Business Economics
Question Bank
Course Introduction
Business Economics explores the application of economic theory and quantitative methods to business decision-making. The course examines key concepts such as demand and supply analysis, market structures, pricing strategies, production and cost functions, and the impact of government policies on business operations. Students will learn how to interpret economic data, forecast business trends, and make informed strategic decisions within a dynamic global marketplace. By bridging economic theory with real-world business practices, this course equips students with practical analytical tools essential for effective management and leadership.
Recommended Textbook
ECON MACRO 5th Edition by William A. McEachern
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19 Chapters
2883 Verified Questions
2883 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/71393
Sample Questions
Q1) An economic model that sometimes makes incorrect predictions may be used by economic decision makers:
A)under no circumstances.
B)only if its assumptions are detailed and realistic.
C)if it is mathematical and computerized.
D)if it is simple enough for a child to understand.
E)until a better model is developed.
Answer: E
Q2) One problem with rent controls is that policy makers often ignore its secondary effects.
A)True
B)False
Answer: True
Q3) Behavioral assumptions:
A)make economic models more complex than if these assumptions were removed.
B)pertain only to consumers.
C)hold all other things constant.
D)are ways to test a hypothesis.
E)describe how individuals are expected to behave.
Answer: E
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Chapter 2: Economic Tools and Economic Systems
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) The production possibilities frontier represents the boundary between attainable and unattainable prices of commodities.
A)True
B)False
Answer: False
Q2) If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes,Josh's opportunity cost of baking one cake is:
A)painting one room.
B)painting 1/40 of a room.
C)painting 1/60 of a room.
D)painting 2/3 of a room.
E)painting 3/2 of a room.
Answer: C
Q3) Opportunity cost is objective; therefore,its value does not change as circumstances change.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Economic Decision Makers
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) A tax is said to be progressive if:
A)the absolute size of the tax (in dollars)increases as income increases.
B)the wealthy pay a smaller percentage of their income than the poor.
C)the average tax rate falls as income rises.
D)the proportion of income paid as taxes increases as income increases.
E)the proceeds are used to pay for liberal political programs.
Answer: D
Q2) Which of the following have their profits taxed twice?
A)Sole proprietorship
B)Partnership
C)Corporation
D)Nonprofit institutions
E)S corporations
Answer: C
Q3) An external benefit is a benefit from an activity that falls on a third party which is not involved in the activity.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Demand, supply, and Markets
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152 Flashcards
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Sample Questions
Q1) Which of the following will indicate a shortage of a product in the market to suppliers?
A)The quantity supplied exceeds the quantity demanded at a particular price.
B)The quantity demanded decreases substantially.
C)The stock of inventories of most suppliers increases.
D)The quantity demanded exceeds the quantity supplied at a particular price.
E)The price of the product declines to an all-time low.
Q2) Which of the following is the best example of a pair of complements?
A)Milk and coffee
B)Coffee and tea
C)CDs and DVDs
D)Hiking boots and athletic shoes
E)Paperback books and hard cover books
Q3) Which of the following would most likely increase the supply of college textbooks?
A)Exodus of five major publishers from the industry
B)An increase in the cost of paper used in books
C)An increase in the wage rate of workers associated with printing
D)Expectation of a price rise in the future
E)An improvement in the technology used in book production
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Page 6
Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) The value of a country's final goods and services after adjusting for changes due to inflation is called its _____.
A)real GDP
B)nominal GDP
C)disposable income
D)net national product
E)full employment output
Q2) Which of these partly accounts for the long-term growth in production in the U.S.economy?
A)An increase in government spending
B)An increase in the availability of resources
C)A reduction in federal taxes
D)A gradual but consistent increase in the price level
E)A general optimism about the future and the pioneering spirit of America
Q3) Which of the following is true of a recession?
A)It is typically accompanied by inflation and investment growth.
B)It lasts for more than two years on an average.
C)It is typically longer than periods of expansion.
D)It begins after an expansion has peaked.
E)It continues as long as actual output exceeds the potential output.
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Chapter 6: Tracking the Useconomy
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Sample Questions
Q1) Gross domestic product (GDP)understates total economic activity because it ignores household production of goods and services.
A)True
B)False
Q2) If the consumer price index (CPI)is 200 one year and 206 the next year,the annual rate of inflation as measured by the CPI is approximately _____.
A)103 percent
B)1 percent
C)6 percent
D)3 percent
E)206 percent
Q3) Which of the following would be included in this year's gross domestic product (GDP)?
A)One hundred shares of IBM stock that Tony sold this May
B)A used car that Tracey sold to Justin
C)George's purchase of a fishing rod and reel at a garage sale
D)Sharon giving Dennis $20 as a reward for finding her ring
E)A bucket of Kentucky Fried Chicken that Kate bought this July
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8
Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) Relative prices describe the terms at which individual goods are exchanged for one another.
A)True
B)False
Q2) The nominal interest rate is equal to the real interest rate minus the anticipated inflation rate.
A)True
B)False
Q3) Which of the following people would be classified as unemployed?
A)A person who wants a job as a fashion model but cannot find work in that field
B)Someone who quits a part-time job to attend school full time
C)Someone who does not have a job and gives up looking for one
D)A person who works at a job that underutilizes his or her skills
E)A person who works part-time and would rather work full time
Q4) The benefits paid by the largest pension program in the United States are:
A)not adjusted for changes in the price level.
B)adjusted for changes in the price level.
C)revised every five years.
D)adjusted for changes in the nominal rate of interest.
E)adjusted for changes in the real rate of interest.
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) Which of the following does not contribute to labor productivity growth?
A)A steepening of the per-worker production function
B)An increase in the amount of capital per unit of labor
C)A growth in the labor force
D)An improvement in the quality of capital
E)A decrease in the labor-capital ratio
Q2) Which of the following implies a decline in labor productivity in an economy?
A)A high rate of growth in capital formation
B)An improvement in input quality
C)A decrease in the production of goods and services
D)An increase in the budget surplus in the economy
E)A decrease in the prices of goods and services
Q3) Over the long run,technological change increases both labor productivity and unemployment rates.
A)True
B)False
Q4) If the ratio of labor to capital increases,we can expect that labor productivity will increase.
A)True
B)False
10
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Chapter 9: Aggregate Demand
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Sample Questions
Q1) A household that expects a decrease in disposable income in the future will _____.
A)increase its current consumption spending
B)decrease its current consumption spending
C)maintain its current consumption spending
D)first increase its current consumption spending and then decrease spending when income falls
E)first decrease its current consumption spending and then increase spending when income falls
Q2) An economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate,other things held constant.
A)True
B)False
Q3) Expectations that disposable income will increase in the future will _____.
A)shift the current consumption function upward
B)shift the current consumption function downward
C)result in an upward movement along the current consumption function
D)make the current consumption function flatter
E)make the current consumption function steeper
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Page 11
Chapter 10: Aggregate Supply
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Sample Questions
Q1) Identify the correct statement.
A)In periods of low inflation,real wages are constant but nominal wages decline.
B)If the price level increases,real wages will increase.
C)If the price level increases,nominal wages will fall.
D)In periods of high inflation,real wages change even if nominal wages remain constant.
E)If the inflation rate is high,real wages and nominal wages change by the same amount.
Q2) A recessionary gap is usually closed in the long run by a(n):
A)rightward shift of the short-run aggregate supply curve.
B)leftward shift of the short-run aggregate supply curve.
C)rightward movement along a fixed short-run aggregate supply curve.
D)decrease in aggregate demand.
E)leftward movement along a fixed short-run aggregate supply curve.
Q3) In the long run,a decrease in aggregate demand will lead to a(n):
A)decrease in price and output levels.
B)increase in price and output levels.
C)increase in the price level and a decrease in output.
D)decrease in the price level and an increase in output.
E)decrease in the price level and no change in output.
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Page 12
Chapter 11: Fiscal Policy
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Suppose government purchases increase by $100 million in an economy,which leads to total output increasing by $500 million.The size of the multiplier is _____.
A)$400
B)5
C)$500
D)0.5
E)50
Q2) A decrease in government purchases can close an expansionary gap by shifting the aggregate demand curve.
A)True
B)False
Q3) Which of the following groups did Clinton target after his stimulus package failed in 1993?
A)High-income households
B)Low-income households
C)Foreign investors
D)Only industrial workers
E)Households with the lowest MPC
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Chapter 12: Federal Budgets and Public Policy
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Which of the following is true of an annually balanced federal budget?
A)Most economists agree that the federal government should balance its budget just as each household does.
B)Such a policy would require the government to increase its spending when tax receipts decrease.
C)Such a policy became popular between the 1930s and 1960s.
D)Such a policy guarantees that the economy is its potential level.
E)Such a policy could worsen a contractionary gap.
Q2) Which of the following is true of an increase in the federal government budget surplus?
A)An increase in surplus results in a decrease in the national saving.
B)An increase in surplus shifts the aggregate demand curve rightward.
C)An increase in surplus increases the federal debt.
D)An increase in surplus dampens aggregate demand in the short run.
E)An increase in surplus increases the natural rate of unemployment.
Q3) Crowding out occurs because lower interest rates discourage saving and make it harder to borrow.
A)True
B)False
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Page 14
Chapter 13: Money and the Financial System
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150 Flashcards
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Sample Questions
Q1) The U.S.dollar is a good example of fiat money.
A)True
B)False
Q2) To say that money serves as a store of value is to say that money is a useful way to store wealth for future use.
A)True
B)False
Q3) Specialization of labor means that:
A)production requires a special kind of labor.
B)the overall skill level of labor is increasing over time.
C)individuals produce goods that they are relatively good at producing and trade for those that they do not produce.
D)individuals achieve self-sufficiency in production by producing all the goods that they require.
E)exchange within the economy consists of trading in services.
Q4) People came to accept fiat money because they believed that others would accept it as well.
A)True
B)False
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Chapter 14: Banking and the Money Supply
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) The M1 money supply consists primarily of:
A)savings deposits.
B)certificates of deposit.
C)miscellaneous near-monies.
D)checkable deposits.
E)money market mutual fund accounts.
Q2) In the United States,paper money is redeemable for gold.
A)True
B)False
Q3) M1 includes currency held in bank vaults.
A)True
B)False
Q4) Suppose the required reserve ratio is 0.1 and Linda deposits $4,000 in cash at the College State Bank.If the bank held no excess reserves before Linda's deposit and now increases its reserves by $500,which of the following is true?
A)The bank must have lent out an additional $4,000.
B)$500 is the value of the bank's required reserves.
C)The bank now has excess reserves of $100.
D)Both the bank's assets and its liabilities rise by $500.
E)The bank now has $500 in excess reserves.
Page 16
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Chapter 15: Monetary Theory and Policy
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Sample Questions
Q1) The demand for money is a downward sloping line that depicts the relationship between the price level and the opportunity cost of holding money.
A)True
B)False
Q2) A movement upward and to the left along the money demand curve is caused by:
A)an increase in the interest rate.
B)a decrease in the interest rate.
C)a decrease in real GDP.
D)an increase in real GDP.
E)an increase in the average price level.
Q3) At a given point in time,if the demand for money increases:
A)the interest rate will fall.
B)there will be a movement downward along the money demand curve.
C)there will be a movement upward along the money demand curve.
D)there will be a rightward shift of the money demand curve.
E)there will be a leftward shift of the money demand curve.
Q4) The higher the interest rate,the greater the preference for liquidity.
A)True
B)False
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Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) As people come to expect higher inflation,the long-run Phillips curve shifts leftward.
A)True
B)False
Q2) According to economists of the rational expectations school,_____.
A)the passive approach must be adopted because they believe the economy is too complex
B)individual forecasts about policies can never be right
C)anticipated monetary policy can affect the output level
D)discretionary policy can stabilize the economy
E)discretionary policy should be completely avoided
Q3) Suppose policy makers are concerned about a shortage of long-term capital investment.To remedy the problem,various plans to cut capital gains taxes have been suggested.The delay in picking a plan is called the _____.
A)implementation lag
B)policy coordination problem
C)decision-making lag
D)recognition lag
E)effectiveness lag
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18
Chapter 17: International Trade
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Sample Questions
Q1) For each pound of blueberry cheesecake Abura produces,it gives up the opportunity to make 150 screwdrivers.Mayo can produce one pound of blueberry cheesecake for every 300 screwdrivers it produces.If specialization and trade were to occur between these two countries,which of the following is true with regard to opportunity costs in the two countries?
A)The opportunity cost of producing cheesecakes is lower in Abura than Mayo.
B)The opportunity cost of producing screwdrivers is lower in Abura than Mayo.
C)The opportunity cost of producing cheesecakes is identical in both countries.
D)The opportunity cost of producing screwdrivers is higher in Abura than Mayo.
E)In Mayo,the opportunity cost of producing one unit of screwdriver is one pound of cheesecake.
Q2) A tariff is a tax on either imports or exports.
A)True
B)False
Q3) An effective import quota:
A)lowers the price of imports.
B)lowers the price of domestic goods competing with imports.
C)increases the variety of goods available to the consumer.
D)increases federal revenues.
E)lowers the quantity of the imported good.
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Chapter 18: International Finance
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150 Flashcards
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Sample Questions
Q1) A country's investment earnings from foreign assets minus foreigners' earnings from their assets in the country is called _____.
A)the merchandise trade balance
B)net unilateral transfers abroad
C)the balance on good and services
D)net investment income from abroad
E)the financial account balance
Q2) Critics of the system of flexible exchange rates allege that it:
A)causes inflation.
B)causes unemployment.
C)gives central banks too little discretion over their money supplies.
D)restricts the growth of developing countries.
E)gives too much financial power to industrial countries.
Q3) Flexible exchange rates do not allow for discretionary monetary policy.
A)True
B)False
Q4) The Bretton Woods system fixed all exchange rates in terms of the U.S.dollar.
A)True
B)False
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Chapter 19: Economic Development
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Sample Questions
Q1) Economists favor export promotion over import substitution as a policy for economic growth because:
A)it provides infant industries with a protected market.
B)it favors replacing high-cost foreign goods with low-cost domestic goods.
C)it improves the efficiency of foreign producers.
D)it emphasizes comparative advantage and trade expansion.
E)it emphasizes trade restrictions and helps provide a market for domestic goods.
Q2) Which of the following is likely to facilitate the adoption of new technology across nations?
A)Consumer preferences
B)A common heritage
C)Higher birth rates
D)A relatively stable price ratio
E)A high percentage of younger people in the population
Q3) Improvement in the quality of human capital is not an important requirement for technology adoption.
A)True
B)False
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