Economic Issues and Policies
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Course Introduction
This course provides an in-depth analysis of contemporary economic issues and the public policies designed to address them. Students will explore topics such as economic growth, income distribution, inflation, unemployment, health care, environmental concerns, globalization, and fiscal and monetary policy. Emphasis is placed on understanding the rationale behind government intervention, evaluating policy effectiveness, and examining the trade-offs involved in addressing complex economic challenges. Through case studies and real-world examples, students will develop critical thinking skills to assess ongoing policy debates and their impact on individuals, businesses, and society as a whole.
Recommended Textbook
Understanding Economics 7th Edition by Mark Lovewell
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15 Chapters
935 Verified Questions
935 Flashcards
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Chapter 1: The Economic Problem
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72 Flashcards
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Sample Questions
Q1) A product has utility if it:
A)takes more and more resources to produce successive units of it
B)can be produced in unlimited quantities
C)satisfies consumer wants
D)is useful
E)is available in only limited quantities
Answer: C
Q2) Assume that a change in government policy results in the increased production of all types of products.It can be concluded that the:
A)economy was not fully employing its resources before the policy change
B)economy's production possibilities curve has shifted to the left as a result of the policy change
C)economy's production possibilities curve does not bow out to the right
D)law of increasing opportunity costs does not apply in this society
E)economy's resources are freely available
Answer: A
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3
Chapter 2: Demand and Supply
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Sample Questions
Q1) The law of supply:
A)reflects the amounts businesses will demand at each price in a series of prices
B)is reflected in a downward-sloping supply curve
C)shows that the relationship between price and quantity supplied is inverse
D)reflects the amounts consumers will supply at each price in a series of prices
E)reflects the direct relationship between price and quantity supplied, ceteris paribus
Answer: E
Q2) An economist for a bicycle company predicts that,ceteris paribus,a rise in consumer incomes increases the demand for bicycles.This prediction is based upon the assumption that:
A)there are many goods that are substitutes for bicycles
B)there are many goods that are complementary to bicycles
C)there are few goods that are substitutes for bicycles
D)bicycles are normal products
E)bicycles are inferior products
Answer: D
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Chapter 3: Elasticity
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Sample Questions
Q1) Supply for a particular product:
A)has the same elasticity in the short run and long run
B)is more elastic in the long run than in the short run
C)is more elastic in the short run than in the long run
D)is more elastic the larger the product is in buyers' budgets
E)is more elastic when the product is a necessity than when it is a luxury
Answer: B
Q2) Marx's theory of exploitation asserts that:
A)workers are paid less than the value they contribute to production
B)each worker's surplus value is eventually paid out in wages
C)when wages are increased, the surplus value extracted from each worker also increases
D)as the length of the workday increases, surplus value remains unchanged
E)as the length of the working day decreases, surplus value increases
Answer: A
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5
Chapter 4: Costs of Production
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Sample Questions
Q1) Decreasing returns to scale may occur because:
A)there are unlimited wants in any society
B)natural resources are limited
C)management easily co-ordinates operations to ensure efficient production
D)inventions of new technology are on the rise
E)there are limited wants in any society
Q2) If total cost is $30 at 10 units of output and $32 at 11 units of output,in this range of output,marginal cost is:
A)$2
B)$31
C)$32
D)$1
E)zero
Q3) Which of the following statements is correct?
A)Average variable cost intersects marginal cost at the latter's minimum point.
B)Marginal cost intersects average cost at the latter's minimum point.
C)Average fixed cost intersects marginal cost at the latter's minimum point.
D)Marginal cost intersects average fixed cost at the latter's minimum point.
E)Average variable cost intersects average fixed cost at the latter's minimum point
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Page 6
Chapter 5: Perfect Competition
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Sample Questions
Q1) In which of the following market structures is the entry of new businesses the most difficult?
A)monopoly
B)oligopoly
C)monopolistic competition
D)perfect competition
E)competitive monopoly
Q2) If the business is hiring workers under perfectly competitive conditions at a wage rate of $22,it will choose to employ:
A)1 worker
B)2 workers
C)3 workers
D)4 workers
E)5 workers
Q3) Which of the following is a basic characteristic of perfect competition?
A)the obstructed operation of the forces of supply and demand
B)a large number of buyers and sellers
C)significant entry and exit barriers
D)significant use of advertising to promote products
E)only a few businesses selling a particular product
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Chapter 6: Monopoly and Imperfect Competition
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Sample Questions
Q1) According to Thomas Schelling,military security for the United States in the era of the Cold War was best ensured by:
A)protecting the American people and their property from potential attacks by the Soviet Union
B)being willing to launch nuclear weapons at the slightest provocation by the Soviet Union
C)offering to protect Soviet nuclear weapons from the possibility of US attack
D)protecting American nuclear weapons from the possibility of Soviet attack
E)constant nuclear warfare
Q2) The four-firm concentration ratio for an industry measures the:
A)geographic concentration of firms
B)extent to which the four largest firms dominate the production and sale of a good
C)percentage of the industry's capital facilities owned by the four largest firms
D)level of production in the industry
E)total revenue earned by all firms in the industry
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8
Chapter 7: Economic Welfare and Income Distribution
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Sample Questions
Q1) The obvious winners from agricultural price supports are:
A)consumers of agricultural products, as price supports create a surplus of such products
B)farmers, as price supports raise their revenues
C)no one, as price supports always lead to wasteful disposal of surpluses
D)Canadian taxpayers
E)companies involved in food-processing, since agricultural price supports reduce their costs
Q2) The cumulative share of income received by the 60 percent of households with the lowest incomes in 2010 was:
A)14.2 percent
B)16.0 percent
C)45.5 percent
D)54.5 percent
E)30.2 percent
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Chapter 8: Measures of Economic Activity
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Sample Questions
Q1) GDP may be defined as:
A)the monetary value of all final goods and services produced within a nation in a given year
B)GNI minus all non-income charges against output
C)the monetary value of the capital stock used in the production of a year's output
D)the monetary value of all goods and services, both final and intermediate, produced in a given year
E)the total monetary earnings of households supplying resources in the Canadian economy
Q2) If the size of the underground economy increases over time:
A)real GDP will rise more rapidly than per capita real GDP
B)GDP will increasingly tend to understate the level of output through time
C)GDP will increasingly tend to overstate the level of output through time
D)the accuracy of GDP will be unaffected through time
E)per capita real GDP will rise more rapidly than real GDP
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Chapter 9: Inflation and Unemployment
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Sample Questions
Q1) If real GDP in 2007 dollars is $1500 billion and the unemployment rate is 7.5 percent when the natural unemployment rate is presumed to be 6.5 percent,then according to Okun's law how much higher could real GDP have been if the economy were operating at its potential output?
A)$3.75 billion
B)$10 billion
C)$25 billion
D)$37.5 billion
E)$15 billion
Q2) Which of the following is least likely to be hurt by unanticipated inflation?
A)a disabled labourer who is living off accumulated savings
B)an owner of a small business with high debts
C)a secretary
D)a retired steelworker with a partially indexed pension
E)an unskilled worker who makes an unindexed wage
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Chapter 10: Economic Fluctuations
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Sample Questions
Q1) If equilibrium real output is $32 billion in this country,the equilibrium price level will be:
A)128
B)122
C)125
D)119
E)116
Q2) Which of the following is a major cost of economic growth?
A)unemployment
B)inflation
C)lower living standards
D)a reduction in current savings
E)pollution
Q3) Economic growth is best represented by a:
A)shift in the production possibilities curve from AB to CD
B)move from y on CD to x on AB
C)shift in the production possibilities curve from CD to AB
D)move from z to x along AB
E)a move from x to z along AB
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12
Chapter 11: Fiscal Policy
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Sample Questions
Q1) If the federal government attempts to eliminate a budget deficit during a depression,these efforts will:
A)shift the investment demand curve to the right
B)raise exports
C)contribute to inflation
D)reduce the severity of the depression
E)intensify the depression
Q2) Fiscal policy refers to the:
A)manipulation of government purchases and taxes for the purpose of stabilizing real output, employment, and the price level
B)manipulation of government purchases and taxes for the purpose of achieving greater equality in the distribution of income
C)altering of the interest rate to change aggregate demand
D)fact that equal increases in government purchases and taxation will be contractionary
E)changing regulations that govern how businesses operate
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13
Chapter 12: Money
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Sample Questions
Q1) Monetarists argue that the relationship between the amount of money which households and businesses want to hold and the level of national income:
A)has increased historically because of increased accessibility to credit
B)rises during recessions and falls during periods of full employment
C)falls during recessions and rises during periods of full employment
D)is stable
E)varies both seasonally and through the business cycle in highly unpredictable ways
Q2) If,in the money market,the quantity of money demanded exceeds the money supply,we would expect the interest rate to:
A)fall, causing households and businesses to hold less money
B)rise, causing households and businesses to hold less money
C)rise, causing households and businesses to hold more money
D)fall, causing households and businesses to hold more money
E)stay the same, causing no change in the money held by households and businesses
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14
Chapter 13: Monetary Policy
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Sample Questions
Q1) Which of the following statements best describes the relationship portrayed by this curve?
A)The demand for labour is high when the inflation rate is low.
B)The inflation rate is high when the unemployment rate is high.
C)The rate of increase in the price level and the unemployment rate are inversely related.
D)The rate of increase in the price level and the unemployment rate are directly related.
E)The demand for labour is low when the unemployment rate is low.
Q2) In terms of the aggregate demand and aggregate supply model,the sale of bonds by the Bank of Canada to chartered banks will:
A)increase aggregate supply
B)decrease aggregate supply
C)increase aggregate demand
D)decrease aggregate demand
E)increase both aggregate demand and aggregate supply
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Chapter 14: The Foreign Sector
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Sample Questions
Q1) Which of the following would call for a monetary inflow into the Canadian economy?
A)travel abroad by Canadians
B)the sale of insurance by Canadian firms to Brazilian shippers
C)Canadian government transfers to low income countries
D)Canadian imports of German automobiles
E)an interest payment by the Canadian federal government to a British bondholder
Q2) Under a system of flexible (floating)exchange rates,a higher Canadian trade deficit with Mexico will tend to cause:
A)the Canadian government to ration pesos to Canadian importers
B)a flow of gold from Canada to Mexico
C)an increase in the price of Canadian dollars, in terms of Mexican pesos
D)a decrease in the price of Canadian dollars, in terms of Mexican pesos
E)a flow of gold from Mexico to Canada
Q3) If the price of yen in terms of Canadian dollars rises,then:
A)the yen price of dollars also rises
B)the dollar depreciates relative to the yen
C)the yen depreciates relative to the dollar
D)the yen price of dollars rises then falls
E)the yen price of dollars stays the same
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Page 16
Chapter 15: Foreign Trade
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Sample Questions
Q1) Which of the following would be feasible terms of trade between Landia and Scandia?
A)1 fish for 4 chips
B)1 fish for 6 chips
C)1 fish for 7 chips
D)2 fish for 4 chips
E)8 chips for 1 fish
Q2) The terms of trade reflect the:
A)rate at which gold exchanges internationally for any domestic currency
B)ratio at which nations will exchange two products
C)fact that the gains from trade will be divided equally
D)cost conditions embodied in the production of two products in a single country
E)the ratio of the two countries' currencies
Q3) In effect,tariffs on imports are:
A)special taxes on domestic producers
B)subsidies to domestic consumers
C)subsidies to foreign producers
D)subsidies to domestic producers
E)income taxes on foreign consumers
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Page 17