Macro Test 1 Guide

Which of the following is the best example of financial investment? Ford Motor Co. builds a new manufacturing plant. A student pursues an MBA degree. A retiree purchases Google stock. A young couple purchases a new home

A retiree purchases Google stock

Which of the following is a consequence of rent controls established to keep housing affordable for the poor? Less rental housing is available, as prospective landlords find it unprofitable to rent at restricted prices. The quality of rental housing declines as landlords lack the funds and incentive to maintain properties. Apartment buildings are torn down in favor of office buildings, shopping malls, and other buildings where rents are not controlled. All of these choices are correct

All of these choices are correct.

Which of the following statements is accurate about most economies? Economies experience a positive growth trend over the short run but experience significant variability in the long run. Economies experience a positive growth trend over the long run but experience significant variability in the short run. Economies experience positive and stable growth over both the long run and short run. Economies experience little long-run growth in output but can experience significant growth in the short run.

Economies experience a positive growth trend over the long run but experience significant variability in the short run.

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP? Nominal GDP doubles. Nominal GDP is halved. Nominal GDP doesn't change. There is not enough information to determine what happens to nominal GDP.

Nominal GDP doubles.

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except real gross domestic product. inflation statistics. prices of oil and gasoline. unemployment data

Prices of oil and gasoline

Which of the following is necessary to make a trade in a barter economy? money unlimited wants a medium of exchange a coincidence of wants

a coincidence of wants

Which of the following do economists consider to be capital? a pair of stockings a construction crane a savings account a share of IBM stock

a construction crane

Assume that a consumer purchases only two products and there is a decrease in the consumer's income. The prices of the two products stay constant. The decrease in income will result in

a shift of the budget line inward to the left.

Which of the following would not be considered a capital resource by economists? a van used by a father to transport his family around an office computer used by an accountant a crane used by a building contractor a camera used by a professional photographer

a van used by a father to transport his family around

The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the manager. entrepreneur. stockbroker. banker

entrepreneur.

What is the difference between financial investment and economic investment? There is no difference between the two. Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods. Economic investment is adjusted for inflation; financial investment is not. Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

What is the best economic explanation for why a person would drop out of college in order to start a business? The person has a good idea for starting a business. The person has to pay a higher tuition to attend college. The expected future benefits from starting a business now are greater than the costs. The opportunity cost of starting a business is high now but will be low later in life.

The expected future benefits from starting a business now are greater than the costs.

Which one of the following expressions best states the idea of opportunity cost? "A penny saved is a penny earned." "He who hesitates is lost." "There is no such thing as a free lunch." "All that glitters is not gold.

There is no such thing as a free lunch."

Which of the following is the best synonym for "marginal" in economics? scarce additional basic minor

additional

Black markets are associated with price floors and the resulting product surpluses. price floors and the resulting product shortages. ceiling prices and the resulting product shortages. ceiling prices and the resulting product surpluses

ceiling prices and the resulting product shortages.

If a nation restricts trade with other nations, then the most likely effect is lower prices of goods and services in the nation. increased specialization of production. expanded economic wealth of the nation. consumers in the nation are made worse off.

consumers in the nation are made worse off.

Which of the following best represents the economic perspective used in customer decision making at fast-food restaurants? customers selecting the shortest line. decisions for which marginal costs exceed marginal benefits. all customer lines tending to be of different lengths. irrational purchasing of high-fat-content food

customers selecting the shortest line.

In markets where the supply curve is vertical, changes in demand will not cause the equilibrium price to change. supply will not cause the equilibrium price to change. demand will not cause the equilibrium quantity to change. supply will not cause the equilibrium quantity to change

demand will not cause the equilibrium quantity to changenatural gas

Property rights are important because they ensure an equal distribution of income. encourage cooperation by improving the chances of mutually agreeable transactions. guarantee that any exchange will make all parties better off than prior to the exchange. allow the government to control how resources are allocated

encourage cooperation by improving the chances of mutually agreeable transactions

A required element for specialization to lead to an increase in the satisfaction of society's wants is a capitalist economy. exchange and trade. the use of money. a central plan.

exchange and trade.

Economic resources are also called free gifts of nature. consumption goods. units of money capital. factors of production.

factors of production.

In cases where sellers have a fixed number of units of a product to sell, the supply curve will be horizontal. True or False

false

Which of the following does not foster innovation and technological advance? competition in markets freedom of choice and enterprise self-interest and personal rewards fear and avoidance of risk

fear and avoidance of risk

The "coincidence of wants" problem associated with barter refers to the fact that for exchange to occur, each seller must have a product that some buyer wants. money must be used as a medium of exchange or trade will never occur. specialization is restricted by the size or scope of a market. buyers in resource markets and sellers in product markets can never engage in exchange

for exchange to occur, each seller must have a product that some buyer wants

The main characteristics of a modern market system include all of the following except entrepreneurs are free to obtain and use resources to produce goods and services. consumers are free to buy goods and services that their budgets allow. economic power is diffused by competition among economic units. government is restricted to national defense and does not intervene at all in various markets

government is restricted to national defense and does not intervene at all in various markets.

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact is an example of irrational behavior. implies that electronic media sources are displacing print sources for many consumers. contradicts the economic perspective. implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost

implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost

Item 24 Harry's Pizza Parlor produced 10,000 large pizzas last year that sold for $10 each. This year Harry's produced 11,000 large pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information, we can conclude that Harry's production of large pizzas increased nominal GDP from last year, but real GDP was unaffected. increased both nominal and real GDP from last year. increased real GDP from last year, but nominal GDP was unaffected. did not change either nominal or real GDP from last year.

increased both nominal and real GDP from last year.

Broadly defined, competition involves private property and freedom of expression. independently acting buyers and sellers and freedom to enter or leave markets. increasing opportunity costs and diminishing marginal utility. capital goods and division of labor

independently acting buyers and sellers and freedom to enter or leave markets.

Purposeful behavior suggests that everyone will make identical choices. resource availability exceeds economic wants. individuals may make different choices because of different desired outcomes. an individual's economic goals cannot involve trade-offs

individuals may make different choices because of different desired outcomes

The process of producing and accumulating capital goods is called money capital. depreciation. investment. consumption

investment

When economists say that people act rationally in their self-interest, they mean that individuals look for and pursue opportunities to increase their utility. generally disregard the interests of others. are mainly creatures of habit. are usually impulsive and unpredictable

look for and pursue opportunities to increase their utility

Which of the following is not considered by economists to be an economic resource? money factory workers computers at a retail store. a forest

money

Which of the following is a land resource a farmer an oil drilling rig a machine for detecting earthquakes natural gas

natural gas

Saving in the economy occurs when current spending is less than current incomes. is generally not a determinant of future output. and investment are essentially the same concept. occurs when current consumption is more than current output.

occurs when current spending is less than current incomes.

Under modern economic growth, the annual average increase in output per person is often not large, perhaps 2 percent per year. often large, perhaps greater than 5 percent per year. often small, perhaps less than 1 percent per year. often the same in rich countries as in poor countries

often not large, perhaps 2 percent per year

The opportunity cost to a consumer who smokes cigarettes consists of the costs imposed on others who inhale second-hand smoke. products that the consumer could have bought instead of cigarettes. amount of cigarette taxes paid by this consumer. cost of complementary products such as lighters, ashtrays, and cigarette holders

products that the consumer could have bought instead of cigarettes.

Suppose that inventories are rising. We can expect that, in the future, real GDP will likely increase real GDP will likely decrease. real GDP could increase or decrease, as its direction cannot be predicted based on inventories. firms will raise prices of their goods and services

real GDP will likely decrease.

The three statistics that are the main focus for those measuring macroeconomic health are real GDP, inflation, and unemployment. real GDP, nominal GDP, and inflation. nominal GDP, unemployment, and inflation. real GDP, nominal GDP, and unemployment

real GDP, inflation, and unemploymen

Business cycle fluctuations typically arise because the actual supply of goods and services ends up being more or less than what consumers were expecting. the actual demand for goods and services ends up being more or less than the expected supply of goods and services. the actual demand for goods and services ends up being more or less than what firms were expecting. prices tend to be flexible in the short run.

the actual demand for goods and services ends up being more or less than what firms were expecting.

Competition in a market system denotes a condition where the diffusion of economic power limits its potential abuse. any given product can be purchased at a wide range of prices. contractual agreements among individual firms are restricted and avoided. a few large, dominant sellers are constantly jostling for market share

the diffusion of economic power limits its potential abuse

If a price ceiling is set below the equilibrium price in a market, rationing will be unnecessary. surpluses of the commodity will develop. the quantity demanded will exceed the quantity supplied. the quantity supplied will exceed the quantity demanded

the quantity demanded will exceed the quantity supplied.

Which of the following characteristics is least unique to a market system? private ownership of property resources competition among buyers and sellers pursuing monetary returns the widespread use of money freedom of enterprise and choice

the widespread use of money

Competition is more likely to exist when there is easy entry into and exit out of industries. a government-issued license is required to set up a firm in an industry. the government purchases most goods and services. economic power is concentrated among a few large firms

there is easy entry into and exit out of industries.

The division of labor means that labor markets are geographically segmented. unskilled workers outnumber skilled workers. workers specialize in various production tasks. each worker performs a large number of tasks

workers specialize in various production tasks.