Macroeconomics Unit 1

The market system's answer to the fundamental question "What will be produced?" is essentially

"Goods and services that are profitable."

Which of the following best illustrates the circular flow model in action? a) Bobbie goes to work and builds cars; she uses the income she receives to buy food at the grocery store. b) Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier and uses the rest to take her family out to dinner. c) Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers. d) All of these answers illustrate the workings of the circular flow model.

All of these answers illustrate the workings of the circular flow model.

Which of the following is assumed in constructing a typical production possibilities curve? a) The economy is using its resources inefficiently. b) Resources are perfectly shiftable among alternative uses. c) Production technology is fixed. d) The economy is engaging in international trade.

Production technology is fixed.

Which of the following is a microeconomic statement? a) The real domestic output increased by 1.6 percent last year. b) Unemployment was 5.2 percent of the labor force last year. c) The price of smartphones declined 2.8 percent last year. d) The general price level increased by 1.1 percent last year.

The price of smartphones declined 2.8 percent last year.

Which of the following is a positive statement? a) A humidity level of 90 percent is too high. b)It is too hot to run outside when the temperature exceeds 80 degrees. c) The temperature is 92 degrees today. d) Summer evenings are nice when it cools off to around 70 degrees.

The temperature is 92 degrees today.

Central planning often suffers from a coordination problem and an incentive problem. T/F

True

Which of the following is one of the Five Fundamental Questions? a) Which products will be in scarce supply and which in excess supply? b) Who should appoint the head of the central bank? c) How much should society save? d) What goods and services will be produced?

What goods and services will be produced?

The organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules, and meet periodically to consider further trade liberalization is called the

World Trade Organization (WTO).

Microeconomics is concerned with

a detailed examination of specific economic units that make up the economic system.

Which of the following will shift the production possibilities curve to the right? a) an increase in the unemployment rate from 6 to 8 percent b) a decline in the efficiency with which the present labor force is allocated c) a decrease in the unemployment rate from 8 to 6 percent d) a technological advance that allows farmers to produce more output from given inputs

a technological advance that allows farmers to produce more output from given inputs

Which of the following is associated with macroeconomics? a) an examination of the incomes of professional athletes b) an empirical investigation of the general price level and unemployment rates since 1990 c) a study of the trend of pecan prices since the Second World War d) a case study of pricing and production in the textbook industry

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

Which is an example of a nontariff barrier (NTB)? a) an export subsidy b) an excise tax on the physical volume of imported goods c) box-by-box inspection requirements for imported fruit d) an excise tax on the dollar value of imported goods

box-by-box inspection requirements for imported fruit

Which of the following is a distinguishing feature of a command system? a) private ownership of all capital b) central planning c) heavy reliance on markets d) widespread dispersion of economic power

central planning

Command systems are also known as

communism.

Countries engaged in international trade specialize in production based on

comparative advantage

In recent years the US has

exported more services abroad than it is imported

A positive statement is one that

focuses on facts, descriptions, and theoretical relationships.

In the resource market,

households sell resources to businesses.

The law of increasing opportunity costs states that

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.

Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n)

import quota.

The French term "laissez-faire" means

let it be

Tariffs

may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).

Which of the following is a distinguishing feature of laissez-faire capitalism? a) public ownership of all capital b) central planning c) minimal government intervention d) a circular flow of goods, resources, and money

minimal government intervention

The primary gain from international trade is

more goods than would be attainable through domestic production alone.

If a nation has a comparative advantage in the production of X, this means the nation

must give up less of other goods than other nations in producing a unit of X.

Which of the following is a land resource? a) a farmer b) an oil drilling rig c) a machine for detecting earthquakes d) natural gas

natural gas

Which of the following is a fundamental characteristic of the market system? a) property rights b) central planning by government c) unselfish behavior d) government-set wages and prices

property rights

Which of the following will not produce an outward shift of the production possibilities curve? a) upgrading the quality of a nation's human resources b) reducing unemployment c) increasing the quantity of a society's labor force d) improving a society's technological knowledge

reducing unemployment

Specialization in production is important primarily because it

results in greater total output.

Economics may best be defined as the

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

Which of the following is a capital resource? a) a computer programmer b) a corporate bond issued by a computer manufacturer c) silicon (sand) used to make computer chips d) software used by a firm

software used by a firm

Opportunity costs exist because

the decision to engage in one activity means forgoing some other activity.

Macroeconomics approaches the study of economics from the viewpoint of

the entire economy.

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive? a) the increased domestic employment argument b) the cheap foreign labor argument c) the diversification-for-stability argument d) the infant industry argument

the infant industry argument

A production possibilities curve shows

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

Which of the following arguments contends that certain industries need to be protected in the interest of national security? a) the increased domestic employment argument b) the cheap foreign labor argument c) the diversification-for-stability argument d) the military self-sufficiency argument

the military self-sufficiency argument

The incentive problem under communist central planning refers to the idea that

workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.