Survey of Economics
Textbook Exam Questions
Course Introduction
Survey of Economics provides a comprehensive introduction to the fundamental concepts and principles of both microeconomics and macroeconomics. Students will explore topics such as supply and demand, market structures, consumer behavior, production, national income, unemployment, inflation, fiscal and monetary policy, and the role of government in the economy. The course emphasizes real-world applications and the practical implications of economic theory, equipping students with analytical tools to better understand current economic issues and make informed decisions as consumers, workers, and citizens.
Recommended Textbook
Economics 20th Edition Volume I and Volume II by Campbell R. McConnell\McConnell 20e
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Page 2
Chapter 22: Income Inequality Poverty and Discrimination
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Sample Questions
Q1) Which of the following measurement issues makes interpretation of U.S.poverty rates difficult?
A) Poverty statistics measure consumption rather than income,and some families may receive income that is above the official poverty line.
B) The high cost of living in urban areas tends to result in the understatement of poverty.
C) Most people below the poverty line have substantial unreported income.
D) The poverty rate is adjusted for every urban and rural area,so people's poverty status changes whenever they move.
Q2) Which of the following is a public assistance or welfare program as opposed to a social insurance program?
A) Supplemental Security Income (SSI).
B) Unemployment compensation.
C) Medicare.
D) Social Security.
Q3) The top 20 percent of U.S.income earners receive nearly 80 percent of total U.S.income.
A)True
B)False
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3
Chapter 23: Health Care
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Sample Questions
Q1) A major implication of asymmetric information is that:
A) health care suppliers may reduce the supply of health care.
B) health care suppliers may increase the demand for health care.
C) collusion between health care suppliers and purchasers may accelerate the rise in costs.
D) resources may be underallocated to the health care industry.
Q2) The main purpose of HMOs and PPOs is to:
A) reduce health care costs for employers and their employees.
B) reduce medical malpractice suits.
C) enable groups of physicians to increase their fees.
D) direct patients to specialists rather than to more expensive primary-care physicians.
Q3) If labor productivity in the health care industry rises very slowly relative to wages and salaries in the industry,this would tend to:
A) increase the demand for health care.
B) decrease the demand for health care.
C) increase the supply of health care.
D) increase the cost of health care.
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Chapter 24: Immigration
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Q1) Other things equal,immigration has what effects on the destination nation?
A) Reduced average wage rate,increased domestic output,increased business income,and lower total wage income of native-born workers.
B) Reduced average wage rate,increased domestic output,increased business income,and greater total wage income of native-born workers.
C) Increased average wage rate,increased domestic output,increased business income,and greater total wage income of native-born workers.
D) Increased average wage rate,reduced domestic output,reduced business income,and lower total wage income of native-born workers.
Q2) If all nations prohibited the international migration of labor,we would expect world output to decline.
A)True
B)False
Q3) Human capital refers to:
A) the accumulated knowledge and skills that allow a person to be productive.
B) machinery that requires extensive human interaction to be productive.
C) the accumulated financial assets of people.
D) all of these things.
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Chapter 25: An Introduction to Macroeconomics
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Q1) Which of the following is used to measure directly the average standard of living across countries?
A) Real GDP.
B) Nominal GDP.
C) Purchasing power parity.
D) GDP per person.
Q2) Prices tend to be stickier in the shorter run than in the longer run.
A)True
B)False
Q3) The business cycle is primarily concerned with changes in the level of overall prices over time.
A)True
B)False
Q4) Which of the following countries would economists say definitively is achieving modern economic growth?
A) Zimbabwe experiences a 5.6 percent increase in nominal GDP.
B) South Africa experiences a 4.2 percent increase in real GDP.
C) Ghana experiences a 3.6 percent increase in nominal GDP per person.
D) Nigeria experiences a 2.7 percent increase in real GDP per person.
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Chapter 26: Measuring Domestic Output and National Income
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Q1) In the second quarter (three-month period)of 2001,U.S.nominal GDP increased but U.S.real GDP declined.We can conclude that:
A) nominal income declined by more than personal income.
B) the price level rose by more than nominal GDP.
C) real wages declined by more than real GDP.
D) the price level fell by more than real GDP.
Q2) Which of the following best defines disposable income?
A) Income received by households less personal taxes.
B) The before-tax income received by households.
C) All income earned by resource suppliers for their current contributions to production.
D) The market value of the annual output net of consumption of fixed capital.
Q3) Transfer payments are included in:
A) NI.
B) PI.
C) GDP.
D) NDP.
Q4) Personal income usually exceeds disposable income.
A)True
B)False
7
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Chapter 27: Economic Growth
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Q1) Growth in well-being tends to be understated by growth in real GDP because of increases in leisure time.
A)True
B)False
Q2) Proponents of economic growth claim that rising living standards can lead to environmental improvements as people can afford to care more about the environment.
A)True
B)False
Q3) Other things equal,which of the following would decrease the rate of economic growth,as measured by changes in real GDP?
A) An increase in the educational attainment of the labor force.
B) A permanent decrease in frictional unemployment.
C) An increase in the amount of capital per worker.
D) A decrease in the labor force participation rate.
Q4) Proponents of economic growth claim that growth leads to greater equality of income in an economy.
A)True
B)False
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Page 8
Chapter 28: Business Cycles, Unemployment, and Inflation
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Q1) (Consider This)Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.Which of the following best explains their argument?
A) Inflation will cause workers' real income to decline,encouraging them to work harder to find more and better employment.
B) Higher prices will increase firm profitability,making them want to hire more workers.
C) Higher prices will correspond with higher wages,which will stimulate demand and employment.
D) Anticipating this inflation,consumers will increase spending to beat the price increases,increasing demand,output,and employment.
Q2) Most economists agree that the immediate determinant of the volume of output and employment is the:
A) composition of consumer spending.
B) ratio of public goods to private goods production.
C) level of total spending.
D) size of the labor force.
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Chapter 29: Basic Macroeconomic Relationships
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Sample Questions
Q1) If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round,income will eventually decline by:
A) $200 billion.
B) $300 billion.
C) $400 billion.
D) $500 billion.
Q2) If DI is $275 billion and the APC is 0.8,we can conclude that saving is $55 billion.
A)True
B)False
Q3) If the marginal propensity to save is 0.2 in an economy,a $20 billion rise in investment spending will increase:
A) GDP by $120 billion.
B) GDP by $20 billion.
C) saving by $25 billion.
D) consumption by $80 billion.
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Chapter 30: The Aggregate Expenditures Model
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Sample Questions
Q1) In the United States from 1929 to 1933,real GDP _____________ and the unemployment rate ________________.
A) declined by 27 percent;rose to 25 percent
B) increased by 21 percent;fell to 2 percent
C) declined by 21 percent;rose to 27 percent
D) declined by 40 percent;rose to 50 percent
Q2) If the marginal propensity to consume in an economy is .8,net exports are zero,and government spending is $33 billion at each level of real GDP,the slope of the economy's aggregate expenditures schedule will be:
A) .8.
B) .2.
C) 5.
D) .125.
Q3) Investment and saving are,respectively:
A) income and wealth.
B) stocks and flows.
C) injections and leakages.
D) leakages and injections.
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Chapter 31: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Which of the following would not shift the aggregate supply curve?
A) An increase in labor productivity.
B) A decline in the price of imported oil.
C) A decline in business taxes.
D) An increase in the price level.
Q2) In response to the Great Recession,the federal government engaged in significant deficit-funded spending,but it did not fully achieve the desired result.Which of the following best explains why the fiscal policy actions fell short of their objective?
A) Monetary policy counteracted fiscal policy,keeping the unemployment rate from falling as much as intended.
B) Consumers did not respond to the fiscal stimulus as well as hoped,as they put more income into saving and repaying debt.
C) Although the fiscal stimulus increased consumer spending significantly,it mostly went to purchase foreign-produced goods and services.
D) The fiscal stimulus caused massive inflation that further disrupted economic activity.
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Chapter 32: The Balance of Payments, Exchange Rates, and Trade Deficits
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Sample Questions
Q1) Economists refer to a budget deficit that exists when the economy is achieving full employment as a:
A) cyclical deficit.
B) cyclically adjusted deficit.
C) natural deficit.
D) nonrecurring deficit.
Q2) When current tax revenues exceed current government expenditures and the economy is achieving full employment:
A) the cyclically adjusted budget has neither a deficit nor a surplus.
B) the cyclically adjusted budget may have either a deficit or a surplus.
C) the cyclically adjusted budget has a surplus.
D) the government is engaging in an expansionary fiscal policy.
Q3) Built-in stability is synonymous with discretionary fiscal policy.
A)True
B)False
Q4) Discretionary fiscal policy will stabilize the economy most when:
A) deficits are incurred during recessions and surpluses during inflations.
B) the budget is balanced each year.
C) deficits are incurred during inflations and surpluses during recessions.
D) budget surpluses are continuously incurred.
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Chapter 33: Money, Banking, and Financial Institutions
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Sample Questions
Q1) (Consider This)Credit card balances are:
A) a component of M1.
B) a component of M2 but not of M1.
C) a component of M1 but not of M2.
D) not a component of M1 or M2.
Q2) To say that the Federal Reserve Banks are quasi-public banks means that:
A) they are privately owned but managed in the public interest.
B) they deal only with banks of foreign nations and do not have direct business contact with U.S.banks.
C) they deal only with commercial banks,and not the public.
D) they are publicly owned but privately managed.
Q3) Collateralized default swaps:
A) helped reduce the losses from the mortgage default crisis.
B) involve exchanging high-risk mortgages for low-risk mortgage-backed securities.
C) are loans to investors in mortgage-backed securities.
D) insured holders of loan-backed securities in case the underlying loans were not repaid.
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Chapter 34: Money Creation
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Sample Questions
Q1) Answer the question on the basis of the following information for the Moolah Bank.
\(\begin{array} { l r }
\text { Reserves } & \$ 100 \\
\text { Checkable Deposits } & 1,000 \\
\text { Loans (to customers) } & 300 \\
\text { Property } & 400 \\
\text { Securities (owned) } & 300 \\
\text { Stock Shares } & 100
\end{array}\) Assume that the listed amounts constitute this bank's complete set of accounts.Moolah's:
A) assets are $1,000.
B) liabilities are $1,000.
C) net worth is zero.
D) profit is $1,000.
Q2) When the receipts given by goldsmiths to depositors were used to make purchases:
A) the gold standard was created.
B) existing banking laws were violated.
C) the receipts became in effect paper money.
D) a fractional reserve banking system was created.
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Page 15
Chapter 35: Interest Rates and Monetary Policy
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Sample Questions
Q1) The federal funds rate is:
A) higher than both the prime interest rate and the discount rate.
B) lower than both the prime interest rate and the discount rate.
C) higher than the prime interest rate but lower than the discount rate.
D) lower than the prime interest rate but higher than the discount rate.
Q2) (Consider This)During and immediately following the severe recession of 2007-2009,commercial bank reserves held on deposit in Federal Reserve Banks:
A) rose to a high of 50 percent of total checkable deposits held by banks.
B) fell significantly as commercial banks withdrew reserves to pay off heavy debt obligations.
C) increased significantly because of Fed purchases of securities from commercial banks and the paying of interest on bank reserves.
D) increased significantly because the Fed increased the required reserve ratio.
Q3) The possible asymmetry of monetary policy is the central idea of the:
A) invisible hand concept.
B) ratchet analogy.
C) pushing-on-a-string analogy.
D) bandwagon effect.
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Page 16
Chapter 36: Financial Economics
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Sample Questions
Q1) The idea that money has "time value" refers to the fact that:
A) people prefer to receive a given sum of money in the future rather than in the present.
B) money can be used to purchase the services of labor,as measured in hourly units.
C) a specific amount of money is more valuable to a person the sooner it is received. D) compound interest converts future dollars into a greater amount of current dollars.
Q2) Jacob is holding an investment he bought for $1,000 that has a 60 percent chance of gaining $200 in value and a 40 percent chance of losing $40.Jacob's average expected rate of return on this investment is:
A) 8 percent.
B) 10.4 percent.
C) 12.2 percent.
D) 24 percent.
Q3) An asset's price and rate of return are directly related.
A)True
B)False
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Chapter 37: Extending the Analysis of Aggregate Supply
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Q1) An adverse aggregate supply shock:
A) automatically shifts the aggregate demand curve rightward.
B) causes the Phillips Curve to shift leftward and downward.
C) can be caused by a boost in the rate of growth of productivity.
D) can cause stagflation.
Q2) The Phillips Curve suggests an inverse relationship between increases in the price level and the level of employment.
A)True
B)False
Q3) Rightward and upward shifts of the Phillips Curve in the 1970s and early 1980s were caused by:
A) adverse shocks to aggregate supply.
B) adverse shocks to aggregate demand.
C) an increase in the misery index.
D) the Vietnam War.
Q4) The Laffer Curve shows the trade-off between the price level and tax rates.
A)True
B)False
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Chapter 38: Current Issues in Macro Theory and Policy
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Q1) Which of the following perspectives believes that both wages and prices are stuck in the immediate short run and that prices are inflexible downward but flexible upward?
A) Monetarism.
B) Mainstream economists.
C) Rational expectations economists.
D) None of these-they all see wages and prices as flexible.
Q2) Modern mainstream macroeconomists agree with the monetarists that:
A) the Fed should increase the money supply at a fixed annual rate.
B) velocity is highly stable.
C) fiscal policy is largely ineffective.
D) "money matters" in the macroeconomy.
Q3) According to new classical economists,the:
A) short-run demand for labor curve is vertical.
B) short-run aggregate demand curve is vertical.
C) long-run aggregate supply curve is horizontal.
D) long-run aggregate supply curve is vertical.
Q4) The equation of exchange is MV = PQ.
A)True
B)False
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Chapter 39: International Trade
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Q1) Which of the following statements is false?
A) Studies show that developing nations that have relied on import restrictions to protect domestic industries have had higher growth rates than similar nations pursuing more open economic policies.
B) The U.S.Constitution forbids individual states from levying tariffs.
C) The high tariffs of the Smoot-Hawley Act of 1930 and the retaliation they caused worsened the Great Depression.
D) The European Union has enhanced prosperity in Western Europe.
Q2) An excise tax on an imported good that is not produced domestically is called a:
A) protective tariff.
B) import quota.
C) revenue tariff.
D) voluntary export restriction.
Q3) In recent years,the United States has:
A) exported more services abroad than it has imported.
B) had a small goods trade surplus with Japan.
C) had a large goods trade surplus with the rest of the world.
D) maintained an overall trade surplus (goods and services combined)with the rest of the world.
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Page 20
Chapter 40: The Balance of Payments, Exchange Rates, and Trade Deficits
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Q1) The following table contains hypothetical data for the 2012 U.S.balance of payments.Answer the question on the basis of this information.All figures are in billions of dollars. \(\begin{array}{lrrr}
\text { 1) US Goods Exports } & +\$100\\
\text {2) US Goods Imports } &-80\\
\text {3) US Service Exports } &+40\\
\text {4) US Service Imports } &-90\\
\text { 5) Net Investment Income } &+20\\
\text { 6) Net Transfers } &-15\\
\text {7) Foreign Purchases of Assets in the United States } &+30\\
\text {8) US Purchases of Foreign Assets Abroad } &-10\\
\text { 9) Balance on Capital Account } &+5\\
\end{array}\)
Refer to the given data.The United States has a balance of goods:
A) deficit of $10 billion.
B) surplus of $30 billion.
C) deficit of $30 billion.
D) surplus of $20 billion.
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Chapter 41: The Economics of Developing Countries
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Q1) Population growth remains high in most DVCs:
A) because religious and sociocultural considerations favor large families.
B) because children may provide economic security for aging parents.
C) because children provide agricultural labor in rural areas.
D) for all of these reasons.
Q2) Many countries remain poor because they currently are poor.This statement summarizes the:
A) infrastructure problem.
B) vicious circle of poverty.
C) demographic transition problem.
D) problem of capital flight.
Q3) The idea that a person's productive efforts and his or her economic rewards are unrelated:
A) is the neocolonialism view of economic development.
B) describes the vicious circle of poverty.
C) is the surplus labor theory of economic development.
D) is the capricious universe view.
Q4) Most nations of the world are now IACs,not middle- and low-income DVCs.
A)True
B)False
Page 22
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Chapter 42: The United States and the Global Economy
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Q1) A nation has a comparative advantage in some product when it can produce that good at a lower domestic opportunity cost than can a potential trading partner.
A)True
B)False
Q2) Offshoring often results from:
A) diminished human capital of American workers.
B) overly restrictive trade policies.
C) a change in comparative advantage.
D) a desire to help out workers in low-income economies.
Q3) Tariffs and quotas:
A) benefit producers of protected products but harm domestic consumers.
B) benefit both producers of protected products and domestic consumers.
C) benefit neither producers of protected products nor domestic consumers.
D) benefit domestic consumers at the expense of producers of protected products.
Q4) Terms of trade of 1X = 5Y will be acceptable to two countries that have domestic opportunity costs of 1X = 4Y and 1X = 1Y,respectively.
A)True
B)False
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