MacroEcon Ch. 1-7 – Flashcards

question
Economics is a social science concerned with:
answer
The best use of scarce resources to achieve the maximum satisfaction of economic wants
question
A person should consume more of something when its marginal:
answer
Benefit exceeds its marginal cost
question
The process of developing hypotheses, testing them against facts, and using the results to construct theories is called:
answer
The scientific method
question
Which is an illustration of a microeconomic question?
answer
Will a new type of television set increase the number of buyers
question
A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is:
answer
A budget line
question
Which of the following is real capital?
answer
a construction crane
question
A point inside a production possibilities curve best illustrates:
answer
unemployment
question
A normative statement is one that:
answer
is based on value judgements
question
The problems of aggregate inflation and unemployment are:
answer
major topics of macroeconomics
question
On a production possibilities curve, the single optimal or best combination of output for any society:
answer
Depends upon the preferences of society
question
Which statement best describes a command economy?
answer
The production and allocation of goods and services is determined primarily through government
question
Which statement is correct? 1. Freedom of choice and enterprise are essential elements of market system 2. Producers are "kings" in a market economy because they determine what is produced 3. The market system is efficient at allocation of resources, but not consumer goods to their most valued uses 4. The operation of market system eventually results inan equal distribution of income
answer
The market system is efficient at allocation of resources, but not consumer goods to their most valued uses
question
In a competitive economy, prices: 1. Influence Consumers in their purchases of goods and services 2. Influence businesses in their purchases of economic resources 3. Influence workers in making occupational choices 4. Do all of these
answer
4. Do all of these
question
The competitive market system:
answer
Encourages innovation because successful innovators are rewarded with economic profits
question
Which is not one of the 5 Fundamental Questions: 1. How will the goods and services be produced? 2. How should the system accommodate change? 3. Who is to receive the output of the system? 4. What goods and services should be produced by government?
answer
4. What goods and services should be produced by government?
question
The idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of:
answer
The "invisible hand"
question
Which of the following is a limitation of the simple circular flow model? 1. Product markets are ignored 2. Resource markets are ignored 3. The determination of product and resource prices is not explained. 4. Households are included, but not businesses
answer
3. The determination of product and resource prices is not explained
question
Households and businesses are:
answer
Sellers in the resource and prodcut markets respectively
question
The influential book written by Adam Smith was:
answer
The Wealth of Nations
question
The circular flow model:
answer
Illustrates the interdependence of businesses and consumers
question
The law of demand is illustrated by a demand curve that is:
answer
Downward sloping
question
Which would cause a decrease in the quantity of computers supplied?
answer
A decrease in the demand for computers
question
When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n)
answer
Increase in the supply of gasoline
question
A schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called:
answer
Supply
question
If the quantity supplied of a product is less than the quantity demanded, then:
answer
There is a shortage of the product
question
If the market price is above the equilibrium price:
answer
A surplus will occur and producers will produce less and lower prices
question
A competitive market will:
answer
Achieve an equilibrium price
question
A product market is in equilibrium:
answer
Where the demand and supply curves intersect
question
A headline reads "Storms destroy half of the lettuce crop." This situation would lead to a(n):
answer
Increase in the price of lettuce and decrease in quantity purchased
question
Government-set price floors and price ceilings:
answer
Interfere with the rationing function of price in a free market
question
A perfectly inelastic demand schedule:
answer
Can be represented by a line parallel to the vertical axis
question
When the percentage change in price is greater than the resulting percentage change in quantity demanded:
answer
An increase in price will increase total revenue
question
Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume. The price elasticity of demand is:
answer
.33 and inelastic
question
Demand is said to be inelastic when:
answer
A reduction in price results in a decrease in total revenue
question
In which of the following instances will total revenue decline?
answer
Price rises and demand is elastic
question
The main determinant of elasticity of supply is the:
answer
Amount of time the producer has to adjust inputs in response to a price change
question
Price elasticity of supply is
answer
Greater in the long run than in the short run
question
Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:
answer
The price of some other product
question
A remote island nation is discovered, and on this island the cross elasticity of demand for coconut milk and fruit punch is 1.0. this indicates that these 2 goods are:
answer
Substitutes
question
The supply of product X is elastic if the price of X rises by:
answer
5% and quantity supplied rises by 7%
question
Real gross domestic product
answer
will increase if there is an increase in the level of output
question
Suppose the real GDP increases by 5% while the population of a country increase by 7%. Then
answer
output per person necessarily decreases
question
Which of the following is the best example of financial investment? 1. Ford Motor Co. builds a new manufacturing plant 2. A student pursue an MBA degree 3. A retiree purchases Google Stock 4. A young couple purchases a new home
answer
A retiree purchases Google stock
question
In economics, the word "shocks" refers to
answer
situations where firms' expectations are unmet
question
Higher oil prices are most likely to lead to
answer
a negative supply shock
question
The business cycle depicts:
answer
Short-run fluctuations in output and employment
question
Which of the following statements is most accurate about advanced economies?
answer
Economies experience a positive growth trend over the long run, but experience significant variability in the short run
question
Before the period of modern economic growth:
answer
Rates of population growth virtually matched rates of output growth
question
What is the difference between financial investment and economic investment
answer
Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods
question
If an economy wants to increase its current level of investment, it must:
answer
Sacrifice current consumption
question
Suppose the total monetary value of all final goods and services produced in a particular country in 2008 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:
answer
GDP in 2008 is $500 billion
question
If depreciation (consumption of fixed capital) exceeds domestic investment, we can conclude that:
answer
Net investment is negative
question
Real GDP measures:
answer
Current output at base year prices
question
Real GDP and nominal GDP different because the real GDP:
answer
Has been adjusted for changes in the price level
question
The GDP tends to
answer
Understate economic welfare because it does not take into account increases in leisure
question
The monetary value of all final goods and services produced by the United States economy during a year is:
answer
GDP
question
Which would be considered an investment according to economists? 1. The purchase of newly-issued shares of stock in Microsoft 2. The construction of a new computer chip factory by Intel 3. The purchase of shares of stock by Fidelity, a mutual fund company 4. The sale of government bonds by the nations's central bank
answer
The construction of a new computer chip factory by Intel
question
THe following are national income account data for a hypothetical economy in billions of dollars: gross domestic investment (320), imports (35), exports (22), personal consumption expenditures (2460), and government purchases (470). What is the GDP in this economy?
answer
$3237 billion
question
GDP in an economy is $4,600 billion. Consumer expenditures are $3,500 billion, government purchase are $900 billion, and gross private domestic investment is $400 billion. Net exports are:
answer
-$200 billion
question
A consumer price index attempts to measure changes in:
answer
The price of a select market basket of goods and services
question
Expenditure Method
answer
+Personal Consumption +Gross Investment (Net Domestic Investment & Depreciation) +Government Expenditures/Purchases +Net Exports (Exports-Imports) = Nominal GDP
question
Income Method
answer
+Compensation of Employees +Rent +Interest +Proprietor Income +Corporate Profits (Dividends, Undistributed Profits, Corporate Income Tax) +Production & Import Tax =National Income (-Net Foreign Factor, +Depreciation, +Statistical Discrepancy) = Nominal GDP
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question
Economics is a social science concerned with:
answer
The best use of scarce resources to achieve the maximum satisfaction of economic wants
question
A person should consume more of something when its marginal:
answer
Benefit exceeds its marginal cost
question
The process of developing hypotheses, testing them against facts, and using the results to construct theories is called:
answer
The scientific method
question
Which is an illustration of a microeconomic question?
answer
Will a new type of television set increase the number of buyers
question
A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is:
answer
A budget line
question
Which of the following is real capital?
answer
a construction crane
question
A point inside a production possibilities curve best illustrates:
answer
unemployment
question
A normative statement is one that:
answer
is based on value judgements
question
The problems of aggregate inflation and unemployment are:
answer
major topics of macroeconomics
question
On a production possibilities curve, the single optimal or best combination of output for any society:
answer
Depends upon the preferences of society
question
Which statement best describes a command economy?
answer
The production and allocation of goods and services is determined primarily through government
question
Which statement is correct? 1. Freedom of choice and enterprise are essential elements of market system 2. Producers are "kings" in a market economy because they determine what is produced 3. The market system is efficient at allocation of resources, but not consumer goods to their most valued uses 4. The operation of market system eventually results inan equal distribution of income
answer
The market system is efficient at allocation of resources, but not consumer goods to their most valued uses
question
In a competitive economy, prices: 1. Influence Consumers in their purchases of goods and services 2. Influence businesses in their purchases of economic resources 3. Influence workers in making occupational choices 4. Do all of these
answer
4. Do all of these
question
The competitive market system:
answer
Encourages innovation because successful innovators are rewarded with economic profits
question
Which is not one of the 5 Fundamental Questions: 1. How will the goods and services be produced? 2. How should the system accommodate change? 3. Who is to receive the output of the system? 4. What goods and services should be produced by government?
answer
4. What goods and services should be produced by government?
question
The idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of:
answer
The "invisible hand"
question
Which of the following is a limitation of the simple circular flow model? 1. Product markets are ignored 2. Resource markets are ignored 3. The determination of product and resource prices is not explained. 4. Households are included, but not businesses
answer
3. The determination of product and resource prices is not explained
question
Households and businesses are:
answer
Sellers in the resource and prodcut markets respectively
question
The influential book written by Adam Smith was:
answer
The Wealth of Nations
question
The circular flow model:
answer
Illustrates the interdependence of businesses and consumers
question
The law of demand is illustrated by a demand curve that is:
answer
Downward sloping
question
Which would cause a decrease in the quantity of computers supplied?
answer
A decrease in the demand for computers
question
When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n)
answer
Increase in the supply of gasoline
question
A schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called:
answer
Supply
question
If the quantity supplied of a product is less than the quantity demanded, then:
answer
There is a shortage of the product
question
If the market price is above the equilibrium price:
answer
A surplus will occur and producers will produce less and lower prices
question
A competitive market will:
answer
Achieve an equilibrium price
question
A product market is in equilibrium:
answer
Where the demand and supply curves intersect
question
A headline reads "Storms destroy half of the lettuce crop." This situation would lead to a(n):
answer
Increase in the price of lettuce and decrease in quantity purchased
question
Government-set price floors and price ceilings:
answer
Interfere with the rationing function of price in a free market
question
A perfectly inelastic demand schedule:
answer
Can be represented by a line parallel to the vertical axis
question
When the percentage change in price is greater than the resulting percentage change in quantity demanded:
answer
An increase in price will increase total revenue
question
Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume. The price elasticity of demand is:
answer
.33 and inelastic
question
Demand is said to be inelastic when:
answer
A reduction in price results in a decrease in total revenue
question
In which of the following instances will total revenue decline?
answer
Price rises and demand is elastic
question
The main determinant of elasticity of supply is the:
answer
Amount of time the producer has to adjust inputs in response to a price change
question
Price elasticity of supply is
answer
Greater in the long run than in the short run
question
Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:
answer
The price of some other product
question
A remote island nation is discovered, and on this island the cross elasticity of demand for coconut milk and fruit punch is 1.0. this indicates that these 2 goods are:
answer
Substitutes
question
The supply of product X is elastic if the price of X rises by:
answer
5% and quantity supplied rises by 7%
question
Real gross domestic product
answer
will increase if there is an increase in the level of output
question
Suppose the real GDP increases by 5% while the population of a country increase by 7%. Then
answer
output per person necessarily decreases
question
Which of the following is the best example of financial investment? 1. Ford Motor Co. builds a new manufacturing plant 2. A student pursue an MBA degree 3. A retiree purchases Google Stock 4. A young couple purchases a new home
answer
A retiree purchases Google stock
question
In economics, the word "shocks" refers to
answer
situations where firms' expectations are unmet
question
Higher oil prices are most likely to lead to
answer
a negative supply shock
question
The business cycle depicts:
answer
Short-run fluctuations in output and employment
question
Which of the following statements is most accurate about advanced economies?
answer
Economies experience a positive growth trend over the long run, but experience significant variability in the short run
question
Before the period of modern economic growth:
answer
Rates of population growth virtually matched rates of output growth
question
What is the difference between financial investment and economic investment
answer
Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods
question
If an economy wants to increase its current level of investment, it must:
answer
Sacrifice current consumption
question
Suppose the total monetary value of all final goods and services produced in a particular country in 2008 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:
answer
GDP in 2008 is $500 billion
question
If depreciation (consumption of fixed capital) exceeds domestic investment, we can conclude that:
answer
Net investment is negative
question
Real GDP measures:
answer
Current output at base year prices
question
Real GDP and nominal GDP different because the real GDP:
answer
Has been adjusted for changes in the price level
question
The GDP tends to
answer
Understate economic welfare because it does not take into account increases in leisure
question
The monetary value of all final goods and services produced by the United States economy during a year is:
answer
GDP
question
Which would be considered an investment according to economists? 1. The purchase of newly-issued shares of stock in Microsoft 2. The construction of a new computer chip factory by Intel 3. The purchase of shares of stock by Fidelity, a mutual fund company 4. The sale of government bonds by the nations's central bank
answer
The construction of a new computer chip factory by Intel
question
THe following are national income account data for a hypothetical economy in billions of dollars: gross domestic investment (320), imports (35), exports (22), personal consumption expenditures (2460), and government purchases (470). What is the GDP in this economy?
answer
$3237 billion
question
GDP in an economy is $4,600 billion. Consumer expenditures are $3,500 billion, government purchase are $900 billion, and gross private domestic investment is $400 billion. Net exports are:
answer
-$200 billion
question
A consumer price index attempts to measure changes in:
answer
The price of a select market basket of goods and services
question
Expenditure Method
answer
+Personal Consumption +Gross Investment (Net Domestic Investment & Depreciation) +Government Expenditures/Purchases +Net Exports (Exports-Imports) = Nominal GDP
question
Income Method
answer
+Compensation of Employees +Rent +Interest +Proprietor Income +Corporate Profits (Dividends, Undistributed Profits, Corporate Income Tax) +Production & Import Tax =National Income (-Net Foreign Factor, +Depreciation, +Statistical Discrepancy) = Nominal GDP