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Teacher Certification · 5911

Praxis Economics Practice Test

Praxis Economics practice centers on how households, firms, governments, and countries make choices under scarcity. The question bank samples microeconomic analysis of prices, costs, surpluses, and market interventions, alongside macroeconomic measures such as GDP, inflation, productivity, banking reserves, and the expenditure multiplier. It also includes international trade and exchange-rate effects.

Exam overview

Exam providerETS Praxis
Exam code5911
CategoryTeacher Certification

About the Praxis Economics Exam

Economic reasoning requires distinguishing changes in demand or supply from movements along a curve, and predicting how price controls, tariffs, and other interventions affect buyers, sellers, and market outcomes. Firm questions call for comparing marginal cost with market price and interpreting profit incentives in competitive settings. National-accounting tasks include identifying current production in GDP, while macroeconomic analysis connects productivity to long-run output and nominal wage growth to real purchasing power. Monetary questions may involve reserve calculations and the roles of required and excess reserves. Open-economy reasoning links currency appreciation to export and import competitiveness. For teacher candidates, these concepts support explaining economic models, interpreting numerical examples, and selecting conclusions consistent with stated assumptions such as a small-country tariff model.

Sample Practice Questions

Review a selection from this exam's published US Practice Tests practice bank.

Question 1

If the marginal propensity to consume is 0.75 in a simple model with no taxes or imports, what is the value of the expenditure multiplier?

  1. A1.33
  2. B3
  3. C4
  4. D7.5
Show answerCorrect answer: C

In the simple model, the expenditure multiplier is 1 divided by one minus the marginal propensity to consume. Thus 1/(1 − 0.75) = 4.

Question 2

A seller receives $100 for a good sold domestically, but the seller would have been willing to sell it for $70. What is the seller's producer surplus on this transaction?

  1. A$30
  2. B$70
  3. C$100
  4. D$170
Show answerCorrect answer: A

Producer surplus is the amount received minus the minimum amount the seller would accept, commonly represented by marginal cost for the unit. Here it is $100 − $70 = $30.

Question 3

Suppose a country experiences a sustained increase in labor productivity, while the quantity of labor and other inputs is unchanged. In the long run, what is the most direct potential effect?

  1. AThe economy's productive capacity can increase.
  2. BThe economy's productive capacity must decrease.
  3. CThe price level must rise by exactly the productivity growth rate.
  4. DStructural unemployment must become zero.
Show answerCorrect answer: A

Higher productivity means more output can be produced from a given amount of inputs. This can raise potential output and shift the economy's production possibilities outward, though the exact effects on prices and employment depend on other conditions.

Question 4

A government imposes a binding price ceiling below the market-clearing price for rental apartments. What is the most likely immediate market effect, other things equal?

  1. AA shortage, because quantity demanded exceeds quantity supplied.
  2. BA surplus, because quantity supplied exceeds quantity demanded.
  3. CNo change in the number of apartments renters seek.
  4. DAn increase in the market-clearing rent.
Show answerCorrect answer: A

At a binding ceiling below equilibrium, the regulated rent is lower than the price that would balance the market. More units are demanded while fewer are supplied, creating a shortage.

Question 5

In national income accounting, which item is included in gross domestic product for the current year?

  1. AThe sale of a newly produced domestic machine to a business.
  2. BThe sale of a used car between two households.
  3. CA cash transfer payment from the government to a household.
  4. DThe purchase of shares in an existing company.
Show answerCorrect answer: A

GDP measures the market value of final goods and services produced within a country during a period. A newly produced machine is current domestic production and is counted as investment. Used goods, transfers, and purchases of financial assets do not represent current production.

Question 6

A commercial bank has $100 million in checkable deposits, $12 million in required reserves, and $15 million in total reserves. How much excess reserves does it hold?

  1. A$3 million
  2. B$12 million
  3. C$15 million
  4. D$27 million
Show answerCorrect answer: A

Excess reserves equal total reserves minus required reserves: $15 million − $12 million = $3 million.

Question 7

A country imposes a tariff on an imported good. Assuming the country is small enough not to affect the world price, what is the most direct effect in its domestic market?

  1. AThe domestic price rises, and imports tend to fall.
  2. BThe domestic price falls, and imports tend to rise.
  3. CThe domestic price stays at the world price, and imports rise.
  4. DDomestic producers stop supplying the good.
Show answerCorrect answer: A

For a small importing country, a tariff raises the domestic price above the world price by the tariff amount. The higher price encourages domestic production and reduces domestic consumption, so imports tend to decline.

How to use this practice test

The free US Practice Tests bank contains 50 published questions. Each practice session presents up to 20 questions selected at random and shows results afterward. Use the set to diagnose which calculations or economic relationships need closer attention, then revisit missed concepts before another session.

Preparation tips

  • For multiplier problems, write the simple-model formula and identify the marginal propensity to consume before calculating.
  • Practice separating total cost from marginal cost by subtracting costs at adjacent output levels, then compare marginal cost with price.
  • For price ceilings and tariffs, state whether the policy is binding and trace its immediate effect on domestic price, quantity supplied, and quantity demanded.
  • Distinguish nominal from real wage changes by comparing wage growth with inflation; explain the result as a change in purchasing power.
  • Review GDP inclusion, required versus excess reserves, and the direction of trade effects when a currency appreciates.
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