Business Economics
Chapter Exam Questions
Course Introduction
Business Economics explores the application of economic theories and methodologies to decision-making processes within businesses and organizations. The course covers fundamental concepts such as demand and supply analysis, production and cost functions, market structures, pricing strategies, profit maximization, and the impact of government policies on business operations. Students will learn how economic principles inform strategic planning, resource allocation, and competitive dynamics, equipping them with analytical tools to make informed economic decisions in real-world business contexts.
Recommended Textbook
Economics 4th Edition by Paul Krugman
Available Study Resources on Quizplus
35 Chapters
7902 Verified Questions
7902 Flashcards
Source URL: https://quizplus.com/study-set/3897 Page 2
Chapter 1: First Principles
Available Study Resources on Quizplus for this Chatper
233 Verified Questions
233 Flashcards
Source URL: https://quizplus.com/quiz/77615
Sample Questions
Q1) Which of the following is an example of marginal analysis?
A) ordering a pizza rather than eating leftover meatloaf
B) deciding whether to eat one more slice of pizza
C) using a coupon to save $2 on a pizza
D) writing a check to pay for the pizza rather than using a credit card
Answer: B
Q2) When the United States and Mexico trade:
A) the United States will be worse off because wages in Mexico are so low.
B) Mexico will be worse off because the United States is a stronger economic power.
C) both Mexico and the United States will be better off.
D) both Mexico and the United States will be worse off.
Answer: C
Q3) Which of the following is the BEST example of making a choice at the margin?
A) buying a new car
B) quitting your job
C) drinking another cup of coffee
D) attending college
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Economic Models- Trade-Offs and Trade
Available Study Resources on Quizplus for this Chatper
313 Verified Questions
313 Flashcards
Source URL: https://quizplus.com/quiz/77613
Sample Questions
Q1) In 2000, financial experts announced that they:
A) would no longer be willing to buy or sell mortgage-backed securities.
B) were unable to predict expected income from mortgage-backed securities.
C) had overestimated the risk of loss from mortgage-backed securities.
D) had developed a model that could predict the risk of losing money on mortgage-backed securities.
Answer: D
Q2) A typical bowed-out production possibility frontier between two goods, guns and butter, shows that the opportunity cost of butter in terms of guns increases as more butter is produced. This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced.
A)True
B)False
Answer: False
Q3) In the circular-flow diagram firms buy _____ in the _____ market.
A) goods and services; product
B) goods and services; factor
C) resources; product
D) resources; factor
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Supply and Demand
Available Study Resources on Quizplus for this Chatper
290 Verified Questions
290 Flashcards
Source URL: https://quizplus.com/quiz/77612
Sample Questions
Q1) (Figure: Shifts in Demand and Supply III) Look at the figure Shifts in Demand and Supply III. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel BEST describes how this will affect the market for designer boots, a normal good?
A) panel A
B) panel B
C) panel C
D) panel D
Q2) (Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.50, there is:
A) a surplus of 35 bags per month.
B) a shortage of 35 bags per month.
C) a surplus of 70 bags per month.
D) a shortage of 70 bags per month.
Q3) If goods A and Z are complements, an increase in the price of good Z will:
A) increase the demand for good A.
B) decrease the demand for good A.
C) decrease the demand for good Z.
D) decrease the demand for both good A and good Z.
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Consumer and Producer Surplus
Available Study Resources on Quizplus for this Chatper
224 Verified Questions
224 Flashcards
Source URL: https://quizplus.com/quiz/77611
Sample Questions
Q1) Efficiency exists when there is no way to make someone better off without making someone else worse off.
A)True
B)False
Q2) (Table: Willingness to Pay for Peanuts) Using the table Willingness to Pay for Peanuts, if the price of a bag of peanuts is $9, who will purchase a bag?
A) George
B) All of the consumers
C) Dave
D) Alvin and Theodore
Q3) (Table: Quantity Supplied and Quantity Demanded) Using the table Quantity Supplied and Quantity Demanded, if this market is in equilibrium and the demand and supply curves are linear, then the value of consumer surplus is:
A) $1,225.
B) $2,450.
C) $4,900.
D) $1,500.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Price Controls and
Quotas- Meddling With Markets
Available Study Resources on Quizplus for this Chatper
201 Verified Questions
201 Flashcards
Source URL: https://quizplus.com/quiz/77610
Sample Questions
Q1) (Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent<sub>1</sub>:
A) the shortage of rental units is the distance Q<sub>3</sub> - Q<sub>1</sub>.
B) some renters will be willing to pay a price as high as Rent<sub>4</sub> for Q<sub>1</sub> units.
C) no one will have to pay a higher actual price than Rent<sub>0</sub>, nor will anyone be willing to do so.
D) there will be a surplus of rental units, but it is impossible to tell how large the surplus is based on the information provided.
Q2) Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed:
A) the quantity demanded will decrease and the quantity supplied will increase.
B) excess demand will develop.
C) the quality of the good supplied will decrease.
D) the quality of the good supplied will improve.
Q3) A price ceiling benefits all consumers.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Elasticity
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/77609
Sample Questions
Q1) The mayor advocates raising the entrance fee at the city's pools to increase revenue for the city. The mayor is right only if the price effect dominates the quantity effect.
A)True
B)False
Q2) (Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would:
A) decrease, as the price effect is dominated by the quantity effect.
B) increase, as the price effect dominates the quantity effect.
C) stay the same, as both the price and quantity effects remain unchanged.
D) stay the same, but the price effect is dominated by the quantity effect.
Q3) If you wanted to make sure that your calculation of elasticity between two points was the same regardless of your initial point, you would use:
A) the absolute value of elasticity.
B) supply elasticity.
C) the midpoint formula calculation of elasticity.
D) the point formula calculation of elasticity.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Taxes
Available Study Resources on Quizplus for this Chatper
298 Verified Questions
298 Flashcards
Source URL: https://quizplus.com/quiz/77608
Sample Questions
Q1) If an excise tax is imposed on beer and collected from the producers, the _____ curve will shift _____ by the amount of the tax.
A) demand; upward
B) demand; downward
C) supply; upward
D) supply; downward
Q2) The percentage of an INCREASE in a taxpayer's income that is taxed away is the _____ tax rate.
A) marginal
B) average
C) total
D) lower
Q3) Economic policies often involve trade-offs between efficiency and equity. Fortunately, tax policy is an exception because it is easy to find taxes that are both efficient and fair.
A)True
B)False
Q4) How does an excise tax impose a cost on society?
Q5) Explain how an excise tax levied on suppliers affects the supply curve.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 9: The Rational Consumer
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/77603
Sample Questions
Q1) Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. If Faruq spends all of his income, the opportunity cost of one taco equals _____ milkshakes.
A) 2
B) 10
C) 5
D) 1/5
Q2) The principle of diminishing marginal utility means that when Sarah eats pizza, her satisfaction from the second slice of pizza is probably _____ that from the first.
A) greater than
B) equal to
C) less than
D) not comparable to
Q3) Whatever the relevant time, Molly's spending will be _____ by her _____.
A) unlimited; marginal utility
B) limited; marginal utility
C) limited; budget
D) unlimited; budget
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 8: International Trade
Available Study Resources on Quizplus for this Chatper
268 Verified Questions
268 Flashcards
Source URL: https://quizplus.com/quiz/77607
Sample Questions
Q1) (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. In Mexico the opportunity cost of producing 40 tractors is _____ barrels of crude oil.
A) 30,000
B) 90,000
C) 120,000
D) 270,000
Q2) If the United States imposes an import quota on French wines, the result in the short run is likely to be _____ profits for American wine producers and _____ profits for French wine producers.
A) lower; lower
B) lower; higher
C) higher; lower
D) higher; higher
Q3) Although U.S. exports and imports have grown substantially in absolute terms since the 1960s, the share of exports and imports in total output has fallen significantly over the past few decades.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Decision Making by Individuals and Firms
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/77606
Sample Questions
Q1) Profit computed without implicit costs is _____ profit.
A) explicit
B) accounting
C) implicit
D) economic
Q2) If the accounting profit for a firm is negative:
A) the economic profit must be positive.
B) the economic profit must be negative.
C) the firm should produce more.
D) the firm will not owe any taxes.
Q3) In economic analysis, at the optimal quantity of an activity:
A) marginal benefit exceeds marginal cost by the greatest amount.
B) total benefit exceeds total cost by the greatest amount.
C) marginal benefit equals marginal cost.
D) total benefit exceeds total cost by the greatest amount and marginal benefit equals marginal cost.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Perfect Competition and the Supply Curve
Available Study Resources on Quizplus for this Chatper
355 Verified Questions
355 Flashcards
Source URL: https://quizplus.com/quiz/77602
Sample Questions
Q1) A perfectly competitive tomato industry is in long-run equilibrium. Now suppose that some consumers are getting sick by eating tomatoes that contain salmonella. Describe how this change will affect short-run economic profits. What will happen to the number of tomato growers in the long run? How will price and output in this industry adjust in the long run?
Q2) (Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for the mower. His variable costs include fuel, his time, and mower parts. If the price for mowing a lawn is $40, how much is Alex's profit per unit at the profit-maximizing output?
A) -$10.00
B) $10.00
C) $23.33
D) -$20.00
Q3) Why are perfectly competitive firms described as price takers?
Q4) A market that is in long-run equilibrium must also be in short-run equilibrium.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Monopoly
Available Study Resources on Quizplus for this Chatper
348 Verified Questions
348 Flashcards
Source URL: https://quizplus.com/quiz/77601
Sample Questions
Q1) (Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, consumer surplus will be:
A) $180.
B) $100.
C) $40.
D) $0.
Q2) (Table: Lunch) Look at the figure Lunch. Joe makes and sells picnic lunches to people taking all-day rafting trips on the river. The marginal cost and average cost of each lunch are a constant $4. If Joe is a monopolist, how many lunches will he produce in the long run?
A) 0
B) 10
C) 20
D) 30
Q3) Producer surplus in monopoly is smaller than in perfect competition.
A)True
B)False
Q4) Explain why the marginal revenue curve lies below the monopolist's demand curve.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Oligopoly
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/77600
Sample Questions
Q1) (Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets at a marginal cost of $2 and no fixed cost. If industry output is 300 gadgets produced by Margaret and 200 gadgets produced by Ray and if Ray decides to increase output by 100, Margaret's profit will be _____, and Ray's profit will be _____.
A) $1,750; $1,250
B) $1,250; $1,250
C) $1,400; $1,000
D) $600; $600
Q2) An extreme case of oligopoly in which firms collude to raise joint profits is known as a:
A) duopoly.
B) cartel.
C) dominant producer.
D) price war.
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Monopolistic Competition and Product
Differentiation
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/77599
Sample Questions
Q1) (Figure: Firms in Monopolistic Competition) In panel (A) of the figure Firms in Monopolistic Competition, economic profit per unit is:
A) KL.
B) LO.
C) MN.
D) NO.
Q2) (Figure: The Restaurant Market) The figure The Restaurant Market shows curves facing a typical restaurant. Assume that many firms, differentiated products, and easy entry and exit characterize the restaurant market. For the restaurant shown here, the profit-maximizing price is:
A) P<sub>1</sub>.
B) P<sub>2</sub>.
C) P<sub>3</sub>.
D) Not enough information is given to answer the question.
Q3) Monopolistic competition is an industry structure characterized by:
A) a product with no close substitutes.
B) a horizontal demand curve.
C) a large number of firms.
D) barriers to entry and exit.
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Externalities
Available Study Resources on Quizplus for this Chatper
140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/77598
Sample Questions
Q1) Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is:
A) zero.
B) the level that reduces the marginal social costs of pollution to zero.
C) the level at which the marginal social cost is equal to the marginal social benefit.
D) the level that minimizes the average total cost of producing the product that generates the pollution.
Q2) Which of the following is an activity generating a negative externality?
A) You buy a new car, then discover it needs a new transmission.
B) Your next-door neighbor mows the lawn at 6 A.M.
C) The only two coffee shops in town conspire to raise prices.
D) After Jane bought health insurance, she began racing motorcycles on the weekends.
Q3) If external costs exist, the competitive free market:
A) allocates resources inefficiently.
B) allocates resources efficiently.
C) automatically corrects an overallocation of resources.
D) automatically corrects an underallocation of resources.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Public Goods and Common Resources
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/77597
Sample Questions
Q1) An artificially scarce good is a good or service for which exclusion is _____ and which is _____ in consumption.
A) possible; rival
B) possible; nonrival
C) not possible; rival
D) not possible; nonrival
Q2) Although most citizens have access to police protection, they also take measures, such as putting locks on their doors, to protect themselves. For most citizens police protection is a(n) _____ good, while self-protection is a(n) _____ good.
A) public; private
B) public; artificially scarce good
C) common resource; private
D) artificially scarce good; common resource
Q3) For a nonexcludable good like national defense, the private market will lead to _____ of the good.
A) too much production
B) too much consumption
C) too little production
D) the efficient level of consumption
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: The Economics of the Welfare State
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/77596
Sample Questions
Q1) Which of the following LACK(S) is (are) associated with poverty?
A) adequate employment
B) education
C) proficiency in English
D) adequate employment, education, and proficiency in English
Q2) _____ is (are) a means-tested monetary benefit in in a welfare program.
A) Food stamps
B) Medicaid
C) Temporary Assistance for Needy Families
D) Unemployment insurance
Q3) Which of the following is NOT a leading cause of poverty in the United States?
A) lack of adequate employment
B) lack of education
C) the welfare system
D) discrimination
Q4) In 2012 _____ of the U.S. population was living in poverty.
A) approximately 15%
B) 20% to 24%
C) 25% to 29%
D) more than 30%
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Factor Markets and the Distribution of Income
Available Study Resources on Quizplus for this Chatper
314 Verified Questions
314 Flashcards
Source URL: https://quizplus.com/quiz/77594
Sample Questions
Q1) A lumberjack cutting giant redwoods in California being paid more than a person cutting and selling small Christmas trees is an example of wage disparity due primarily to compensating differentials.
A)True
B)False
Q2) The trade-off between work and leisure underlying the supply of labor involves the substitution effect and the _____ effect.
A) production
B) elasticity
C) income
D) complementary
Q3) The median earnings of Hispanics are greater than the median earnings of African Americans.
A)True
B)False
Q4) When wages increase, if the income effect dominates, the quantity of labor supplied will increase.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Uncertainty, Risk, and Private Information
Available Study Resources on Quizplus for this Chatper
197 Verified Questions
197 Flashcards
Source URL: https://quizplus.com/quiz/77593
Sample Questions
Q1) Insurance companies attempt to minimize moral hazard by imposing:
A) premiums.
B) capital at risk.
C) adverse selection.
D) deductibles.
Q2) (Table: Natasha's Total Utility) Look at the table Natasha's Total Utility. Natasha earns $50,000 per year but faces losing $20,000 of it if she is late with her work. If there is a 25% probability that Natasha will be late with her work and her income will then equal $30,000, her expected income is:
A) $32,500.
B) $38,200.
C) $40,500.
D) $45,000.
Q3) (Scenario: Used Car Market) Look at the scenario Used Car Market. The expected value of a used car is:
A) $9,000.
B) $7,800.
C) $18,000.
D) $10,500.
To view all questions and flashcards with answers, click on the resource link above.
Page 21
Chapter 20: Macroeconomics- the Big Picture
Available Study Resources on Quizplus for this Chatper
168 Verified Questions
168 Flashcards
Source URL: https://quizplus.com/quiz/77592
Sample Questions
Q1) The concept that the whole is greater than the sum of its parts best characterizes: A) microeconomics.
B) supply and demand.
C) macroeconomics.
D) business forecasting.
Q2) Rising total output accompanied by increasing employment is generally known as: A) stagflation.
B) recession.
C) inflation.
D) expansion.
Q3) The economy is in a recession and Congress passes legislation to reduce income taxes. Tom, seeing an increase in his take-home pay, goes to Best Buy and purchases a new television. Why is the tax cut a macroeconomic issue, while Tom's new TV is a microeconomic issue?
Q4) Long-run growth is the:
A) sustained upward trend in aggregate output per person over several decades.
B) expansion phase of business cycles.
C) downturn phase of business cycles.
D) sustained downward trend in the employment rate over several decades.
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Gdp and the Consumer Price Index
Available Study Resources on Quizplus for this Chatper
204 Verified Questions
204 Flashcards
Source URL: https://quizplus.com/quiz/77591
Sample Questions
Q1) (Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. What is GDP in this economy?
A) $100
B) $400
C) $500
D) $600
Q2) (Table: Pizza Economy I) Look at the table Pizza Economy 1. GDP in this economy is:
A) $73,000.
B) $65,000.
C) $57,000.
D) $51,000.
Q3) Don has built an addition to his house. This transaction will be:
A) not included in GDP because it is not produced for the marketplace.
B) included in GDP because Don is a professional builder.
C) not included in GDP because it is an intermediate good.
D) included in GDP because building is Don's hobby.
To view all questions and flashcards with answers, click on the resource link above.
23
Chapter 22: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
351 Verified Questions
351 Flashcards
Source URL: https://quizplus.com/quiz/77590
Sample Questions
Q1) In 2002, the French adopted the British pound as their national currency.
A)True
B)False
Q2) A person who has no job but is looking for one is:
A) unemployed.
B) a discouraged worker.
C) part of the labor force.
D) unemployed and part of the labor force.
Q3) Economists claim that the unemployment rate can understate the true level of unemployment because none of the following groups is included EXCEPT:
A) discouraged workers.
B) marginally attached workers.
C) underemployed workers.
D) workers without jobs who have looked for work in the past four weeks.
Q4) The unemployment rate is the ratio of all of the people:
A) out of work to the total population.
B) out of work to those over age 16.
C) unemployed to those looking for work.
D) unemployed to those in the labor force.
Q5) Explain the difference between shoe-leather costs and menu costs of inflation.
Page 24
To view all questions and flashcards with answers, click on the resource link above.
Chapter 23: Long-Run Economic Growth
Available Study Resources on Quizplus for this Chatper
313 Verified Questions
313 Flashcards
Source URL: https://quizplus.com/quiz/77589
Sample Questions
Q1) The key measure used to track economic growth is:
A) real GDP per capita.
B) nominal GDP.
C) real GDP.
D) nominal GDP per capita.
Q2) Which of the following factors is NOT necessary for convergence between two countries?
A) equal access to education
B) equal access to infrastructure
C) a common language between the two countries
D) similar levels of political stability
Q3) If technology advances:
A) more output can be obtained from the same inputs.
B) more inputs are needed to produce the same output.
C) less output can be obtained from the same inputs.
D) less output can be produced even with more inputs.
Q4) More than 50% of the world's population lives in countries whose population is poorer than the United States population was a century ago.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 24: Savings, Investment Spending
Available Study Resources on Quizplus for this Chatper
398 Verified Questions
398 Flashcards
Source URL: https://quizplus.com/quiz/77588
Sample Questions
Q1) (Figure: The Market for Loanable Funds II) Look at the figure The Market for Loanable Funds II. Other things being equal, if there is an increase in the interest rate above 8%, _____ quantity of loanable funds will be demanded.
A) the same
B) a larger
C) a smaller
D) at first a smaller and then a larger
Q2) The United States is a net recipient of foreign savings.
A) This has never happened before.
B) This is bad because we are borrowing money from overseas.
C) This is bad because we are losing control over our own destiny.
D) This has been true throughout much of our history.
Q3) Suppose the federal government has a budget deficit and the economy is closed. Using the savings-investment spending identity, explain how this affects investment spending.
Q4) The savings-investment spending identity says that:
A) each person in the economy must invest as much as he or she saves.
B) savings and investment spending are always equal for the economy as a whole.
C) savings must equal government investment for the economy as a whole.
D) each person in the economy must save as much as he or she invests.
To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 25: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
376 Verified Questions
376 Flashcards
Source URL: https://quizplus.com/quiz/77587
Sample Questions
Q1) (Scenario: Fiscal Policy) Look at the scenario Fiscal Policy. Suppose actual real GDP in Arcadia is 500 billion arcs. This economy has:
A) a recessionary gap.
B) production at the full employment level.
C) an inflationary gap.
D) a liquidity trap.
Q2) A government can pay off its debt if:
A) GDP and the debt grow at the same rate.
B) the ratio of debt to GDP is increasing.
C) GDP grows faster than the debt.
D) the debt grows faster than GDP.
Q3) When potential output is less than actual aggregate output:
A) the economy faces an inflationary gap.
B) the SRAS curve intersects the AD curve to the left of the LRAS curve.
C) the government should follow an expansionary policy to correct the problem.
D) a decrease in taxes would solve the problem.
Q4) Suppose that economic policy makers want to increase real GDP by $100 with as little impact on the budget balance as possible. Should they increase government purchases of goods and services, increase transfer payments, or decrease taxes?
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 26: Money, Banking, and the Federal Reserve System
Available Study Resources on Quizplus for this Chatper
464 Verified Questions
464 Flashcards
Source URL: https://quizplus.com/quiz/77586
Sample Questions
Q1) A major problem with bank runs is that they:
A) spread to other banks.
B) cause inflation because the money moves so fast.
C) drive down interest rates.
D) drive down both inflation and interest rates.
Q2) Suppose the Federal Reserve were to buy $100 million of U.S. Treasury bills. The money supply would:
A) stay the same.
B) decrease by $100 million.
C) increase by $100 million.
D) increase by more than $100 million.
Q3) When a person makes price comparisons among products, money is being used mainly as a(n):
A) unit of account.
B) expander of economic activity.
C) medium of exchange.
D) checkable deposit.
Q4) What caused the savings and loan crisis of the 1980s?
Page 28
Q5) Explain how money adds to welfare although it does not directly produce anything.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 27: Monetary Policy
Available Study Resources on Quizplus for this Chatper
359 Verified Questions
359 Flashcards
Source URL: https://quizplus.com/quiz/77585
Sample Questions
Q1) If the Federal Reserve wants to close an inflationary gap, it will _____ the money supply and _____ the interest rate, thus _____ investment spending and GDP. The AD curve will shift to the _____.
A) increase; raise; increasing; right B) increase; lower; lowering; left C) decrease; raise; lowering; left D) decrease; lower; lowering; right
Q2) (Figure: Economic Adjustments) Look at the figure Economic Adjustments. Assume that the economy is at point c. The effect of an increase in the money supply is represented by a shift of the _____ curve to _____.
A) SRAS<sub>1</sub>; SRAS<sub>2</sub>
B) SRAS<sub>2</sub>; SRAS<sub>1</sub>
C) AD<sub>1</sub>; AD<sub>2</sub>
D) AD<sub>2</sub>; AD<sub>1</sub>
Q3) The zero lower bound for interest rates is the target that the Taylor rule sets.
A)True
B)False
Q4) How would a significant fall in the interest rate on short-term certificates of deposit (CDs) affect the money demand curve?
To view all questions and flashcards with answers, click on the resource link above. Page 29
Chapter 28: Inflation, Disinflation, and Deflation
Available Study Resources on Quizplus for this Chatper
240 Verified Questions
240 Flashcards
Source URL: https://quizplus.com/quiz/77584
Sample Questions
Q1) The liquidity trap is associated with all of the following EXCEPT:
A) a large reduction in the demand for loanable funds.
B) the nominal interest rate falling to zero.
C) monetary policy becoming ineffective.
D) fiscal policy becoming ineffective.
Q2) Analysis of the Phillips curve reveals that a _____ in unemployment, like that of the early 1980s, is needed to break the cycle of inflationary expectations.
A) permanent increase
B) permanent decrease
C) temporary increase
D) temporary decrease
Q3) Suppose that you live in a city whose economic growth has been declining for several months. Oddly, the official unemployment rate in your city has not begun to rise. How can you explain this?
Q4) The inflation tax refers to the:
A) increase in taxes when inflation rises.
B) inflation rate when aggregate demand increases.
C) inflation rate multiplied by the tax rate.
D) inflation rate multiplied by the money supply.
To view all questions and flashcards with answers, click on the resource link above. Page 30
Chapter 29: Crises and Consequences
Available Study Resources on Quizplus for this Chatper
214 Verified Questions
214 Flashcards
Source URL: https://quizplus.com/quiz/77583
Sample Questions
Q1) Lehman Brothers was established by Henry Lehman in 1844 as a(n):
A) investment bank.
B) commercial bank.
C) dry goods store.
D) saloon.
Q2) Maturity transformation can be done by:
A) depository banks but not by shadow banks.
B) shadow banks but not by depository banks.
C) both depository banks and shadow banks.
D) neither depository banks nor shadow banks.
Q3) The banking panics in 1873 and 1893 were caused by:
A) asset bubbles in real estate.
B) overbuilding in the railroad industry.
C) gold rushes.
D) overly strict regulation of the banking industry.
Q4) In general, the higher the rate of return on an asset, the lower its liquidity.
A)True
B)False
Q5) What is maturity transformation? Explain the difference between maturity transformation by depository banks and by shadow banks.
Page 31
To view all questions and flashcards with answers, click on the resource link above.
Chapter 30: Macroeconomics- Events and Ideas
Available Study Resources on Quizplus for this Chatper
320 Verified Questions
320 Flashcards
Source URL: https://quizplus.com/quiz/77582
Sample Questions
Q1) Rational expectations theory suggests that people and firms base their expectations on:
A) the recent past.
B) government announcements.
C) "animal spirits."
D) all available information.
Q2) In the classical model, an increase in the money supply will result in:
A) inflation only, without affecting aggregate output.
B) economic expansion, as aggregate output will increase.
C) higher interest rates, lower investment, and ultimately lower aggregate output.
D) recession only, without affecting the aggregate price level.
Q3) Which of the following is a point of the Great Moderation consensus? I. Monetary policy should be the main stabilization policy.
II) The central bank should be independent of political influence.
III) Discretionary fiscal policy should be used sparingly.
A) I only
B) II only
C) III only
D) I, II, and III
To view all questions and flashcards with answers, click on the resource link above.
Page 32
Chapter 31: Open-Economy Macroeconomics
Available Study Resources on Quizplus for this Chatper
466 Verified Questions
466 Flashcards
Source URL: https://quizplus.com/quiz/77581
Sample Questions
Q1) A country with a fixed exchange rate regime:
A) tends to increase uncertainty regarding the value of its currency.
B) allows countries to use both fiscal and monetary policies to stabilize their economy.
C) reduces a country's bias toward inflationary policies.
D) reduces the amount of foreign currency a country must hold.
Q2) The exchange rate is determined in the commodities markets.
A)True
B)False
Q3) The behavior of the balance of payments on goods and services is determined in the international _____ market.
A) goods and services
B) loanable funds
C) money
D) stock
Q4) Direct foreign investment means the purchase of:
A) stock in foreign companies.
B) bonds of a foreign country.
C) bank loans in a foreign country.
D) factories in a foreign country.
To view all questions and flashcards with answers, click on the resource link above. Page 33
Chapter 32: Graphs in Economics
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/77614
Sample Questions
Q1) (Figure: Labor Force Participation Rate) Look at the figure Labor Force Participation Rate. Using the figure, the labor force participation rate for women was ______ during 1970-1985 and ______ during 1998-2006.
A) increasing; slightly decreasing
B) increasing; increasing
C) decreasing; increasing
D) decreasing; constant
Q2) A scatter diagram shows:
A) how far apart dependent variables are.
B) individual points of data showing both variable values.
C) the slope of a line.
D) the intercept of a curve.
Q3) A positive relationship between swimsuits purchased and ice cream purchased could be the result of:
A) reverse causality.
B) a magnified scale on the swimsuit axis.
C) a truncation of the ice cream axis.
D) an omitted variable, such as the external temperature.
To view all questions and flashcards with answers, click on the resource link above.
34
Chapter 33: Toward a Fuller Understanding
Available Study Resources on Quizplus for this Chatper
36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/77605
Sample Questions
Q1) If a friend offers to pay you $1 five years from now, when the prevailing annual interest rate is 5%, what is the net present value of that $1 today?
A) $0.95
B) $1.05
C) $0.78
D) $1.50
Q2) (Table: Present Value of Projects A, B, C, and D) Look at the table Present Value of Projects A, B, C, and D. If the annual interest rate is 2%, which project do you choose?
A) A
B) B
C) C
D) D
Q3) The present value (PV) of a payment n years in the future (FV), given an interest rate (r), is given by the equation:
A) PV = FV<sup>n</sup>.
B) PV = 1 / FV<sup>n</sup>.
C) PV = FV / (1 + r).
D) PV = FV / (1 + r)<sup>n</sup>.
To view all questions and flashcards with answers, click on the resource link above. Page 35
Chapter 34: Consumer Preferences and Consumer Choice
Available Study Resources on Quizplus for this Chatper
62 Verified Questions
62 Flashcards
Source URL: https://quizplus.com/quiz/77604
Sample Questions
Q1) Joseph chooses a combination of apples and oranges along his budget line. The marginal rate of substitution of apples for oranges is 2, the price of an apple is $0.50, and the price of an orange is $0.25. Joseph:
A) is maximizing total utility.
B) should consume more apples and fewer oranges to maximize total utility.
C) should consume fewer apples and more oranges to maximize total utility.
D) may or may not be maximizing total utility.
Q2) Jake considers fries and onion rings perfect substitutes. The indifference curve between fries and onion rings must be:
A) a right angle.
B) concave.
C) perfectly vertical.
D) a straight line.
Q3) Higher indifference curves represent _____ lower curves.
A) less utility than
B) more utility than C) the same utility as D) either more or less utility than
To view all questions and flashcards with answers, click on the resource link above.
36
Chapter 35: Indifference Curve Analysis of Labor Supply
Available Study Resources on Quizplus for this Chatper
41 Verified Questions
41 Flashcards
Source URL: https://quizplus.com/quiz/77595
Sample Questions
Q1) Javon has 80 hours per week to allocate between labor and leisure. Javon's wage is $8 per hour. Graph hours of leisure per week on the horizontal axis and income per week on the vertical axis. According to the optimal time allocation rule, Javon should allocate his time such that the marginal utility of an additional hour of leisure is:
A) $8.
B) $10.
C) $640.
D) $800.
Q2) (Figure: Joanna's Time Allocation Budget Line) Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. If Joanna's wage rate increases and she ends up working more hours, for her:
A) the substitution effect dominates.
B) the income effect dominates.
C) the substitution and income effects cancel each other out.
D) the substitution effect becomes ineffective.
Answer Key
To view all questions and flashcards with answers, click on the resource link above.