Question 1

After the gold standard was abandoned, what was one major consequence for global economies?

Accepted Answer

The dollar became the new global currency, allowing countries to use monetary policies such as printing more money.

Question 2

Which of the following best describes the Law of Demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 3

Suppose the price of coffee increases. According to the substitution effect, what is likely to happen to the demand for tea?

Accepted Answer

Demand for tea will increase because tea is a substitute for coffee.

Question 4

Which statement about the production possibilities frontier (PPF) is correct?

Accepted Answer

Points on the PPF are efficient, while points inside are inefficient and points outside are unattainable.

Question 5

If a country can produce more of both goods than another country, but has a lower opportunity cost in one, what does it have?

Accepted Answer

Comparative advantage in the good with the lower opportunity cost.

Question 6

Which of the following is an example of a Pareto improvement?

Accepted Answer

At least one person is made better off and no one is made worse off.

Question 7

The Gini index is used to measure which economic concept?

Accepted Answer

Income inequality

Question 8

If the marginal cost of producing pizzas increases as more pizzas are produced, what does this imply about the shape of the PPF?

Accepted Answer

The PPF is bowed outward.

Question 9

Which of the following is NOT a factor that can shift the supply curve?

Accepted Answer

Consumer preferences

Question 10

A market is in equilibrium when:

Accepted Answer

The price balances the plans of buyers and sellers, and quantity supplied equals quantity demanded.

Question 11

Which of the following best describes a Giffen good?

Accepted Answer

A good for which demand increases as its price increases due to the income effect outweighing the substitution effect.

Question 12

Which of the following is a normative statement?

Accepted Answer

"The government should increase spending to boost the economy."

Question 13

According to Adam Smith, what is necessary for markets to generate efficient outcomes?

Accepted Answer

Firms must compete to supply high quality, competitively priced goods.

Question 14

If the price of a complement increases, what happens to the demand for the related good?

Accepted Answer

Demand for the related good decreases.

Question 15

Which equation represents the marginal cost ($MC$) of moving along the PPF?

Accepted Answer

$MC = \frac{\Delta 	ext{Good Y}}{\Delta 	ext{Good X}}$

Question 16

Which of the following is an example of an externality?

Accepted Answer

A factory polluting a river, affecting people who do not buy its products.

Question 17

If a country is in autarky, what does this mean?

Accepted Answer

It does not engage in international trade.

Question 18

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone.

Question 19

If the government sets a price ceiling below the equilibrium price, what is the likely result?

Accepted Answer

A shortage of the good.

Question 20

Suppose Country A can produce 2 cans of cola or 4 pizzas, and Country B can produce 4 cans of cola or 2 pizzas. According to comparative advantage, which country should specialize in which good?

Accepted Answer

Country A should specialize in pizza, Country B in cola.

Core Principles and Applications in Macroeconomics: Inflation, Trade, Supply & Demand, and Inequality

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