the U.S.price level
B)a decrease in the U.S.price level
C)an appreciation of the U.S.dollar
D)an expansionary monetary policy
Q4) A large tax cut in the United States should lead to an increase in the trade deficit.
A)True
B)False
Q5) Explain how exchange rate changes affect aggregate demand.
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