Theory and Problems of Principles of Economics (1-7 Chapters) Useful Book

Book Review – Schaum’s Outline of Theory and Problems of Principles of Economics

The book “Schaum’s Outline of Theory and Problems of Principles of Economics“. The authors of this book are as under:-

  • Dominick Salvatore, Ph.D., Professor of Economics, Fordham University
  • Eugene A. Diulio, Ph.D., Associate Professor of Economics, Fordham University

This book “Schaum’s Outline of Theory and Problems of Principles of Economics” is designed to enhance comprehension of introductory economics by presenting the core material in an easily understood format. It covers the topics of introductory economics, microeconomics, macroeconomics, money and banking, and international trade.

The methodology of this book and its contents is well-defined. It also supports self-study or combined study at home. This book is recommended for those students with basic concepts and who want to understand core concepts of economics topics.

Theory and Problems of Principles of Economics
Schaum’s Outline of Theory and Problems of Principles of Economics

Chapter-Wise Solved MCQs ~ Schaum’s Outline of Theory and Problems of Principles of Economics

Here, Solved MCQs of the first 6 chapters of Theory and Problems of Principles of Economics is available. You are requested to kindly review the topic in the comments section and share it with your friends and class-fellows to promote us.

  • Chapter 1: Introduction to Economics
  • Chapter 2: The Economic Problem
  • Chapter 3: Demand, Supply, and Equilibrium
  • Chapter 4: Introduction to Macroeconomics
  • Chapter 5: Unemployment, Inflation, and National Income
  • Chapter 6: Consumption, Investment, and Net Exports
  • Chapter 7: Traditional Keynesian Approach to Equilibrium Output

Chapter 1: Introduction to Economics (Solved MCQs)

  • Economics studies individuals and organizations in society engaged in
    • Production of goods and services
    • Distribution of goods and services
    • Consumption of goods and services
    • All of the above
  • Economics principles, theories, or models
    • Seek to explain and predict economic events in the hope of developing policies to correct economic problems
    • Identify all of the numerous detailed causes of an economic event
    • Develop rules of individual behavior in order to generalize and predict society’s economic behavior
    • All of the above
  • Which of the following does not refer to macroeconomics?
    • The study of aggregate economic activity
    • The study of the economic behavior of individual decision-making units such as consumers, resource owners, and business firms
    • The study of the causes of and policies to remedy unemployment
    • The study of the causes of inflation
  • Which of the following is a correct statement?
    • The value of an independent variable depends upon the value of a dependent variable
    • The term ceteris paribus is sued when the value of a dependent variable is held constant
    • The term ceteris paribus is sued when the value of a dependent variable is changing
    • The term ceteris paribus is used when the value of an independent variable is held constant
  • When the value of an independent variable increases, the value of dependent variable
    • Also increases when there is a positive relationship
    • Also increases when there is a negative relationship
    • Decreases when there is a positive relationship
    • Decreases when there is no relationship between the two variable
  • In the statement “Quantity Demanded” is a function of Price”
    • Quantity demanded is the dependent variable and price is the independent variable
    • Price is the dependent variable and quantity is the independent variable
    • Quantity demanded and price have no relationship
    • None of the above
  • Ceteris paribus is used in economics when
    • Two variables are positively related
    • Two variables are positively related
    • The value of an independent variable affecting the dependent variable is held constant
    • The value of a dependent variable affecting the independent variable is held constant
  • In the equation C = $10 + 0.90Yd,
    • C (consumption is $90 when Yd (disposable income) is $100
    • C (consumption is $190 when Yd (disposable income) is $200
    • C (consumption is $190 when Yd (disposable income) is $200
    • C (consumption is $390 when Yd (disposable income) is $400
0

Chapter 1: Introduction to Economics

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 8

Economics studies individuals and organizations in society engaged in

2 / 8

Economics principles, theories, or models

3 / 8

Which of the following does not refer to macroeconomics?

4 / 8

Which of the following is a correct statement?

5 / 8

When the value of an independent variable increases, the value of dependent variable

6 / 8

In the statement “Quantity Demanded” is a function of Price”

7 / 8

Ceteris paribus is used in economics when

8 / 8

In the equation C = $10 + 0.90Yd,

Chapter 2: The Economic Problem (Solved MCQs)

  • Scarcity exists in every society because there are
    • Limited wants and abundant resources
    • Limited resources and unlimited production capabilities
    • Limited resources and unlimited wants
    • Limited production capabilities and an unlimited quantity of economic resources
  • The word “economic” refers to something that
    • is scarce
    • is limited
    • commands a price
    • All of the above
  • In economics the term “opportunity cost” refer to
    • The monetary cost of a good or service
    • The money cost of hiring an economic resource
    • The value of a good or service forgone
    • The money cost of providing a good or service
  • The production-possibility frontier depicts
    • The maximum amount of alternative combinations of two goods that an economy can produce at a point in time
    • The limited amount of resources that an economy has at a point in time
    • The alternative combination of capital and labour inputs used in producing goods and services over time
    • The economy’s employment level at a point in time
  • A point inside the production-possibility curve indicates
    • Inefficiency
    • Unemployed resource
    • That existing resources can produce a higher level of output
    • All of the above
  • The production-possibility curve shifts outward when
    • There is an increase in the opportunity cost of a good
    • Increased drug use decreases the skills of the labour force
    • There is a technological advance
    • Unemployed resources are called back to work
  • Increasing costs indicate that
    • All resources are equally efficient
    • All resources are equally inefficient
    • The output of a good can be increased only by giving up larger and larger quantities of alternative goods
    • The output of a good can be increased only by using more economic resources
  • The economic problem of what to produce refers to the decision of
    • Which goods and services and how much of each are to be produced
    • Which goods are good for society
    • Which goods and services to produce to maximize the rate of economic growth
    • What combination of resources and production techniques to use
  • The economic problem for how to produce refers to the decision of
    • Who should be given the authority to produce goods and services
    • How many people in the population are to be employed
    • How much of current production should go toward consumption rather than saving
    • Which of the production techniques is to be used
  • The economic problem of for whom to produce refers to the decision of
    • How to allocate economic resources
    • How many of the wants of various members of society are to be satisfied
    • How much to produce for import or export
    • How much saving should go on in the economy
The Economic Problem
The Economic Problem
0

Chapter 2: The Economic Problem

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

Scarcity exists in every society because there are

2 / 10

The word “economic” refers to something that

3 / 10

In economics the term “opportunity cost” refer to

4 / 10

The production-possibility frontier depicts

5 / 10

A point inside the production-possibility curve indicates

6 / 10

The production-possibility curve shifts outward when

7 / 10

Increasing costs indicate that

8 / 10

The economic problem of what to produce refers to the decision of

9 / 10

The economic problem for how to produce refers to the decision of

10 / 10

The economic problem of for whom to produce refers to the decision of

Chapter 3: Demand, Supply, and Equilibrium (Solved MCQs)

  • A demand schedule shows the relationship between the quantity demanded of a commodity over a given period of time and
    • the price of the commodity
    • the tastes of the consumers
    • the income of the consumers
    • the price of related commodities
  • More of a commodity will be purchased at lower prices because
    • consumers substitute this commodity for others whose price has not changed
    • at lower prices, consumers can purchase more of this commodity with a given money income
    • more consumers will buy the commodity at lower prices than at higher prices
    • all of the above
  • A supply schedule shows the relationship between the quantity supplied over a given period of time and
    • factor prices
    • the price of the commodity
    • technology
    • the prices of other commodities related in production
  • The intersection of a market demand curve and a market supply curve for a commodity determines
    • the equilibrium price for the commodity
    • the equilibrium quantity for the commodity
    • the point of neither surplus nor shortage for the commodity
    • all of the above
  • Which of the following statements is not true when price is above the equilibrium price?
    • There is a shortage of the commodity
    • The quantity supplied exceeds the quantity demanded of the commodity
    • The pressure on the commodity price is downward
    • There is a surplus of the commodity
  • An increase in demand results in which of the following changes in the commodity’s equilibrium price and quantity?
    • Price rises and quantity falls
    • Price falls and quantity rises
    • Price and quantity both rise
    • Price and quantity both fall
  • Which of the following does not cause an increase in demand?
    • An increase in consumers’ incomes
    • An increase in consumers’ preference for the commodity
    • A reduction in the commodity’s price
    • A reduction in the price of a complementary good
  • An increase in market supply and a decrease in market demand will result in
    • a decrease in equilibrium price and an increase in equilibrium quantity
    • a decrease in equilibrium price—the change in equilibrium quantity is indeterminate
    • an increase in equilibrium quantity—the change in equilibrium price is indeterminate
    • a decrease in equilibrium price and quantity
  • Which of the following does not cause an increase in supply?
    • An increase in the commodity’s price
    • An improvement in technology
    • A reduction in factor prices
    • A decrease in the cost of materials
  • An increase in market supply results in which of the following changes in the commodity’s equilibrium price and quantity?
    • Price rises and quantity falls
    • Price falls and quantity rises
    • Price and quantity both rise
    • Price and quantity both fall
0

Chapter 3: Demand, Supply, and Equilibrium

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

A demand schedule shows the relationship between the quantity demanded of a commodity over a given period of time and

2 / 10

More of a commodity will be purchased at lower prices because

3 / 10

A supply schedule shows the relationship between the quantity supplied over a given period of time and

4 / 10

The intersection of a market demand curve and a market supply curve for a commodity determines

5 / 10

Which of the following statements is not true when price is above the equilibrium price?

6 / 10

An increase in demand results in which of the following changes in the commodity’s equilibrium price and quantity?

7 / 10

Which of the following does not cause an increase in demand?

8 / 10

An increase in market supply and a decrease in market demand will result in

9 / 10

Which of the following does not cause an increase in supply?

10 / 10

An increase in market supply results in which of the following changes in the commodity’s equilibrium price and quantity?

Chapter 4: Introduction to Macroeconomics (Solved MCQs)

  • Which of the following does not refer to macroeconomics?
    • The study of the aggregate level of economic activity
    • The study of the economic behaviour of individual decision-making units such as consumers, resource owners and business firms
    • The study of the cause of unemployment
    • The study of the cause of inflation
  • Gross domestic product is the market value of
    • all transactions in an economy during a one-year period
    • all goods and services exchanged in an economy during a one-year period
    • all final goods and services exchanged in an economy during a one-year period
    • all final goods and services produced in a domestic economy during a one-year period
  • A positive GDP gap exists when
    • nominal GDP is greater than real GDP
    • real GDP is greater than potential GDP
    • potential GDP is greater than real GDP
    • economic activity is at its full-employment level
  • Aggregate demand is inversely related to the price level because an increase in the price level
    • lowers the rate of interest, which results in a higher level of aggregate spending
    • has a negative effect upon wealth, which results in increased aggregate spending
    • dampens exports and increases imports, which results in a lower level of aggregate spending
    • causes government spending to decline, which results in a lower level of aggregate spending
  • Which of the following will result in a shift up and to the right by an aggregate demand curve?
    • There is an increase in government spending, ceteris paribus
    • There is an increase in gross imports, ceteris paribus
    • There is an increase in the rate of interest, ceteris paribus
    • There is an increase in taxes, ceteris paribus
  • A classical aggregate supply curve shows the following relationship between the price level and real output.
    • Aggregate supply is positively related to real output
    • Aggregate supply is negatively related to real output
    • Aggregate supply is unrelated to the price level
    • Aggregate supply is horizontal
  • Suppose equilibrium output is yo and the price level is po for an aggregate demand and a classical aggregate supply curve. A technological advance will result in
    • An increase in the equilibrium level of output and the price level
    • An increase in the equilibrium level of output and a decrease in the price level
    • an increase in the price level and no change in equilibrium output
    • an increase in the equilibrium level of output and no change in the price level
  • Suppose equilibrium output is yo> which is below the full-employment level, and the price level is Po for aggregate demand and a Keynesian aggregate supply curve. An increase in government spending will result in
    • An increase in the equilibrium level of output and the price level
    • An increase in the equilibrium level of output and a decrease in the price level
    • An increase in the price level and no change in equilibrium output
    • An increase in the equilibrium level of output and no change in the price level
  • Which of the following statements is true?
    • A peak occurs at the start of an economic recovery
    • A trough occurs at the start of an economic decline
    • A peak occurs when economic activity starts decreasing
    • A trough occurs when economic activity starts decreasing
  • Which of the following statements is true?
    • During a recession the economy is inside its production-possibility frontier
    • During a recession the GDP gap is positive
    • During a recession the unemployment rate is increasing
    • All of the above
0

Chapter 4: Introduction to Macroeconomics

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

Which of the following does not refer to macroeconomics?

2 / 10

Gross domestic product is the market value of

3 / 10

A positive GDP gap exists when

4 / 10

Aggregate demand is inversely related to the price level because an increase in the price level

5 / 10

Which of the following will result in a shift up and to the right by an aggregate demand curve?

6 / 10

A classical aggregate supply curve shows the following relationship between the price level and real output.

7 / 10

Suppose equilibrium output is yo and the price level is po for aggregate demand and a classical aggregate supply curve. A technological advance will result in

8 / 10

Suppose equilibrium output is yo> which is below the full-employment level, and the price level is Po for aggregate demand and a Keynesian aggregate supply curve. An increase in government spending will result in

9 / 10

Which of the following statements is true?

10 / 10

Which of the following statements is true?

Chapter 5: Unemployment, Inflation, and National Income (Solved MCQs)

  • Frictional unemployment exists when
    • There is a fall in aggregate demand
    • Workers are seasonally unemployed
    • Workers lack the skills necessary to be employed
    • Potential GDP exceeds real GDP
  • Inflation is a situation in which
    • There is a decrease in the purchasing power of the monetary unit
    • There is a decrease in the price level
    • A given quantity of money purchases a larger quantity of goods and services
    • Increases in the price level exceed increases in the nominal wage
  • Cost-push inflation exists when
    • Consumers use their market power to push up prices
    • Resource owners use their market power to push up prices
    • Potential output is growing faster than real GDP
    • Real GDP is increasing faster than potential GDP
  • Personal income
    • Is income received by individuals during a given year
    • Is the income individuals have available for spending during a given year
    • Equals national income less indirect taxes
    • Is the sum of wages plus interest received by individuals during a given year
  • The natural rate of unemployment is the rate of unemployment that exists when there is only
    • Frictional and structural unemployment
    • Frictional and cyclical unemployment
    • Structural and cyclical unemployment
    • Frictional unemployment
  • Okun’s law specifies that for each 2% that real GDP falls short of potential GDP, there is a
    • 1 % rate of cyclical unemployment below the natural rate
    • 1 % rate of cyclical unemployment above the natural rate
    • 1 % rate of structural unemployment above the natural rate
    • 1 % rate of structural unemployment below the natural rate
  • An increase in the price level from 200 in year 5 to 210 in year 6 indicates a
    • 10% rate of inflation between years 5 and 6
    • 5% rate of inflation between years 5 and 6
    • 110% rate of inflation between years 5 and 6
    • 105% rate of inflation between years 5 and 6
  • Unanticipated inflation is harmful to
    • Retirees whose retirement income is indexed
    • Debtors
    • Creditors
    • Economic growth but has no effect upon individual members of the economy
  • Net national product equals
    • National income plus indirect business taxes
    • National income less depreciation
    • National income plus depreciation
    • Gross domestic product less indirect business taxes
  • Which of the following statements is false?
    • GDP is greater than personal income
    • Personal disposable income is greater than personal income
    • GDP is greater than national income
    • National income is greater than personal disposable income
0

Chapter 5: Unemployment, Inflation, and National Income

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

Frictional unemployment exists when

2 / 10

Inflation is a situation in which

3 / 10

Cost-push inflation exists when

4 / 10

Personal income

5 / 10

The natural rate of unemployment is the rate of unemployment that exists when there is only

6 / 10

Okun’s law specifies that for each 2% that real GDP falls short of potential GDP, there is a

7 / 10

An increase in the price level from 200 in year 5 to 210 in year 6 indicates a

8 / 10

Unanticipated inflation is harmful to

9 / 10

Net national product equals

10 / 10

Which of the following statements is false?

Unemployment, Inflation, and National Income
Unemployment, Inflation, and National Income

Chapter 6: Consumption, Investment, and Net Exports (Solved MCQs)

  • The consumption function specifies that consumption spending is
    • Negatively related to the level of disposable income
    • Positively related to the level of disposable income
    • Negatively related to the rate of interest
    • Positively related to the rate of interest
  • Suppose consumption is $10.0 million when disposable income is $10.5 million, and consumption is $10.5 million when disposable income is $11.5 million, the marginal propensity to consume is
    • 0.50
    • 0.75
    • 0.80
    • 0.90
  • The average propensity to consume is the ratio of
    • A change in consumption to a change in disposable income
    • A change in consumption to total disposable income at a specific income level
    • Total consumption to total disposable income at a specific income level
    • Total consumption to a change in disposable income
  • A marginal propensity to consume of 0.80 indicates that
    • Change in C to Change in Yd is 0.80
    • C/Yd is 0.80
    • Change in Yd to Change in C is 0.80
    • Yd/C is 0.80
  • The saving function is
    • The level of planned saving for every change in disposable income
    • The level of planned saving at different levels of disposable income
    • The ratio of total saving to total disposable income
    • The ratio of a change in planned saving to a change in disposable income
  • When the MPC is 0.80 and the APC is 0.95, the MPS is
    • 0.20 and the APS is 0.05
    • 0.05 and the APS is 0.20
    • 0.20 and the APS is 0.20
    • 0.05 and the APS is 0.05
  • Gross investment in the national income accounts includes
    • Residential and non-residential construction
    • Spending on producers’ durable goods
    • Changes in business inventories
    • All of the above
  • Which of the following statements is true?
    • Gross investment is solely determined by the rate of interest
    • Gross investment is negatively related to the rate of interest, ceteris paribus
    • Gross investment is positively related to the rate of interest, ceteris paribus
    • None of the above
  • Which of the following statements is true?
    • Imports lower aggregate spending on domestically produced goods and services
    • Exports lower aggregate spending on domestically produced goods and services
    • An increase in net exports lowers aggregate spending on domestically produced goods and ser­vices
    • Imports and exports have no effect upon aggregate spending on domestically produced goods and services
  • Which of the following statements is false?
    • A country’s exports increase when the economic activity of its major trading partners increases, ceteris paribus
    • A country’s exports increase when its currency depreciates, ceteris paribus
    • A country’s exports increase when it imports less, ceteris paribus
    • A country’s exports increase when the price level of its major trading partners rises, ceteris paribus
0

Chapter 6: Consumption, Investment, and Net Exports

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

The consumption function specifies that consumption spending is

2 / 10

Suppose consumption is $10.0 million when disposable income is $10.5 million, and consumption is $10.5 million when disposable income is $11.5 million, the marginal propensity to consume is

3 / 10

The average propensity to consume is the ratio of

4 / 10

A marginal propensity to consume of 0.80 indicates that

5 / 10

The saving function is

6 / 10

When the MPC is 0.80 and the APC is 0.95, the MPS is

7 / 10

Gross investment in the national income accounts includes

8 / 10

Which of the following statements is true?

9 / 10

Which of the following statements is true?

10 / 10

Which of the following statements is false?

Chapter 7: Traditional Keynesian Approach to Equilibrium Output (Solved MCQs)

  • A recessionary gap exists when
    • Aggregate supply exceeds aggregate demand
    • The aggregate spending line intersects the 45 degree line at an output level to the right of the full- employment level of output
    • The aggregate spending line intersects the 45 degree line at an output level to the left of the full- employment level of output
    • The aggregate spending line intersects the aggregate supply curve at a lower price level
  • Businesses will continue producing at the current level of output when
    • They receive a sum of money equal to that paid out for the services of economic resources
    • Leakages equal injections
    • They are able to sell what has been offered for sale
    • All of the above
  • When actual output is to the right of the intersection of the 45 degree line and the aggregate spending line,
    • There is a production surplus
    • Output is not at the equilibrium level
    • Leakages exceed injections
    • All of the above
  • Which of the following are leakages from the circular flow?
    • Consumption and saving
    • Saving and imports
    • Imports and exports
    • Exports and saving
  • The paradox of thrift maintains that a society’s desire to save more
    • Lowers the equilibrium level of output and has no effect upon the amount saved
    • Lowers the equilibrium level of output and the amount saved
    • Lowers the equilibrium level of output and increases the amount saved
    • Has no effect upon the equilibrium level of output and increases the amount saved
  • There is a multiplier effect from changes in investment spending because
    • Aggregate supply is related to the level of output
    • Consumer spending is positively related to the level of output
    • Consumer spending is negatively related to the level of output
    • Exports are positively related to the level of output
  • The multiplier measures the rate of change in
    • Output resulting from a change in spending
    • Consumption resulting from a change in output
    • Output resulting from a change in consumption
    • Investment resulting from a change in output
  • When the marginal propensity to consume is 0.80, the value of the multiplier is
    • 2
    • 3
    • 4
    • 5
  • When aggregate supply is horizontal and the marginal propensity to consume is 0.50, a $10 increase in investment spending will result in
    • A $10 increase in the equilibrium level of output
    • A $20 increase in the equilibrium level of output
    • A $50 increase in the equilibrium level of output
    • No change in the equilibrium level of output
  • When aggregate supply is positively sloped and the marginal propensity to consume is 0.80, a $10 increase in investment spending will result in
    • A $10 increase in the equilibrium level of output
    • A $50 increase in the equilibrium level of output
    • An increase in the equilibrium level of output less than $50
    • An increase in the equilibrium level of output greater than $50
0

Chapter 7: Traditional Keynesian Approach to Equilibrium Output

Quiz with Answers

Principles of Economics Schaum’s Outline

1 / 10

A recessionary gap exists when

2 / 10

Businesses will continue producing at the current level of output when

3 / 10

When the actual output is to the right of the intersection of the 45-degree line and the aggregate spending line,

4 / 10

Which of the following are leakages from the circular flow?

5 / 10

The paradox of thrift maintains that a society’s desire to save more

6 / 10

There is a multiplier effect from changes in investment spending because

7 / 10

The multiplier measures the rate of change in

8 / 10

When the marginal propensity to consume is 0.80, the value of the multiplier is

9 / 10

When aggregate supply is horizontal and the marginal propensity to consume is 0.50, a $10 increase in investment spending will result in

10 / 10

When aggregate supply is positively sloped and the marginal propensity to consume is 0.80, a $10 increase in investment spending will result in

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