Survey of Economics
Final Exam Questions
Course Introduction
Survey of Economics provides an overview of the fundamental principles of both microeconomics and macroeconomics. The course covers basic economic concepts such as supply and demand, market equilibrium, the role of government in the economy, production and costs, and market structures. Students are introduced to macroeconomic measures like GDP, unemployment, inflation, fiscal and monetary policy, and international trade. Emphasis is placed on understanding how economic theory applies to real-world issues and decision-making, equipping students with analytical tools to better comprehend economic events and policies affecting individuals, businesses, and society as a whole.
Recommended Textbook
Macroeconomics 13th Edition by Roger A. Arnold
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Chapter 1: What Economics Is About
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Sample Questions
Q1) In economics,something that provides utility is called a
A) good.
B) bad.
C) want.
D) need.
E) a and d
Answer: A
Q2) A mandatory seat-belt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.05 to 0.03 while raising the number of accidents per period from 30,000 to greater than ___________ accidents per period.
A) 48,000
B) 50,000
C) 500,000
D) 45,000
Answer: B
Q3) Economists sometimes refer to the resource category land as natural resources. A)True
B)False
Answer: True
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Page 3
Chapter 2: Production Possibilities Frontier Framework
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Sample Questions
Q1) In a PPF graph of goods X and Y,points that lie beyond (to the right of)the PPF represent combinations of the two goods that are currently unattainable.
A)True
B)False
Answer: True
Q2) Refer to Exhibit 2-1.The opportunity cost of moving from point A to B is
A) 10,000 units of butter.
B) 20,000 units of butter.
C) 20,000 units of guns.
D) 10,000 units of guns.
Answer: C
Q3) A decrease in unemployment causes the PPF to shift outward (to the right).
A)True
B)False
Answer: False
Q4) Economic growth is illustrated by a shift inward (toward the origin)of the PPF.
A)True
B)False
Answer: False
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Chapter 3: Supply and Demand: Theory
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Sample Questions
Q1) Suppose the government decides that every family should own its own home.To bring this about,the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build.As a result of this,
A) the supply curve of new houses would shift leftward,since it now costs $10,000 more for builders to produce a house.
B) the demand curve for new houses would shift rightward,since now every family would want to buy a house.
C) the demand curve for new houses would shift leftward.
D) the supply curve of new houses would shift rightward,since builders would be willing to produce and sell more houses at each given price.
E) c and d
Answer: D
Q2) Refer to Exhibit 3-4.A price of $6 in this market will result in a
A) shortage of 10 units.
B) surplus of 10 units.
C) surplus of 5 units.
D) shortage of 5 units.
Answer: B
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Page 5
Chapter 4: Prices: Free,controlled,and Relative
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Sample Questions
Q1) Refer to Exhibit 4-3.Which of the following is true?
A) If price P<sub>3</sub> is set as a price ceiling it will have an effect on the market for good X.
B) If price P<sub>3</sub> is set as a price floor it will have an effect on the market for good X.
C) Price P<sub>3</sub> is the equilibrium price for good X.
D) Price P<sub>3</sub> is the highest price that can legally be charged in the market for good X.
Q2) Price ceilings and price floors
A) shift demand and supply curves and therefore have no effect upon the rationing function of prices.
B) interfere with the rationing function of prices.
C) make the rationing function of free markets more efficient.
D) cause surpluses and shortages,respectively.
Q3) It is possible for the absolute price of a good to rise at the same time that the good's relative price is falling.
A)True
B)False
Q4) List and describe the two major jobs performed by price.
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Chapter 5: Supply,demand,and Price: Applications
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Sample Questions
Q1) When congestion occurs on the freeway (because of a shortage of freeway space),an economist would most likely explain this by saying that it is because
A) the freeway has too few miles of roadway.
B) there are too many cars.
C) the price of driving on the freeway is below the equilibrium price.
D) a and c
Q2) If the government sets out to make home buying easier for more people by forcing lenders to accept ____________ down payments and ______________ interest rates,the result will likely be a(n)_______________ in housing prices.
A) lower; lower; increase
B) higher; higher; increase
C) lower; higher; decrease
D) higher; lower; decrease
Q3) When the government enacts policies that lead to lower mortgage lending standards and lower interest rates,their actions can indirectly lead to higher home prices.
A)True
B)False
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Chapter 6: Elasticity
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Sample Questions
Q1) The CPI was 154 in one year and 165 the following year.How much did prices rise between these two years?
A) 5.46 percent
B) 6.67 percent
C) 7.14 percent
D) 0.07 percent
Q2) In an economy with 200 million people,140 million hold civilian jobs and 9 million are not working but are looking for jobs.The unemployment rate is
A) 6.4%
B) 6.0%.
C) 9.2%.
D) 27.4%.
E) 4.5%
Q3) Refer to Exhibit 6-2.The labor force participation rate in year 1 is
A) 12 1/2 percent.
B) 80 percent.
C) 87 1/2 percent.
D) 70 percent.
E) 10 percent.
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Page 8
Chapter 7: Consumer Choice: Maximizing Utility and Behavioral Economics
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Sample Questions
Q1) Real GDP is the value of all __________ goods and services produced in a given year in __________ prices.
A) intermediate; that year's
B) intermediate; base-year
C) final; that year's
D) final; base-year
Q2) The base year is the year
A) in which prices are unstable.
B) in which prices are lowest.
C) in which prices are highest.
D) that serves as a reference point or benchmark.
E) in which nominal output is largest.
Q3) In which phase of the business cycle does a recession occur?
A) contraction
B) peak
C) recovery
D) expansion
Q4) List and explain the two different approaches used to measure GDP.
Q5) Explain why GDP figures do not necessarily measure happiness or well-being.
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Chapter 8: Production and Costs
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Sample Questions
Q1) Starting from short-run equilibrium,the following occurs: the U.S.dollar depreciates and wage rates rise.Moreover,the effect on the economy from the dollar depreciating is stronger than the effect on the economy from rising wage rates.What is the effect on the price level and Real GDP in the short run?
A) The price level falls and Real GDP falls.
B) The price level rises and Real GDP falls.
C) The price level falls and Real GDP rises.
D) The price level rises and Real GDP rises.
E) none of the above
Q2) Which set of changes is definitely predicted to lower Real GDP in the short run?
A) Interest rates rise and wage rates fall.
B) Interest rates rise and there is a beneficial supply shock.
C) Interest rates rise and labor productivity increases.
D) Interest rates rise and individuals expect lower (future)incomes.
E) c and d
Q3) Explain how aggregate demand and aggregate supply may affect your job prospects after you leave college.Support your answer with an appropriate example.
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Page 10
Chapter 9: Perfect Competition
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Sample Questions
Q1) Refer to Exhibit 9-1.The economy is currently producing Q<sub>1</sub>.At this level of Real GDP,the economy is in
A) an inflationary gap.
B) a recessionary gap.
C) long-run equilibrium.
D) none of the above
Q2) Refer to Exhibit 9-7.Which point is representative of the economy with an unemployment rate that is greater than the natural unemployment rate?
A) A
B) B
C) C
D) D
E) E
Q3) Say's law states that
A) demand creates its own supply.
B) the more supply there is,the lower prices are.
C) supply creates supply.
D) supply creates its own demand.
E) none of the above
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Chapter 10: Monopoly
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Sample Questions
Q1) Using the concept of the multiplier,explain in detail how college students flocking to beach towns for spring break can positively impact the beach towns' economies.
Q2) Keynes believed that investment is
A) dependent on a number of factors,including business expectations.
B) mainly determined by changes in interest rates.
C) unrelated to business expectations.
D) related to business expectations only during recessionary periods.
Q3) Which of the following statements is true?
A) When TP = TE (total production = total expenditures),the economy is necessarily producing Natural Real GDP.
B) When TP is greater than TE,inventory levels unexpectedly fall.
C) When TE is greater than TP,inventory levels unexpectedly rise.
D) b and c
E) none of the above
Q4) The part of consumption that is dependent on disposable income is called autonomous consumption.
A)True
B)False
Q5) Describe Keynes' criticism of Say's law in a money economy.
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Chapter 11: Monopolistic Competition, oligopoly, and Game Theory
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Sample Questions
Q1) Supply-side economists believe reductions in tax rates can
A) shift the aggregate demand curve to the left.
B) shift the short run aggregate supply curve to the left.
C) increase output and lower prices.
D) decrease output and lower prices.
Q2) Keynesians
A) advocate for a laissez-faire approach.
B) believe that equilibrium may exist at less than full employment.
C) believe in the use of fiscal policy to stabilize the economy.
D) b and c
E) all of the above
Q3) A balanced budget occurs when
A) the national debt is reduced to zero dollars.
B) a budget deficit during one year is matched by a budget surplus in the next year.
C) transfer payments equal tax revenues.
D) government expenditures equal tax revenues.
E) the deficit-GDP ratio equals one.
Q4) Explain how tax cuts can impact both aggregate demand and aggregate supply.Give an example of each.
Page 13
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Chapter 12: Government and Product Markets: Antitrust and Regulation
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Sample Questions
Q1) Explain why it is not necessary for paper money to be backed by some commodity (e.g.gold)before it can have value.
Q2) Inflation does the greatest harm to money's function as a A) medium of exchange.
B) unit of account.
C) store of value.
D) liquid asset.
Q3) The term federal reserve notes refers to coins minted by the U.S.Treasury.
A)True
B)False
Q4) Saying that it takes twice as many dollars to buy one ticket for a concert than two tickets for a movie refers to the use of money as a A) medium of exchange.
B) unit of account.
C) store of value.
D) means of achieving the double coincidence of wants.
Q5) A bank's business is to turn its liabilities into assets.
A)True B)False
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Chapter 13: Factor Markets: With Emphasis on the Labor Market
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Sample Questions
Q1) A bank is reserve deficient when
A) its reserves fall short of the level determined by the required reserve ratio.
B) its excess reserves are greater than its required reserves.
C) its required reserves are greater than its excess reserves.
D) it purchases government securities from the Fed.
Q2) Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.
A) 12; 7; 19
B) 14; 6; 22
C) 6; 5; 14
D) 14; 7; 12
E) 12; 6; 12
Q3) The funds the Fed receives from selling government securities
A) are deposited in a commercial bank.
B) disappear into thin air.
C) are turned over to the Office of Management and Budget in Washington,D.C.
D) are deposited in the U.S.Treasury.
Q4) Explain the major differences between the Federal Reserve and the U.S.Treasury.
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Chapter 14: Wages,union,and Labor
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Sample Questions
Q1) If the money supply is $6,000,velocity is 5,and Real GDP is 10,000 units of output,then the price level is _____________.If the money supply doubled over a short time period to $12,000,the simple quantity theory of money would predict that _____________________.
A) $3; the price level would double
B) $3; Real GDP would double
C) $3; the price level would be cut in half
D) $2; the price level would double
Q2) An increase in the expected inflation rate results in an increase in the real interest rate.
A)True
B)False
Q3) According to the simple quantity theory of money,if the money supply falls by 20 percent,
A) the price level will fall by 20 percent.
B) Real GDP will rise by less than 20 percent.
C) GDP will fall by 20 percent.
D) velocity will rise.
E) a and c
Q4) Describe the expectations (or Fisher)effect.
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Chapter 15: The Distribution of Income and Poverty
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Q1) If a country's rules-based monetary policy sets the annual money supply growth rate equal to the average annual growth rate of Real GDP,and velocity is a constant,then the price level
A) is also constant.
B) rises in years when Real GDP rises.
C) rises in years when Real GDP growth is less than average.
D) rises in years when Real GDP growth is greater than average.
Q2) The quantity demanded of money decreases as the supply of money increases.
A)True
B)False
Q3) The rules-based monetary policy reads: The annual growth rate in the money supply will be equal to the average annual growth rate in Real GDP minus the growth rate in velocity.If the average growth rate in Real GDP this year is 3 percent and the growth rate in velocity is 2 percent,then the money supply will increase by ______________ percent this year.
A) 1
B) 2
C) 3
D) 4
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Chapter 16: Interest,rent,and Profit
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Q1) Refer to Exhibit 16-1.Suppose the economy is currently at point A on the short-run Phillips curve,SRPC<sub>1</sub>.What could get the economy to move to point B?
A) an increase in aggregate demand combined with an unchanged expected inflation rate
B) an increase in aggregate demand combined with a rise in the expected inflation rate
C) a rise in the expected inflation rate
D) a decrease in aggregate demand combined with an unchanged expected inflation rate
E) none of the above
Q2) Real business cycle theory emphasizes that an adverse supply shock will shift the LRAS curve leftward and cause a decline in Real GDP.
A)True
B)False
Q3) The original Phillips curve depicted the relationship between
A) price inflation and unemployment.
B) price inflation and employment.
C) wage inflation and unemployment.
D) wage inflation and employment.
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Chapter 17: Market Failure: Externalities, public Goods, and
Asymmetric
Information
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Q1) According to new growth theory,technological advances can be promoted
A) from within the economy.
B) if only the right fiscal and monetary policies are in place.
C) in a few rare cases.
D) through industrial policy.
E) none of the above
Q2) An economy growing at a steady rate of 1.8 percent per year doubles in size approximately every __________ years.
A) 56
B) 39
C) 32
D) 18
Q3) _______________________ specifies the relation between technology and the factor inputs to output.
A) Neoclassical growth theory
B) Meta-ideas
C) The LRAS curve
D) A production function
Q4) List and describe four factors that can contribute to economic growth.
Page 19
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Chapter 18: Public Choice
and Special-Interest-Group
Politics
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Sample Questions
Q1) In order for an increase in aggregate demand to raise Real GDP and the price level,the aggregate supply curve must be ____________________.If an increase in aggregate demand raises the price level but leaves Real GDP unchanged,the aggregate supply curve must be _____________________.
A) upward-sloping; vertical
B) upward-sloping; horizontal
C) downward sloping; vertical
D) vertical; upward-sloping
E) vertical; downward-sloping
Q2) Those economists who view the AS curve as being vertical see more government tools capable of raising Real GDP than do the economists who view the AS curve as being upward-sloping.
A)True
B)False
Q3) A rise in government spending could
A) decrease both the size and scope of government.
B) increase the size,but not the scope of government.
C) decrease the size,but increase the scope of government.
D) increase both the size and scope of government
E) none of the above
Page 20
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Chapter 19: Building Theories to Explain Everyday Life: From
Observations to Questions to Theories to Predictions
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Q1) Rational ignorance refers to voter-citizens choosing to be uninformed about politics and government on an individual basis because A) of apathy.
B) of ignorance.
C) of laziness.
D) they believe the benefits of becoming informed are greater than the costs.
E) they believe the benefits of becoming informed are less than the costs.
Q2) Simple majority voting will generate the same result whether taxes are equally divided or unequally divided.
A)True
B)False
Q3) In the early 19th century,the main lobbyists behind passage of the Factory Acts were the women and children who were being exploited.
A)True
B)False
Q4) Under certain circumstances,a congressional district may be a special interest group.
A)True
B)False
21
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Chapter 20: International Trade
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Sample Questions
Q1) Which of the following is not a prediction of the theory on baseball caps and cheating?
A) More people will wear baseball caps on test days than on lecture days.
B) More people will wear baseball caps for multiple choice tests than for essay tests.
C) More people will wear baseball caps when students sit close to each other in class and are taking a test than when students sit far apart from each other and are taking a test.
D) b and c
E) none of the above
Q2) If people value clean air over dirty air,and if the air in city A is cleaner than the air in city B (by a wide margin),then we would expect that ____________________,all else equal between the two cities.
A) comparable houses in the two cities will sell for the same price.
B) comparable house in A will be more expensive than comparable house in B.
C) comparable house in B will be more expensive than comparable house in A.
D) There is not enough information to answer the question.
Q3) A theory is a perfect description of reality.
A)True
B)False
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Page 22
Chapter 21: International Finance
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Q1) Refer to Exhibit 34-3.The world price is P<sub>W</sub>.If a tariff is imposed,the price rises to P<sub>W</sub> + T.Because of the tariff,government collects tariff revenues equal to the area of
A) 1.
B) 1 + 2.
C) 3.
D) 1 + 2 + 4.
E) 1 + 3.
Q2) Refer to Exhibit 34-1.The opportunity cost of one unit of X in country A is
A) 1 unit of Y.
B) 2 units of Y.
C) 10 units of Y.
D) 0.50 units of Y.
Q3) Refer to Exhibit 34-9.For country Y,the opportunity cost of producing one unit of good B is __________ unit(s)of good A.
A) 1.5
B) 2
C) 2/3
D) 1/3
E) 3
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Chapter 22: The Economic Case for and Against
Government: Five Topics Considered
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Q1) Proponents of the fixed exchange rate system argue that
A) flexible exchange rates may promote international trade,but under a fixed exchange rate system at least we know what the rates will be from day to day.
B) under a flexible exchange rate system,there is too great a chance that the exchange rate will diverge from the equilibrium exchange rate.
C) under a flexible exchange rate system,there is no way of knowing what the exchange rate is at any particular point in time.
D) under a fixed exchange rate system,there would be only one currency.
E) none of the above
Q2) If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.007 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________,and the yen will __________.
A) increase; appreciate
B) decrease; appreciate
C) increase; depreciate
D) decrease; depreciate
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Chapter 23: Stocks,bonds,futures,and Options
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Q1) The government can _______________ change an inefficient market outcome (in the case where there is a negative externality)into an efficient outcome by imposing a tax on the activity that generates the negative externality.
A) in almost all situations
B) possibly
C) not
D) in all situations
E) a or d
Q2) If government removes two people from a prisoner's dilemma setting (and,in the process,requires that the two persons pay taxes for the service that government provides),it holds that on net
A) each of the two persons is better off.
B) each of the two persons is worse off.
C) one person is better off and the other person is worse off.
D) a,b,or c
E) none of the above
Q3) In making the case against government,discuss the two main points about special interest groups.
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Chapter 24: Stocks,bonds,futures,and Options
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Q1) Which of the following statements is false?
A) The issuer of a bond is a borrower.
B) The person who buys a bond is a lender.
C) Interest earned on corporate bonds is exempt from federal income taxes.
D) The coupon rate on a bond is the percentage of the face value that the bondholder receives annually until the bond matures.
Q2) If the coupon payment on a bond is $140 and the coupon rate is 5%,then what is the price value of the bond?
A) $2,800
B) $147
C) $254.40
D) $5,000
E) There is not enough information provided to answer this question.
Q3) A stock with a price-earnings ratio of 11.2 means that the stock is selling for a closing share price that is 11.2 times its latest available net earnings per share.
A)True
B)False
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