Survey of Economics
Textbook Exam Questions
Course Introduction
Survey of Economics provides a comprehensive overview of the fundamental principles and concepts in both microeconomics and macroeconomics. Students learn about supply and demand, consumer and producer behavior, market structures, and government intervention in markets. The course also covers topics such as national income, economic growth, unemployment, inflation, monetary and fiscal policy, and international trade. Emphasis is placed on applying economic reasoning to real-world issues and understanding how economic forces shape society, business, and government decision-making. This course serves as an introduction for students with little or no prior background in economics and prepares them for more advanced study in the field.
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Economics The Basics 2nd Edition by Michael Mandel
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Chapter 1: Introduction
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Q1) Suppose the government decides to eliminate some,but not all,of the rules that govern how investment banks conduct their business.This would be an example of
A) laissez-faire policy.
B) deregulation.
C) central planning.
D) economic competition.
Answer: B
Q2) The top _____% of U.S.households earn more than half of the country's income.
A) 25
B) 15
C) 35
D) 20
Answer: D
Q3) Technological change is the only reason for globalization.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Demand and Supply: The Basics of the Market Economy
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Q1) The supply schedule is a description of
A) the quantity demanded at a single price.
B) the supply offered according to demand.
C) the basis of calculating market price.
D) the relationship between quantities supplied and market prices.
Answer: D
Q2) The law of demand
A) always holds true.
B) is the opposite of the law of supply.
C) works only in large markets.
D) is a general tendency.
Answer: D
Q3) Crude oil is sold on a local market.
A)True
B)False
Answer: False
Q4) Explain why a demand curve slopes downward.
Answer: As price decreases,the quantity demanded increases because the product is less expensive to purchase.Because of the lower price,more consumers are inclined to purchase it,increasing the quantity demanded.
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Chapter 3: Market Equilibrium and Shifts
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Q1) Between 2000 and 2007,many more U.S.furniture stores purchased their furniture from Chinese manufacturers.As a result,the supply curve for furniture
A) shifted to the left.
B) shifted to the right.
C) remained unchanged.
D) showed a marked increase in the price of furniture.
Answer: B
Q2) For which pair of goods below would an increase in income have the same effect on both goods?
A) A normal good and an inferior good.
B) An inferior good and a luxury good.
C) A normal good and a luxury good.
D) A superior good and a normal good.
Answer: C
Q3) Excess demand generally causes prices to go down.
A)True
B)False
Answer: False
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Chapter 4: How Businesses Work
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Q1) Explain how marginal product can be negative.
Q2) Fixed costs are also known as __________ costs because they are much harder for a business to change.
A) short-term
B) long-term
C) variable
D) static
Q3) The long-lived physical equipment and structures that a business uses in its production process are called
A) boot.
B) land.
C) capital.
D) function.
Q4) The additional money a business gets from producing and selling one more unit of output is
A) marginal product.
B) long-term revenue.
C) marginal revenue.
D) average profit.
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Chapter 5: Competition and Market Power
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Q1) Under the right circumstances,competition could be a win-win proposition for companies and consumers.
A)True
B)False
Q2) Companies will often spend considerable amounts of money to create a ____________ in regards to their brand name.
A) market effect
B) product orientation
C) relational effect
D) reputation effect
Q3) Advertising a brand can help create a reputation effect.
A)True
B)False
Q4) A ___________ makes it more difficult for a competitor to enter a market.
A) luxury product
B) barrier to entry
C) lower price
D) lower cost
Q5) Why does the government sometimes support a monopoly?
Q6) Over the long run,why do low-cost providers generally prevail?
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Chapter 6: Government and the Economy
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Q1) What is income redistribution?
Q2) The free-rider problem concerns
A) government deregulation of the public transit system.
B) voluntary associations that provide public goods to an individual who receives the benefit but does not pay for it.
C) government taxation.
D) welfare programs.
Q3) Rent-seeking behavior can sometimes cause
A) housing rental prices to increase.
B) a decrease in government spending.
C) corruption in public officials.
D) a sharp increase in economic activity.
Q4) Which of the following is NOT one of the programs through which the U.S.government attempts to redistribute income to the poor?
A) The Supplemental Nutrition Assistance Program (food stamps).
B) Medicare.
C) Unemployment insurance.
D) The Works Progress Administration (WPA).
Q5) What is a network externality?
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Chapter 7: The First Step Into Macroeconomics
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Q1) Which component of GDP captures goods that are produced but not sold in a given year?
A) Personal consumption.
B) Nonresidential investment.
C) Changes in private inventories.
D) Net exports.
Q2) The term "gross domestic purchases" refers to
A) the amount spent by U.S. consumers, business, and government on final goods and services.
B) the amount spent only by U.S. consumers on final goods and services.
C) the amount spent only by businesses on final goods and services.
D) the amount spent only by government on final goods and services.
Q3) Only final goods and services count in calculating the GDP.
A)True
B)False
Q4) Gross domestic product does NOT include
A) personal consumption.
B) intermediate inputs.
C) residential investment.
D) net exports.
Page 9
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Chapter 8: Inflation
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Q1) Nominal increases take into account inflation adjustments over a period of time.
A)True
B)False
Q2) Unexpected inflation can often
A) reduce price levels below cost.
B) reduce wages below the inflation rate.
C) help borrowers by allowing them to pay back lenders with less valuable dollars.
D) help lenders collect payments in more valuable dollars.
Q3) Real dollars are also called inflation-adjusted dollars.
A)True
B)False
Q4) Expected inflation is
A) the inflation rate that governments require from year to year.
B) the inflation rate that consumers and businesses expect will hold for some time in the future.
C) the inflation rate that is based on GDP growth.
D) the inflation rate minus the actual growth rate.
Q5) Why does core inflation not include energy or food prices?
Q6) What is a pure price change?
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Chapter 9: Growth
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Q1) Real GDP is usually measured in A) 2005 dollars.
B) Units of output.
C) 1982-1984 dollars.
D) Tons (for goods) and hours (for services).
Q2) Output rises as workers become more educated and skilled.
A)True
B)False
Q3) Besides a growing workforce,how can a country boost its aggregate production?
Q4) The skill level of workers is called human production.
A)True
B)False
Q5) In the past 50 years,the economy of the United States grew,causing
A) a higher standard of living for most citizens.
B) a higher standard of living for the employed.
C) a stagnant standard of living after adjusting for inflation.
D) a lower standard of living after adjusting for inflation.
Q6) What inputs are included in the aggregate production function,and what is the economic impact of those inputs?
Q7) What is the economic definition of productivity?
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Chapter 10: Business Cycles, unemployment and Inflation
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Q1) If there is a mismatch between the skills of unemployed workers and the needs of employers,economists say that there is
A) frictional unemployment.
B) cyclical unemployment.
C) per capita unemployment.
D) structural unemployment.
Q2) What is the definition of the natural rate of unemployment?
Q3) _________ are organized groups of workers that bargain collectively with employers.
A) Unions
B) Student councils
C) Aggregated labor groups
D) Amalgamations
Q4) The pattern of recession,recovery,and expansion is known as the
A) economic cycle.
B) inflationary cycle.
C) deflationary cycle.
D) business cycle.
Q5) How is it possible for output to be greater than potential GDP?
Q6) What are the definition and purpose of potential GDP?
Page 12
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Chapter 11: Fiscal Policy
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Q1) The federal government's budget deficit __________ between 2008 and 2009.
A) decreased from $1,413 billion to $459 billion
B) remained stable at $459 billion
C) increased from $459 billion to $1,413 billion
D) increased by $1,413 billion
Q2) An increase in government spending in the short term lowers unemployment and increases the GDP.
A)True
B)False
Q3) The wealthy have a(n)___________ marginal propensity to consume.
A) lower
B) higher
C) elastic
D) inelastic
Q4) The government's decisions about spending and taxation that affect employment,output,and inflation are called
A) fiscal policy.
B) multiplier policy.
C) short-term policy.
D) Keynesian policy.
Page 13
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Chapter 12: Monetary Policy
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Q1) If the Federal Reserve raises the federal funds rate,which one of the following will tend to happen as a result?
A) The inflation rate will increase.
B) The demand curve for goods and services bought with a credit card will shift to the left.
C) The demand curve for cars will shift to the right.
D) Home mortgage rates will decline.
Q2) Having government-issued money makes it easier for policy makers to A) completely prevent inflation.
B) keep wages high in certain key industries.
C) guide and control the economy.
D) keep oil prices stable.
Q3) The Federal Reserve Act establishing the Federal Reserve System was passed by Congress in A) 1788.
B) 1863.
C) 1913. D)1934.
Q4) What advantages does monetary policy have over fiscal policy?
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Chapter 13: The Financial Markets
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Q1) Which of the following is NOT true about banks?
A) Banks are tightly regulated by state and federal governments.
B) Banks are required to keep a certain amount of cash reserves.
C) Banks are an example of a financial intermediary.
D) Banks are sellers, not buyers, in the market for money.
Q2) When companies first sell shares to the public,this is called
A) an initial public offering.
B) venture capital funding.
C) microcredit financing.
D) primary lending.
Q3) Individual investors wishing to buy shares of stock will typically purchase them from A) venture capital firms.
B) investment banks, through an initial public offering.
C) stockbrokers.
D) the company that initially issued the shares of stock.
Q4) Why is the interest rate on U.S.Treasury securities lower than on other types of bonds?
Q5) Where do banks get their money,and what do they do with the money once they have it? How do banks make a profit?
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Chapter 14: International Trade
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Q1) Which of the following policies would benefit American consumers?
A) South Korea begins to subsidize its auto exports.
B) The U.S. currency experiences depreciation against the euro.
C) The U.S. government strengthens trade barriers against foreign imports.
D) The Chinese economy begins to grow more slowly than the U.S. economy.
Q2) Which of the following statements about trade deficits is FALSE?
A) The trade deficit in the United States has grown since the early 1990s.
B) Budget deficits tend to produce trade deficits.
C) The U.S. has run a trade deficit for over 30 years.
D) A U.S. trade deficit makes it less likely that foreigners will make investments in the United States.
Q3) When an exchange rate changes so that one currency can buy more of another,we say the first currency is ___________ and the second currency is ___________.
A) depreciating; appreciating
B) appreciating; depreciating
C) pegged; floating
D) floating; pegged
Q4) Briefly describe at least three of the arguments for protectionism mentioned by the author of your textbook.
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Chapter 15: Technological Change
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Sample Questions
Q1) What is a patent,and how does it encourage innovation?
Q2) What does "R&D" stand for?
A) Research and design.
B) Research and development.
C) Revenue and demand.
D) Real and domestic.
Q3) Suppose home builders figure out how to produce houses faster by prefabricating more of the house in a factory,then transporting the components to the construction site.This saves labor time and prevents materials from being wasted.Which type of innovation is this?
A) The creation of new goods and services.
B) A quality-of-life innovation.
C) A productivity-enhancing innovation.
D) Basic research.
Q4) China is the largest spender on research and development in the world (in total dollars or dollar equivalents).
A)True
B)False
Q5) What is the difference between basic research and applied research? Provide one example of each.
17
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Chapter 16: Economics of the Labor Market
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Q1) The minimum wage makes it possible for more low-skilled workers to find jobs.
A)True
B)False
Q2) Employees who are members of a labor union can expect to receive lower wages than nonunion workers in the same industry,but can also expect greater job security.
A)True
B)False
Q3) As U.S.companies gain better access to growing overseas markets,
A) the demand for labor will increase, increasing the equilibrium wage.
B) the supply of labor will decrease, increasing the equilibrium wage.
C) the most highly-educated American workers have suffered from the competition.
D) American firms find they are suffering because they now must incur the higher costs of shipping to overseas customers.
Q4) Which of the following could increase the quantity of workers employed in the labor market?
A) A leftward shift in the labor supply curve.
B) A decrease in the demand for labor.
C) An increase in the minimum wage.
D) An increase in the demand for labor.
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Chapter 17: The Distribution of Income
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Q1) Your textbook mentions four arguments against government intervention to reduce inequality.List any three of these.
Q2) In the United States,some groups have higher incomes than others.Which of these would be considered discrimination?
A) English professors, who are more likely to be female than engineering professors, are paid less than engineering professors.
B) A male employee is paid more than an equally qualified female employee because the male employee is a manager and the female employee is not.
C) College-educated employees are consistently paid more than employees without a college education.
D) White candidates for a job opening are consistently preferred over equally qualified black candidates for the same position.
Q3) Give a brief explanation of the "superstar economy" as a factor in the widening of income inequality.
Q4) How has global trade affected income inequality? Explain briefly.
Q5) Why might people object to a regressive tax structure?
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Chapter 18: Economics of Retirement and Healthcare
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Q1) In most defined contribution retirement plans,employees have a choice about whether or not to participate.Which of the following statements about worker participation is true?
A) Current U.S. law says that workers must be automatically enrolled in employer retirement plans.
B) Full-time workers are less likely to participate than part-time workers because part-time workers need the retirement income more.
C) Workers are more likely to participate if they are automatically enrolled and are permitted to opt out, rather than not enrolled and permitted to opt in.
D) Workers are more likely to be part of a defined benefit plan than a defined contribution plan.
Q2) List the four possible responses to the Social Security financing gap.
Q3) The "individual mandate" included in President Obama's health insurance reform bill was designed to address which problem?
A) The moral hazard problem.
B) The healthcare uncertainty problem.
C) The healthcare poverty problem.
D) The adverse selection problem.
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Chapter 19: Economics of Energy, the Environment, and Global Climate Change Glossary
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Q1) Since the mid-1970s,energy use per person in the United States has A) doubled.
B) remained more or less stable from year to year. C) tripled.
D) fallen by 50 percent.
Q2) Among the characteristics of the command-and-control approach to pollution reduction is that it is
A) less costly than cap-and-trade systems.
B) easily adjusted to changes in marginal costs of pollution reduction across firms.
C) typically inflexible and thus quite expensive.
D) less costly than a carbon tax.
Q3) Adjusting GDP downward for the impact industry has on the environment results in a number that is greatly disputed,but is often referred to as A) "eco-output."
B) "environment-neutral GDP."
C) "resource-adjusted GDP."
D) "green GDP."
Q4) List and briefly describe the four types of negative impacts from pollution.
Page 21
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