Economics Trivia Questions for Students

Which is the best way to describe the AS curve in the long run?

• AAlways vertical in the long run.
• BAlways horizontal.
• CAlways downward sloping.
• DAlways upward sloping because it follows the Law of Supply.

Which group of people will suffer the most from a rising price level?

• Aproperty owners
• Bpeople with fixed money incomes
• Cinvestors in gems coins and stamps
• Ddebtors with fixed interest rates

If consumers are advised that multigrained bread will substantially lessen the risk of cancer, which of the following will happen in the market for multigrained bread?

• AThe supply curve will shift to the right, decreasing the price of multigrained bread.
• BThe demand curve will shift to the left, decreasing the price of multigrained bread.
• CThe demand curve will shift to the right, increasing the price of multigrained bread.
• DThe supply curve will shift to the left, increasing the price of multigrained bread.

Output in country A is 1200 units and its population is 100 persons. Output in country B is 2400 units and its population is 400 persons.

• ACountry A and B have identical living standards.
• BCountry A has a lower standard of living than country B.
• CCountry A is less productive than country B.
• DCountry A has a higher standard of living than country B.

Stagflation occurs when

• Athe price level stays the same and output increases
• Bthe price level rises and output falls
• Cthe price level stays the same and output decreases
• Dthe price level rises for two consecutive quarters

Private industry can promote economic growth by

• Aimplementing innovative production techniques.
• Boffering products at artificially low prices.
• Chiring workers who are not really needed.
• Dgiving a significant amount of profits to charity.

In an oligopoly market, firms

• Aare not subject to antitrust legislation
• Bare interdependent
• Ccannot earn economic profits
• Dare large in number

A nation's economic growth can be seen as a(n)

• Aincrease in the AD curve.
• Bdecrease in the production possibility curve.
• Cincrease in the LRAS curve.
• Dincrease in the SRAS curve.

If $1000 is deposited into a checking account and excess reserves increase by $700 the reserve ratio must be:

• A70%.
• B30%.
• C40%.
• D90%.

Economic growth is

• Ashared equally among the population.
• Bmeasured by the amount of government spending.
• Ccritical in determining the standard of living in a nation.
• Dmeasured by the number of businesses in the economy.

Which of the following statements is positive?

• AAn economy that produces more butter than guns is better off than an economy that produces more guns than butter.
• BThe production possibilities frontier is concave to the origin because of the law of increasing costs.
• CNations ought to devote at least some of their resources to national defense.
• DNations should concentrate their resources on producing wholesome consumer goods as opposed to the weapons of war.

The tax multiplier increases in magnitude when

• Athe spending multiplier falls.
• Bthe MPS increases.
• Cthe MPC increases.
• Dgovernment spending increases.

A competitive firm's demand for labor is determined directly by

• Aprofits
• Bthe marginal (physical) product of labor and the output price
• Cthe opportunity cost of workers' time
• Dthe wage and the average (physical) product of labor

If the government regulates a monopoly to produce at the allocative efficient quantity, which of the following would be true?

• AThe monopoly would incur an economic loss.
• BThe monopoly would break even.
• CThe monopoly would make an economic profit.
• DThe deadweight loss in this market would decrease.

If people expect the price of a particular product to increase in the near future

• Athis will increase the demand for the product.
• Bthis will decrease the demand for the product.
• Cthis will not affect the demand for the product now or later.
• Dthis will not affect the demand for the product right now.

An industry with three firms selling a standardized or differentiated product would be called

• Aa duopoly
• Ba competitive industry
• Can oligopoly
• Da monopolistically competitive industry

Suppose a price floor is installed in the market for coffee. One result of this policy would be

• Aa decrease in the demand for coffee-brewing machines.
• Ban increase in the demand for coffee.
• Ca persistent shortage of coffee in the market.
• Dan increase in consumer surplus due to lower coffee prices.

Which of the following correctly identifies the condition that explains inefficiency for firms in a monopolistically competitive industry?

• AExcess capacity compared to competitive industries.
• BHigher output than competitive industries.
• CLower price than competitive industries.
• DPrice equals marginal cost.

Which of the following are harmed by unexpectedly high rates of inflation?

• ABorrowers repaying a long-term loan at a fixed interest rate.
• BWorkers who have negotiated cost-of-living raises into their contracts.
• CRenters of apartments who have signed a lease that holds rent constant for two years.
• DSavers who have put their money in long-term assets that pay a fixed interest rate.

Which of the following is a characteristic of monopolistic competition?

• AP =MR.
• BMostly price competition.
• CP > MC.
• DEfficiency.

Which of the following would best complete a short definition of economics? "Economics is the study of . . ."

• Ahow scarce resources are allocated to satisfy unlimited wants.
• Bhow unlimited resources are allocated between scarce wants.
• Chow money is circulated through the economy.
• Dhow corporations maximize the share price of their stock.

Which of the following could limit the ability of a central bank to conduct expansionary monetary policy?

• ABanks make loans with all excess reserves.
• BMoney demand is nearly perfectly elastic.
• CHouseholds carry very little cash holding their money in checking and saving deposits.
• DInvestment demand is nearly perfectly elastic.

The population of country X is exactly the same as country Y but country X produces twice as much output as country Y. We can conclude that

• Athe people of country X are smarter than the people of country Y.
• Bthe people of country X enjoy a standard of living twice as much as country Y.
• Cthe people of country Y work twice as hard as the people of country X.
• Dthe people of country Y enjoy a standard of living twice as much as country X.

If the price of a product decreases so that the consumer can buy more of it and other products, this is called the

• Amarginal effect.
• Bsupply effect.
• Csubstitution effect.
• Dincome effect.

Which of the following statements is correct in regard to the federal budget deficit and the federal debt?

• AWhen the deficit is negative the debt decreases.
• BWhen the debt is positive the deficit decreases.
• CWhen the debt is negative the deficit decreases.
• DThe deficit is the accumulation of past debts.

For a polluting steel company, a government action to most likely achieve an optimal or efficient outcome would produce what effect on the market equilibrium price and output?

• AOutput would increase; price would decrease.
• BOutput would decrease, price would increase.
• COutput would increase; no change in price.
• DOutput would increase; price would increase.

The reserve ratio is .10 and Mommy Morebucks withdraws $1 million from her checking account and keeps it as cash in her refrigerator. How does this withdrawal potentially impact money in circulation?

• ADecreases it by $100000
• BIncreases it by $1 million
• CDecreases it by $1 million
• DDecreases it by $9 million

The standard of living will increase if

• Areal GDP increases at a greater rate than the population.
• Beveryone works harder.
• Cthe population grows.
• DGDP increases.

If the economy is experiencing a recession how will a plan to decrease taxes for consumers and increase spending on government purchases affect real gross domestic product (GDP) and the price level?

• Areal GDP rises and the price level rises.
• Breal GDP falls and the price level falls.
• Creal GDP rises and the price level falls.
• Dreal GDP falls and the price level rises.

In what ways is contractionary fiscal policy in the United States likely to affect domestic interest rates and the international value of the dollar?

• AInterest rates decrease and the dollar appreciates.
• BInterest rates decrease and the dollar depreciates.
• CInterest rates increase and the dollar depreciates.
• DInterest rates increase and the dollar appreciates.

Which of the following would shift the aggregate demand curve to the right?

• AAn increase in the price level
• BDepreciation in the international value of the dollar
• CAn increase in personal income tax rates
• DAn increase in interest rates

The market demand curve for labor will shift to the right when

• Athe labor supply curve shifts to the left
• Bthe price of output decreases
• Cthe labor supply curve shifts to the right
• Dthe number of firms increases

Which of the following is not the basis for a wage differential?

• AHigher risk job.
• BInvestment in human capital.
• CRacial discrimination.
• DIncrease in production of SUVs.

If $100 of new autonomous private investment were added to an economy with a marginal propensity to consume of .90 by how much would aggregate demand shift to the right?

• A$1,000
• B$900
• C$190
• D$1,900

If the economy is in disequilibrium where the price level is such that the aggregate quantity of products demanded exceeds the aggregate quantity of products supplied then

• Aprices will be driven upward to restore equilibrium.
• Bsupply will decrease.
• Csupply will increase.
• Ddemand will decrease.

The economy is in a deep recession. Given this economic situation which of the following statements about monetary policy is accurate?

• AExpansionary policy greatly increases aggregate demand if investment is sensitive to changes in the interest rate.
• BContractionary policy is the appropriate stimulus for investment and consumption.
• CIf the demand for money is perfectly elastic expansionary monetary policy might be quite effective.
• DExpansionary policy would only worsen the recession.

Which of the following insures the value of the U.S. dollar?

• AThe euro and other foreign currencies held by the Federal Reserve
• BThe value of the actual paper on which it is printed.
• CThe promise of the U.S. government to maintain its value
• DGold bars in secure locations like Fort Knox

If in a given year the government collects more money in net taxes than it spends there would exist

• Aa trade surplus.
• Ba budget surplus.
• Ca current account deficit.
• Da budget deficit.

If the economy is suffering from extremely high rates of inflation which of the following fiscal policies would be an appropriate strategy for the economy?

• AThe Federal Reserve increases the discount rate.
• BDecrease government spending and increase taxes.
• CIncrease government spending and decrease taxes.
• DIncrease government spending with no change in taxes.

When the United States places an import quota on imported sugar we expect which of the following effects?

• AConsumers seek substitutes for sugar and products that use sugar.
• BThe supply of sugar increases.
• CNet exports in the United States fall.
• DConsumers consume more sugar and products that use sugar.

An externality

• Aresults in an equilibrium that does not maximize the total benefit to society
• Bexists when markets cannot reach equilibrium
• Ccauses the equilibrium price to be artificially low
• Dcauses the equilibrium price to be artificially high

An increase in the demand for money in the economy could result from

• Aa recession.
• Bhigher interest rates.
• Ca higher price level.
• Dexpected future inflation.

Output in country X is 30000 units and there are 3000 persons working while country Z has an output of 40000 units and 8000 workers.

• AThe productivity of labor in country X is 33 percent higher than in country Z.
• BThe productivity of labor in country Z is 33 percent higher than in country X.
• CThe productivity of labor in country Z is 25 percent higher than in country X.
• DThe productivity of labor in country X is twice as much as country Z.

Which of the following is not a scarce economic resource?

• AHuman wants
• BLand
• CLabor
• DCapital

To close an expansionary gap

• Athe aggregate supply curve should be shifted to the left.
• Bthe aggregate demand curve should be shifted to the left.
• Cthe aggregate demand curve should be shifted to the right.
• Dthe aggregate supply curve should be shifted to the right.

The government measures inflation using the

• AURL
• BCPI
• CGNP
• DFED

A difference between M1 and M2 is that

• AM1 is a first mortgage and M2 is a second mortgage
• BM2 includes savings deposits
• CM1 is larger than M2
• DM2 is M1 plus assets that are more liquid

Which of the following is the most likely to be a deterrent to growth in the economy?

• AIncreases in capital
• BSpending on education and training
• CIncreases in the interest rate
• DExpenditures on research and development

Which of the following is a consequence of removal of a protective tariff on imported steel?

• AIncome is transferred from foreign steel producers to domestic steel producers.
• BIncome is transferred from steel consumers to domestic steel producers.
• CAllocative efficiency is improved.
• DImports fall.

Which of the following policies best describes supply-side fiscal policy?

• AAn increase in the money supply
• BHigher taxes on household income
• CIncreased government spending
• DLower taxes on research and development of new technology