Course Introduction
Survey of Economics
Pre-Test Questions
Survey of Economics provides an introduction to the fundamental principles of economics, exploring both microeconomics and macroeconomics. The course covers topics such as supply and demand, market structures, consumer behavior, production costs, national income, inflation, unemployment, monetary and fiscal policy, and the role of government in the economy. Through real-world applications and case studies, students gain an understanding of how economic concepts impact individuals, businesses, and societies, preparing them for more advanced study or informed citizenship.
Recommended Textbook
Principles of Macroeconomics 9th Edition by John Sayre
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13 Chapters
2035 Verified Questions
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Page 2
Chapter 1: The Economic Problem
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Sample Questions
Q1) Refer to the table above to answer this question.What is the total cost of producing 100 beans?
A)40 rice
B)60 rice
C)120 rice
D)180 rice
Answer: B
Q2) If each country is self-sufficient (no trade)and each allocates one half of its resources to producing each of the two products,what will be the output in each country?
A)40 bread and 20 figs in Rome and 20 bread and 40 figs in Cathay.
B)40 bread and 0 figs in Rome and 20 bread and 0 figs in Cathay.
C)0 bread and 20 figs in Rome and 0 bread and 40 figs in Cathay.
D)20 bread and 10 figs in Rome and 10 bread and 20 figs in Cathay.
Answer: D
Q3) Choice implies opportunity cost.Explain.
Answer: Since the economy cannot produce all the goods and service everybody wants,the economy has to decide what goods and services to produce.By deciding to produce one good,the economy is giving up the opportunity to produce something else.This is opportunity cost.
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Chapter 2: Demand and Supply: an Introduction
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Sample Questions
Q1) Which of the following could cause an increase in the supply of wheat?
A)A decrease in the price of oats.
B)An imposition of a sales tax on wheat.
C)An increase in the price of fertilizer.
D)Producers expect the price of wheat to increase.
Answer: A
Q2) What is the effect on a normal product if income increases?
A)It will cause an increase in the quantity demanded.
B)It will cause an increase in demand.
C)It will cause a decrease in demand.
D)It will cause an increase in supply.
E)It will cause a decrease in supply.
Answer: B
Q3) Equilibrium price implies that everyone who would like to purchase a product is able to.
A)True
B)False
Answer: False
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4
Chapter 3: Measuring the Economy 1: GDP and Economic Growth
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Sample Questions
Q1) All of the following,except one,are excluded when measuring GDP.Which is the exception?
A)The income earned from illegal activities.
B)Unreported income.
C)Volunteer services.
D)The services of the military.
E)Do-it-yourself production.
Answer: D
Q2) Explain how GDP can be understated.
Answer: The exclusion of underground and nonmarket activities understates GDP.Underground activities are not reported to the government and nonmarket activities does not involve payment.
Q3) If gross profits are $100,corporate taxes are $20 and undistributed corporate profits are $35,then what is the value of dividends?
Answer: Gross profit = net profits + corporate taxes
Net profit = dividends + undistributed corporate profits
Net profit = 100 - 20 = 80
Dividends = net profit - undistributed profit 80 - 35 = $45
Page 5
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Chapter 4: Measuring the Economy 2: Unemployment and Inflation
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Sample Questions
Q1) Refer to the above information to answer this question.What is the inflation rate in 2016?
A)7.3%
B)8.0%
C)9.5%
D)18.0%
Q2) Suppose there are 2 million unemployed workers seeking jobs.After a period of time,two hundred thousand of them become discouraged over their job prospects and stop looking for work.What will the effect of this on the unemployment rate?
A)It will increase in the short run but would eventually decline.
B)It will increase.
C)It will fall.
D)It will be unchanged.
E)The question cannot be answered from this information.
Q3) Explain the output costs of inflation.
Q4) How are the participation rate and the unemployment rate measured?
Q5) The natural rate of unemployment is the unemployment rate at full employment.
A)True
B)False
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Chapter 5: Aggregate Demand and Supply
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Sample Questions
Q1) What happens if the aggregate demand curve shifts to the right?
A)The price level will rise.
B)Real GDP will increase.
C)Both A and B will occur.
D)Aggregate supply will also rise.
Q2) All of the following,except one,will contribute to economic growth.Which is the exception?
A)Increased levels of human capital.
B)Higher prices.
C)Increases in the capital stock.
D)Technological change.
E)Increased quantities of natural resources.
Q3) What is the shape of the AS curve according to Keynesians?
A)Vertical,because prices tend to be inflexible.
B)Vertical,at the level of LAS.
C)Horizontal,because wages are inflexible.
D)Downward-sloping,because wages are inflexible.
Q4) What factors can cause an increase in aggregate supply?
Q5) Assume there is an inflationary gap in the economy.If investment spending increases,what will happen to the inflationary gap?
Page 7
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Chapter 6: Aggregate Expenditures
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Sample Questions
Q1) Which of the following will cause net exports to increase?
A)An increase in Canadian prices.
B)An increase in foreign prices.
C)A decrease in foreign incomes.
D)An appreciation in the Canadian dollar.
Q2) What is the effect of a decrease in government spending?
A)It leads to an even larger increase in income.
B)It leads to an even larger decrease in income.
C)It leads to a smaller increase in income.
D)It leads to a smaller decrease in income.
Q3) What has evidence from modern economies shown to be true of the MPC?
A)It is higher among richer members of a society.
B)It is higher among poorer members of a society.
C)It does not depend on the level of income.
D)It is on average equal to 0.53.
Q4) Assume an economy has a budget deficit.Now suppose national income increases,what is its impact on the budget deficit? Explain.
Q5) Define marginal propensity to consume.
Q6) What is meant by the term expenditures equilibrium? What are the three equivalent ways of expressing it?
Page 8
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Chapter 7: Fiscal Policy
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Sample Questions
Q1) Why do economists prefer to examine the debt as a percentage of GDP rather than the level of debt?
Q2) Since the end of World War II,what has happened to the public debt?
A)It has remained constant absolutely,but has declined as a percentage of the GDP.
B)It has declined absolutely,but has remained constant as a percentage of the GDP.
C)It has grown absolutely and in terms of real per capita debt.
D)It has grown absolutely but has recently declined in terms of real per capita debt.
E)It has grown absolutely but has remained constant in terms of real per capita debt.
Q3) Some economists believe that the economy returns to full-employment equilibrium through a self-adjustment process.Which type of fiscal policy would they support?
A)Counter-cyclical.
B)Balanced-budget
C)Cyclically balanced budget.
D)Counter-cyclically balanced budget.
E)Interventionist.
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Chapter 8: Money and Banking
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Sample Questions
Q1) Refer to the information above to answer this question.If this bank has excess reserves of $4 then what must be the target reserve ratio?
A)9%.
B)18%.
C)7%.
D)10%.
E)20%.
Q2) Refer to the information above to answer this question.Which item(s)is included in the M2 definition of money?
A)Items 1,2,3 and 4.
B)Items 3,4 and 6.
C)Items 2,3 and 4.
D)Items 2,3,4 and 6.
E)Items 3,4,and 5.
Q3) Explain why a bank would not like to hold excess reserves.
Q4) What will happen to the money multiplier,if:
a)target reserve ratio decreases b)people hold more cash c)people do not take out loans
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Chapter 9: The Money Market and Monetary Policy
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Sample Questions
Q1) Refer to Table 8.1 to answer this question.What are the implications if the current supply of money is $160 and the interest rate is 7 percent?
A)The interest rate will fall.
B)The interest rate will rise.
C)The asset demand will fall.
D)The transactions demand will fall.
Q2) What will an increase in the money supply tend to do?
A)Increase interest rates and lower the equilibrium GDP.
B)Increase interest rates and increase the equilibrium GDP.
C)Lower interest rates and increase the equilibrium GDP.
D)Lower interest rates and lower the equilibrium GDP.
E)Interest rate and equilibrium GDP does not change.
Q3) Refer to the graph above to answer this question.Which curve represents the transactions demand for money?
A)MD1.
B)MD2.
C)MD3.
D)MS.
Q4) How and why is the asset demand for money related to the interest rate?
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Chapter 10: International Trade
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Sample
Questions
Q1) What term describes the ability to produce something at a lower opportunity cost than others are able to?
A)Increased production possibilities.
B)Factor endowments.
C)Increasing returns to scale.
D)Comparative advantage.
Q2) Refer to the graph above to answer this question.What is the opportunity cost of 100 tons of rice in Bajor?
A)50 tons of flax.
B)100 tons of flax.
C)125 tons of flax.
D)200 tons of flax.
E)225 tons of flax.
Q3) All of the following,except one,are promoted by the IMF.Which is the exception?
A)International monetary cooperation.
B)Exchange rate stability.
C)Price stability.
D)Economic growth.
E)International trade.
Q4) List four major advantages of free trade.
Page 12
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Chapter 11: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) A fixed exchange rate above the market value will lead to an outflow of foreign currencies.
A)True
B)False
Q2) All of the following groups except one demand Canadian dollars.Which is the exception?
A)An American tourist visiting Canada.
B)Canadians who received dividends from American corporations.
C)Texans who purchase Alberta beef.
D)Americans who receive interest on their holdings of Canadian savings bonds.
E)International speculators who think that the Canadian dollar will soon appreciate.
Q3) Until the last few years,the trade in goods and services has usually produced:
A)A positive balance of trade.
B)A net outflow of foreign investment funds.
C)A positive balance on its current account.
D)A net inflow of foreign currencies.
E)A negative balance on its capital account.
Q4) Explain how a recession can correct an overvalued fixed exchange rate.
Q5) What are the four determinants of the demand for the Canadian dollar?
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Chapter 12: Macroeconomic Policy Revisited
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Sample Questions
Q1) The Phillips Curve suggests a tradeoff between:
A)price level stability and income equality.
B)the level of unemployment and price level stability.
C)unemployment and income equality.
D)economic growth and full employment.
Q2) Which one of the following is true about deflation?
A)It is associated with stagflation.
B)It occurs whenever an inflationary gap gets large enough.
C)It precedes periods of high investment.
D)It is a period of decreases in the general price level.
Q3) The Phillips Curve suggests that,if government uses an expansionary fiscal policy to stimulate output and employment:
A)unemployment may actually increase because of the crowding-out effect.
B)tax revenues may increase even though tax rates have been reduced.
C)inflation may result.
D)the natural rate of unemployment may fall.
Q4) The rise of supply-side economics is rooted in the stagflation of the 1970s.
A)True
B)False
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Chapter 13: A Walk Through the Twentieth Century and Beyond
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Sample Questions
Q1) What ensures the equality of savings and investment,according to neoclassical theory?
A)Flexible prices
B)Flexible interest rates
C)Flexible wages
D)Say's Law
Q2) The abandonment of stimulus packages was advocated in favour of policies for reducing Deficits (thus rejecting Keynesian theory).Explain the arguments for the new approach.
Q3) What did supply-siders see as a solution for the economic problems of the 1970s and 1980s? Explain.
Q4) According to neoclassical theory,why is involuntary unemployment impossible?
Q5) Identify which of the following policy actions would be advocated by Keynesians and which would be advocated by Supply-siders.
a)Privatizing the telecommunication industry.
b)Constructing a national highway.
c)Deregulating the financial industry.
d)Increasing health spending.
Q6) Define 'derivative'.
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