Survey of Economics Practice
Questions
Course Introduction
Survey of Economics provides an overview of fundamental economic concepts, principles, and theories that shape decision-making at both individual and societal levels. The course explores topics such as supply and demand, market structures, the role of government in the economy, macroeconomic indicators, international trade, and the impact of fiscal and monetary policies. Designed for students from all disciplines, it emphasizes practical applications of economic reasoning to current events and everyday life, fostering a deeper understanding of how economic systems function and affect society.
Recommended Textbook
Principles of Macroeconomics 5th Canadian Edition by N. Mankiw
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17 Chapters
3430 Verified Questions
3430 Flashcards
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Page 2
Chapter 1: Ten Principles of Economics
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205 Verified Questions
205 Flashcards
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Sample Questions
Q1) What did Ralph Nader's book Unsafe at Any Speed cause the U.S. government to require?
A)safety glass in all new cars
B)seat belts in all new cars
C)air bags in all new cars
D)stricter drunk driving laws
Answer: B
Q2) When government policies such as the welfare system try to help the neediest members of society, what happens?
A)It increases equity and reduces efficiency.
B)It reduces charitable contributions in an economy.
C)It increases the productivity of the needy in the society.
D)It causes market failure to occur.
Answer: A
Q3) Equity refers to how the pie is divided, and efficiency refers to the size of the economic pie.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Thinking Like an Economist
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230 Verified Questions
230 Flashcards
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Sample Questions
Q1) Which is true about models used by economists?
A)they cannot be useful to economists if they are based on false assumptions
B)they make the economics profession more difficult than necessary
C)they allow economists to learn how the economy works
D)they must include every possible variable in the economy to be useful to economists
Answer: C
Q2) Which is true in the circular-flow diagram?
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)spending on goods and services flows from firms to households.
Answer: C
Q3) Refer to Figure 2-2. In which market are firms sellers?
A)the goods and services market
B)the factors of production market
C)both of the above markets
D)neither of the above markets
Answer: A
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Chapter 3: Interdependence and the Gains From Trade
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200 Verified Questions
200 Flashcards
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Sample Questions
Q1) Refer to Table 3-1. What is the opportunity cost of 1 kg of potatoes for the Farmer?
A)8 hours of labour.
B)2 hours of labour.
C)4 kg of meat.
D)1/4 kg of meat.
Answer: D
Q2) What is the best reason for people to provide you with goods and services?
A)They are acting out of generosity.
B)They are acting because they like you.
C)They do so because they get something in return.
D)They are required to do so by government.
Answer: C
Q3) Adam Smith developed the theory of comparative advantage as we know it today. A)True
B)False
Answer: False
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Chapter 4: The Market Forces of Supply and Demand
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303 Flashcards
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Sample Questions
Q1) What do most studies indicate that tobacco and marijuana tend to be?
A)substitute goods
B)complementary goods
C)not related since one is legal and one is illegal
D)inferior goods
Q2) You love peanut butter. You hear on the news that 50% of the peanut crop in North America has been wiped out, which will cause the price to double by the end of the year. What happens as a result?
A)Your demand for peanut butter will increase by the end of the year.
B)Your demand for peanut butter increases today.
C)Your demand for peanut butter falls as you look for a substitute good.
D)You decide to give up peanut butter completely.
Q3) Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDs became more expensive, and DVD production technology improved, then what could we safely conclude would happen to the equilibrium price of a new DVD?
A)It would rise.
B)It would fall.
C)It would stay the same.
D)We couldn't be sure what it might do.
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Chapter 5: Measuring a Nations Income
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168 Flashcards
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Sample Questions
Q1) GDP is used as the basic measure of a society's economic well-being. What is a better measure of the economic well-being of individuals in society?
A)GDP per person
B)the consumption component of GDP
C)government expenditures per person
D)the level of business investment
Q2) Which of these would be included in Canadian consumption?
A)A Canadian resident buys a car manufactured in Brazil.
B)A French resident buys a new house in Canada
C)Beverly buys a newly issued stock in a Canadian corporation
D)Samantha produces some art work to decorate her house.
Q3) Which of the following is included in GDP?
A)the sale of stocks and bonds
B)the estimated rental value of owner-occupied housing
C)unpaid production of goods and services at home
D)the sale of an old piece of jewellery
Q4) Calculate nominal GDP, real GDP, and GDP deflator and fill in the corresponding columns.
Q5) Calculate the percentage changes in nominal GDP, real GDP, and GDP deflator.
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Chapter 6: Measuring the Cost of Living
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176 Flashcards
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Sample Questions
Q1) What are the categories of Canadian consumer spending, ranked from largest to smallest?
A)food, alcoholic beverages and tobacco products, housing, transportation, and health and personal care
B)health and personal care, housing, food, alcoholic beverages and tobacco products, and transportation
C)housing, food, alcoholic beverages and tobacco products, transportation, and health and personal care
D)housing, transportation, food, health and personal care, and alcoholic beverages and tobacco products
Q2) What is the basket of goods used to construct the CPI?
A)a random sample of all goods and services produced in the economy
B)the goods and services typically bought by consumers, according to Statistics Canada surveys
C)goods and services weighted by the ratio of expenditures on them relative to the consumption component of GDP
D)the least and the most expensive goods and services in each major category of consumer expenditures
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8
Chapter 7: Production and Growth
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185 Flashcards
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Sample Questions
Q1) Which of the following is one of the consequences of accumulating capital?
A)Accumulating capital requires that society sacrifice consumption in the present.
B)Accumulating capital allows society to consume more in the present.
C)Accumulating capital decreases saving rates.
D)Accumulating capital increases income inequality.
Q2) Which of the following countries benefited a lot from the catch-up effect in the last half of the twentieth century?
A)Ethiopia
B)Saudi Arabia
C)South Korea
D)Germany
Q3) Other things the same, if a country increased its saving rate, in 40 years which of the following would that country likely have?
A)higher productivity and a higher growth rate of real GDP
B)higher productivity but not a higher growth rate of real GDP
C)the same productivity and growth of real GDP it began with
D)higher productivity growth rate and higher real GDP
Q4) Compare and contrast the population theories of Malthus and Kremer.
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Page 9
Chapter 8: Saving, Investment, and the Financial System
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208 Verified Questions
208 Flashcards
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Sample Questions
Q1) If other things are the same, will countries that tax saving less have lower or higher interest rates and investment than other countries?
A)lower interest rates and higher investment
B)lower interest rates and lower investment
C)higher interest rates and higher investment
D)higher interest rates and lower investment
Q2) Which of the following is a financial intermediary?
A)a mutual fund
B)the stock market
C)a Canadian government bond
D)a stock exchange company
Q3) In a closed economy, how does national saving compare with investment?
A)National saving is usually greater than investment.
B)National saving is equal to investment.
C)National saving is usually less than investment because of the leakage of taxes.
D)National saving is usually less than investment.
Q4) The sale of stocks or bonds to raise money is known as equity finance.
A)True
B)False
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Chapter 9: Unemployment and Its Natural Rate
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) Arnie is the owner of a firm that produces bottled water in Alberta. There are many such firms in the area. Arnie decides that if he pays his workers a wage higher than the going market wage, his profits will increase. Which of the following is a likely explanation for his decision?
A)The higher the wage, the less often his workers will choose to leave his firm.
B)The higher the wage, the lower will be the cost of obtaining needed supplies.
C)The higher the wage, the more he can charge for his water.
D)The higher the wage, the less competition will be in the industry.
Q2) Since World War II, which of the following has happened to the labour-force participation rate?
A)It has increased for both men and women.
B)It increased for women and decreased for men.
C)It has decreased for both men and women.
D)It decreased for women and increased for men.
Q3) Even though the difference in labour-force participation rates of males and females has narrowed, the participation rate of males remains higher.
A)True
B)False
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11
Chapter 10: The Monetary System
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196 Flashcards
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Sample Questions
Q1) If the Bank of Canada decreases reserve requirements, the money supply will increase.
A)True
B)False
Q2) The banking system has $20 million in reserves and has a reserve requirement of 20 percent. The public holds $20 million in currency. Bankers previously did not hold any excess reserves, but difficult economic times make them decide that it is prudent to hold 25 percent of deposits as reserves. At the same time, the public decides to deposit $6.7 million in currency into the banking system. Other things equal, what must the Bank of Canada do to bank reserves to keep the money supply the same?
A)reduce reserves by $6.7 million
B)reduce reserves by $5 million
C)increase reserves by $3 million
D)No action by the Bank of Canada is necessary.
Q3) Which of the following is current Canadian currency?
A)fiat money with intrinsic value
B)fiat money with no intrinsic value
C)commodity money with intrinsic value
D)commodity money with no intrinsic value
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Page 12
Chapter 11: Money Growth and Inflation
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193 Flashcards
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Sample Questions
Q1) If your salary increased by 7 percent and prices increased by 4 percent, by how much did your real wage rise?
A)3 percent
B)4 percent
C)6 percent
D)7 percent
Q2) When the money market is drawn with the value of money on the vertical axis, in which of the following situations does the price level increase?
A)if either money demand or money supply shifts right
B)if either money demand or money supply shifts left
C)if money demand shifts right or money supply shifts left
D)if money demand shifts left or money supply shifts right
Q3) Everything else being the same, what is the effect of an increase in interest rates on the price level? Discuss the process of adjustment to the new equilibrium.
Q4) "The introduction of the automated teller machines was equivalent to an increase in money supply." Discuss this assertion.
Q5) Show in your graph how this curve changes when Y changes.
Q6) List and define any two of the costs of high inflation.
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Chapter 12: Open-Economy Macroeconomics: Basic Concepts
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215 Verified Questions
215 Flashcards
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Sample Questions
Q1) John, a Canadian citizen, opens up a 70s style disco bar in Tokyo. This count as which of the following?
A)Canadian exports
B)Canadian imports
C)Canadian foreign portfolio investment
D)Canadian foreign direct investment
Q2) Suppose that money supply growth continues to be higher in Turkey than it is in Canada. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?
Q3) Roger lives in Iceland and purchases a snowmobile manufactured in Canada. Which of the following is this purchase?
A)both a Canadian and an Icelandic export
B)both a Canadian and an Icelandic import
C)a Canadian import and an Icelandic export
D)a Canadian export and an Icelandic import
Q4) In an open economy, Canadian national savings can be less than Canadian investment.
A)True
B)False
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Chapter 13: A Macroeconomic Theory of the Open Economy
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184 Flashcards
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Sample Questions
Q1) What does a lower real interest rate decrease the quantity of?
A)loanable funds demanded
B)loanable funds supplied
C)domestic investment
D)net capital outflow
Q2) Suppose that Chile has a budget surplus, and then goes into deficit. Which of the following best predicts the consequences?
A)National saving would increase, and Chile's supply of loanable funds would shift to the left.
B)National saving would increase, and Chile's demand for loanable funds would shift to the right.
C)National saving would decrease, and Chile's supply of loanable funds would shift to the left.
D)National saving would decrease, and Chile's demand for loanable funds would shift to the right.
Q3) In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign-currency exchange.
A)True
B)False
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Page 15
Chapter 14: Aggregate Demand and Aggregate Supply
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241 Verified Questions
241 Flashcards
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Sample Questions
Q1) Other things the same, a decrease in the price level makes the interest rate increase, which leads to an appreciation of the dollar in the foreign-currency exchange.
A)True
B)False
Q2) Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?
Q3) Refer to Figure 14-1. How would an increase in the money supply move the economy in the short and long run?
A)From C to B in the short run and the long run.
B)From C to D in the short run and the long run.
C)From C to B in the short run and to A in the long run.
D)From C to D in the short run and to C in the long run.
Q4) What happens when the price level rises?
A)Interest rates rise, so firms increase investment.
B)Interest rates rise, so firms decrease investment.
C)Interest rates fall, so firms increase investment.
D)Interest rates fall, so firms decrease investment.
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Chapter 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand
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Sample Questions
Q1) How does a reduction in the money supply by the Bank of Canada make owning stocks less attractive?
Q2) For the Canadian economy, which of the following is the LEAST important reason for the downward slope of the aggregate-demand curve?
A)the wealth effect
B)the interest-rate effect
C)the exchange-rate effect
D)the real-wage effect
Q3) Refer to Figure 15-2. In a closed economy, which of the following would cause the aggregate demand curve to shift from AD to AD*?
A)an increase in government purchases
B)a decrease in stock prices
C)consumers and firms becoming more optimistic about the future
D)an increase in the price level
Q4) Explain the logic according to liquidity preference theory by which an increase in the money supply changes the aggregate demand curve.
Q5) Why and in what way are fiscal policy lags different from monetary policy lags?
Page 17
Q6) Explain how unemployment insurance acts as an automatic stabilizer.
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Chapter 16: The Short-Run Tradeoff Between Inflation and Unemployment
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Sample Questions
Q1) Refer to Figure 16-3. When would the economy move from c and 3 to e and 5?
A)in the short run if money supply growth increased unexpectedly
B)in the short run if money supply growth decreased unexpectedly
C)in the long run if money supply growth increases
D)in the long run if money supply growth decreases
Q2) Among other things, which of the following determines the long-run average unemployment rate and inflation, respectively?
A)the market power of unions; government spending
B)the minimum wage; the money supply growth rate
C)the rate of growth of the money supply; the market power of unions
D)efficiency wages; the extent to which firms are competitive
Q3) In the late 1960s and early 1970s, how did the short-run Phillips curve shift?
A)It shifted right as inflation expectations rose.
B)It shifted right as inflation expectations fell.
C)It shifted left as inflation expectations rose.
D)It shifted left as inflation expectations fell.
Q4) In the Friedman-Phelps analysis, when inflation is less than expected, unemployment is greater than the natural rate.
A)True
B)False
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Chapter 17: Five Debates Over Macroeconomic Policy
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Sample Questions
Q1) Which kind of lag is important for monetary policy? Which kind of lag is important for fiscal policy?
Q2) Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 6 percent per year. Suppose also that it has nominal GDP of about 200 billion units of currency. What is the highest possible deficit it can have without raising the debt-to-income ratio?
A)just under 18 billion units
B)just under 12 billion units
C)just under 9 billion units
D)just under 1 billion units
Q3) What would those who oppose tax-law changes to encourage saving NOT say?
A)that saving is not very responsive to changes in the tax rate
B)that saving is not an important determinant of a nation's ability to produce output
C)that reducing the budget deficit instead of changing the tax laws could raise saving
D)that changes in the tax laws to induce saving would distribute the tax burden less fairly
Q4) Explain the main argument in favour of economic stabilization.
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