WGU Global Economics for Managers (C211) Exam Questions Instant Access

Question 1

If the demand for a good is inelastic, what is true?

AQuantity demanded responds substantially to price changes

BQuantity demanded responds only slightly to price changes

CPrice and total revenue move in opposite directions

DConsumers are highly sensitive to price changes

Answer : B

In Global Economics for Managers, demand is inelastic when quantity demanded responds only slightly to changes in price, making option B correct.

Inelastic demand is common for necessities, goods with few substitutes, or goods that represent a small portion of income. When demand is inelastic, price and total revenue move in the same direction.

Options A, C, and D describe elastic demand.

Thus, option B correctly defines inelastic demand.

Question 2

Which statement about the GDP deflator is true?

AIts percentage change from one year to the next is the inflation rate.

BIt is a more reliable indicator of economic well-being than real GDP.

CIt includes fewer core economic measurements than GDP.

DIt follows a nearly strict decreasing pattern from a base year.

Answer : A

In Global Economics for Managers, the GDP deflator is a price index used to measure inflation, making option A correct. The percentage change in the GDP deflator from one year to the next reflects the overall inflation rate of domestically produced goods and services.

The GDP deflator is calculated as:

GDP Deflator = (Nominal GDP / Real GDP) 100

Because it includes all goods and services produced domestically, it provides a broad measure of price changes across the economy. Unlike the CPI, it is not based on a fixed basket of goods.

Option B is incorrect because real GDP, not the GDP deflator, is used to assess economic well-being. Option C is incorrect because the GDP deflator is derived from the same GDP components. Option D is incorrect because the deflator generally increases over time due to inflation.

Thus, option A is correct.

Question 3

What is one characteristic of a market shortage?

APrice is greater than the equilibrium price.

BQuantity demanded is less than equilibrium quantity.

CThere is downward pressure on price.

DQuantity supplied is less than equilibrium quantity.

Answer : D

In Global Economics for Managers, a market shortage occurs when quantity demanded exceeds quantity supplied at the current price. A defining characteristic of a shortage is that quantity supplied is less than the equilibrium quantity, making option D correct.

Shortages typically arise when prices are set below equilibrium, such as under price controls. At these lower prices, consumers demand more, while producers supply less, creating excess demand.

Option A describes a surplus condition. Option B contradicts the definition of shortage. Option C is incorrect because shortages create upward, not downward, pressure on prices.

Thus, option D correctly identifies a characteristic of a market shortage.

Question 4

What is the necessity of making sensible decisions in the absence of complete information called?

APerfect rationality

BBounded rationality

CMoral hazard

DAdverse selection

Answer : B

In Global Economics for Managers, bounded rationality describes the necessity of making sensible decisions without complete information, making option B correct. Because information is costly, limited, or imperfect, individuals and firms cannot always make fully optimal decisions.

Bounded rationality recognizes cognitive limitations and time constraints. Managers often rely on rules of thumb, experience, and simplified models rather than exhaustive analysis. This approach leads to satisfactory decisions rather than perfectly optimal ones.

Option A assumes complete information, which is unrealistic. Options C and D describe information asymmetry problems, not decision-making constraints.

Thus, option B correctly defines bounded rationality.

Question 5

When the Federal Reserve decreases the money supply, what is the result?

AThe efficiency of market corrections is reduced.

BThe quantity of goods and services demanded for any given price decreases.

CThe quantity of goods and services demanded for one specific price increases.

DThe aggregate demand for imports increases.

Answer : B

When the Federal Reserve decreases the money supply, aggregate demand decreases because borrowing becomes more expensive and less credit is available. Option B is correct because the quantity of goods and services demanded at any given price level falls. A lower money supply tends to raise interest rates, which discourages consumer borrowing, business investment, and interest-sensitive purchases such as homes, vehicles, and capital equipment. This shifts the aggregate demand curve left. Option A is not the standard macroeconomic result. Option C is too narrow and incorrectly states that demand increases. Option D is also incorrect because contractionary monetary policy does not directly increase aggregate demand for imports. For managers, tighter monetary policy can reduce sales forecasts, investment plans, and expansion opportunities.

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Question 6

Direct exports have which advantage?

ALower transportation costs

BCapitalization of economies of scale in production in the home country

CFull control over foreign distribution

DElimination of exchange rate risk

Answer : B

In Global Economics for Managers, direct exporting allows firms to capitalize on economies of scale in production in the home country, making option B correct.

By concentrating production domestically, firms can achieve lower average costs, maintain quality control, and leverage existing facilities and expertise. Direct exporting avoids the fixed costs of establishing foreign production facilities.

Options A, C, and D are incorrect because exporting typically involves transportation costs, limited distribution control, and exposure to exchange rate risk.

Thus, option B correctly identifies a key advantage of direct exporting.

Question 7

What is opportunity cost?

AThe explicit monetary cost of an activity

BThe lost potential from pursuing one activity at the expense of another, given the alternatives

CThe total cost of all inputs used in production

DThe marginal benefit of an additional unit

Answer : B

In Global Economics for Managers, opportunity cost is defined as the lost potential from pursuing one activity at the expense of another, given the available alternatives, making option B correct. Opportunity cost reflects the value of the next best alternative that is foregone when a decision is made.

This concept is central to economic decision making because resources---such as time, capital, and labor---are scarce. Choosing one option necessarily means giving up another. Opportunity cost includes both monetary and non-monetary factors and applies to individuals, firms, and governments alike.

For firms, opportunity cost may involve using capital for one investment rather than another. For consumers, it may involve spending money on one good instead of saving it or purchasing a different good. Managers must account for opportunity costs to make efficient and rational decisions.

Option A refers only to explicit costs, which are incomplete. Options C and D describe different cost and benefit concepts.

Thus, option B correctly defines opportunity cost.