Economics Exam 3

What is the difference between microeconomics and macroeconomics? a. Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole. b. Microeconomics is the study of the economy as a whole, whereas macroeconomics is the study of individual decisions in specific markets. c. Microeconomics focuses only on the forces of individual demand and individual supply, whereas macroeconomics focuses only on policy making for the economy. d. Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of government policies.

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

When a U.S. consumer buys Canadian maple syrup at the grocery store, this purchase is: a. an import. b. gross domestic product. c. an export. d. a transfer payment.

an import.

Enforceable property rights encourage economic growth by encouraging: . the sale of property rights. b. the growth of human capital. c. investment. d. depreciation.

investment.

If you see that the consumer price index this year is lower than the consumer price index last year, this means that: a. the prices of each and every good and service went down. b. the consumer price index is lower than the producer price index. c. economic growth also decreased. d. on average, prices went down across the economy.

on average, prices went down across the economy.

The Producer Price Index is an index that tracks the: . average price that consumers pay over time for a representative basket of goods and services. b. price of all goods and services produced domestically. c. highest prices consumers pay over time for imported goods and services. d. price that businesses pay over time for the inputs used in the production process.

price that businesses pay over time for the inputs used in the production process.

Human capital refers to: a. machines that have artificial intelligence. b. work done by machinery. c. money earned by workers in businesses. d. worker skills and knowledge.

worker skills and knowledge.

An underemployed person is one who is: a. retired or outside of the labor force. b. working but whose skills are not fully utilized. c. employed in the underground economy. d. cyclically unemployed.

working but whose skills are not fully utilized

The labor force participation rate is the: a. percentage of the working age population that is either employed or unemployed. b. percentage of the labor force that is unemployed. c. number of unemployed divided by the number of employed. d. sum of the employed and the unemployed.

. percentage of the working age population that is either employed or unemployed

A production function is: a. a method through which inputs can be turned into outputs, given the available resources. b. a method by which outputs can be recycled to produce inputs. c. the amount of money generated from selling outputs. d. the sum of total production possibilities, if resources were unlimited.

a method through which inputs can be turned into outputs, given the available resources.

The working age population includes people who are: a. not retired. b. age 16 or older who are not in the military or institutionalized. c. age 16 or older. d. not in the military or institutionalized.

age 16 or older who are not in the military or institutionalized

The consumer price index is an index that tracks the: a. highest prices consumers pay over time for imported goods and services. b. average price that consumers pay over time for a representative basket of goods and services. c. price that businesses pay over time for the inputs used in the production process. d. price of all goods and services produced domestically.

b. average price that consumers pay over time for a representative basket of goods and services.

The "market value" of a good or service refers to the: a. total market demand for that good or service. b. units of that good or service that are purchased by consumers. c. units of that good or service that are produced in the current period. d. current dollar value of that good or service.

current dollar value of that good or service.

A "final" good or service is one that is: a. finished and ready for the final user. b. not being produced for the market. c. not for sale. d. intermediate and ready to be used as an input.

finished and ready for the final user.

GDP is defined as the: a. value of all intermediate goods produced within a country in a given year. b. market value of all consumer goods purchased within an economy. c. market value of all final goods and services produced within a country in a given year. d. value of all output produced by businesses within a country in a given year.

market value of all final goods and services produced within a country in a given year.

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is: a. quality bias. b. the failure to capture real variables versus nominal variables. c. understated inflation. d. substitution bias.

substitution bias.

The law of diminishing returns states that: a. when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts. b. when all inputs are held constant, there is an upper limit to the amount of output that can be produced. c. the level of capital accumulation is directly related to the level of human capital in an economy. d. the lower the level of human capital in an economy, the lower the economic growth rate.

a. when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts

Frictional unemployment is unemployment: a. due to a temporary downturn in the economy. b. that occurs because of seasonal changes. c. due to the time it takes for employers to search for workers and for workers to search for jobs. d. that occurs because wages don't fall to bring labor demand and labor supply into equilibrium.

due to the time it takes for employers to search for workers and for workers to search for jobs.

A government can promote the development of human capital by: a. providing savings tax credits. b. subsidizing secondary school education. c. placing caps on salaries for teachers. d. promoting programs that encourage late retirement from work.

subsidizing secondary school education.