Survey of Economics
Final Exam Questions
Course Introduction
Survey of Economics offers an introduction to the fundamental principles of both microeconomics and macroeconomics, providing students with an overview of how economic systems operate at individual, business, and societal levels. The course examines core topics such as supply and demand, market structures, government intervention, fiscal and monetary policy, and the role of international trade. Through real-world examples and case studies, students explore the effects of economic decision-making, resource allocation, and the impact of current economic issues on everyday life, equipping them with analytical tools to better understand the modern economy.
Recommended Textbook
Principles of Macroeconomics 7th Canadian Edition by N. Mankiw
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Chapter 1: Ten Principles of Economics
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Sample Questions
Q1) If France is better than Latvia at producing wine,but Latvia is better than France at producing lumber,what should happen?
A) Latvia should sell lumber to France,and should buy French wine.
B) Latvia should impose a tariff on French wine in order to protect jobs in the Latvian lumber industry.
C) Latvia should subsidize its wine industry so that it can compete with French wine.
D) Latvia should put a quota on the amount of French wine imported.
Answer: A
Q2) According to an economic principle,what is the effect of government intervention in the presence of a market failure?
A) Government action does not improve on the market outcome because sometimes public policies simply reward the politically powerful.
B) Government action does not improve on the market outcome because some leaders are not fully informed.
C) Government action can sometimes improve on the market outcome.
D) Government action will always improve on the market outcome.
Answer: C
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Chapter 2: Thinking Like an Economist
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Sample Questions
Q1) What is a characteristic of the circular-flow model?
A) Firms are sellers in the resource market and the product market.
B) Firms are buyers in the product market.
C) Households are sellers in the resource market.
D) Households are buyers in the resource market.
Answer: C
Q2) Refer to Figure 2-8.What would happen if this economy moved from point C to point E?
A) It still would not be producing efficiently.
B) There would be no gain in either bathtubs or barrels.
C) It would be producing more barrels and more bathtubs than at point C.
D) It is not possible for this economy to move from point C to point E without additional resources.
Answer: A
Q3) Refer to Figure 2-3.Which point or points are efficient?
A) points B and E
B) points A,B,and E
C) point C
D) point D
Answer: A
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Chapter 3: Interdependence and the Gains From Trade
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Sample Questions
Q1) Mike and Sandy are two woodworkers who both make tables and chairs.In one month,Mike can make 6tables or 18 chairs,where Sandy can make 5 tables or 25 chairs.What is the opportunity cost of 1 table?
A) 1 / 5 chair for Mike and 1 / 3 chair for Sandy
B) 5 chairs for Mike and 3 chairs for Sandy
C) 1 / 3 chair for Mike and 1 / 5 chair for Sandy
D) 3 chairs for Mike and 5 chairs for Sandy
Answer: D
Q2) Explain the difference between absolute advantage and comparative advantage.Which is more important in determining trade patterns and why?
Answer: Absolute advantage refers to productivity,as in the producer who can produce a product at a lower cost in terms of the resources used in production.Comparative advantage refers to the producer who can produce a product at a lower opportunity cost.Comparative advantage is the principle upon which trade patterns are based.Comparative advantage is based on opportunity cost,and opportunity cost measures the real cost to an individual or country of producing a particular product.Opportunity cost is therefore the information necessary for an individual or nation to determine whether to produce a good or buy it from someone else.
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Chapter 4: The Market Forces of Supply and Demand
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Sample Questions
Q1) Market demand is given as QD = 150 - P.Market supply is given as QS = 4P.If price increases from $30 to $40,what is the price elasticity of demand?
A) 0.3
B) 0.7
C) 1.5
D) 2.0
Q2) If a surplus exists in a market,what do we know?
A) The actual price is above equilibrium price,and quantity supplied is greater than quantity demanded.
B) The actual price is above equilibrium price,and quantity demanded is greater than quantity supplied.
C) The actual price is below equilibrium price,and quantity demanded is greater than quantity supplied.
D) The actual price is below equilibrium price,and quantity supplied is greater than quantity demanded.
Q3) In a perfectly competitive market,buyers and sellers are price setters.
A)True
B)False
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Chapter 5: Measuring a Nations Income
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Q1) Refer to the Table 5-4.What is the nominal GDP?
A) $680 for 2013,$880 for 2014,and $1200 for 2015
B) $760 for 2013,$880 for 2014,and $1000 for 2015
C) $760 for 2013,$1100 for 2014,and $1600 for 2015
D) $960 for 2013,$1280 for 2014,and $1300 for 2015
Q2) Refer to the Table 5-1.What is the national income for this economy?
A) $175
B) $185
C) $192
D) $215
Q3) Which of the following is included in the consumption component of GDP?
A) CPP / QPP payments
B) purchases of foreign goods and services
C) purchases of newly constructed homes
D) goods produced but not sold during the reference period
Q4) Which of the following is counted in GDP?
A) the estimated value of housework
B) the value of illegally produced goods and services
C) the value of newly issued stocks and bonds
D) the estimated value of housing services
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Chapter 6: Measuring the Cost of Living
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Sample Questions
Q1) In 1990,Professor Fellswoop made $12,000,in 2000 he earned $24,000,and in 2015 he earned $36,000.If the CPI was 40 in 1990,60 in 2000,and 100 in 2015,then in real terms,when was Professor Fellswoop's salary highest and lowest?
A) highest in 1990; lowest in 2000
B) highest in 2015; lowest in 2000
C) highest in 2000; lowest in 1990
D) highest in 2015; lowest in 1990
Q2) The price index in 2014 is 120,and in 2015 it is 127.2.What is the inflation rate?
A) 5 percent
B) 6 percent
C) 7.2 percent
D) 8.4 percent
Q3) Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price.By itself,what will this do to the GDP deflator and the consumer price index?
A) The GDP deflator and the consumer price index will fall.
B) The GDP deflator and the consumer price index will be unaffected.
C) The GDP deflator will be unaffected,but the consumer price index will fall.
D) The GDP deflator will fall,but the consumer price index will be unaffected.
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Chapter 7: Production and Growth
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Sample Questions
Q1) In a market economy,what does the real,or inflation-adjusted,price of a resource measure?
A) contribution to revenue
B) relative scarcity
C) relative importance
D) contribution to efficiency
Q2) In the traditional view,which production process is considered when studying economic growth?
A) constant returns
B) increasing returns
C) diminishing returns
D) diminishing returns for low levels of capital,and increasing returns for high levels of capital
Q3) The following table shows real GDP per person in a few countries over a period of about a century.
a)Does this data support the catch-up theory of economic growth? Explain your answer. b)What additional information would be necessary when testing the catch-up theory?
Q4) What might the African governments do to foster higher economic growth?
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Chapter 8: Saving, investment, and the Financial System
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Sample Questions
Q1) What is a medium of exchange?
A) a stock exchange company
B) an item that makes transactions easier
C) a financial market
D) a stock or bond
Q2) In a closed economy,what remains after paying for consumption and government purchases?
A) national disposable income
B) national saving
C) public saving
D) private saving
Q3) Most entrepreneurs finance their purchases of real capital using their past saving.
A)True
B)False
Q4) What are junk bonds?
A) Junk bonds are those that yield low interest rates.
B) Junk bonds are those that never mature.
C) Junk bonds refer to bonds that have been resold many times.
D) Junk bonds are those issued by financially weak corporations.
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Chapter 9: Unemployment and Its Natural Rate
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Sample Questions
Q1) What was the labour-force participation rate of men just after World War II?
A) about 68%
B) about 75%
C) about 80%
D) about 84%
Q2) How is the unemployment rate computed?
A) by counting the number of employment insurance applications filed
B) by dividing the number of unemployed by the number of persons in the labour force
C) by determining the number of unemployed in the population aged 18 and older
D) by counting the number of working-age persons who don't have a job
Q3) Who would be counted as unemployed according to official statistics?
A) Brian,a full-time student who is not looking for work
B) Kate,who is waiting to be recalled after a temporary layoff
C) Heath,who has retired and is not looking for work
D) James,who has just graduated from university and is taking a year off to volunteer abroad
Q4) Suppose that there is an excess supply of economics professors.Should universities necessarily reduce salaries? What does standard economic theory suggest? What does efficiency-wage theory suggest?
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Chapter 10: The Monetary System
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Sample Questions
Q1) Refer to the Table 10-2.If the reserve requirement is 12 percent,what is the state of this bank?
A) It can make a new loan of $17,500.
B) It has less reserves than required.
C) It has excess reserves of less than $5000.
D) It has excess reserves of more than $5000.
Q2) The bank of Hinton has $100 reserves,$10,000 long-term loans,$500 securities,$8800 deposits,and $1400 debt.Due to a macroeconomic slowdown,many people lose their jobs and need to live off their savings for a while.Discuss the possible effects of this situation on the bank of Hinton's assets,liabilities,and capital.Is the bank insolvent? Use numerical examples to illustrate your points.
Q3) Which statement best defines liquidity?
A) It is the ease with which an asset is converted to the medium of exchange.
B) It is a measurement of the intrinsic value of commodity money.
C) It is the ability of an asset to retain purchasing power.
D) It refers to how many times a dollar changes hands in a given year.
Q4) If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.
Q5) What is the difference between money and wealth?
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Chapter 11: Money Growth and Inflation
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Sample Questions
Q1) Refer to the Figure 11-1.If the current money supply is located at MS1 and the value of money is 2,what is the excess demand or supply?
A) 0
B) 1
C) 2
D) 3
Q2) When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.
A)True
B)False
Q3) According to the quantity equation,if P = 6 and Y = 800,which of the following pairs could M and V be?
A) 200,3
B) 400,4
C) 600,5
D) 800,6
Q4) Explain how inflation affects savings.
Q5) List and define any two of the costs of high inflation.
Q6) Define each of the symbols and explain the meaning of M × V = P × Y.
Page 13
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Chapter 12: Open-Economy Macroeconomics: Basic Concepts
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Q1) The theory of purchasing-power parity states that a unit of any given currency should be able to buy the same quantity of goods in all countries.
A)True
B)False
Q2) In 2006,Canada had positive net exports.What does this fact imply?
A) Canada sold more abroad than it purchased abroad and had a trade surplus.
B) Canada sold more abroad than it purchased abroad and had a trade deficit.
C) Canada bought more abroad than it sold abroad and had a trade surplus.
D) Canada bought more abroad than it sold abroad and had a trade deficit.
Q3) The country of Sylvania has a GDP of $4000,investment of $1500,government purchases of $400,and net capital outflow of negative $300.What is consumption?
A) $700
B) $800
C) $2400
D) $2700
Q4) If the exchange rate is 10 pesos per dollar,it is also 0.10 dollars per peso.
A)True
B)False
Q5) How do the nominal exchange rate and the real exchange rate differ?
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Chapter 13: A Macroeconomic Theory of the Small Open Economy
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Q1) What changes will a shortage of loanable funds induce in a savings-investment diagram in a closed economy?
A) The demand for loanable funds curve will shift right,so the interest rate will rise.
B) The supply of loanable funds curve will shift left,so the interest rate will fall.
C) There will be no shifts of the curves,but the interest rate will rise.
D) There will be no shifts of the curves,but the interest rate will fall.
Q2) If a country went from a government budget deficit to a surplus,which statement would best predict the consequences?
A) National saving would increase,shifting the supply of loanable funds right.
B) National saving would increase,shifting the supply of loanable funds left.
C) National saving would decrease,shifting the demand for loanable funds right.
D) National saving would decrease,shifting the demand for loanable funds left.
Q3) Which statement is the most accurate description of trade policy?
A) Trade policy has neither microeconomic nor macroeconomic effects.
B) Trade policy has similar microeconomic and macroeconomic effects.
C) The effects of trade policy are more macroeconomic than microeconomic.
D) The effects of trade policy are more microeconomic than macroeconomic.
Q4) Explain why saving need not equal domestic investment in an open economy.
Page 15
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Chapter 14: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Which relationship does the model of aggregate demand and aggregate supply explain?
A) the relationship between the price and quantity of a particular good
B) the relationship between the interest rate and output
C) the relationship between wages and employment
D) the relationship between real GDP and the price level
Q2) Because we understand what things change GDP,we can predict recessions with a fair amount of accuracy.
A)True
B)False
Q3) Which of the following shifts the short-run aggregate supply right?
A) an increase in the money supply
B) an increase in the minimum wage
C) a decrease in the price of oil
D) a decrease in immigration from abroad
Q4) In 1982,Canada was in a recession.What would you expect NOT to have happened?
A) layoffs and firings
B) a higher rate of foreclosures
C) increased claims for unemployment insurance
D) increased investment spending
16
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Chapter 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand
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Q1) Assume that the MPC is 0.75.Assuming only the multiplier effect matters,how will an increase in government purchases of $200 billion shift the aggregate demand curve?
A) It will shift the aggregate demand curve left by $80 billion.
B) It will shift the aggregate demand curve left by $250 billion.
C) It will shift the aggregate demand curve right by $750 billion.
D) It will shift the aggregate demand curve right by $800 billion.
Q2) If the multiplier is 5,what is the MPC?
A) 0.20
B) 0.50
C) 0.80
D) 1.00
Q3) Assume the money market is initially in equilibrium.If the price level increases,according to liquidity-preference theory,what is in excess and for how long?
A) The supply of money is in excess until the interest rate increases.
B) The supply of money is in excess until the interest rate decreases.
C) The demand for money is in excess until the interest rate increases.
D) The demand for money is in excess until the interest rate decreases.
Q4) What is the difference between monetary policy and fiscal policy?
Page 17
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Chapter 16: The Short-Run Tradeoff Between Inflation and Unemployment
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Q1) Suppose that weather around the world is especially good next year,so farmers have unusually good crops.What might we expect that this will do to the short-run and long-run Phillips curves?
A) This will shift both the short-run and long-run Phillips curves to the right.
B) This will shift both the short-run and long-run Phillips curves to the left.
C) This will shift the short-run Phillips curve to the left,but not affect the long-run Phillips curve.
D) This will shift the long-run Phillips curve to the left,but not affect the short-run Phillips curve.
Q2) Refer to the Figure 16-4.If the economy is at point c and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short and long run?
A) point b in the short run and point c in the long run
B) point m in the short run and point c in the long run
C) point d in the short run and point h in the long run
D) point h in the short run and point d in the long run
Q3) In the long run,the inflation rate depends primarily on money supply growth.
A)True
B)False
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Chapter 17: Five Debates Over Macroeconomic Policy
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Sample Questions
Q1) Which statement best describes RRSP plans?
A) They impose added taxes on those who save.
B) They are taxed twice.
C) They postpone income taxes.
D) They are never taxed.
Q2) Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 5 percent per year.Suppose also that it has nominal GDP of about 100 billion units of currency.What is the highest deficit it can have without raising the debt-to-income ratio?
A) just under 1 billion units
B) just under 3 billion units
C) just under 6 billion units
D) just under 8 billion units
Q3) Which statement is consistent with the political business cycle theory?
A) The economy expands after the elections.
B) The economy contracts after the elections.
C) The economy expands before the elections.
D) The economy contracts before the elections.
Q4) Explain the time inconsistency of monetary policy.
Q5) Identify three of the five costs of inflation.
Page 19
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