Economics I Exam Questions
Course Introduction
Economics I offers an introduction to the fundamental principles of microeconomics and macroeconomics. The course examines basic concepts such as supply and demand, market equilibrium, elasticity, consumer behavior, production and costs, as well as the roles of households and firms within various market structures. Additionally, students will explore broader economic issues including national income, inflation, unemployment, and the functioning of fiscal and monetary policy. Through theoretical models and real-world applications, this course lays the groundwork for understanding how economies operate and introduces tools for analyzing economic problems and policy decisions.
Recommended Textbook
Macroeconomics 5th Edition by Stephen
D. Williamson
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966 Verified Questions
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Page 2
Chapter 1: Introduction
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Sample Questions
Q1) In the long run,the quantity of money
A) does not matter.
B) influences GDP.
C) influences unemployment.
D) influences the business cycle.
Answer: A
Q2) The Beveridge curve shifted outward during what period?
A) during the Great Depression.
B) during the Great Moderation.
C) after January 2008.
D) between January 2000 and December 2007.
Answer: C
Q3) The two most important American business cycle events of the twentieth century were
A) the Great Depression and stagflation.
B) World War II and the Great Depression.
C) the productivity slowdown and the Great Depression.
D) government budget deficits and World War II.
Answer: B
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Page 3
Chapter 2: Measurement
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Sample Questions
Q1) Year 2 nominal GDP is
A) $200.
B) $270.
C) $310.
D) $390.
Answer: D
Q2) Suppose that Year 2 is the base year. The CPI for Year 1 is approximately
A) 80.0.
B) 90.0.
C) 100.0.
D) 120.0.
Answer: A
Q3) If Year 1 is the base year,the growth of real GDP is approximately A) 100%.
B) 109.5%.
C) 137.5%.
D) 148%.
Answer: C
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Chapter 3: Business Cycle Measurement
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Sample Questions
Q1) Employment tends to
A) lead the cycle.
B) be coincident with the cycle.
C) lag the cycle.
D) sometimes lead, sometimes lag the cycle.
Answer: C
Q2) For the period 1947-2012,the behavior of the U.S. money supply is best characterized as
A) nearly constant over time.
B) somewhat smoother than GDP.
C) somewhat more volatile than GDP.
D) extremely volatile and unstable.
Answer: B
Q3) Average labor productivity tends to be
A) procyclical and less variable than real GDP.
B) procyclical and more variable than real GDP.
C) countercyclical and less variable than real GDP.
D) countercyclical and more variable than real GDP.
Answer: A
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Page 5
Chapter 4: Consumer and Firm Behavior: The Work-Leisure
Decision and Profit Maximization
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Sample Questions
Q1) The construct of a representative firm is most helpful in describing the behavior of all of the firms in the economy when
A) there are constant returns to scale.
B) there are increasing returns to scale.
C) there are decreasing returns to scale.
D) the marginal product of labor is increasing in the amount of labor input.
Q2) In a one-period economy
A) consumption equals disposable income.
B) consumption equals disposable income plus the value of non-market work.
C) savings is always positive.
D) consumers may increase their consumption by borrowing.
Q3) A pure positive income shock leads to
A) an increase in leisure and consumption.
B) an increase in leisure and work.
C) an increase in work and consumption.
D) an increase in leisure and taxes.
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6
Chapter 5: A Closed-Economy One-Period Macroeconomic Model
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Sample Questions
Q1) A Pareto optimum is a point that
A) a malevolent dictator would choose.
B) a cooperative coalition of some altruistic consumers would choose.
C) a cooperative coalition of some socially responsible firms would choose.
D) a social planner would choose.
Q2) A one-unit increase in government expenditures should,according to the model,increase GDP by
A) 0.
B) between zero and one unit.
C) one unit.
D) more than one unit.
Q3) In the model of public goods
A) government spending is pure waste
B) private consumption and government spending are equal.
C) consumers benefit from private goods and public goods.
D) the government provides goods at no cost to the public.
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Chapter 6: Search and Unemployment
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Sample Questions
Q1) In the Keynesian DMP model,if the wage is high then
A) the vacancy rate is low.
B) the unemployment rate is low.
C) labor market tightness is high.
D) the labor force must be low.
Q2) From 2009 to 2012
A) The Beveridge curve became flat.
B) The Beveridge curve shifted to the right.
C) The Beveridge curve cannot be discerned in the data.
D) The Beveridge curve shifted to the left.
Q3) The participation rate was higher in 2012 than in 1948 because
A) the labor force was larger in 2012 than in 1948.
B) the unemployment rate became less variable over time.
C) of the Great Moderation
D) the participation rate of women rose between 1948 to 2012.
Q4) The employment/population ratio is
A) more volatile than the participation rate.
B) roughly constant over time.
C) less volatile than the participation rate.
D) smaller in 2012 than in 1970.
Page 8
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Chapter 7: Economic Growth: Malthus and Solow
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Sample Questions
Q1) The saving rate has the following characteristic in Solow's exogenous growth model
A) it increases with output.
B) it first decreases, then increases with output.
C) it first increases, then decreases with output.
D) it is constant.
Q2) In the Malthusian model of economic growth
A) Per capita consumption affects birth rates and death rates.
B) Per capita consumption affects birth rates but not death rates.
C) Per capita consumption affects death rates but not birth rates.
D) Per capita consumption is always constant.
Q3) If an epidemic hits a Malthusian economy,the immediate consequence is
A) an increase in the standard of living.
B) a reduction in the standard of living.
C) no change in the standard of living.
D) dependent on the population growth rate.
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Chapter 8: Income Disparity Among Countries and Endogenous Growth
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Sample Questions
Q1) Paul Romer argues that a key feature of knowledge is A) divisibility.
B) private ownership.
C) nonrivalry.
D) durability.
Q2) In the endogenous growth model presented in the text,an increase in the fraction of time accumulating human capital
A) increases the growth rate of human capital and increases the growth rate of output.
B) increases the growth rate of human capital and decreases the growth rate of output.
C) decreases the growth rate of human capital and increases the growth rate of output.
D) decreases the growth rate of human capital and decreases the growth rate of output.
Q3) Endogenous growth theory is about
A) the welfare of indigenous people.
B) explaining growth.
C) studying fertility choices.
D) giving more importance to capital accumulation.
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10
Chapter 9: A Two-Period Model: The Consumption-Savings
Decision and Credit Markets
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Sample Questions
Q1) A consumer is a borrower if
A) optimum current consumption is less than current disposable income.
B) optimum current consumption is greater than current disposable income.
C) future disposable income is greater than current disposable income.
D) the consumer's indifference curves are relatively steep.
Q2) We limit ourselves to two periods in the intertemporal model of the business cycle because
A) we need to concentrate on the two phases of the business cycle.
B) we can assume that people can live two periods of, say, 30 years.
C) this is all we need to emphasize the intertemporal trade-off.
D) we need an even number of periods.
Q3) For a lender in a (c,c')graph,the optimal consumption bundle is
A) to the left of the endowment point.
B) to the right of the endowment point.
C) on the endowment point.
D) dependent on other factors.
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Chapter 10: Credit Market Imperfections: Credit Frictions,
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Sample Questions
Q1) In the two-period model with limited commitment,if the collateral constraint binds
A) increases in the present value of collateral increase current consumption and reduce future consumption.
B) increases in the present value of collateral increase current consumption one-for-one.
C) increases in the present value of collateral decrease current consumption and increase future consumption.
D) increases in the present value of collateral increase current consumption less than one-for-one.
Q2) The negative impact of the loss of value of collateralized assets is due to A) asymmetric information.
B) Ricardian Equivalence.
C) limited commitment.
D) financial intermediation through banks.
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12
Chapter 11: A Real Intertemporal Model with Investment
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Sample Questions
Q1) The marginal cost of investment for the firm is equal to A) 1.
B) 0.
C) the depreciation rate.
D) the depreciation rate plus the interest rate.
Q2) Labor demand depends on the interest rate because
A) household savings depend on the interest rate.
B) firms discount future profits.
C) of Ricardian equivalence.
D) Labor demand actually does not depend on the interest rate.
Q3) In determining the benefit of additional investment to the representative firm,we consider the marginal product of A) current capital.
B) future capital
C) current labor.
D) future labor.
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Chapter 12: Money, Banking, Prices, and Monetary Policy
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Sample Questions
Q1) When the nominal interest rate increases,the quantity of credit card services
A) increases.
B) decreases.
C) stays constant.
D) moves in unpredictable ways.
Q2) The classical dichotomy states that
A) money is superneutral.
B) goods markets are separated from labor markets.
C) demand is separate from supply.
D) real markets determine nominal outcomes, not the reverse.
Q3) The two most common types of money in circulation in the United States today consist of
A) private bank notes and commodity-backed paper currency.
B) commodity-backed paper currency and fiat money.
C) fiat money and transaction deposits at banks.
D) transaction deposits at banks and commodity money.
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14
Chapter 13: Business Cycle Models with Flexible Prices and Wages
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Sample Questions
Q1) The coordination failure model is based on the possibility of increasing returns to scale
A) both at the aggregate level and at the level of the individual firm.
B) at the aggregate level, but not at the level of the individual firm.
C) at the level of the individual firm, but not at the aggregate level.
D) in future periods, but not in the current period.
Q2) Extraneous events that are completely unrelated to economic fundamentals are called
A) moonbeams.
B) black holes.
C) sunspots.
D) time warps.
Q3) The behavior of the Solow residual suggests that when current total factor productivity increases
A) it becomes more difficult to predict future total factor productivity.
B) future total factor productivity is also likely to increase.
C) such increases are temporary, so we can draw no conclusions about the likely behavior of future total factor productivity.
D) future total factor productivity is likely to decrease.
Page 15
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Chapter 14: New Keynesian Economics: Sticky Prices
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Sample Questions
Q1) Suppose that there is an increase in the demand for money. What is the appropriate monetary policy response in the New Keynesian sticky price model?
A) an increase in the interest rate target
B) no change in the interest rate target
C) a decrease in the interest rate target
D) an increase in government spending
Q2) According to New Keynesian theory,fluctuations in the target interest rate are not a good explanation of the business cycle because the model predicts that
A) consumption is constant.
B) labor is countercyclical.
C) average labor productivity is countercyclical.
D) output is countercyclical.
Q3) Under a liquidity trap in the New Keynesian model,
A) prices cannot be sticky.
B) monetary policy is ineffective.
C) the economy is always efficient.
D) fiscal policy is ineffective.
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16
Chapter 15: International Trade in Goods and Assets
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Sample Questions
Q1) In a two-period model,holding everything else constant,an increase in government spending
A) unambiguously increases the current account surplus.
B) unambiguously decreases the current account surplus.
C) has an uncertain effect on the current account surplus.
D) has no effect on the current account surplus.
Q2) The behavior of investment and real GDP in the United States after the 1990s
A) is not consistent with the two-period model with production.
B) is consistent with the effects of an increase in the government deficit in the two-period model with production.
C) is consistent with the effects of an increase in optimism about future total factor productivity in the two-period model with production.
D) is consistent with the effects of a decrease in the government deficit in the two-period model with production.
Q3) Including investment and production in the two-good,two-period model with trade
A) allows the country to equalize absorption and output demand.
B) renders terms of trade endogenous.
C) allows the country to react to changes in the interest rate.
D) allows the government to run budget deficits.
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Page 17
Chapter 16: Money in the Open Economy
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Sample Questions
Q1) The balance of payments is zero
A) as an accounting identity.
B) because market forces ensure that this is so.
C) only if the current account balance is zero.
D) only if the capital account balance is zero.
Q2) Under purely flexible exchange rates,
A) there is no intervention by the domestic fiscal or monetary authorities to specifically target the nominal exchange rate.
B) there is only occasional intervention by the domestic fiscal or monetary authorities to specifically target the nominal exchange rate.
C) the domestic fiscal and monetary authorities retain considerable flexibility to prevent short-run variability in the nominal exchange rate.
D) the domestic fiscal and monetary authorities retain considerable flexibility to prevent long-run variability in the nominal exchange rate.
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Chapter 17: Money, Inflation, and Banking
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Sample Questions
Q1) The Federal Reserve System has a network of how many Federal Reserve Banks?
A) 12
B) 36
C) 50
D) 84
Q2) There is a double coincidence of wants when
A) person 1 has what person 2 wants, who in turn wants what person 3 has.
B) person 1 has what person 2 wants, and person 2 has money.
C) person 1 has what person 2 wants, and person 2 has what person 1 wants.
D) person 1 has money, and person 2 has what person 1 wants.
Q3) In the monetary intertemporal model,the long-run effects of an increase in the level of money include
A) an increase in employment.
B) lower output.
C) higher real wages.
D) higher nominal wages.
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19
Chapter 18: Inflation, the Phillips Curve, and Central Bank Commitment
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Sample Questions
Q1) The Phillips curve shifts because
A) private behavior adapts to monetary policy.
B) expected inflation changes.
C) the central bank attempts to exploit the Phillips curve.
D) all of the above.
Q2) In the Friedman-Lucas money surprise model,a surprise increase in money supply growth
A) has no effect on inflation.
B) increases inflation less than in proportion to the growth rate of the money supply.
C) increases inflation in an equal proportion to the growth rate of the money supply.
D) increases inflation more than in proportion to the growth rate of the money supply.
Q3) The original work on the application of the time inconsistency problem in macroeconomics is due to
A) Milton Friedman and Robert Lucas.
B) Michael Hutchinson and Carl Walsh.
C) Finn Kydland and Edward Prescott.
D) Robert Barro and Donald Gordon.
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