Clemson ECON 2130: Principles of
Microeconomics – Complete Final Exam
Review (2026/2027) Academic Year |
(Clemson University, - VERIFIED
QUESTIONS AND ANSWERS | Covering
Four Core Domains
Domain 1: Foundations of Economics & The Market
System
(Questions 1–50)
1. Gross Domestic Product (GDP) is defined as:
• A) The market value of all final goods and services produced in a country in a
year
• B) The total income earned by all citizens of a country
• C) The total value of all transactions in an economy
• D) The market value of all goods and services consumed in a country
• ✅ Correct Answer: A – GDP is the market value of all final goods and
services produced within a country's borders in a given period. Only final
goods are counted to avoid double counting intermediate goods.
2. The expenditure approach to measuring GDP uses the accounting identity:
• A) Y = C + I + G + NX
• B) Y = C + I + G − NX
• C) Y = C + I + G + EX − IM
• D) Y = Employee Compensation + Taxes + Rents + Interest + Profits
• ✅ Correct Answer: C – The expenditure approach sums consumption,
investment, government spending, and net exports (exports minus imports).
3. Which component is consistently the largest of U.S. GDP?
, • A) Investment
• B) Government spending
• C) Consumption
• D) Net exports
• ✅ Correct Answer: C – Consumption typically accounts for about 70% of
U.S. economic activity.
4. If you purchase a BMW produced in Germany for $45,000, what happens to
U.S. GDP?
• A) GDP increases by $45,000
• B) GDP decreases by $45,000
• C) GDP is unchanged
• D) GDP increases by $45,000 in investment
• ✅ Correct Answer: C – Since the BMW was produced in Germany, it is not
counted in U.S. GDP. Imports are subtracted in the net exports component.
5. Transfer payments such as Social Security benefits are NOT counted in GDP
because:
• A) They are too small to matter
• B) They represent a transfer of existing income, not new production
• C) They are paid by the government
• D) They are taxed
• ✅ Correct Answer: B – Transfer payments do not represent payment for
newly produced goods or services.
6. The income approach to measuring GDP sums:
• A) Consumption, investment, government spending, and net exports
• B) Employee compensation, taxes, rents, interest, profits, and depreciation
• C) Value added at each stage of production
• D) All transactions in the economy
• ✅ Correct Answer: B – The income approach sums all income earned in the
economy.
7. The value-added approach to GDP measures:
• A) Total sales in the economy
• B) The sum of value added at each stage of production
• C) Total profits in the economy
• D) Total wages paid
• ✅ Correct Answer: B – Value added = gross output − intermediate inputs.
,8. Value added for a firm with gross output of $10,000 and intermediate inputs
of $3,000 is:
• A) $3,000
• B) $7,000
• C) $10,000
• D) $13,000
• ✅ Correct Answer: B – Value added = $10,000 − $3,000 = $7,000.
9. Which of the following would increase GDP?
• A) Purchase of stocks and bonds
• B) Business spending on new equipment and structures
• C) Household spending on new homes and business inventory changes
• D) Both B and C
• ✅ Correct Answer: D – Investment includes business fixed investment,
residential investment (new homes), and inventory changes. It does NOT
include financial investments like stocks and bonds.
10. Net exports (NX) is calculated as:
• A) Exports plus imports
• B) Exports minus imports
• C) Imports minus exports
• D) Total international trade
• ✅ Correct Answer: B – Net exports = Exports − Imports. A positive NX is a
trade surplus; negative is a trade deficit.
11. Business cycles refer to:
• A) Long-run economic growth trends
• B) Yt = Ȳt + Ỹt
• C) Yt = Ȳt × Ỹt
• D) Yt = Ȳt ÷ Ỹt
• ✅ Correct Answer: B – Actual output equals potential output plus short-run
output.
12. Short-run output (Ỹt) is defined as:
• A) Ỹt = (Yt − Ȳt) / Ȳt
• B) Ỹt = Yt − Ȳt
• C) Ỹt = Yt + Ȳt
• D) Ỹt = Ȳt / Yt
• ✅ Correct Answer: A – Short-run output is the percent deviation of actual
output from potential output.
, 13. A recession is defined as:
• A) A period of declining real GDP for two consecutive quarters
• B) A period of rising inflation
• C) A period of high unemployment
• D) A period of declining stock prices
• ✅ Correct Answer: A – A recession is typically defined as two consecutive
quarters of negative real GDP growth.
14. Which of the following is TRUE about GDP as a measure of living standards?
• A) GDP perfectly measures living standards
• B) GDP does not account for inequality
• C) GDP includes all non-market activities
• D) GDP adjusts for environmental damage
• ✅ Correct Answer: B – GDP does not account for inequality, black market
goods, informal sector activity, environmental damage, or leisure time.
15. According to course materials, world GDP per capita in 2016 was
approximately:
• A) $57,500
• B) $10,313
• C) $2,000
• D) $30,000
• ✅ Correct Answer: B
16. Opportunity cost is defined as:
• A) The monetary cost of a decision
• B) The value of the best alternative forgone
• C) The total cost of production
• D) The sunk cost of a decision
• ✅ Correct Answer: B
17. When making decisions, we should ignore ______ and focus on ______.
• A) Marginal costs; sunk costs
• B) Sunk costs; marginal costs and benefits
• C) Fixed costs; variable costs
• D) Opportunity costs; explicit costs
• ✅ Correct Answer: B
18. The production possibilities frontier (PPF) illustrates:
Microeconomics – Complete Final Exam
Review (2026/2027) Academic Year |
(Clemson University, - VERIFIED
QUESTIONS AND ANSWERS | Covering
Four Core Domains
Domain 1: Foundations of Economics & The Market
System
(Questions 1–50)
1. Gross Domestic Product (GDP) is defined as:
• A) The market value of all final goods and services produced in a country in a
year
• B) The total income earned by all citizens of a country
• C) The total value of all transactions in an economy
• D) The market value of all goods and services consumed in a country
• ✅ Correct Answer: A – GDP is the market value of all final goods and
services produced within a country's borders in a given period. Only final
goods are counted to avoid double counting intermediate goods.
2. The expenditure approach to measuring GDP uses the accounting identity:
• A) Y = C + I + G + NX
• B) Y = C + I + G − NX
• C) Y = C + I + G + EX − IM
• D) Y = Employee Compensation + Taxes + Rents + Interest + Profits
• ✅ Correct Answer: C – The expenditure approach sums consumption,
investment, government spending, and net exports (exports minus imports).
3. Which component is consistently the largest of U.S. GDP?
, • A) Investment
• B) Government spending
• C) Consumption
• D) Net exports
• ✅ Correct Answer: C – Consumption typically accounts for about 70% of
U.S. economic activity.
4. If you purchase a BMW produced in Germany for $45,000, what happens to
U.S. GDP?
• A) GDP increases by $45,000
• B) GDP decreases by $45,000
• C) GDP is unchanged
• D) GDP increases by $45,000 in investment
• ✅ Correct Answer: C – Since the BMW was produced in Germany, it is not
counted in U.S. GDP. Imports are subtracted in the net exports component.
5. Transfer payments such as Social Security benefits are NOT counted in GDP
because:
• A) They are too small to matter
• B) They represent a transfer of existing income, not new production
• C) They are paid by the government
• D) They are taxed
• ✅ Correct Answer: B – Transfer payments do not represent payment for
newly produced goods or services.
6. The income approach to measuring GDP sums:
• A) Consumption, investment, government spending, and net exports
• B) Employee compensation, taxes, rents, interest, profits, and depreciation
• C) Value added at each stage of production
• D) All transactions in the economy
• ✅ Correct Answer: B – The income approach sums all income earned in the
economy.
7. The value-added approach to GDP measures:
• A) Total sales in the economy
• B) The sum of value added at each stage of production
• C) Total profits in the economy
• D) Total wages paid
• ✅ Correct Answer: B – Value added = gross output − intermediate inputs.
,8. Value added for a firm with gross output of $10,000 and intermediate inputs
of $3,000 is:
• A) $3,000
• B) $7,000
• C) $10,000
• D) $13,000
• ✅ Correct Answer: B – Value added = $10,000 − $3,000 = $7,000.
9. Which of the following would increase GDP?
• A) Purchase of stocks and bonds
• B) Business spending on new equipment and structures
• C) Household spending on new homes and business inventory changes
• D) Both B and C
• ✅ Correct Answer: D – Investment includes business fixed investment,
residential investment (new homes), and inventory changes. It does NOT
include financial investments like stocks and bonds.
10. Net exports (NX) is calculated as:
• A) Exports plus imports
• B) Exports minus imports
• C) Imports minus exports
• D) Total international trade
• ✅ Correct Answer: B – Net exports = Exports − Imports. A positive NX is a
trade surplus; negative is a trade deficit.
11. Business cycles refer to:
• A) Long-run economic growth trends
• B) Yt = Ȳt + Ỹt
• C) Yt = Ȳt × Ỹt
• D) Yt = Ȳt ÷ Ỹt
• ✅ Correct Answer: B – Actual output equals potential output plus short-run
output.
12. Short-run output (Ỹt) is defined as:
• A) Ỹt = (Yt − Ȳt) / Ȳt
• B) Ỹt = Yt − Ȳt
• C) Ỹt = Yt + Ȳt
• D) Ỹt = Ȳt / Yt
• ✅ Correct Answer: A – Short-run output is the percent deviation of actual
output from potential output.
, 13. A recession is defined as:
• A) A period of declining real GDP for two consecutive quarters
• B) A period of rising inflation
• C) A period of high unemployment
• D) A period of declining stock prices
• ✅ Correct Answer: A – A recession is typically defined as two consecutive
quarters of negative real GDP growth.
14. Which of the following is TRUE about GDP as a measure of living standards?
• A) GDP perfectly measures living standards
• B) GDP does not account for inequality
• C) GDP includes all non-market activities
• D) GDP adjusts for environmental damage
• ✅ Correct Answer: B – GDP does not account for inequality, black market
goods, informal sector activity, environmental damage, or leisure time.
15. According to course materials, world GDP per capita in 2016 was
approximately:
• A) $57,500
• B) $10,313
• C) $2,000
• D) $30,000
• ✅ Correct Answer: B
16. Opportunity cost is defined as:
• A) The monetary cost of a decision
• B) The value of the best alternative forgone
• C) The total cost of production
• D) The sunk cost of a decision
• ✅ Correct Answer: B
17. When making decisions, we should ignore ______ and focus on ______.
• A) Marginal costs; sunk costs
• B) Sunk costs; marginal costs and benefits
• C) Fixed costs; variable costs
• D) Opportunity costs; explicit costs
• ✅ Correct Answer: B
18. The production possibilities frontier (PPF) illustrates:
