Macroeconomics Chapter 1 Exam and Homework
Mixed
A ________________ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
Are simplified versions of reality.
Economic models
How households and firms make choices.
Microeconomics is the study of
How households and firms make choices, how they interact in markets, and how the government attempts to influence their choices
Microeconomics is the study of ______________.
The highest valued alternative that must be given up to engage in an activity
Opportunity cost is defined as
What goods and services to produce?; How will these goods and services be produced?; and Who will receive them?
The three fundamental questions that any economy must address are
There is no conflict between the two goals
Which of the following correctly describes the relationship between economic efficiency and economic equity?
Macroeconomics
Which of the following covers the study of topics such as inflation or unemployment?
What determines the growth rate of gross domestic product?
Which of the following is a macroeconomics question?
What determines the inflation rate?
Which of the following is a macroeconomics question?
What factors determine the price of carrots?
Which of the following is a microeconomics question?
The price of gasoline is too high.
Which of the following is a normative economic statement?
The minimum wage law causes unemployment.
Which of the following is a positive economic statement?
Production managers are more concerned with satisfying government's orders than with satisfying consumer wants.
Which of the following is a problem inherent in centrally planned economies?
Make value judgments to be proven or disproven
Which of the following is not a step economists follow when developing an economic model?
Productive efficiency; Allocative efficiency
__________________ occurs when a good or service is produced at the lowest possible cost. __________________ occurs when production is in accordance with consumer preferences.
Productive efficiency and allocative efficiency but not necessarily equity.
Canada has a market economy. As such, Canada's economy (relative to centrally planned economies) tends to result in
What will be produced; how something will be produced
Allocative efficiency best explains ________, and productive efficiency best explains ________.
Model
An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.
Cuba
Trade-offs force society to answer questions such as what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced. Which of the following countries has an economy where the government makes these decisions?
People are rational
When economists develop models designed to explain the choices people make, they generally assume that ______________.
The government increased personal income tax rates earlier this year.
Xylo Inc., a manufacturer of domestic appliances, lowered the prices of its products, expecting an increase in demand and sales by at least 20 percent. However, it was observed that sales increased by only 8 percent. Which of the following, if true, can explain this outcome?
Positive analysis; normative analysis; positive analysis
_____________ is concerned with what is, and _____________ is concerned with what ought to be. Economics is about ______________, which measures the costs and benefits of different courses of action.
Consumers, firms, and government
______________ decide(s) what goods and services will be produced.
Economics
_______________ is the study of the choices people make to attain their goals, given their scarce resources.
Productive efficiency
________ is a situation in which a good or service is produced at the lowest possible cost.
Consumers and producers
Consider the following economic agents: a. the government b. consumers c. producers Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?
All of the above
Economics is a social science because - It is based on studying the actions of individuals - It considers human behavior - particularly decision-making behavior - It applies the scientific method to the study of the interactions among individuals. - All of the above
Choices; scarce
Economics is the study of the ________ people make to attain their goals, given their ________ resources.
Producing more of one good means less of another good can be produced.
Every society faces economic trade−offs. This means
Receive the most of what is produced
In a market economy, those who are willing and able to buy what is produced
How income is distributed
In the United States, who receives the goods and services produced depends largely on ______________.
Scarcity
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls
The highest valued alternative that must be given up to engage in an activity.
Opportunity cost is ______________.
Unlimited wants exceed limited resources
Scarcity refers to the situation in which
Economic incentives
Suppose, in an effort to prevent the population from declining, Italy begins offering new mothers extended periods of paid family leave from work and, consequently, the birthrate per woman increases. If so, then this could best be characterized as an example of people responding to
Macroeconomics
The branch of economics which studies the behavior of entire economies is called
Both a and b
Any model is based on making assumptions because - We cannot analyze an economic issue unless we reduce its complexity - Models have to be simplified to be useful - Both a and b - Neither a nor b
The choices people make to attain their goals, given their scarce resources.
By definition, economics is the study of
Positive analysis
Suppose an analyst estimates how many jobs have been lost from family leave laws. This is an example of _____________.
Marginal revenue
A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?
All of the above
A hypothesis in an economic model is - Usually about a causal relationship - Tested before it can be accepted (or not rejected) - A statement that may be either correct or incorrect about an economic variable - All of the above
Should
A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of "beds" it offers at its nursing homes. Given the changes to Medicare, if the marginal benefit of offering an additional bed is $6,000 and the marginal cost is $2,000 per bed, then the corporation _______________ offer additional beds.
Buyers and sellers
A market is a group of ________________ of a good or service and the institution or arrangement by which they come together to trade.
Marginal benefit equals the marginal cost
Economists reason that the optimal decision is to continue any activity up to the point where the
Marginal benefit equals marginal cost
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when
The fair distribution of economic benefits.
Equity is _______________.
$1,000,000
Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $1,000,000 next year playing for a minor league baseball team, $700,000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is ____________.
Macroeconomics
Examining whether government intervention can reduce the severity of recessions is most likely an issue in ______________.
Many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.
Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example, ______________.
Interest rates increased substantially during this period.
Harry Fletcher is a market analyst at an automobile firm. He formed a hypothesis that an increase in advertising would increase demand for the firm's cars. The ad campaign ran for a period of six months. However, the results were not as positive as Harry had anticipated. Which of the following, if true, can explain this outcome?
Even brand-loyal consumers can be convinced to change their preferences.
Jonathan Baker is a market analyst. He works at a firm that is one of the few producers of good X. Jonathan formulates a hypothesis that an increase in advertising will increase the demand for this firm's products by attracting new customers. Which of the following, if true, would suggest that Jonathan's hypothesis will hold?
Inflation
Macroeconomics is most likely to include the study of ___________.
The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
Macroeconomics is:
Centrally planned; Market
Societies organize their economies in two main ways to answer the three questions of what, how, and who. A society can have a ________________ economy in which the government decides how economic resources will be allocated. Or a society can have a _______________ economy in which the decisions of households and firms interacting in markets allocate economic resources.
Imported varieties of many goods were cheaper than the domestically produced varieties
Terbia is a closed economy, which has been growing at a very slow pace over the last decade. In order to boost economic growth, the government removed trade barriers earlier this year and increased its spending on the economy. These moves were expected to generate employment and increase economic growth. However, unemployment did not decline as much as expected. Which of the following, if true, can explain this outcome?
Consumers and firms choosing which goods and services to buy or produce
The decision about what goods and services will be produced in a market economy is made by
Most people were expecting prices to decline further.
The economy of East Paragon has been experiencing deflation for the last few months, with prices of goods and services declining. Because firms are charging lower prices, they expected higher sales. However, consumption spending did not increase much, resulting in substantial losses for these firms. Which of the following, if true, explains why consumers did not increase consumption in spite of falling prices?
One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?
Trade-offs force society to make choices, particularly when answering the following three fundamental questions:
Competition
________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.