Macroeconomics Review Questions # 1

In recent years the economy of Japan has grown, despite the fact that the population of Japan has declined. Which of the following would best explain Japan's economic growth despite having a smaller population?

Advancements in technology that make labor more productive.

An economic system in which money is not used is a:

Barter economy

The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the:

Bureau of Economic Analysis

The development of the Internet and e-mail to replace regular mail would be an example of:

Creative destruction

Which of the above diagrams illustrate(s) the effect of an increase in automobile worker wages on the market for automobiles?

D only.

Which of the following statements is correct?

Freedom of choice and enterprise are essential elements of the market system

Real GDP refers to:

GDP data that have been adjusted for changes in the price level.

In determining real GDP, economists adjust the nominal GDP by using the:

GDP price index.

A major problem with state ownership of resources is that it does not:

Give incentives for individuals to make the best use of those resources

The market system is an economic system that:

Gives private individuals the right to own resources used in production

A basic characteristic of a command system is that:

Government owns most economic resources

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Holly's statement is normative, but Ben's is positive.

Economic efficiency is the primary guide in answering which of the fundamental questions in a market economy?

How is the output to be produced?

Which statement is correct?

In a market system, prices serve to ration goods and services to consumers

Anything that is generally acceptable in trading for goods and services is a:

Medium of exchange

The system that measures the economy's overall performance is formally known as:

National income accounting

Refer to the above diagram for athletic shoes. The optimal output of shoes is:

Q2.

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as:

The invisible hand

Laissez-faire capitalism is characterized by:

Very limited government role in the economy

The term consumer sovereignty means that:

What is produced is ultimately determined by what consumers buy

Consumer sovereignty and "dollar votes" guide the market system in dealing with which fundamental question?

What will be produced?

Issues of the distribution of goods and services and of incomes in a market system are the primary topics of which fundamental question?

Who is to receive the output?

The value added of a firm is the market value of:

a firm's output less the value of the inputs bought from others.

A well-tested economic theory is often called:

a principle.

Refer to the above diagram. A price of $60 in this market will result in:

a surplus of 100 units.

Which of the following is associated with macroeconomics?

an empirical investigation of the general price level and unemployment rates since 1990

(Last Word) The "after this, therefore because of this" fallacy states that:

because event A precedes event B, A is necessarily the cause of B.

Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information we:

cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.

(Last Word) The post hoc, ergo propter hoc fallacy suggests that:

cause and effect can be determined merely by observing the sequence of events.

Refer to the above diagram. Points A, B, C, D, and E show:

combinations of bicycles and computers that society can produce by using its resources efficiently.

The largest component of total expenditures in the United States is:

consumption.

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is ____.

direct, inverse

(Last Word) The fallacy of composition is essentially the error of:

generalizing from the particular to the general.

Other things equal, an excise tax on a product will:

increase its price.

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:

inflated to $1080 billion.

The process of producing and accumulating capital goods is called:

investment.

According to economists, economic self-interest:

is a reality that underlies economic behavior.

A market:

is an institution that brings together buyers and sellers.

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation.

The upward slope of the supply curve reflects the:

law of supply.

The economizing problem is one of deciding how to make the best use of:

limited resources to satisfy virtually unlimited wants.

(Last Word) A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks, naïve college students, and trade union radicals." This is an example of:

loaded terminology.

The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by:

national income.

Refer to the above data. From this information we can conclude that the net foreign factor income is:

negative $5 billion.

The smallest component of aggregate spending in the United States is:

net exports.

Environmental pollution is accounted for in:

none of these.

In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:

not counted.

A positive statement is one which is:

objective and is based on facts.

Purposeful behavior means that:

people weigh costs and benefits to make decisions.

Refer to the above diagram. A government-set price ceiling is best illustrated by:

price A.

Refer to the above diagram. A government-set price floor is best illustrated by:

price C.

The law of demand states that, other things equal:

price and quantity demanded are inversely related.

(Consider This) Ticket scalping refers to:

reselling a ticket at a price above its original purchase price.

The economy above has experienced a:

rising real GDP.

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:

scarcity and opportunity costs.

Economics may best be defined as the:

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

Macroeconomics can best be described as the:

study of the large aggregates of the economy or the economy as a whole.

Consumption of fixed capital (depreciation) can be determined by:

subtracting NDP from GDP.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

supply has decreased and equilibrium quantity has decreased.

The construction of a production possibilities curve assumes:

technology is fixed.

If intermediate goods and services were included in GDP:

the GDP would be overstated.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

the child-care services provided by stay-at-home parents

Macroeconomics approaches the study of economics from the viewpoint of:

the entire economy.

A production possibilities curve shows:

the maximum amounts of two goods that can be produced, assuming the full use of available resources.

Nominal GDP is:

the sum of all monetary transactions involving final goods and services that occur in the economy in a year.

The negative slope of the production possibilities curve is a graphical way of indicating that:

to produce more of one product we must do with less of another.

The concept of net domestic investment refers to:

total investment less the amount of investment goods used up in producing the year's output.

Refer to the above diagram. The combination of computers and bicycles shown by point G is:

unattainable, given currently available resources and technology.

A large underground economy results in an:

understated GDP.

Refer to the above diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:

will be 4 units of bicycles.

Which one of the following expressions best states the idea of opportunity cost?

"There is no such thing as a free lunch."

The gross domestic product for the above economy is:

$110.

Refer to the above data. Real GDP in year 3 is:

$150.

Refer to the above data. Equilibrium price will be:

$2.

Refer to the above data. DI is:

$274.

Refer to the above data. PI is:

$314.

Refer to the above data. NDP is:

$392.

Refer to the above data. NI is:

$402.

Refer to the above data. GDP is:

$417.

Refer to the above data. Nominal GDP in year 3 is:

$450.

Refer to the above data. Consumption of fixed capital is:

$5.

Refer to the above data. Disposable income is:

$75.

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is:

300.

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately:

44 percent.

Refer to the above data. If year 3 is chosen as the base year, the price index for year 1 is:

60.