WGU D089 Principles of Economics Exam Questions - Verified & Rationalized Answers - Macroeconomics GDP Inflation
Unemployment - A+ Graded
WGU D089 Principles of Economics | 300+ Questions | Verified and Rationalized Answers | Different Title 2
TABLE OF CONTENTS
1. I. Foundations - Scarcity Choice Opportunity Cost Next Best Alternative Explicit Implicit Costs PPF
2. II. Demand and Supply - Law Demand Inverse Price Quantity, Law Supply Direct, Shifts vs Movement Along, Equilibrium Surplus Shortage
3. III. Elasticity - Price Elasticity Demand Midpoint Formula Percent Delta Q / Percent Delta P Elastic greater than 1 Inelastic less than 1
Unitary 1, Income Elasticity Normal Inferior, Cross Price Substitutes Complements, Supply Elasticity Time Horizon
4. IV. Consumer Behavior - Law Diminishing Marginal Utility, Consumer Surplus Willingness to Pay Minus Price
5. V. Production and Costs - Short Run vs Long Run, Fixed Variable Costs, MC MR AC, Economies Scale
6. VI. Market Structures - Perfect Competition P=MC, Monopoly MR=MC Price from Demand, Monopolistic Competition, Oligopoly
7. VII. GDP Measurement - Final Goods Services Within Country, Nominal Current Prices vs Real Constant Prices GDP Deflator
Nominal/Real*100, Excludes Intermediate Used Financial Non-Market
8. VIII. Inflation and Unemployment - CPI Basket vs GDP Deflator All Goods, Natural Rate Frictional Structural Cyclical Zero Full Employment,
Types Inflation Demand Pull Cost Push
9. IX. AD-AS Model - AD C+I+G+NX, SRAS LRAS Vertical Full Employment, Supply Shock Oil Stagflation Inflation Up Output Down
10. X. Fiscal Policy - Expansionary Increase G Decrease T Close Recessionary Gap Increase AD, Contractionary Decrease G Increase T
Close Inflationary Gap, Crowding Out Interest Rate Reduces Private Investment
11. XI. Money and Banking - Functions Medium Exchange Unit Account Store Value Deferred Payment, Federal Reserve Tools Fed Funds
Rate Reserve Requirement Open Market Buy Sell Bonds
12. XII. Monetary Policy - Expansionary Decrease Fed Funds Rate Decrease Reserve Buy Bonds Increase Money Supply Decrease Interest
Rate, Contractionary Increase Rate Increase Reserve Sell Bonds
13. XIII. Phillips Curve - Short Run Inverse Inflation Unemployment, Long Run Vertical Natural Rate NAIRU Expectations-Augmented
14. XIV. International Trade - Comparative Advantage Lower Opportunity Cost Basis Specialization, Absolute Advantage More Output, Trade
Barriers Tariffs Quotas
15. XV. Practice Questions - Each Asked Like Real WGU D089 Exam
16. XVI. Answer Key with Verified and Rationalized Answers A+ Graded
,WGU D089 PRINCIPLES OF ECONOMICS - PRACTICE QUESTIONS - EACH QUESTION ASKED LIKE REAL EXAM
Based on WGU D089 Principles of Economics Competency - Microeconomics Macroeconomics Policy. High Yield.
1. Money functions?
A. No functions
B. Only medium exchange
C. Only store value
D. Medium exchange, unit account, store value, standard deferred payment - money functions
Answer: D
Rationale: Money functions medium exchange unit account store value deferred payment.
2. What is GDP deflator formula?
A. CPI*100
B. No formula
C. Real/Nominal
D. GDP deflator = Nominal GDP/Real GDP*100 measures price level all goods
Answer: D
Rationale: GDP deflator Nominal/Real*100 price level all goods vs CPI basket.
3. What causes shift in demand vs movement along demand?
A. Movement along caused by price change, shift caused by income tastes expectations number buyers price related goods - demand shifter
B. No shift
C. Only price shifts
D. Same
Answer: A
Rationale: Movement along price change, shift income tastes expectations buyers related goods.
4. What is comparative advantage?
A. Ability to produce at lower opportunity cost - basis for trade specialization
B. Produce more
C. Absolute advantage
D. No trade benefit
Answer: A
Rationale: Comparative advantage lower opportunity cost basis trade.
5. What is Phillips Curve?
A. Positive inflation unemployment
B. Short-run inverse relationship inflation and unemployment, long-run vertical at natural rate NAIRU - expectations-augmented
C. No relationship
D. Long-run inverse
Answer: B
Rationale: Short-run Phillips inverse inflation unemployment, long-run vertical natural rate.
6. Fiscal policy to close recessionary gap?
A. Decrease G increase T
B. Increase interest rate
C. Decrease money supply
D. Increase government spending G decrease taxes T increase AD - expansionary fiscal
Answer: D
Rationale: Recessionary gap expansionary fiscal increase G decrease T increase AD.
7. Monopoly profit maximization where?
A. MR greater than P
B. MR=MC - monopoly MR less than P due to downward demand, produces where MR=MC then charges demand price
C. MC=0
D. P=MC
Answer: B
Rationale: Monopoly MR=MC profit max, price from demand greater than MR.
8. Fiscal policy to close recessionary gap?
A. Increase government spending G decrease taxes T increase AD - expansionary fiscal
B. Decrease G increase T
C. Increase interest rate
D. Decrease money supply
Answer: A
Rationale: Recessionary gap expansionary fiscal increase G decrease T increase AD.
9. What is difference between nominal GDP and real GDP?
A. Nominal uses current prices, real uses base year constant prices adjusted for inflation - real = nominal/GDP deflator*100
,B. Same
C. No difference
D. Real includes inflation
Answer: A
Rationale: Nominal current prices, real constant base year prices inflation-adjusted.
10. GDP includes which?
A. Financial transactions
B. Final goods and services produced within country in given period, excludes intermediate to avoid double counting, excludes non-market
C. Intermediate goods
D. Used goods
Answer: B
Rationale: GDP final goods services produced within country period, excludes intermediate used financial.
11. What is GDP deflator formula?
A. No formula
B. CPI*100
C. GDP deflator = Nominal GDP/Real GDP*100 measures price level all goods
D. Real/Nominal
Answer: C
Rationale: GDP deflator Nominal/Real*100 price level all goods vs CPI basket.
12. What is comparative advantage?
A. No trade benefit
B. Ability to produce at lower opportunity cost - basis for trade specialization
C. Absolute advantage
D. Produce more
Answer: B
Rationale: Comparative advantage lower opportunity cost basis trade.
13. What does the law of demand state?
A. Price up quantity up
B. Price and quantity same
C. Price up quantity demanded down, price down quantity demanded up - inverse relationship ceteris paribus
D. No relationship
Answer: C
Rationale: Law of demand inverse price-quantity demanded ceteris paribus.
14. What is crowding out?
A. Increases investment
B. Expansionary fiscal increases interest rate reduces private investment I - crowding out reduces multiplier effectiveness
C. No crowding
D. No effect
Answer: B
Rationale: Crowding out fiscal increase interest rate reduces private investment.
15. What causes shift in demand vs movement along demand?
A. No shift
B. Only price shifts
C. Movement along caused by price change, shift caused by income tastes expectations number buyers price related goods - demand shifter
D. Same
Answer: C
Rationale: Movement along price change, shift income tastes expectations buyers related goods.
16. What is comparative advantage?
A. Absolute advantage
B. Ability to produce at lower opportunity cost - basis for trade specialization
C. No trade benefit
D. Produce more
Answer: B
Rationale: Comparative advantage lower opportunity cost basis trade.
17. What is comparative advantage?
A. Absolute advantage
B. Ability to produce at lower opportunity cost - basis for trade specialization
C. Produce more
D. No trade benefit
Answer: B
Rationale: Comparative advantage lower opportunity cost basis trade.
, 18. What is difference between nominal GDP and real GDP?
A. Real includes inflation
B. No difference
C. Same
D. Nominal uses current prices, real uses base year constant prices adjusted for inflation - real = nominal/GDP deflator*100
Answer: D
Rationale: Nominal current prices, real constant base year prices inflation-adjusted.
19. Monopoly profit maximization where?
A. MC=0
B. MR=MC - monopoly MR less than P due to downward demand, produces where MR=MC then charges demand price
C. MR greater than P
D. P=MC
Answer: B
Rationale: Monopoly MR=MC profit max, price from demand greater than MR.
20. GDP includes which?
A. Used goods
B. Intermediate goods
C. Final goods and services produced within country in given period, excludes intermediate to avoid double counting, excludes non-market
D. Financial transactions
Answer: C
Rationale: GDP final goods services produced within country period, excludes intermediate used financial.
21. Elasticity of supply determinants?
A. Only demand
B. No determinants
C. Time horizon, availability inputs, excess capacity, storability - more elastic long run
D. Only price
Answer: C
Rationale: Supply elasticity time horizon inputs capacity storability.
22. Elasticity of supply determinants?
A. Only price
B. Only demand
C. No determinants
D. Time horizon, availability inputs, excess capacity, storability - more elastic long run
Answer: D
Rationale: Supply elasticity time horizon inputs capacity storability.
23. What is opportunity cost?
A. Value of next best alternative forgone when making a choice - includes explicit and implicit costs
B. No cost
C. Sunk cost
D. Only money cost
Answer: A
Rationale: Opportunity cost next best alternative forgone explicit plus implicit.
24. What is difference between nominal GDP and real GDP?
A. Nominal uses current prices, real uses base year constant prices adjusted for inflation - real = nominal/GDP deflator*100
B. Real includes inflation
C. No difference
D. Same
Answer: A
Rationale: Nominal current prices, real constant base year prices inflation-adjusted.
25. What is natural rate of unemployment includes?
A. Zero unemployment
B. Only structural
C. Frictional plus structural - natural rate around 4-5 percent, cyclical 0 at full employment
D. Only cyclical
Answer: C
Rationale: Natural rate frictional plus structural, cyclical 0 at full employment.
26. What causes shift in demand vs movement along demand?
A. Only price shifts
B. Movement along caused by price change, shift caused by income tastes expectations number buyers price related goods - demand shifter
C. Same
D. No shift
Unemployment - A+ Graded
WGU D089 Principles of Economics | 300+ Questions | Verified and Rationalized Answers | Different Title 2
TABLE OF CONTENTS
1. I. Foundations - Scarcity Choice Opportunity Cost Next Best Alternative Explicit Implicit Costs PPF
2. II. Demand and Supply - Law Demand Inverse Price Quantity, Law Supply Direct, Shifts vs Movement Along, Equilibrium Surplus Shortage
3. III. Elasticity - Price Elasticity Demand Midpoint Formula Percent Delta Q / Percent Delta P Elastic greater than 1 Inelastic less than 1
Unitary 1, Income Elasticity Normal Inferior, Cross Price Substitutes Complements, Supply Elasticity Time Horizon
4. IV. Consumer Behavior - Law Diminishing Marginal Utility, Consumer Surplus Willingness to Pay Minus Price
5. V. Production and Costs - Short Run vs Long Run, Fixed Variable Costs, MC MR AC, Economies Scale
6. VI. Market Structures - Perfect Competition P=MC, Monopoly MR=MC Price from Demand, Monopolistic Competition, Oligopoly
7. VII. GDP Measurement - Final Goods Services Within Country, Nominal Current Prices vs Real Constant Prices GDP Deflator
Nominal/Real*100, Excludes Intermediate Used Financial Non-Market
8. VIII. Inflation and Unemployment - CPI Basket vs GDP Deflator All Goods, Natural Rate Frictional Structural Cyclical Zero Full Employment,
Types Inflation Demand Pull Cost Push
9. IX. AD-AS Model - AD C+I+G+NX, SRAS LRAS Vertical Full Employment, Supply Shock Oil Stagflation Inflation Up Output Down
10. X. Fiscal Policy - Expansionary Increase G Decrease T Close Recessionary Gap Increase AD, Contractionary Decrease G Increase T
Close Inflationary Gap, Crowding Out Interest Rate Reduces Private Investment
11. XI. Money and Banking - Functions Medium Exchange Unit Account Store Value Deferred Payment, Federal Reserve Tools Fed Funds
Rate Reserve Requirement Open Market Buy Sell Bonds
12. XII. Monetary Policy - Expansionary Decrease Fed Funds Rate Decrease Reserve Buy Bonds Increase Money Supply Decrease Interest
Rate, Contractionary Increase Rate Increase Reserve Sell Bonds
13. XIII. Phillips Curve - Short Run Inverse Inflation Unemployment, Long Run Vertical Natural Rate NAIRU Expectations-Augmented
14. XIV. International Trade - Comparative Advantage Lower Opportunity Cost Basis Specialization, Absolute Advantage More Output, Trade
Barriers Tariffs Quotas
15. XV. Practice Questions - Each Asked Like Real WGU D089 Exam
16. XVI. Answer Key with Verified and Rationalized Answers A+ Graded
,WGU D089 PRINCIPLES OF ECONOMICS - PRACTICE QUESTIONS - EACH QUESTION ASKED LIKE REAL EXAM
Based on WGU D089 Principles of Economics Competency - Microeconomics Macroeconomics Policy. High Yield.
1. Money functions?
A. No functions
B. Only medium exchange
C. Only store value
D. Medium exchange, unit account, store value, standard deferred payment - money functions
Answer: D
Rationale: Money functions medium exchange unit account store value deferred payment.
2. What is GDP deflator formula?
A. CPI*100
B. No formula
C. Real/Nominal
D. GDP deflator = Nominal GDP/Real GDP*100 measures price level all goods
Answer: D
Rationale: GDP deflator Nominal/Real*100 price level all goods vs CPI basket.
3. What causes shift in demand vs movement along demand?
A. Movement along caused by price change, shift caused by income tastes expectations number buyers price related goods - demand shifter
B. No shift
C. Only price shifts
D. Same
Answer: A
Rationale: Movement along price change, shift income tastes expectations buyers related goods.
4. What is comparative advantage?
A. Ability to produce at lower opportunity cost - basis for trade specialization
B. Produce more
C. Absolute advantage
D. No trade benefit
Answer: A
Rationale: Comparative advantage lower opportunity cost basis trade.
5. What is Phillips Curve?
A. Positive inflation unemployment
B. Short-run inverse relationship inflation and unemployment, long-run vertical at natural rate NAIRU - expectations-augmented
C. No relationship
D. Long-run inverse
Answer: B
Rationale: Short-run Phillips inverse inflation unemployment, long-run vertical natural rate.
6. Fiscal policy to close recessionary gap?
A. Decrease G increase T
B. Increase interest rate
C. Decrease money supply
D. Increase government spending G decrease taxes T increase AD - expansionary fiscal
Answer: D
Rationale: Recessionary gap expansionary fiscal increase G decrease T increase AD.
7. Monopoly profit maximization where?
A. MR greater than P
B. MR=MC - monopoly MR less than P due to downward demand, produces where MR=MC then charges demand price
C. MC=0
D. P=MC
Answer: B
Rationale: Monopoly MR=MC profit max, price from demand greater than MR.
8. Fiscal policy to close recessionary gap?
A. Increase government spending G decrease taxes T increase AD - expansionary fiscal
B. Decrease G increase T
C. Increase interest rate
D. Decrease money supply
Answer: A
Rationale: Recessionary gap expansionary fiscal increase G decrease T increase AD.
9. What is difference between nominal GDP and real GDP?
A. Nominal uses current prices, real uses base year constant prices adjusted for inflation - real = nominal/GDP deflator*100
,B. Same
C. No difference
D. Real includes inflation
Answer: A
Rationale: Nominal current prices, real constant base year prices inflation-adjusted.
10. GDP includes which?
A. Financial transactions
B. Final goods and services produced within country in given period, excludes intermediate to avoid double counting, excludes non-market
C. Intermediate goods
D. Used goods
Answer: B
Rationale: GDP final goods services produced within country period, excludes intermediate used financial.
11. What is GDP deflator formula?
A. No formula
B. CPI*100
C. GDP deflator = Nominal GDP/Real GDP*100 measures price level all goods
D. Real/Nominal
Answer: C
Rationale: GDP deflator Nominal/Real*100 price level all goods vs CPI basket.
12. What is comparative advantage?
A. No trade benefit
B. Ability to produce at lower opportunity cost - basis for trade specialization
C. Absolute advantage
D. Produce more
Answer: B
Rationale: Comparative advantage lower opportunity cost basis trade.
13. What does the law of demand state?
A. Price up quantity up
B. Price and quantity same
C. Price up quantity demanded down, price down quantity demanded up - inverse relationship ceteris paribus
D. No relationship
Answer: C
Rationale: Law of demand inverse price-quantity demanded ceteris paribus.
14. What is crowding out?
A. Increases investment
B. Expansionary fiscal increases interest rate reduces private investment I - crowding out reduces multiplier effectiveness
C. No crowding
D. No effect
Answer: B
Rationale: Crowding out fiscal increase interest rate reduces private investment.
15. What causes shift in demand vs movement along demand?
A. No shift
B. Only price shifts
C. Movement along caused by price change, shift caused by income tastes expectations number buyers price related goods - demand shifter
D. Same
Answer: C
Rationale: Movement along price change, shift income tastes expectations buyers related goods.
16. What is comparative advantage?
A. Absolute advantage
B. Ability to produce at lower opportunity cost - basis for trade specialization
C. No trade benefit
D. Produce more
Answer: B
Rationale: Comparative advantage lower opportunity cost basis trade.
17. What is comparative advantage?
A. Absolute advantage
B. Ability to produce at lower opportunity cost - basis for trade specialization
C. Produce more
D. No trade benefit
Answer: B
Rationale: Comparative advantage lower opportunity cost basis trade.
, 18. What is difference between nominal GDP and real GDP?
A. Real includes inflation
B. No difference
C. Same
D. Nominal uses current prices, real uses base year constant prices adjusted for inflation - real = nominal/GDP deflator*100
Answer: D
Rationale: Nominal current prices, real constant base year prices inflation-adjusted.
19. Monopoly profit maximization where?
A. MC=0
B. MR=MC - monopoly MR less than P due to downward demand, produces where MR=MC then charges demand price
C. MR greater than P
D. P=MC
Answer: B
Rationale: Monopoly MR=MC profit max, price from demand greater than MR.
20. GDP includes which?
A. Used goods
B. Intermediate goods
C. Final goods and services produced within country in given period, excludes intermediate to avoid double counting, excludes non-market
D. Financial transactions
Answer: C
Rationale: GDP final goods services produced within country period, excludes intermediate used financial.
21. Elasticity of supply determinants?
A. Only demand
B. No determinants
C. Time horizon, availability inputs, excess capacity, storability - more elastic long run
D. Only price
Answer: C
Rationale: Supply elasticity time horizon inputs capacity storability.
22. Elasticity of supply determinants?
A. Only price
B. Only demand
C. No determinants
D. Time horizon, availability inputs, excess capacity, storability - more elastic long run
Answer: D
Rationale: Supply elasticity time horizon inputs capacity storability.
23. What is opportunity cost?
A. Value of next best alternative forgone when making a choice - includes explicit and implicit costs
B. No cost
C. Sunk cost
D. Only money cost
Answer: A
Rationale: Opportunity cost next best alternative forgone explicit plus implicit.
24. What is difference between nominal GDP and real GDP?
A. Nominal uses current prices, real uses base year constant prices adjusted for inflation - real = nominal/GDP deflator*100
B. Real includes inflation
C. No difference
D. Same
Answer: A
Rationale: Nominal current prices, real constant base year prices inflation-adjusted.
25. What is natural rate of unemployment includes?
A. Zero unemployment
B. Only structural
C. Frictional plus structural - natural rate around 4-5 percent, cyclical 0 at full employment
D. Only cyclical
Answer: C
Rationale: Natural rate frictional plus structural, cyclical 0 at full employment.
26. What causes shift in demand vs movement along demand?
A. Only price shifts
B. Movement along caused by price change, shift caused by income tastes expectations number buyers price related goods - demand shifter
C. Same
D. No shift
