Macro Final

Diminishing marginal benefit: a. is not important in determining a consumer's purchase decision. b. is when buying an additional item yields a larger marginal benefit than the previous item. c. is when consumers do not follow the rational rule. d. is when buying an additional item yields a smaller marginal benefit than the previous item.

is when buying an additional item yields a smaller marginal benefit than the previous item

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are a. normal goods. b. goods with a congestion-effect. c. inferior goods. d. goods with a network-effect.

normal goods

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? a. The marginal principle. b. The cost-benefit principle. c. The opportunity cost principle. d. The interdependence principle.

The opportunity cost principle

When thinking about retirement, which of the following is correct? The sooner you start saving, the better. Saving just a little bit won't help. Your pension benefits will increase to keep pace with inflation. You'll spend less money when you retire.

The sooner you start saving, the better.

Which of the following is an investment? a. Marios builds a new house. b. Mary buys $4,000 worth of Alibaba stock. c. Cameron saves $400 in his savings account. d. Dale purchases a house that was built in 1940.

a. Marios builds a new house.

How is monetary policy different from fiscal policy? a. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes. b. There is no difference between the two policies. c. Monetary policy is determined by the president, whereas fiscal policy is determined by the chair of the Federal Reserve. d. Monetary policy focuses on correcting inflation, whereas fiscal policy focuses on unemployment.

a. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes.

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

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

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

a. on average, prices went down across the economy.

Investment refers to: a. spending on physical capital. b. saving money in banks. c. spending on financial assets such as stocks. d. depreciation of capital stocks.

a. spending on physical capital.

In a market graph, consumer surplus is the area: a.above the price and below the demand curve. b.below the demand curve. c.between the demand curve and the supply curve. d.above the price.

above the price and below the demand curve

On a market graph, producer surplus is the area that is: a. below the demand curve. b. above the supply curve and below the price. c. above the demand curve. d. above the demand curve and below the supply curve.

above the supply curve and below the price

A trade cost is: a. the cost associated with producing a good that is bought or sold abroad. b. the difference in price between a good that is bought or sold abroad rather than domestically. c. the price of a good that is bought or sold abroad. d. an extra cost incurred as a result of buying or selling a good abroad rather than domestically.

an extra cost incurred as a result of buying or selling a good abroad rather than domestically

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

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

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

Cost benefit principle a. benefits are positive b. costs are greater than the benefits. c. benefits are greater than the costs. d. costs are negative.

benefits are greater than the costs

Which of the scenarios represents consumption spending? a. You take out a bank loan. b. Your parents pay their income taxes. c. You eat at a fancy restaurant for Valentine's Day. d. A new hospital is constructed in your town.

c. You eat at a fancy restaurant for Valentine's Day.

The liquidity of an asset is defined as the: a. ability to predict the future cash flow of the asset. b. risk that if you need to sell the asset quickly, you may not be able to get a good price for it. c. ability to quickly and easily convert the asset to cash, with little or no loss in value. d. ability to index the asset's returns to the inflation rate.

c. ability to quickly and easily convert the asset to cash, with little or no loss in value.

A bank can make money by: a. giving you a particular interest return on your savings and then loaning out the same money at a lower rate of interest. b. borrowing money from the government at 0% interest. c. giving you a particular interest return on your savings and then loaning out the same money at a higher rate of interest. d. storing and locking away all the deposits made by consumers.

c. giving you a particular interest return on your savings and then loaning out the same money at a higher rate of interest.

Specialization will increase output when it is based on: a. who can produce at the least comparative cost. b. absolute advantage. c. who can produce the fastest. d. comparative advantage.

comparative advantage

An excise tax is a tax on: a. luxury goods and services. b. imports. c. purchases that is typically a percentage of the purchase price of goods and services. d. a specific product.

d. a specific product.

The three major pillars of the financial sector are the: a. stock market, the labor market, and the bond market. b. foreign exchange market, the bond market, and the government. c. banks, the goods market, and the labor market. d. stock market, the bond market, and the banks.

d. stock market, the bond market, and the banks.

Which of the following items is an inferior good? a. Car rentals b. Discount stores c. Luxury SUVs d. Airline tickets

discount stores

Positive analysis is based on identifying _____ and _____. a. beliefs; options b. facts; relationships c. values; judgments d. priorities; scruples

facts; relationships

The concept of equity focuses on: a. fairness. b. efficiency. c. the level of economic surplus. d. profit.

fairness

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. a. interdependence b. opportunity cost c. marginal d. cost-benefit

interdependence

What is quantity supplied? a. It is the amount of an item that a seller is willing to sell at a particular price. b. It is a graph that plots how much a seller produces at different points in time. c. It is a graph that plots the quantities of an item that a seller plans to sell at different prices. d. It is the amount of an item that a buyer is willing to buy at a particular price.

it is the amount of an item that a seller is willing to sell at a particular price

Which of the following is an argument for limiting international trade? An increase in international trade may: a. lead to anticompetitive practices, such as dumping. b. reduce specialization, which has national security benefits. c. lead to economic growth, stemming from specialization. d. reduce the amount of outsourcing by domestic firms.

lead to anticompetitive practice such as dumping

The __________ suggests, decisions about quantities are best made incrementally. a. opportunity cost principle b. marginal principle c. interdependence principle d. cost-benefit principle

marginal principle

An import is a good or service: a. sold to a foreign buyer. b. purchased from a foreign seller. c. sold to a domestic buyer. d. purchased from a domestic seller.

purchased from a foreign seller

An equilibrium price is a price where the a. demand curve is identical to the supply curve. b. quantity supplied equals the quantity demanded. c. quantity demanded no longer changes. d. amount that buyers are willing to buy is equal to the amount that buyers are able to buy.

quantity supplied equals quantity demanded

A market is a a. a place where governments decide what is sold. b. set of demand curves for a product. c. set of supply curves for a product. d. setting that brings together potential buyers and sellers.

setting that brings together potential buyers and sellers

When quantity demanded exceeds quantity supplied, _____ exists. a. a surplus b. fixed demand c. equilibrium d. a shortage

shortage

Government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving your savings is known as a: b. social safety net. c. progressive tax system. d. social insurance system.

social insurance system

An export is a good or service: a. purchased from a domestic seller. b. sold to a foreign buyer. c. purchased from a foreign seller. d. sold to a domestic buyer.

sold to a foreign buyer

Which of the following is a source of comparative advantage? a. high tariff rates b. scarce inputs c. specialized skills d. small-scale production

specialized skills

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are a. products that do not follow the law of supply. b. substitutes-in-production. c. inputs in production. d. complements-in-production.

substitutes-in-production

When a manager uses comparative advantage to assign tasks in a workplace, then each a. task is assigned to the worker with the lowest opportunity cost for performing the task. b. worker learns how to do all tasks to increase flexibility in assignments. c. worker is assigned to the tasks for which he or she has the highest aptitude and efficiency. d. task is assigned to the worker who is best at doing the task.

task is assigned to the worker with the lowest opportunity cost for performing the task

A tariff is a: a. tax on exported products. b. tax on imported products. c. limit on the quantity of a good that can be exported. d. limit on the quantity of a good that can be imported.

tax on imported goods

Intergenerational mobility is the extent to which: a. children own more personal transportation vehicles (such as cars and motorcycles) than their parents did. b. the geographic dispersion of families occurs as children pursue economic opportunities. c. the income of children in a given family varies across the children. d. the economic status of children is independent of the economic status of their parents.

the economic status of children is independent of the economic status of their parents.

A market's deadweight loss is calculated as: a. the loss to consumers when a product malfunctions or fails to meet expectations. b. the economic loss that a firm has when it is not producing its profit-maximizing output. c. the price at equilibrium minus the price at actual quantity. d. the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity

The law of demand refers to a. the positive relationship between price and quantity supplied. b. the positive relationship between price and quantity demanded. c. the inverse relationship between price and quantity demanded. d. the inverse relationship between price and quantity supplied.

the inverse relationship between price and quantity demanded

Future value is the: a. amount that your money will grow into by a future date as a result of earning interest. b. equivalent of present value divided by the real interest rate. c. total amount of interest paid on a loan by a future date. d. sum of all present values for a portfolio of savings instruments.

a. amount that your money will grow into by a future date as a result of earning interest.

Mr. Delwar purchased a 10-year bond a year ago. He expected an annual return of 5.25% on it. Last month, he had an unexpected need for money and had to cash in his bond. He received a low price for it. This scenario describes _____ risk. a. liquidity b. term c. default d. market

a. liquidity

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

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

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

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

A mutual fund is a fund that: a. is owned by the government. b. consists of only international assets. c. buys a variety of assets, including land and precious metals, for companies. d. buys a portfolio of stocks and bonds on your behalf.

d. buys a portfolio of stocks and bonds on your behalf.

discretionary spending is spending that: a. supports programs that do not get determined annually but instead are set in law. b. includes all federal government spending. c. includes all state and local government spending. d. is appropriated by Congress annually.

d. is appropriated by Congress annually.

The law of supply refers to a. the positive relationship between price and quantity demanded. b. the inverse relationship between price and quantity supplied. c. the positive relationship between price and quantity supplied. d. the inverse relationship between price and quantity demanded.

the positive relationship between price and quantity supplied

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

an import

Market failure occurs when market forces lead to: a. an inefficient outcome. b. high quantity. c. high price. d. a marginal benefit that is equal to marginal cost.

an inefficient outcome

Sunk costs are costs that a. should be considered in any decision. b. are incurred in the past and cannot be reversed. c. are potential costs associated with a particular decision. d. are part of the opportunity costs of a decision.

are incurred in the past and cannot be reversed

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. substitution bias. c. the failure to capture real variables versus nominal variables. d. understated inflation.

b. substitution bias.

Mandatory spending is spending that: a. includes all state and local government spending. b. supports programs that do not get determined annually but instead are set in law. c. includes all federal government spending. d. is appropriated by Congress annually.

b. supports programs that do not get determined annually but instead are set in law.

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. cyclically unemployed. d. employed in the underground economy.

b. working but whose skills are not fully utilized.

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

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

Depreciation refers to the a. spending by a business on new capital assets. b. fall in the price of output that the business produces. c. decline in capital due to wear and tear, obsolescence, accidental damage, and aging. d. decline in the quality of output produced by a business.

c. decline in capital due to wear and tear, obsolescence, accidental damage, and aging.

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

c. finished and ready for the final user.

The slope of the consumption function is the: a. marginal propensity to import. b. average level of consumption over time. c. marginal propensity to consume. d. marginal propensity to invest.

c. marginal propensity to consume.

The federal funds rate is the: a. nominal interest rate minus the inflation rate. b. interest rate on loans from the Federal Reserve's discount window. c. nominal interest rate that banks pay on overnight interbank loans. d. interest rate the public pays on loans from banks.

c. nominal interest rate that banks pay on overnight interbank loans.

Forward guidance occurs when the Federal Reserve: a. carries out open market operations to influence future interest rates. b. follows the same future course of monetary policy that it has been following in the past. c. provides information about the future course of monetary policy in order to influence expectations about future interest rates. d. provides information about current monetary policy in order to influence expectations about future interest rates.

c. provides information about the future course of monetary policy in order to influence expectations about future interest rates.

What is the Federal Reserve's mandate? a. to print as many dollars as possible without causing inflation b. to ensure that interest rates remain low all the time c. to ensure maximum employment while maintaining stable prices d. to encourage inflation and raise unemployment

c. to ensure maximum employment while maintaining stable prices

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

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

An initial public offering occurs when a company: a. first sells stock directly to the government. b. first opens for business and offers its goods and services for sale to the public. c. experiences a rise in the price and demand for its stock. d. first sells stock directly to the public.

d. first sells stock directly to the public.

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

d. investment.

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

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

The Producer 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 of all goods and services produced domestically. d. price that businesses pay over time for the inputs used in the production process.

d. 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.

d. worker skills and knowledge.

You go to Starbucks and see that the price of your favorite tall vanilla latte has gone up by 25 cents. All sizes of the vanilla lattes are now more expensive. As a result of this price increase, you would expect to see a a. rise in the quantity demanded of vanilla lattes. b. rise in the demand for vanilla lattes. c. fall in the demand for vanilla lattes. d. fall in the quantity demanded of vanilla lattes.

fall in the quantity demanded for vanilla lattes

To maximize production, people should a. focus on the task in which they have an absolute advantage. b. learn all the skills so that they can perform any task needed. c. focus on the task in which they have a comparative advantage. d. focus on improving their weakest skills.

focus on the task in which they have a comparative advantage

Shifts in demand a. always lead to increases in equilibrium quantity. b. lead to price and quantity to move in opposite directions. c. always lead to increases in equilibrium price. d. lead to price and quantity to move in the same direction.

lead to price and quantity to move in the same direction

If the price of jet fuel rises, the a. supply of airline flights increases. b. supply of jet fuel increases. c. quantity supplied of jet fuel increases. d. supply of jet fuel decreases.

quantity supplies of jet fuel increases

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, and the relative size of the shifts is not known? a. The equilibrium price rises, and the change in the equilibrium quantity is ambiguous. b. The equilibrium quantity rises, and the change in the equilibrium price is ambiguous. c. The equilibrium quantity falls, and the change in the equilibrium price is ambiguous. d. The equilibrium price falls, and the change in the equilibrium quantity is ambiguous.

the equilibrium price rises, and the change in the equilibrium quantity is ambiguous

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

a. subsidizing secondary school education.

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

current dollar value of that good or service