Survey of Economics
Exam Materials
Course Introduction
Survey of Economics provides an overview of fundamental economic concepts, principles, and systems, introducing students to both microeconomics and macroeconomics. The course examines how individuals, businesses, and governments make choices regarding resource allocation, production, and distribution of goods and services. Topics include supply and demand, market structures, fiscal and monetary policies, the role of government in the economy, international trade, and current economic issues. Emphasis is placed on practical applications of economic reasoning to real-world problems, enabling students to better understand and analyze everyday economic decisions and public policy debates.
Recommended Textbook
Survey of Economics 8th Edition by Irvin B. Tucker
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4541 Verified Questions
4541 Flashcards
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Chapter 1: Introducing the Economic Way of Thinking
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Sample Questions
Q1) Policies to lower the price level of goods in the nation are a concern of:
A) macroeconomics.
B) microeconomics.
C) both microeconomics and macroeconomics.
D) political science.
Answer: A
Q2) What is an economic theory or model? What constitutes a "good" economic theory or model?
Answer: An economic theory is a simplified version of reality.It is a general statement about the causal relationship between economic phenomena based on facts.A truly "good" theory will predict well,explain economic behavior,indicate to what extent the predicted outcome is expected to occur,and indicate how long it will take for the predicted outcome to be observed.
Q3) A chain saw is an example of which of the following factors of production?
A) Land.
B) Labor.
C) Capital.
D) None of the above.
Answer: C
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Chapter 1: A: Appendix: Applying Graphs to Economics
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Sample Questions
Q1) A change in a third variable not on either axis of a graph is illustrated with a:
A) horizontal or vertical line.
B) movement along a curve.
C) shift of a curve.
D) point of intersection.
Answer: C
Q2) A downward-sloping line has a negative slope.
A)True
B)False
Answer: True
Q3) Straight line AB in Exhibit 1A-1 shows that:
A) increasing values for X will decrease the values of Y.
B) decreasing values for X will increase the values of Y.
C) there is a direct relationship between X and Y.
D) all of the above.
Answer: C
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Chapter 2: Production Possibilities,Opportunity Cost,and Economic Growth
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Sample Questions
Q1) In Exhibit 2-16,which of the following points on the production possibilities curve are full-employment production points?
A) A, B, C, D
B) A, B, C, D, U
C) E, U, W
D) B, C, D, U
E) A, B, C, U
Answer: A
Q2) A production possibilities curve shows the:
A) dollar costs of producing two different goods.
B) amounts of labor and capital needed to produce one good.
C) various combinations of goods that can be produced.
D) prices of different goods that are produced in an economy.
E) inefficient use of available resources and technology.
Answer: C
Q3) If some resources were used inefficiently,the economy would operate outside its production possibilities curve.
A)True
B)False
Answer: False
Page 5
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Chapter 3: Part 1: Market Demand and Supply
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Sample Questions
Q1) Assuming coffee and tea are substitutes,a rise in the price of coffee will have which of the following effects on the market for tea?
A) A movement up along the tea demand curve.
B) A movement down along the tea demand curve.
C) A leftward shift in the tea demand curve.
D) A rightward shift in the tea demand curve.
Q2) Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers.This would cause the current demand for computers to:
A) increase.
B) decrease.
C) remain unchanged.
D) increase and then decrease.
Q3) "Because of unseasonable cold weather,much of the peach crop has been destroyed." This statement indicates that the:
A) price of peaches will fall.
B) quantity of peaches that will be available at any given price has decreased.
C) demand for peaches will shift to the left.
D) quantity of peaches that will be available at any given price have increased.
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Page 6
Chapter 3: Part 2: Market Demand and Supply
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Sample Questions
Q1) A shortage occurs when the quantity demanded exceeds the quantity supplied.
A)True
B)False
Q2) If X and Y are substitutes,the demand curve for X will shift to the right when the price of Y decreases.
A)True
B)False
Q3) If renting videos is an inferior good,demand for this service will rise when consumer income falls.
A)True
B)False
Q4) If equilibrium is present in a market:
A) there is either a shortage or a surplus.
B) the quantity demanded equals quantity supplied.
C) the quantity demanded exceeds quantity supplied.
D) the quantity supplied exceeds quantity demanded.
Q5) Distinguish the laws of demand and supply.How are the laws of demand and supply illustrated graphically?
Q6) Discuss how a market reaches equilibrium.How is it expressed graphically?
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Chapter 4: Markets in Action
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Sample Questions
Q1) If there is a decrease in demand for lettuce,we would expect:
A) both the price and quantity sold to increase.
B) both the price and quantity sold to decrease.
C) the price to decrease and the quantity sold to increase.
D) the price to increase and the quantity sold to decrease.
Q2) Which of the following would be an external cost to the consumption of cigarettes?
A) Price of a pack of cigarettes.
B) Loss of income resulting from extra missed days of work.
C) Higher life insurance premiums due the practice of smoking.
D) The loss in utility received because the smoker must stand outside her office building in the winter to smoke.
E) Increased risk of cancer to the nonsmoking passengers in the smoker's carpool.
Q3) A price ceiling set below the equilibrium price creates a shortage.
A)True
B)False
Q4) Discuss the impact of demand and supply changes on market equilibrium price and quantity.Express this graphically.
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Chapter 5: Price Elasticity of Demand
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Sample Questions
Q1) Suppose an economist found that total revenues increase for the bus system when fares were raised,the conclusion is that the price elasticity demand for subway services over the range of fare increase is inelastic.
A)True
B)False
Q2) Which of the statements below does not describe a demand curve that is unit elastic?
A) The percentage change in the quantity demanded = percentage change in product price.
B) An increase in product price will not change total revenue.
C) The price elasticity of demand equals one.
D) A change in price does not change quantity demanded.
E) A decrease in product price will not change total revenue.
Q3) Other things constant,the price elasticity of demand for a product will be smaller (more inelastic)if:
A) people spend a large share of their income on the product.
B) people spend an insignificant share of their income on the product.
C) the population in the market area is large.
D) there are many good substitutes for the product.
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Page 9
Chapter 6: Production Costs
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Sample Questions
Q1) A firm's marginal product curve slopes downward throughout its length.
A)True
B)False
Q2) For a typical firm,the long-run average total cost curve:
A) is tangent to the minimum point of each possible short-run average total cost curves.
B) is tangent to each possible short-run average total cost curve at one point.
C) intersects each possible short-run average total cost curve at two points.
D) passes through the minimum points of all possible short-run average total cost curves.
Q3) The law of diminishing marginal returns implies that,in the short run:
A) output must fall beyond a certain point.
B) price must fall beyond a certain point.
C) the marginal product of the variable input must eventually decrease.
D) wages of workers must eventually increase.
E) total cost must fall beyond a certain point.
Q4) Diseconomies of scale occur when high levels of output are produced in a short period of time.
A)True
B)False
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Chapter 7: Perfect Competition
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Sample Questions
Q1) As shown in Exhibit 7-12,the price that will yield zero economic profit is:
A) OA.
B) OB.
C) OC.
D) OD.
Q2) The short-run supply curve and short-run marginal cost curve for a perfectly competitive firm coincide when the market price is greater than average variable cost.
A)True
B)False
Q3) Marginal revenue is the change in:
A) total profit brought about by selling one more unit of output.
B) price brought about by selling one more unit of output.
C) total revenue brought about by selling one more unit of output.
D) output brought about by a $1 change in product price.
E) average revenue brought about by selling one more unit of output.
Q4) In long-run equilibrium,a perfectly competitive firm will produce an output level at which its long-run average cost curve is upward sloping.
A)True
B)False
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Chapter 8: Monopoly
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Sample Questions
Q1) Alcoa had a monopoly in the U.S.aluminum market from the late nineteenth century until the end of World War II.Which barrier to entry was the source of Alcoa's monopoly power?
A) Ownership of a vital resource.
B) Government franchises and licenses.
C) Patents and copyrights.
D) Economies of scale.
Q2) If the average total cost curve is always above the demand curve for a monopolist:
A) the profits of the monopolist will be large.
B) the monopolist must be producing inefficiently.
C) the monopolist will suffer economic losses.
D) entry will occur, forcing the monopolist to reduce price and expand output.
Q3) Under what conditions might a monopoly lose money?
Q4) In contrast to a perfectly competitive firm,a monopolist operates in the long run at a quantity of output at which:
A) P=MC.
B) MR=MC.
C) P=ATC.
D) P>MR.
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Chapter 9: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':
A) demand curves downward.
B) demand curves upward.
C) demand curves more inelastic.
D) cost curves upward.
E) cost curves downward.
Q2) Which of the following is characteristic of a monopolistically competitive firm?
A) The firm faces an upward-sloping demand curve.
B) The firm faces an inelastic demand curve.
C) The firm faces a horizontal demand curve.
D) The firm produces a differentiated product.
Q3) Which of the following is always a characteristic of the oligopoly market structure?
A) Many sellers, each small in size relative to the overall market.
B) Few sellers.
C) All sellers produce identical products.
D) Easy, low-cost entry and exit.
Q4) What are the characteristics of monopolistic competition?
Q5) What are the characteristics of an oligopoly?
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Chapter 10: Labor Markets and Income Distribution
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Sample Questions
Q1) An increase in the demand for a product will shift the demand curve for labor producing the product to the right.
A)True
B)False
Q2) Dividing the change in total revenue by the change in labor gives:
A) marginal product of labor.
B) marginal revenue product of labor.
C) the price of the output.
D) demand for the output.
E) economic efficiency.
Q3) The highest fifth of all families receive approximately ____ of the distribution of annual money income among families.
A) 5 percent
B) 10 percent
C) 25 percent
D) 50 percent
Q4) Describe the decision for a perfectly competitive employer in determining the profit maximizing quantity of labor to employ.
Q5) Make a case for income inequality.
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Chapter 11: Gross Domestic Product
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Sample Questions
Q1) Which of the following items is included in the calculation of GDP?
A) Purchase of 100 shares of General Motors stock.
B) Purchase of a used car.
C) The value of a homemaker's services.
D) Sale of Gulf War military surplus.
E) None of the above would be included.
Q2) Personal income is:
A) total income received by households before taxes.
B) the amount households have available for consumption, savings, and payment of personal taxes.
C) national income minus corporate profits and Social Security (FICA) plus transfer payments, and other income.
D) all of the above.
Q3) Which of the following is true?
A) GDP is a "flow" concept.
B) The purchase prices of both intermediate goods and final goods are included in GDP.
C) GDP measures economic welfare.
D) GDP is a measure of changes in the general level of prices.
Q4) Discuss the components of GDP using the expenditure approach.
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Chapter 12: Business Cycles and Unemployment
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Sample Questions
Q1) Recovery is the phase of the business cycle during which real GDP reaches its maximum.
A)True
B)False
Q2) When full employment is present in the United States:
A) the rate of unemployment will fall to zero.
B) the actual rate of unemployment will be less than the natural rate of unemployment.
C) approximately 95 percent of the adult population will be employed.
D) approximately 95 percent of the labor force will be employed.
Q3) The natural rate of unemployment occurs if there is no:
A) unemployment.
B) frictional unemployment.
C) structural unemployment.
D) cyclical unemployment.
Q4) What stage of the business cycle immediately follows the trough?
A) Peak.
B) Recovery.
C) Recession.
D) Depression.
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Chapter 13: Inflation
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Sample Questions
Q1) In which of the following years was inflation in the United States the highest?
A) 1960.
B) 1970.
C) 1980.
D) 1990.
E) 2007.
Q2) Consider an economy with only two goods: bread and wine.In 1982,the typical family bought 4 loaves of bread at 50¢ per loaf and 2 bottles of wine for $9 per bottle.In Year X,bread cost 75¢ per loaf and wine cost $10 per bottle.The CPI for Year X (using a 1982 base year)is:
A) 100.
B) 115.
C) 126.
D) 130.
Q3) Inflation:
A) reduces the cost-of-living of the typical worker.
B) is measured by changes in the cost of a typical market basket of goods between time periods.
C) causes the purchasing power of a dollar to rise.
D) has no effect on real income.
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Chapter 14: Aggregate Demand and Supply
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Sample Questions
Q1) According to classical theory,if the aggregate demand curve decreased and the economy experienced unemployment,then:
A) the economy would remain in this condition indefinitely.
B) the government must increase spending to restore full employment.
C) prices and wages would fall quickly to restore full employment.
D) the supply of money would increase until the economy returned to full employment.
Q2) The aggregate demand curve:
A) shows the level of real GDP purchased in the economy at different possible price levels during a period of time.
B) shows the level of real GDP produced in the economy at different possible price levels during a period of time.
C) shifts to the left whenever there is an increase in aggregate expenditures.
D) slopes upward.
Q3) Which of the following are inherent in classical theory?
A) Flexible prices.
B) Flexible wages.
C) Long-run full employment.
D) All of the above.
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Chapter 14: A: Appendix: The Self-Correcting Aggregate
Demand and Supply Model
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Q1) Given the shift of the aggregate demand curve from AD to AD in Exhibit 14A-5,the real GDP and price level (CPI)in long-run equilibrium will be:
A) P , Y .
B) P , Yp.
C) P ,Yp.
D) P , Yp.
Q2) In the long run,wages and prices are considered to be:
A) fixed.
B) sticky.
C) flexible.
D) unstable.
Q3) In Exhibit 14A-3,the level of real GDP represented by Yp:
A) is potential real GDP for this economy.
B) indicates that the economy is experiencing zero inflation.
C) indicates that the economy is experiencing a recessionary gap.
D) would be associated with considerable unemployment.
Q4) In long-run full-employment equilibrium,the CPI equals AD equals SRAS equals LRAS.
A)True
B)False
Page 19
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Chapter 15: Fiscal Policy
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Sample Questions
Q1) According to supply-side fiscal policy,reducing tax rates on wages and profits will:
A) create demand-pull inflation.
B) lower the price level but may trigger a recession.
C) result in stagflation.
D) reduce both unemployment and inflation.
Q2) The ratio of a change in consumption to a change in income is the:
A) consumption function.
B) propensity to consume.
C) average propensity to consume.
D) extra propensity to consume.
E) marginal propensity to consume.
Q3) Which of the following is an example of an automatic stabilizer?
A) Congress legislates lower tax rates to increase consumption and investment.
B) Tax rates are increased during a recession to maintain a balanced budget.
C) A regressive income tax system reduces tax revenues (as a share of income) as income expands.
D) Revenues from the corporate income tax increase sharply during a business boom but decline substantially during a recession, even though no new tax legislation has been enacted.
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Chapter 16: The Public Sector
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Sample Questions
Q1) Suppose a person with an income of $20,000 pays a tax of $2,000.If the tax is progressive,then how large of a tax will a person with an income of $40,000 pay?
A) Exactly $2,000.
B) Between $2,000 and $4,000.
C) Exactly $4,000.
D) More than $4,000.
Q2) At the federal level,the single most important tax,accounting for slightly less than half of revenue,is the:
A) corporate income tax.
B) personal income tax.
C) estate tax.
D) property tax.
E) sales tax.
Q3) If a person is concerned that an additional $1,000 income will move him/her into a new tax bracket,that person is worried about the:
A) proportional rate.
B) regressive tax rate.
C) marginal tax rate.
D) flat tax rate.
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Page 21
Chapter 17: Federal Deficits,Surpluses,and the National Debt
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Sample Questions
Q1) A concern about crowding out caused by increased government borrowing is that:
A) interest rates on private borrowing fall.
B) lower rates of economic growth can result from a decline in business investment spending.
C) the federal government may default on its loans.
D) foreign lenders find it less attractive to help finance federal deficits.
Q2) Which of the following countries has the largest national debt as a percentage of GDP?
A) Greece.
B) Japan.
C) United States.
D) Canada.
E) Italy.
Q3) Internal ownership of the debt refers to the portion of the national debt owned by government agencies.
A)True
B)False
Q4) Between 1960 and 1997,the federal budget was never in surplus.
A)True
B)False
Page 22
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Chapter 18: Money and the Federal Reserve System
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Sample Questions
Q1) Which of the following is not part of the Federal Reserve System?
A) Council of Economic Advisors.
B) Board of Governors.
C) Federal Open Market Committee.
D) 12 Federal Reserve District Banks.
E) Federal Advisory Council.
Q2) In order for barter to occur,traders must have a:
A) unit of account.
B) coincidence of wants.
C) medium of exchange.
D) central banking facility.
Q3) The Federal Reserve System was founded in:
A) 1913.
B) 1929.
C) 1933.
D) 1935.
Q4) The Federal Reserve System was created by act of Congress in 1931 in an effort to end a wave of bank failures brought on by the Great Depression.
A)True
B)False
Page 23
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Chapter 19: Money Creation
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Q1) Which of the following correctly describes fractional reserve banking?
A) The federal government only insures a fraction of the deposits at most banks.
B) Banks keep a fraction of their loans with other banks to maintain the quality of their loan portfolio.
C) Banks can loan out all but a small fraction of its own money, but must hold all money deposited at the bank on reserve in bank vaults.
D) Banks can loan out all but a fraction of its own money, but must hold all money deposited at the bank on reserve in bank vaults.
Q2) Discuss how a single bank creates money.What is the limit to which a single bank can add to the money supply? By how much can an entire banking system add to the money supply?
Q3) The federal funds market is the market where:
A) the federal government borrows money from banks to finance the national debt.
B) the federal government lends money to commercial banks.
C) banks borrow money from other banks for short periods of time.
D) banks borrow money from the Fed for short periods of time.
E) banks borrow money from the Treasury for long periods of time.
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Page 24
Chapter 20: Monetary Policy
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Sample Questions
Q1) In Exhibit 20-5,a shift in aggregate demand from AD to AD :
A) cannot raise real GDP because the economy is at full employment.
B) cannot raise real GDP because the aggregate supply curve is upward sloping at GDP .
C) will raise real GDP because the economy is operating below the full-employment level.
D) will cause the interest rate to increase from i to i .
E) will raise real GDP but will also significantly raise the price level.
Q2) Keynesian economists believe monetary policy is more effective than fiscal policy in stabilizing the business cycle.
A)True
B)False
Q3) Assume a fixed demand for money curve and the Fed increases the money supply.The result is a temporary:
A) excess quantity of money demanded.
B) excess quantity of money supplied.
C) new equilibrium interest rate.
D) decrease in the demand for loans.
Q4) Contrast the Keynesian and Monetarist views on the effectiveness of fiscal policy?
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Chapter
Self-Correcting Aggregate Demand and Supply Model
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Q1) If the economy is experiencing an inflationary gap,Keynesian economists advocate allowing flexible wages to shift the short-run aggregate supply curve (SRAC)upward and restore full employment.
A)True
B)False
Q2) Assume that the economy depicted in Panel (b)of Exhibit 20A-1 is in short-run equilibrium where AD equals SRAS .Keynesian theory argues:
A) nominal wages will fall as long as employment remains above the natural level of unemployment.
B) lower wages will result in a shift from SRAS to SRAS .
C) long-run equilibrium will be established at Yp and P .
D) government intervention must shift AD rightward to AD .
Q3) In Panel (a)of Exhibit 20A-2,an expansionary Keynesian government stabilization policy designed to move the economy from Y to Yp would shift the:
A) aggregate demand curve (AD)to the left.
B) aggregate demand curve (AD) to the right.
C) SRAS rightward.
D) LRAS rightward.
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Chapter 21: International Trade and Finance
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Q1) An increase in the price level in Japan relative to the price level in the United States will shift the demand curve for dollars leftward and the dollar depreciates or becomes weaker.
A)True
B)False
Q2) Which of the following is not an argument used in favor of protectionism?
A) To protect an "infant" industry.
B) To protect domestic jobs.
C) To preserve national security.
D) To protect against "unfair" competition because of cheap foreign labor.
E) To reduce prices paid by domestic consumers.
Q3) International specialization and trade according to the principle of comparative advantage is mutually beneficial for all economies involved.
A)True
B)False
Q4) Tariffs help consumers by lowering the price of imported goods.
A)True
B)False
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Chapter 22: Economies in Transition
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Q1) The economic system in which the basic economic questions are answered through markets with some government intervention is a:
A) command economy.
B) mixed economy.
C) market economy.
D) planned economy.
Q2) Which of the following is not a characteristic of capitalism?
A) Private ownership of resources.
B) Decentralized decision-making using markets.
C) Representative democracy.
D) Consumer sovereignty.
Q3) Centralized planning agencies are a key feature of command economies.
A)True
B)False
Q4) A mixed economy cannot exist without a politically free society.
A)True
B)False
Q5) Describe the differences between capitalism and socialism.
Q6) Discuss the three basic types of economic systems.
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Chapter 23: Growth and the Less-Developed Countries
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Q1) If a country's real GDP is growing at 5 percent and the population is also growing at 5 percent,its:
A) per capita real GDP grows at an increasing rate.
B) per capita real GDP grows at a constant rate.
C) population growth will eventually exceed real GDP.
D) per capita real GDP decreases at a constant rate.
E) per capita real GDP does not change.
Q2) The vicious circle of poverty refers to the fact that in LDCs,
A) low living standards lead to declines in population growth.
B) too much spending leads to periods of recession.
C) people are poor because too much is spent on capital goods.
D) there are not enough people in the under-15 age groups.
E) poverty leads to low investment in capital goods.
Q3) Which of the following is in charge of U.S.aid to foreign countries?
A) Agency for International Development (AID).
B) World Bank.
C) International Monetary Fund (IMF).
D) New International Economic Order (NIEO).
Q4) What role does population growth play in economic development?
Q5) Describe the vicious cycle of poverty.What are the consequences of this cycle?
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