Macroeconomics

When making decisions, people sometimes make mistakes because they ______. A. do not have any implicit costs B. fail to consider implicit costs C. take implicit costs into consideration D. ignore sunk costs

B

Economic models are _____ if people do not consciously weigh costs and benefits when making decisions. A. Useful even B. Of little value C. Are wrong

A

In the graph of a straight line, the vertical intercept is the value taken by the A. dependent variable when the independent variable is equal to zero. B. dependent variable when the independent variable is equal to one. C. independent variable when the dependent variable is equal to zero. D. independent variable when the dependent variable is equal to one

A

When deciding whether to take an action, sunk costs A. should be ignored B. should not be ignored C. are easily recovered

A

The fact that people do not always consciously weigh costs and benefits when making decisions A. doesn't mean that economic models aren't useful for predicting behavior. B. suggests that economic models are unlikely to be useful in explaining behavior. C. implies that economic models are wrong.

A.

Economic activity moves from a trough into a period of ______ until it reaches a ______ and then into a period of _______. A. expansion; peak; recession B. expansion; trough; recession. C. recession; trough; expansion D. recession; peak; expansion

A. Starting with the trough, the economy experiences an expansion until a peak is reached, and then it falls into recession.

Opportunity cost is.. A. the total cost of undertaking n units of an activity divided by n. B. a cost that is beyond recovery at the moment a decision must be made. C. a cost that cannot be perfectly measured. D. the value of what must be foregone in order to undertake an activity.

D

(T or F) Economic models are useful in explaining and predicting behavior only to the extent that people are consciously aware of those models when making decisions.

False! Reason: Even when people do not consciously weigh costs and benefits, people often do so unconsciously, often learning through trial and error which choices lead to the best outcomes. As a result, economic models are still useful in predicting behavior.

Economic ______ is the benefit of taking an action minus its cost.

Surplus

A rational person is someone A. Who consumes very little B. With well-defined goals who tries to fulfill those goals the best he/she can C. Who tries to justify their actions through whatever means possible

B

In the graph of a straight line, the vertical intercept is the value taken by the dependent variable when the independent variable is equal to _____. A. 1 B. 0 C. -1 D. the slope

B

Macroeconomics is the study of A. individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets. B. the performance of national economies and the policies that governments use to try to improve that performance.

B

A positive economic principle ______. A. says nothing about how people will or should behave B. says how people should behave C. predicts how people will behave

C

Economist view scarcity as A. Something that can be eliminated if people act wisely B. A relatively unimportant factor in how people make choices C. An unavoidable fact of life D. Something that affects few people due to years of sustained economic growth

C

In the graph of a straight line, the value taken by the dependent variable when the independent variable is equal to zero is known as the A. Rise B. Horizontal intercept C. Vertical intercept D. Run E. Slope

C

Suppose you are choosing between two jobs. Let H be the number of hours you work each week, and let E be your weekly earnings (in dollars). At the first job, your weekly earnings are computed as E = 50 + 12.5H, and at the second job your weekly earnings are computed as E = 200 + 5H. How many hours of work each week would lead to the same earnings at either job? A. 40 B. None, second job always pays more C. 20 D. 15 E. 10

C

When assessing the costs and benefits associated with taking an action, it is generally best to consider costs and benefits A. as neither proportions nor absolute dollar amounts. B. as proportions rather than absolute dollar amounts. C. as absolute dollar amounts rather than proportions.

C

When people ignore the implicit cost of activities ______. A. they are acting rationally B. they tend to make the right choice C. they tend to make the wrong choice

C

In Macroland potential GDP equals $20 billion and real GDP equals $19.4 billion. Macroland has a(n) ______ gap equal to ______ percent of potential GDP. A. expansionary; 6 B. recessionary; −6 C. expansionary; 3 D. recessionary; −3

D. Since Macroland's actual GDP is less than its potential GDP, it has a recessionary gap. The size of the gap is [(Y − Y*)/Y*] × 100, or [($19.4 billion − $20)/$20 billion] × 100 = −3 percent.

Economists believe that people A. can do everything and have everything they want with sufficient planning and hard work. B. should want less out of life, both in terms of what they are able to do and what they are able to have. C. never have enough time, money, or energy to do everything or have everything they want.

C