question

Macroeconomics deals with:

answer

the working of the entire economy or large sectors of it.

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Scarcity exists when:

answer

individuals can have more of one good but only by giving up something else.

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Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

answer

whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.

question

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

answer

the enjoyment you would have received from the candy bar.

question

You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:

answer

"How much" is a decision at the margin.

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You are analyzing a trade-off when you compare the _____and _____ of doing something.

answer

costs; benefits

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After swimming 100 laps at the pool, Erik decides to swim 10 more before lifting weights. This statement best represents this economic concept:

answer

"How much" is a decision at the margin.

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Corner offices in high-rise office buildings usually cost more to rent than other offices. This best illustrates the economic principle of:

answer

scarce resources.

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Florida schools offered cash bonuses to students who scored high on the state's standardized exams. The cash bonuses are an example of this economic principle:

answer

People usually take advantage of opportunities to make themselves better off.

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If every individual were required to be self-sufficient:

answer

living standards would fall.

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Which of the following statements is TRUE?

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If a market is in equilibrium, there will be no remaining opportunities for individuals to make themselves better off.

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An economy is efficient when:

answer

all opportunities to make some people better off without making other people worse off have been taken.

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When individuals act in their own self-interest:

answer

society may be worse off in some cases.

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If in Equitania, 20% of the population receive 80% of the income and the remaining 80% of the population receive 20% of the income, Equitania's economy:

answer

may be efficient.

question

Market failure occurs when:

answer

individual actions have side effects that are not properly taken into account.

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When a factory closes, why does it spell bad news for the local restaurants?

answer

Unemployed factory workers have lower incomes and are less likely to dine out.

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Sometimes the government varies its spending, depending on the needs of the country. This statement best represents the economic concept that:

answer

government policies can change spending.

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The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept:

answer

When markets don't achieve efficiency, government intervention can improve society's welfare.

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When people want more goods and services than are available, the economy undergoes inflation. This statement best represents this economic concept:

answer

Overall spending sometimes gets out of line with the economy's productive capacity.

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An economy is efficient if it is:

answer

not possible to produce more of one good without producing less of another good.

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An increase in efficiency means that an economy has:

answer

made more people better off without making others worse off.

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Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean the bathroom only if Lena vacuums the living room. This statement best represents this economic concept:

answer

There are gains from trade.

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Too little spending in an economy often leads to:

answer

a recession.

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The provision of disabled-parking passes to those with disabilities often requires that more than enough spaces be available for those with disabilities. As a result, many of these spaces are vacant quite often when they could be used by able-bodied individuals. Such a situation illustrates the:

answer

trade-off between efficiency and equity.

question

Overall, trade between China and the United States will:

answer

benefit both countries.

question

The importance of an economic model is that it allows us to:

answer

focus on the effects of only one change at a time.

question

If an economy is producing at a point on its production possibilities frontier, it is:

answer

efficient in production but not necessarily in allocation.

question

Economists usually assume that production is subject to increasing opportunity costs because:

answer

not all resources are equally suited to producing every good.

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At a point inside the curve on a Production Possibility Frontier graph, we know that the economy:

answer

is using its resources inefficiently.

question

Suppose Indiana produces only steel and corn, with fixed amounts of land, labor, and capital resources. Which of the following best sets the stage for economic growth?

answer

The percentage of Indiana residents with a college degree rises from 25% to 30%.

question

When a nation's economy grows:

answer

its production possibility frontier shifts outward.

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If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____.

answer

Laurence; both programs and sunglasses.

question

To achieve the gains from trade, each nation should specialize in the production of a good or service if:

answer

Money flows from households to firms as households offer factors of production for sale.

question

If two countries can produce the same maximum amount of a good, which one has the comparative advantage?

answer

Neither.

question

Which of the following is FALSE about the circular-flow diagram? A. Households are the primary demanders of goods and services. B. Money flows in the direction opposite to goods and services and factors of production. C. Firms are the primary suppliers of goods and services. D. Money flows from households to firms as households offer factors of production for sale.

answer

D. Money flows from households to firms as households offer factors of production for sale.

question

Which of the following is a normative statement? A. Women's labor force participation rate has increased during the past 100 years. B. The best way to encourage growth in the economy is through government spending. C. Children in the United States are required to go to school until they reach a certain age. D. The federal minimum wage is higher today than it was in 1990.

answer

B. The best way to encourage growth in the economy is through government spending.

question

Economists who are asked to choose between two government policies may disagree because:

answer

they base their conclusions on models that make different assumptions.

question

Positive economics:

answer

describes how the world does work

question

Of the following statements, which reflect(s) a normative view? I. The United States should increase the minimum wage to $10 per hour. II. There is a federal minimum wage in the United States. III. The federal minimum wage in the United States is less than $10 per hour.

answer

I.

question

A decrease in the price of a good will result in:

answer

an increase in the quantity demanded.

question

If goods A and B are substitutes, a decrease in the price of good B will:

answer

decrease the demand for good A.

question

If the demand for tires goes down when the price of gas goes up, then tires and gas are:

answer

complements.

question

If the price of a commodity increases, you can expect the:

answer

quantity supplied to increase.

question

A leftward shift of a supply curve is caused by:

answer

an increase in the cost of an input.

question

If the supply and demand curves intersect at $47, then any price above that would result in:

answer

a surplus.

question

For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes _____ in the equilibrium price of a hamburger and _____ in the equilibrium quantity of hamburgers.

answer

a rise; an increase

question

Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect:

answer

a shift to the right in the demand curve for Hondas and higher prices for Hondas.

question

An increase in supply with no change in demand will lead to _____ in equilibrium quantity and _____ in equilibrium price.

answer

an increase; a decrease

question

A decrease in demand and a decrease in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price.

answer

a decrease; an indeterminate change

question

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound:

answer

the price floor will not affect the market price or output.

question

A price ceiling will have NO effect if: it is set above the equilibrium price. the equilibrium price is above the price ceiling. it creates a shortage. it is set below the equilibrium price.

answer

it is set above the equilibrium price.

question

Suppose that the average cost of a doctor visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be:

answer

an excess demand for doctor visits.

question

Which is NOT an inefficiency caused by binding price ceilings? illegal activity inefficient allocation of sales among sellers wasted resources inefficient allocation to consumers

answer

inefficient allocation of sales among sellers

question

When the government removes a binding price floor:

answer

quantity demanded will increase and quantity supplied will decrease.

question

Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed:

answer

the quality of the good supplied will decrease.

question

The system of taxicab medallions in New York City is an example of a:

answer

quantity control.

question

The amount that consumers are willing to pay for the quota limit quantity is the:

answer

demand price.

question

Assuming that U.S. and French wines are substitutes in consumption, if the U.S. government imposes a quota on the amount of French wine allowed into the United States and the quota is set at a quantity below equilibrium, the price of French wine in the United States will _____ while the price of the U.S.-produced wine will _____.

answer

increase; increase

question

A binding price ceiling will cause a persistent _____, and a binding price floor will cause a persistent _____.

answer

shortage; surplus

question

True or False: Suppose Congress imposes a price ceiling of $5 per ATM transaction. If the average market-clearing price for an ATM transaction is $2, the price ceiling will not be binding in this instance.

answer

True

question

True or False: Critics of the pharmaceutical industry often argue that price ceilings should be imposed on drug manufacturers. If this happened, the quality of drugs would improve.

answer

False

question

A price ceiling on a good often results in:

answer

black market or underground transactions of the good.

question

A price ceiling results in:

answer

inefficiency because transactions are held below the equilibrium quantity.

question

The topics studied in macroeconomics include: monopolies. inflation. spillovers, such as pollution. mergers.

answer

inflation.

question

Which would NOT be classified as a MACROECONOMIC question? What determines the overall trade in goods, services, and financial assets between the United States and the rest of the world? What determines a university's cost of offering a new course? What determines the overall level of prices? How many people are employed in the economy as a whole?

answer

What determines a university's cost of offering a new course?

question

Which question is the most appropriate to the study of MACROECONOMICS? How does the level of interest rates affect Delta's decision to buy a new airplane? How does the aggregate price level affect overall consumer spending? What determines whether Wachovia opens a new office in Beijing? How much will Sony charge for the new game system to be introduced later this year?

answer

How does the aggregate price level affect overall consumer spending?

question

The view that the government should take an active role in the macroeconomy dates to:

answer

the Great Depression.

question

The central mission of modern macroeconomics is to prevent:

answer

a deep recession like the Great Depression.

question

Keynesian economics stressed:

answer

the importance of total spending.

question

If during several months the economy is simultaneously increasing its levels of output and employment, then the economy is in a(n):

answer

expansion.

question

An economic expansion in the United States is typically associated with a(n):

answer

falling unemployment rate.

question

Long-run growth is the sustained upward trend in:

answer

aggregate output per person over several decades.

question

Long-run economic growth is best measured by:

answer

a sustained rise in the production of goods and services.

question

Which of the following statements is TRUE? The level of saving is important for long-run growth. In the past century, the population of the United States has grown faster than output. Since World War II, the economy of Argentina has grown faster than the economy of Canada. Long-run growth models and business cycle models are the same.

answer

The level of saving is important for long-run growth.

question

If workers' nominal wages have risen by 50% over a 10 years and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services workers can buy has:

answer

increased.

question

Price stability occurs when:

answer

the overall cost of living is changing very slowly.

question

A nation whose value of imports exceeds its value of exports is said to have:

answer

a trade deficit.

question

One of the issues of importance to macroeconomists is:

answer

understanding how living standards change over time.

question

Setting government spending and taxes in an effort to change overall spending in an economy is use of:

answer

fiscal policy.

question

One normally expects that unemployment increases while aggregate output and aggregate incomes decrease during:

answer

a recession.

question

If an economy is open:

answer

trading with other countries makes up a portion of its economy.

question

The relation between a country's level of saving and investment:

answer

affects its trade balances.

question

The sequence of business cycle phases is:

answer

peak, recession, trough, expansion.

question

Inflation:

answer

is an increase in the overall level of prices.

question

With inflation:

answer

overall prices are increasing, although some may be decreasing.

question

Fiscal policy entails:

answer

setting levels of taxation and/or government spending.

question

Fiscal and monetary policies:

answer

are used to correct for short-term economic fluctuations.

question

The short-run alternation between economic downturns and recessions, then economic upturns and expansions is known as the _____ cycle.

answer

business

question

Use of monetary policy entails changes in:

answer

the quantity of money.

question

Use of fiscal policy involves changes in:

answer

government spending.

question

Changing the level of government spending is an example of _____ policy.

answer

fiscal

question

The modern macroeconomic tools used by the government are _____ policy and _____ policy.

answer

fiscal; monetary

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