ECO121 EXAM PRACTICE QUESTIONS

Which of the following is the consumer price index used for?

a.to track changes in the level of wholesale prices in the economy

b.to monitor changes in the level of real GDP

c.to track changes in the stock market

d.to monitor changes in the cost of living

 

Which of the following will cause the equilibrium quantity to fall?

a.demand decreases and supply increases

b.demand increases and supply decreases

c.demand and supply both increase

d.demand and supply both decrease

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Suppose that the incomes of buyers in a particular market for a normal good decrease and there is also a reduction in input prices. What do we expect to occur in this market?

a.Both equilibrium price and equilibrium quantity would increase.

b.Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous

c.The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.

d.The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.

 

Which of the following would definitely result in a higher price in the market for Maggi?

a.demand increases and supply decreases

b.demand decreases and supply increases

c.demand and supply both decrease

d.demand and supply both increase

 

 

If real GDP doubles and the GDP deflator doubles, what will happen to nominal GDP?

a.It will quadruple

b.It will double.

c.It will stay the same.

d.It will triple.

 

If one wants to know how the material well-being of the average person has changed over time in a given country, which of the following should one look at?

a.the growth rate of real GDP per person

b.the growth rate of real GDP

c.the level of real GDP

d.the growth rate of nominal GDP

 

What is the relationship between income and expenditure for an economy?

a.Income could be greater or less than expenditure.

b.Income is greater than expenditure.

c.Income is less than expenditure.

d.Income equals expenditure

 

Which of the following statistics is the best single measure of an economy\’s well-being?

a.the inflation rate

b.the unemployment rate

c.increase GDP

d.the trade deficit

 

How does a rise in consumer price index affect a typical family?

a.The typical family can spend fewer Nairas to maintain the same standard of living.

b.The typical family finds that its standard of living is not affected.

c.The typical family can offset the effects of rising prices by saving more.

d.The typical family has to spend more Nairas to maintain the same standard of living

 

 

What does economics study?

a.How firms make profits

b.how society manages its scarce resources

c.the government\’s role in society

d.how to increase production

 

How does the “invisible hand” direct economic activity?

a.through government regulations

b.through advertising

c.through prices

d.through central planning

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When government policies such as the welfare system try to help the neediest members of society, what happens?

a.It reduces charitable contributions in an economy.

b.It increases equity and reduces efficiency

c.It increases the productivity of the needy in the society.

d.It causes market failure to occur.

For most students, what is the largest single cost of a university education?

a.tuition, fees, and books

b.room and board

c.the wages given up to attend school

d.transportation, parking, and entertainment

 

Which is the most correct statement about the invisible hand?

a. The invisible hand is more effective at ensuring efficiency than it is at ensuring equity

b.The invisible hand cannot ensure either equity or efficiency.

c.The invisible hand is more effective at ensuring equity than it is at ensuring efficiency.

d.The invisible hand always ensures both equity and efficiency.

For what reason do both households and societies face many decisions?

a.because wages for households and therefore society fluctuate with business cycles

b.because resources are scarce

c.because populations may increase or decrease over time

d.because people by nature tend to disagree

 

Which of the following is NOT a major area of study for economists?

a.how forces and trends affect the overall economy

b.how people interact with each other

c.how people make decisions

d.how countries choose national leaders

 

When does scarcity exist?

a.when there is less than an infinite amount of a resource or good

b.when society can meet the wants of every individual

c.when there is less of a good or resource available than people wish to have

d.when the government fails to produce goods

 

What does making decisions “at the margin” mean?

a.that people make those decisions that do not impose a marginal cost

b.that people always calculate the marginal dollar costs for each decision

c.that people evaluate how easily a decision can be reversed if problems arise

d.that people compare the marginal costs and marginal benefits of each decision

When does a rational decision-maker take action?

a.only if the average benefit is greater than the average cost

b.only if the marginal benefit is less than the marginal cost

c.only if the marginal benefit is greater than both the average cost and the marginal cost

d.only if the marginal benefit is greater than the marginal cost

 

If the price of a substitute to good X increases, what will happen?

a.Quantity demanded for good X will increase

b.Demand for good X will decrease.

c.Market price of good X will decrease.

d.Demand for good X will increase.

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For what reason are production possibilities frontiers usually bowed outward?

a.It is because of the effects of technological change.

b.The more resources a society uses to produce one good, the fewer resources it has available to produce another good.

c. It reflects the fact that the opportunity cost of producing a good falls as one produces more and more of it.

d.Resources are specialized, that is, some are better at producing particular goods rather than other goods

 

Which of the following would NOT shift the demand curve for a good or service?

a.a change in the price of a related good

b.a change in income

c.a change in the price of the good or service

d.a change in expectations about the price of the good or service

 

If goods A and B are complements, what will result from an increase in the price of A?

a.more of good A sold

b.no difference in the quantity sold of either good

c.less of good B sold

d.more of good B sold

 

The free market economy is an economic system where the basic economic decisions are made by the buyers and sellers, individual households, and businesses in the economy through the ……………

Ans. price mechanism

 

The tabular presentation quantity demanded of particular commodities at different prices

Ans. demand schedule

 

A rise in prices of goods and services will mean ……………… in quantity demanded

Ans. a fall

Free market economy or market economy is an economic system where the basic economic decisions are made by the buyers and sellers, individual households and businesses in the economy through …………….. mechanism

Ans. Price

 

Price ceiling is always fixed ………….equilibrum price

Ans. Below

 

In Nigeria, the people of Abeokuta are known for the ……………. Cloth business while the people of Oke-ogun continue to produce the …………. Traditional attires

Ans. ‘adire’ /’ofi’

 

As far as basic economics is concerned it is assumed that people act ……… so as to gain the most benefits for themselves especially when benefits are compared with the associated costs

Ans. Rationally

 

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Return to scale law is a ……. Process

Ans. Long run

 

Individuals and ………… work together to answer basic economic problems in relation to the resources in the society and it’s ………….

Ans. Institutions

 

The system of economy in which the resources are held in trust by the government is known as ………….

Ans. Socialism

 

The ……………….  method calculates the total expenditure required to purchase the nation’s output

Ans. Expenditure

 

One of the great welfare economists is ……………

Ans. A. C Pigou

 

The meaning of APC is ………….

Ans. Average Propensity to Save

 

Autonomous consumption represents consumption when income is

Ans. Zero

 

Domestic income does not include the income earned

Ans. Abroad

 

A ………… company transacts the business of banking which means accepting to lend all investments or deposits of money from the public

Ans. Banking

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The income not spent on goods and services for current consumption is called

Ans. Savings

 

The meaning of ……….. macroeconomics is disposable income

Ans. Yd

 

The gross domestic product is the summation of all the values of goods and services produced in a country by the ……….

Ans. nationals and non-nationals

 

According to …………….. an economist, asserts that there is a close relationship between economic welfare and national income because both are measured in terms of money

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