WGU C211 GLOBAL ECONOMICS EXAM | QUESTIONS AND
ANSWERS | VERIFIED ANSWERS PLUS RATIONALES | EXAM
ALREADY GRADED A+ | LATEST EXAM
1. Which of the following best describes the law of demand?
A) As the price of a good increases, the quantity demanded increases.
B) As the price of a good increases, the quantity demanded decreases.
C) As the price of a good decreases, the supply decreases.
D) Demand is independent of price.
Answer: B
Rationale: The law of demand states that, all else equal, when the price of a good rises, the
quantity demanded falls, and vice versa.
2. Gross Domestic Product (GDP) measures:
A) The total income earned by a nation’s residents regardless of location.
B) The total market value of all final goods and services produced within a country in a given
period.
C) Only government spending in the economy.
D) Total exports minus imports only.
Answer: C
Rationale: GDP measures the total market value of all final goods and services produced within
a country. This distinguishes it from GNP, which includes income earned abroad.
3. Which market structure is characterized by many firms selling differentiated products?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
Answer: C
Rationale: Monopolistic competition has many firms, each offering slightly different products,
giving them some pricing power.
4. A central bank decreases the reserve requirement. This action is likely to:
A) Reduce the money supply.
B) Increase the money supply.
,C) Increase taxes.
D) Reduce government spending.
Answer: B
Rationale: Lowering reserve requirements allows banks to lend more, increasing the money
supply.
5. Which of the following is a leading economic indicator?
A) Unemployment rate
B) GDP growth rate
C) Stock market performance
D) Consumer Price Index (CPI)
Answer: C
Rationale: Leading indicators, like stock market performance, predict future economic activity,
while others like unemployment are lagging indicators.
6. Comparative advantage refers to:
A) A country’s ability to produce more goods than another country.
B) A country’s ability to produce goods at a lower opportunity cost than another country.
C) A country’s monopoly in certain goods.
D) Absolute production efficiency.
Answer: D
Rationale: Comparative advantage focuses on lower opportunity cost, allowing mutually
beneficial trade, not absolute output.
7. If a country experiences hyperinflation, the central bank is likely to:
A) Increase interest rates.
B) Lower interest rates.
C) Increase government spending.
D) Reduce taxes.
Answer: A
Rationale: Raising interest rates helps reduce borrowing and spending, slowing inflation.
8. Which of the following best describes a trade deficit?
A) Exports exceed imports.
B) Imports exceed exports.
C) The government balances its budget.
D) The country has a surplus in capital accounts.
,Answer: B
Rationale: A trade deficit occurs when a country imports more than it exports.
9. The concept of “invisible hand” is most closely associated with:
A) John Maynard Keynes
B) Adam Smith
C) Karl Marx
D) David Ricardo
Answer: B
Rationale: Adam Smith proposed the “invisible hand,” meaning self-interest in free markets
leads to efficient resource allocation.
10. If demand for a product increases while supply remains constant, the equilibrium price
will:
A) Decrease
B) Increase
C) Stay the same
D) Become zero
Answer: B
Rationale: Higher demand with constant supply creates upward pressure on prices.
11. A country with high investment in human capital is likely to experience:
A) Lower economic growth
B) Higher productivity and growth
C) Increased unemployment
D) Deflation
Answer: A
Rationale: Human capital investment improves worker skills, raising productivity and economic
growth.
12. Which fiscal policy tool involves changing government spending and taxation to
influence the economy?
A) Monetary policy
B) Fiscal policy
C) Trade policy
D) Industrial policy
Answer: B
Rationale: Fiscal policy uses taxation and government spending to influence aggregate demand.
, 13. The opportunity cost of attending college is:
A) Tuition and fees only
B) The value of the best alternative forgone, including earnings
C) Only books and supplies
D) None of the above
Answer: C
Rationale: Opportunity cost includes the value of the next best alternative, often foregone wages
plus costs like tuition.
14. Which of the following is an example of a public good?
A) A smartphone
B) National defense
C) A restaurant meal
D) Private tutoring
Answer: D
Rationale: Public goods are non-excludable and non-rivalrous, like national defense.
15. Which policy would most directly reduce unemployment during a recession?
A) Increase taxes
B) Reduce government spending
C) Increase government spending
D) Raise interest rates
Answer: C
Rationale: Expansionary fiscal policy, like increased government spending, stimulates demand
and reduces unemployment.
16. A binding price ceiling set below equilibrium will:
A) Cause a surplus
B) Cause a shortage
C) Have no effect
D) Increase supply
Answer: D
Rationale: A price ceiling below equilibrium prevents prices from rising, causing shortages as
demand exceeds supply.
17. If a country’s currency appreciates, its exports are likely to:
ANSWERS | VERIFIED ANSWERS PLUS RATIONALES | EXAM
ALREADY GRADED A+ | LATEST EXAM
1. Which of the following best describes the law of demand?
A) As the price of a good increases, the quantity demanded increases.
B) As the price of a good increases, the quantity demanded decreases.
C) As the price of a good decreases, the supply decreases.
D) Demand is independent of price.
Answer: B
Rationale: The law of demand states that, all else equal, when the price of a good rises, the
quantity demanded falls, and vice versa.
2. Gross Domestic Product (GDP) measures:
A) The total income earned by a nation’s residents regardless of location.
B) The total market value of all final goods and services produced within a country in a given
period.
C) Only government spending in the economy.
D) Total exports minus imports only.
Answer: C
Rationale: GDP measures the total market value of all final goods and services produced within
a country. This distinguishes it from GNP, which includes income earned abroad.
3. Which market structure is characterized by many firms selling differentiated products?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
Answer: C
Rationale: Monopolistic competition has many firms, each offering slightly different products,
giving them some pricing power.
4. A central bank decreases the reserve requirement. This action is likely to:
A) Reduce the money supply.
B) Increase the money supply.
,C) Increase taxes.
D) Reduce government spending.
Answer: B
Rationale: Lowering reserve requirements allows banks to lend more, increasing the money
supply.
5. Which of the following is a leading economic indicator?
A) Unemployment rate
B) GDP growth rate
C) Stock market performance
D) Consumer Price Index (CPI)
Answer: C
Rationale: Leading indicators, like stock market performance, predict future economic activity,
while others like unemployment are lagging indicators.
6. Comparative advantage refers to:
A) A country’s ability to produce more goods than another country.
B) A country’s ability to produce goods at a lower opportunity cost than another country.
C) A country’s monopoly in certain goods.
D) Absolute production efficiency.
Answer: D
Rationale: Comparative advantage focuses on lower opportunity cost, allowing mutually
beneficial trade, not absolute output.
7. If a country experiences hyperinflation, the central bank is likely to:
A) Increase interest rates.
B) Lower interest rates.
C) Increase government spending.
D) Reduce taxes.
Answer: A
Rationale: Raising interest rates helps reduce borrowing and spending, slowing inflation.
8. Which of the following best describes a trade deficit?
A) Exports exceed imports.
B) Imports exceed exports.
C) The government balances its budget.
D) The country has a surplus in capital accounts.
,Answer: B
Rationale: A trade deficit occurs when a country imports more than it exports.
9. The concept of “invisible hand” is most closely associated with:
A) John Maynard Keynes
B) Adam Smith
C) Karl Marx
D) David Ricardo
Answer: B
Rationale: Adam Smith proposed the “invisible hand,” meaning self-interest in free markets
leads to efficient resource allocation.
10. If demand for a product increases while supply remains constant, the equilibrium price
will:
A) Decrease
B) Increase
C) Stay the same
D) Become zero
Answer: B
Rationale: Higher demand with constant supply creates upward pressure on prices.
11. A country with high investment in human capital is likely to experience:
A) Lower economic growth
B) Higher productivity and growth
C) Increased unemployment
D) Deflation
Answer: A
Rationale: Human capital investment improves worker skills, raising productivity and economic
growth.
12. Which fiscal policy tool involves changing government spending and taxation to
influence the economy?
A) Monetary policy
B) Fiscal policy
C) Trade policy
D) Industrial policy
Answer: B
Rationale: Fiscal policy uses taxation and government spending to influence aggregate demand.
, 13. The opportunity cost of attending college is:
A) Tuition and fees only
B) The value of the best alternative forgone, including earnings
C) Only books and supplies
D) None of the above
Answer: C
Rationale: Opportunity cost includes the value of the next best alternative, often foregone wages
plus costs like tuition.
14. Which of the following is an example of a public good?
A) A smartphone
B) National defense
C) A restaurant meal
D) Private tutoring
Answer: D
Rationale: Public goods are non-excludable and non-rivalrous, like national defense.
15. Which policy would most directly reduce unemployment during a recession?
A) Increase taxes
B) Reduce government spending
C) Increase government spending
D) Raise interest rates
Answer: C
Rationale: Expansionary fiscal policy, like increased government spending, stimulates demand
and reduces unemployment.
16. A binding price ceiling set below equilibrium will:
A) Cause a surplus
B) Cause a shortage
C) Have no effect
D) Increase supply
Answer: D
Rationale: A price ceiling below equilibrium prevents prices from rising, causing shortages as
demand exceeds supply.
17. If a country’s currency appreciates, its exports are likely to:
