Economics Questions -
Part A -
Q1. Protective tariffs are:
a. Maximum limits on the quantity or total value of specific products imported to a nation.
b. Taxes or duties placed on imported products
c. Licensing requirements, unreasonable quality standards, and the like designed to impede imports
d. Government payments to domestic producers to reduce the world prices of exported goods
Q2. There are gains from trade means:
a. Companies that trade overseas are more profitable than companies whose business is domestic only
b. By specializing in the production of a single good and then trading their surplus production, individuals can achieve a higher overall income than would be the case if they were self-sufficient (produced all of their needs on their own)
c. Trade increases the cost of production without increasing return to the producer
d. Large companies are always more efficient than small firms
Q3. The assertion that There is no free lunch means that:
a. Economic policy regarding agriculture in inherently flawed
b. All production involves the use of scarce resources and thus tradeoffs between
alternative goods
c. Marginal analysis is not used in economic reasoning
d. Choices need not be made if behavior is rational
4. Nominal GDP is:
a. The total dollar value of all transactions that occur in the economy in a year.
b. The total dollar value of all transactions that involve final goods and services that occur in the economy in a year
c. The amount of production that occurs when the economy is operating at full employment
d. GDP in current dollar terms adjusted for inflation
Q5. When markets fail to achieve efficiency (when market failures occur):
a. Nothing can be done
b. Government intervention can improve society's welfare
c. lt is a sign of foreign activity
d. Markets never fail
Q6. Macroeconomics approaches the study of economics from the viewpoint of:
a. The entire economy
b. Governmental un its
c. The operation of specific product and resource markets
d. Individual firms
Q7. Regarding economics, a theory is:
a. A fundamental truth that all economists accept
b. A concept drawn from observation and analysis that predicts some real world behavior and can be tested
c. The same as a normative statement
d. A gut feeling
Q8. The three main tools of monetary policy are:
a. Tax rate changes, the discount rate, and open-market operations
b. Tax rate changes, changes in government expenditures, and open-market operations
c. The discount rate, the reserve requirement, and open-market operations
d. Changes in government expenditures, the reserve requirement, and the discount rate
Q9. The invisible hand refers to the:
a. Fact that our tax system redistributes income from rich to poor
b. Notion that, under competition, actions of producers that are motivated by self interest are turned such that these actions promote the social interest
c. Tendency of monopolistic sellers to raise prices above competitive levels
d. Idea that government established rules for the market tend to redistribute income toward the rich from everyone else
Q10. Cyclical unemployment is a consequence of:
a. A shortage or deficiency oftotal spending in the economy (i.e., a downturn in the business cycle)
b. The decreasing relative importance of goods and the increasing relative importance of services in our economy
c. The everyday dynamics of a free labor market
d. Technological change
Q11. When we say that money serves as a unit of measure, we mean that it is:
a. A way to keep some of our wealth in a readily spendable form for future use
b. A means of payment
c. A monetary unit for comparing the relative values of goods
d. Declared as legal tender by the government
Q12. lf the inflation rate is 10 percent and the "real" interest rate is 12 percent, the nominal interest rate is:
a. 2 percent
b. Zero percent
c. 10 percent
d. 22 percent
Q13. Fiscal policy is controlled by:
a. The U.S. Congress
b. State and local governments working together
c. State governments alone
d. Local governments alone
Q14. The primary purpose of the reserve requirement (for Banks) is to:
a. Prevent banks from hoarding too much vault cash
b. Provide a means by which the Federal Reserve Bank can influence the ability of commercial banks to lend
c. Prevent commercial banks from earning excess profits
d. Provide a dependable source of interest income for commercial banks
Q15. Inflation affects:
a. Both the level and the distribution of income
b. Neither the level nor the distribution of income
c. The distribution, but not the level, of income
d. The level, but not the distribution, of income
Q16. Economists refer to a budget deficit which exists when the economy is at full employment as a:
a. Cyclical deficit
b. Surplus in the full-employment budget
c. Natural deficit
d. Structural deficit
Q17. The term mixed economy refers to an economy:
a. Comprised of both product and resource markets
b. Which engages in both domestic and international trade
c. Comprised of both extensive private markets and government involvement in the economy
d. Which functions primarily on the basis of custom and tradition
Q18. ln the United States monetary policy is the responsibility of the:
a. U.S. Treasury
b. Department of Commerce
c. Federal Reserve Bank
d. U.S. Congress
Q19. According to the classical economists, a shortage or deficiency of total spending (decline in GDP) would:
a. Cause prices, wages, and interest rates to decline, which would restore spending and full employment
b. Cause prices, wages, and interest rates to rise, which would restore spending and full employment
c. Raise the interest rate and induce a higher level of investment
d. Cause aggregate output and employment to rise
20. It is costly to hold money (i.e., keep some cash in your pocket or at home) because:
a. Deflation may reduce its purchasing power
b. Inflation may reduce its purchasing power
c. Bond prices are highly variable
d. The velocity of money may decline
Part B -
Q1. An example of a normative statement is:
a. A high rate of economic growth is good for the country
b. People with health insurance tend to spend more on health care than do those who are uninsured
c. The rate of unemployment is 6 percent
d. The federal government spends one half of its budget on national defense
Q2. Economics is a/an:
a. Social science that deals with making choices among alternatives
b. Humanities course that mainly concerns itself with limited wants versus unlimited resources
c. Natural science that concerns itself with allocating relatively scarce resources among alternative ends
d. Science that has no theories or models based on the scientific method
Q3. Scarcity in economics means:
a. Not having sufficient resources to produce all the goods and services we want
b. There must be poor people in rich countries
c. The wants of people are limited
d. Economists are clearly not doing their jobs
Q4. An answer to the question "For whom" determines:
a. How resources are combined in production
b. The kinds and quantities of goods produced
c. Tastes and preferences
d. How society distributes the goods and services produced
Q5. The models used in economics:
a. Based mostly on value judgments
b. Emphasize basic relationships by abstracting from (i.e., simplifying) complexities in the everyday world
c. Useful only if based on normative economic statements
d. Are necessily unrealistic and have no relationship to the real world
Q6. Economics is primarily concerned with:
a. None of these
b. The operation of the bond and stock markets
c. The issue of income inequality
d. How people choose among the alternatives available to them
Q7. Positive statements:
a. Deal with what ought to be
b. Are dealt with solely in microeconomics
c. Imply value judgments must be made
d. Are factual and can be tested
Q8. Anything whose value can change is a/an:
a. Variable
b. Hypothesis
c. constant
d. AII of these
Q9. A tradeoff between two economic goals means that:
a. If achievement of one increases, then achievement of the other must increase
b. If achievement of one decreases, then achievement of the other must decrease
c. The goals are fully compatible
d. If you achieve more of one, you will achieve less of the other
Q10. The concept of the margin deals with:
a. Society's decision as to how to distribute the benefits of production
b. Doing a little more or a little less of something
c. All of these
d. Society's decision of how to produce something
Q11. Prior to the Industrial Revolution, annual economic growth on a per person basis was close to:
a. None of these
h. 10%
c. 20%
d. 0%
Q12. Capital (physical capital) is best considered as:
a. Financial assets (e.g., stocks. bonds)
b. Money
c. The natural environment
d. A factor of production that has been produced by mankind
Q13. The two critical characteristics of a free market economy are:
a. State ownership of resources and state allocation of resources
b. None of these
c. Collective ownership of resources and market allocation of resources
d. Private ownership of resources and market allocation of resources
Q14. Economics defines "increased efficiency" from society's standpoint as:
a. Ensuring that there are always some spare (i.e., unused) resources
b. Making at least one person better off without making anyone worse off
c. Producing the largest possible quantity of all goods and services
d. A situation where increased output can be achieved without a tradeoff
Q15. A market is nothing more than a place where buyers and sellers meet to exchange goods and services.
a. True
b. False
Q16. An example of the input to production, land (a natural resource), is:
a. A new machine
b. A computer program
c. An interstate highway
d. Oil in the ground
Q17. The "Invisible Hand of the Market" concept refers to the idea that:
a. Markets are good for individuals, but bad for society
b. Success in the market requires some slight of hand
c. The market turns the selfish actions of individuals to the benefit of society at large
d. Pick-pockets are common in open air markets
Q18. The "gains from trade" arise because of more efficient resource use that comes from:
a. Reduced shipping costs
b. Specialization
c. None of these
d. Increased borrowing
Q19. Given a laissez faire approach to the economy (i.e., no government involvement in the economy other than the minimum needed to protect property rights):
a. Corporations would dominate the marketplace as they do today
b. Corporations would exist but would yield little influence
c. Corporations would not exist
d. None of the above
Q20. Income redistribution:
a. Occurs both directly (intentionally) from government action and as a side effect of government action
b. Occurs whenever individuals, businesses or government make purchase decisions
c. Always moves money from higher income groups to lower income groups
d. Both A and BC