AP Macroeconomics Final - Winter 2017

The largest share of total production in the United States is: A) consumption goods and services B) capital goods C) government goods and services D) exports of goods and services E) imports of goods and services

A) consumption goods and services.

The decisions of firms and households are: A) coordinated by markets B) made independently of one another C) controlled by but not totally coordinated by the government D) unexplainable by the circular flow model E) coordinated by but not totally controlled by the government

A) coordinated by markets.

The CPI is a measure of the: A) percentage change in the price level B) average prices of all goods C) average prices paid by consumers for a fixed basket of goods and services D) average prices of all goods and services produced E) average change in the output of the goods and services purchased by a typical urban consumer

C) average prices paid by consumers for a fixed basket of goods and services.

By donating $1,000 to the Salvation Army, Caroline reduces her taxable income. To Caroline, the reduction in her taxable income is: A) a marginal benefit B) an opportunity cost C) an incentive D) a marginal cost E) the margin

C) an incentive.

If the number of sellers decreases, then the supply curve ____ and the supply ____. A) shifts rightward; increases B) shifts rightward; decreases C) shifts leftward; increases D) shifts leftward; decreases E) does not shift; does not change but there is a decrease in the quantity supplied

D) shifts leftward; decreases

The phrase "a change in demand" most directly implies a A) movement along a demand curve B) movement along the price curve C) change in the quantity demanded of a good D) shift of the demand curve E) movement along the quantity curve

D) shift of the demand curve.

The unemployment rate equals: A) (number of people unemployed/labor force) X 100 B) (number of people unemployed/ working-age population) X 100 C) (labor force/ working-age population) X 100 D) (number of people employed - number of people unemployed) / labor force X 100 E) (Number of people unemployed/number of people emploed) X 100

A) (number of people unemployed / labor force) X 100.

In the reference base period the CPI is equal to A) 100 B) 100% C) 0 D) 1% E) 50

A) 100.

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Cindy's opportunity cost of producing 1 taco is: A) 3/4 of a pizza B) 1 pizza C) 30 pizzas D) 40 pizzas E) 1 1/3 of a taco

A) 3/4 of a pizza.

In stores, it is common to find products marked as "On Sale" at a lower than usual price. What explains this behavior? A) The law of demand is being used to increase the quantity demanded B) the store is trying to increase its customers' demand for the product C) the store manager must be trying to drive away customers by selling low quality products D) the store is trying to increase its consumer's incomes by increasing their purchasing power E) the store is trying to sell the goods and realizes that they are substitutes for other goods whose prices have risen

A) The law of demand is being used to increase the quantity demanded.

The Colorado Ski Shop sold 60 ski jackets to a Belgium company's headquarters located in Paris, France. The ski jackets are a: A) U.S. export B) capital good C) government good D) U.S. consumption service E) U.S. import

A) U.S. export.

Which of the following is an example of a sunk cost? A) after you start watching a movie, the $8 you paid for the ticket B) the $100,000 a shoe factory will pay for the leather it uses to make shoes C) the electricity purchased by a horse breeder D) the $10 being spent on gasoline purchased by a traveling salesperson E) the $6000 Tommy's insurance company pays him after an accident

A) after you start watching a movie, the $8 you paid for the ticket

Which of the following directly contributes to people's standard of living? A) consumption goods and services B) capital goods C) government goods and services D) exports of goods and services E) private goods

A) consumption goods and services

A reduction in unemployment compensation will A) decrease the amount of frictional unemployment B) increase the amount of frictional unemployment C) leave unchanged the amount of frictional unemployment because unemployment compensation affects only cyclical unemployment D) leave unchanged the amount of frictional unemployment because unemployment compensation affects only structural unemployment E) increase the amount of cyclical unemployment

A) decrease the amount of frictional unemployment.

Economists try to isolate the effect of one variable at a time. They do so by: A) holding all other relevant factors the same B) imagining a real world C) assuming every economic variable changes simultaneously D) keeping all variables constant E) looking only at decisions made on the margin

A) holding all other relevant factors the same.

Scarcity exists because: A) humans wants exceed the resources available to satisfy them B) some individuals have a low income C) the costs of production are high D) some people make bad economic decisions E) people take too much leisure time

A) human wants exceed the resources available to satisfy them

Teenagers drink more soda than other age groups. If the number of teenagers increases, everything else remaining the same: A) market demand for soda increases B) market demand for soda decreases C) market demand for soda does not change D) there is movement along the market curve for soda E) none of the above answers is correct because the effect on the demand depends whether the supply curve shifts rightward, leftward, or not at all

A) market demand for soda increases.

The production possibilities frontier illustrates the: A) maximum combinations of goods and services that can be produced B) resources the economy possess, but not its level of technology C) goods and services that people want D) limits to people's wants E) amount of each good that people want to buy

A) maximum combinations of goods and services that can be produced.

To be considered unemployed, a worker must have had: A) no employment during the week before the survey and be actively looking for a job B) part-time employment while actively looking for a full-time job C) no employment during the week before the survey and be actively looking for a job while a student D) no employment during the day before the survey and be actively looking for a job E) both answers A and B are correct

A) no employment during the week before the survey and be actively looking for a job.

Allocative efficiency refers to: A) producing the goods and services most highly valued B) using the least amount of labor to produce output C) producing the maximum possible amount of output D) obtaining the least output with the most inputs E) producing at any point on the PPF

A) producing the goods and services most highly valued.

Structural unemployment is the result of A) technological change or foreign competition B) normal labor market turnover C) a slowdown in the rate of economic expansion D) irresponsible workers with poor work habits E) changing weather patterns throughout the year

A) technological change or foreign competition.

The GDP deflator measures: A) the price level B) the quantity level C) real GDP D) nominal GDP E) the quality of the goods and services in GDP

A) the price level

In the above figure, as the y variable increases: A) the x variable is constant B) the x variable increases C) the x variable decreases D) the x variable at first increases but then decreases E) the x variable probably changes but more information is needed to determine if it increases, decreases, or stays the same

A) the x variable is constant.

The fact of increasing opportunity cost when moving on the PPF means that: A) to increase the production of one product requires larger and larger sacrifices of the other good B) to decrease the production of one product requires smaller and smaller sacrifices of the other good C) to increase the production of one product requires smaller and smaller sacrifices of the other good D) when the government forces a movement from one point on the PPF to another point, no production is lost E) the PPF will be a negatively sloped straight line

A) to increase the production of one product requires larger and larger sacrifices of the other good.

The figure above shows the production possibilities frontier for a country. A combination of 4 million gallons of milk and 4 million gallons of ice cream is: A) unattainable B) attainable and has full employment of all resources C) attainable and has less than full employment of all resources D) unattainable because it has less than full employment of all resources E) more information is needed to determine if the point is attainable or not

A) unattainable.

When Ford decides to produce more hybrid cars that run on both gas and electricity, it directly answers the ______ question. A) what B) how C) for whom D) where E) why

A) what

The table gives data for a nation. What is the amount of the country's GDP? A) $6,000 billion B) $6200 billion C) $6600 billion D) $6900 billion E) $5800 billion

B) $6,200 billion

The table above has information about an economy. Using this information, GDP equals: A) $5600 billion B) $7100 billion C) $8300 billion D) $9500 billion E) some amount that cannot be calculated without information on the amount of government expenditures

B) $7,100 billion.

Pizza is a normal good. Which figure above shows the effect of a decrease in consumers' incomes? A) figure a B) figure b C) figure c D) figure d E) both figure b and figure c

B) Figure B

The question of "How are goods and services produced?" most closely addresses which of the following issues? A) Should Ford build SUV's or luxury cars? B) Should Ford use expensive industrial robots or inexpensive Mexican autoworkers to produce SUV's? C) Should contractors build residential housing or shopping malls? D) Is income distributed fairly in the United States? E) Why are Christmas trees popular only in December?

B) Should Ford use expensive industrial robots or inexpensive Mexican autoworkers to produce SUV's?

The functional distribution of income measures which of the following? A) How federal tax revenues are related to the business function that employs taxpayers B) the distribution of earnings by the factors of production C) the proportion of income generated by the four types of expenditure on goods and services D) the distriubtion of income among households E) the distribution of income among nations

B) The distribution of earnings by the factors of production.

The economic choices made by individuals, businesses, and governments and the interactions of those choices answer which three major economic questions? A) What? How? and Why? B) What?, How?, and For Whom? C) Why? How much? and At what price? D) At what price? What? and Why? E) Where? What? and How?

B) What?, How?, and For Whom?

Which of the following is a final good or service? A) The grilled chicken purchased by Taco Bell for use in their burittos B) a new replacement muffler installed by Midas Mufflers C) the fertilizer purchased by Royal lawn and Landscape D) the computers purchased by Office Depot for sale to its customers E) the CPUs purchased by Dell to be used in their computers

B) a new replacement muffler installed by Midas Mufflers

GDP is measured by: A) adding units of all goods and services B) adding the market value of total final production C) adding the value of total production at original cost D) multiplying total production by the difference between the market value and original cost E) adding the difference between the market price and the cost for all final goods and services produced

B) adding the market value of total final production.

Making choices on the margin means: A) scribbling on the edges of your notebook paper B) comparing all relevant alternatives systematically and incrementally C) making a decision based on emotions D) making decisions in the largest possible increments E) taking account of all marignal benefits, all opportunity costs, and all sunk costs

B) comparing all relevant alternatives systematically and incrementally.

In the stock market, the price of a share of stock might fall one day and rise the next. This fluctuation indicates that: A) there is no equilibrium price for the share of stock B) either demand or supply changed from one day to the next C) the stock market does not obey the law of supply and demand D) the prices of shares of stock change even if the demand and supply do not change E) there is no way to explain this phenomenon

B) either demand or supply changed from one day to the next.

Based on the Consumer Expenditure Survey, the largest fraction of an average urban household budget is spent on A) apparel B) housing C) food and beverages D) transportation E) medical care

B) housing.

Capital (NOT human capital) is the productive resource that: A) includes stocks and bonds B) includes machinery and tools C) humans acquire on the job D) organizes labor land and capital E) is equal to money

B) includes machinery and tools.

"During 2005, the higher price of gasoline led to a decrease in demand for gasoline." Holding other things constant, this statement is: A) correct, because this really happened - it is a positive economic statement B) incorrect, because as the price increases, the quantity demanded decreases, not the demand. C) incorrect, because the statement implies that gasoline is an inferior good D) correct, because people did end up buying less gasoline during the summer of 2005 E) incorrect, because the statement implies that gasoline is a complement to automobiles

B) incorrect, because as the price increases, the quantity demanded decreases, not the demand.

To help unscramble cause and effect, economists: A) use the concept of opportunity costs B) must use the ceteris paribus assumption C) answer the "what" question D) answer the "how" question E) must use normative statements

B) must use the ceteris paribus assumption.

The United Auto Workers bargained for higher wages and more benefits for autoworkers. As a result of the higher wages and increased benefits, i. the quantity of new automobiles supplied decreases. ii. the supply of new automobiles decreases. iii. the supply of new automobiles increases. A) only i B) only ii C) only iii D) both i and ii E) neither i, ii, or iii is correct

B) only ii.

The figure above shows a A) time-series graph B) scatter diagram C) cross-section diagram D) slope E) trend diagram

B) scatter diagram.

To achieve gains from trade, a country: A) needs to have an absolute advantage in the production of all goods B) specializes in the producing a good in which it has a lower opportunity cost C) must produce at a point beyond its PPF D) should produce at the midpoint of its PPF E) needs to have an absolute advantage in the production of at least one good

B) specializes in the producing a good in which it has a lower opportunity cost.

If the demand for used cars decreases after the price of a new car falls, used cars and new cars are: A) inferior goods B) substitute goods C) complementary goods D) normal goods E) The question errs because it is the quantity of used cars, NOT the demand for used cars that will change when the price of a new car falls

B) substitute goods.

Potential GDP is A) the value of he maximum amount of output that can be produced at any given time B) the amount of real GDP that the economy would produce if it were at full employment C) another name for real GDP D) the amount of real GDP that the economy would produce if the unemployment rate was 0 E) the amount of real GDP that the economy would produce if all unemployment was cyclical unemployment

B) the amount of real GDP that the economy would produce if it were at full employment.

For rock concerts, the admission price is set by the promoter. If scalpers (sellers who buy tickets and then sell them just before the concert) are able to sell their tickets for more than the admission price, then: A) the equilibrium price to the concert must be less than the set admission price B)the equilibrium price to the concert must be more than the set admission price C) the equilibrium price to the concert must be equal to the set admission price D) there must be a surplus of seats available at the set admission price E) there is not enough information to make nay conclusions

B) the equilibrium price to the concert must be more than the set admission price.

In the circular flow model: A) the government is represented as a separate market B) the government buys goods and services form firms C) goods and services are sold by households and purchased by firms D) factor markets are where gods rather than services are bought and sold E) the government has no direct interaction with either households or firms

B) the government buys goods and services from firms.

If the price is below the equilibrium price: A) there is a surplus B) there is a shortage C) the supply curve will shift rightward D) the supply curve will shift leftward E) the demand curve will shift leftward

B) there is a shortage.

During 2005, net domestic product at factor cost equals $3,300 billion. Indirect taxes minus subsidies equals $200 billion, depreciation equals $800 billion, the statistical discrepancy equals zero, and net operating surplus equals $150 billion. The country's GDP using the income approach equals: A) $2300 billion B) $3500 billion C) $4300 billion D) $4450 billion E) $4150 billion

C) $4,300 billion.

Robinson Crusoe divides his time between catching fish and gathering fruit. Part of his production possibilities frontier is given in the above table. If Mr. Crusoe is on his PPF and he increases the amount of fruit he gathers from 56 to 90 pounds, the opportunity cost is: A) 37 lbs of fish B) 31 lbs of fish C) 17 lbs of fish D) 34 lbs of fruit E) 90 lbs of fruit

C) 17 pounds of fish.

From the table above, which gives data about the U.S. labor market in 1933, the unemployment rate is A) 2% B) 18% C) 20% D) 25% E) 35%

C) 20 percent.

In the table above, the size of the labor force is A) 80 million B) 46 million C) 42 milion D) 40 million E) 34 million

C) 42 million.

Which of the following is true? A) the world distribution of income is equal B) most people live in countries that have average income levels above the world average C) most people live in countries that have average income levels below the world average D) most people in the world have incomes that exceed $55 per day E) the percentage of the world's poor that live in Africa has steadily fallen since 1960

C) Most people live in countries that have average income levels below the world average.

Which of the following is NOT a normative economic statement? A) states should reduce the tax on heating fuel oil during the winter B) People over the age of 75 should not be allowed to drive cars C) Teenagers are responsible for most driving fatalities D) We don't spend enough money on anti-smoking campaigns E) the price of gasoline is too high

C) Teenagers are responsible for most driving fatalities.

Which of the following is a macroeconomic topic? A) The federal government's decision to spend more on environmental protection B) The county government's decision to increase the sales tax for your county C) Why did production and jobs expand rapidly in 2004? D) General Motors decides what prices to set for their new models E) The effect of floods in growing areas on the price and quantity of wheat

C) Why did production and jobs expand rapidly in 2004?

Gross Domestic Product equals: A) Y = C + I - G + NX B) Y = C - I + G + NX C) Y = C + I + G + NX D) Y = C - I - G - NX E) Y = C + I + G - NX

C) Y = C + I + G + NX.

Which of the following results in a rightward shift of the supply curve of rutabagas? (A rutabaga is a potato-like vegetable.) A) an increase in the price of a rutabaga B) an exceptionally cold summer that killed much of the rutabaga crop C) a fall in the price of fertilizer used to grow rutabagas D) Both answers A and C result in a rightward shift in the supply curve of rutabagas E) Both answers A and B result in a rightward shift in the supply curve of rutabagas

C) a fall in the price of fertilizer used to grow rutabagas

A common political statement in the United States is that we must strengthen social security. This statement is an example of: A) a positive statement B) an answer to the what to produce question C) a normative statement D) an answer to the how to produce question E) ceteris paribus

C) a normative statement.

Using the data in the table above, at the price of $80 a phone: A) a shortage of 25,000 phones occurs B) a surplus of 80,000 phones occurs C) a surplus of 25,000 phones occurs D) a shortage of 55,000 phones occurs E) the market is in equilibrium

C) a surplus of 25,000 cellular telephones occurs.

A slope is measured as the: A) value of the variable measured on the y-axis divided by the value of the variable on the x-axis B) value of the variable measured on the s-axis divided by the value of the variable on the y-axis C) change in the value of the variable on the y-axis divided by the change in the value of the variable on the x-axis D) value of the variable measured on the y-axis minus the value of the variable measured on the x-axis E) value of the variable measured on the x-axis minus the value of the variable measured on the y-axis

C) change in the value of variable on the y-axis divided by the change in the value of the variable on the x-axis.

The expenditure approach to measuring GDP is done by using data on only: A) consumption expenditure B) consumption expenditure and investment C) consumption expenditure, investment, government expenditures on goods and services, and net exports of goods and services D) Consumption expenditure, investment, and government expenditure E) wages, rent, interest, and profit

C) consumption expenditure, investment, government expenditures on goods and services, and net exports of goods and services

If the demand and supply both increase equally, then the equilibrium price ____ and the equilibrium quantity ____. A) increases; increase B) increases; does not change C) does not change; increases D) increases; decreases E) decreases; does not change

C) does not change; increases

To increase its economic growth, a nation should: A) limit the number of people in college because they produce nothing B) encourage spending on goods and services C) encourage education because that increases the quality of labor D) increase current consumption E) eliminate expenditure on capital goods

C) encourage education because that increases the quality of labor.

The United States possesses a large amount of human capital. As a result of this fact, in the United States there is a: A) large amount of machinery and equipment B) large number of people and a great deal of land C) highly skilled and educated labor force D) large number of kind and generous humans E) large amount of machinery (capital) that is run by people (humans)

C) highly skilled and educated labor force.

An increase in nominal GDP could result from an increase in i. production ii. prices iii. taxes and subsidies A) i only B) ii only C) i and ii D) i and iii E) i, ii, and iii

C) i and ii.

Mothers Against Drunk Drivers (MADD) campaigned to increase the legal penalties of drunk driving. This successful campaign ____ of drunk driving. A) increased the marginal benefit B) decreased the marginal benefit C) increased the marginal cost D) decreased the marginal cost E) increased the sunk cost

C) increased the marginal cost

Real GDP can increase if the i. quantities of goods and services produced decrease and prices fall by a smaller percentage. ii. quantities of goods and services produced decrease and prices fall by a larger percentage. iii. quantities of goods and services produced decrease and prices do not change. iv. quantities of goods and services produced increase. A) i only B) iii only C) iv only D) i and iii E) i, ii, and iii

C) iv only.

The cost of a one-unit increase in an activity is called the: A) opportunity benefit B) sunk cost C) marginal cost D) marginal benefit E) margin

C) marginal cost.

Payments to the factors of production are: A) rend, mortgage, interest, and bonds B) rend, interest, bonds, and profit or loss C) rend, wages, interest, and profit or loss D) rent, wages, profit or loss, and bonus E) land, labor, capital, and entrepreneurship

C) rent, wages, interest, and profit or loss.

An opportunity cost is: A) the dollar amount paid B) anything the decision maker believes costs to be C) the benefits of the highest-valued alternative forgone D) whatever is paid out and cannot be reduced or reversed E) another term for all the sunk costs

C) the benefits of the highest-valued alternative forgone.

The opportunity cost of a decision is measured in terms of: A) time B) the price of the alternative we choose C) the next best thing given up D) the price of a new opportunity that arises E) Sunk cost

C) the next best thing given up.

The labor force consists of: A) the number of people who are employed B) the number of people who are unemployed and who are actively seeking work C) the number of people in the working-age population who are employed or unemployed D) all the people in the population aged 16 and over who are not in jail, a hospital, or an institution or in the US armed forces E) the number of people who are employed minus the number of people who are unemployed

C) the number of people in the working-age population who are employed or unemployed

The law of demand refers to how: A) demand changes when people's incomes change B) demand changes when the prices of substitues and complements change C) the quantity demanded changes when the price of the good changes D) the price of the good changes when people's demand the good changes E) the quantity demanded changes when the demand for the good changes

C) the quantity demanded changes when the price of the good changes.

Correlation means: A) holding everything else constant B) after this, therefore because of this C) the values of two variables move in a predictable and related way D) making statements about how the world should be E) the same as the conclusion

C) the values of two variables move in a predictable and related way.

In year 2004, in Candamica, consumption expenditure was $13 billion, interest, rent, and profit were $1.5 billion, government expenditures on goods and services were $3 billion, net exports of goods and services amounted to $2 billion, and investment was $8 billion. Hence total expenditure was: A) $24.5 billion B) $27.5 billion C) $22.5 billion D) $26 billion E) $16 billion

D) $26 billion.

What typically happens to benefits as the amount of an activity is increased? A) total benefits remain constant B) marginal benefit increases C) marginal benefit remains constant D) marginal benefit decreases E) the marginal benefit changes only if the marginal cost changes

D) Marginal benefit decreases.

Which of the following statement is correct? A) if nominal GDP increases, the real GDP must increase B) if nominal GDP decreases, then real GDP must increase C) if real GDP decreases, then nominal GDP must decrease D) nominal and real GDP can change either in the same direction or the opposite direction E) if nominal GDP does not change, then real GDP cannot change

D) Nominal and real GDP can change either in the same direction or the opposite direction.

Which of the following is true? A) to be classified as employed, you must be a full-time worker at a paid job B) to be classified as employed, you must work at at least 20 hours per week at a paid job C) Part-time workers are all those who work less than 40 hours per week D) To be classified as employed, you must work at least 1 hour per week at a paid job or 15 hours or more as unpaid workers in your family business. E) If you are not working and turn down a job offer in the previous week, you are no longer classified as unemployed

D) To be classified as employed, you must work at least 1 hour per week at a paid job or 15 hours or more as unpaid workers in your family business.

The United States produces large amounts of software. Based on this observation, it is possible to state that the United States has decided that "software" is part of the answer to which economic question? A) How are goods and services produced? B) For whom are the various goods and services produced? C) What will be the price of goods and services? D) What goods and services are produced? E) Why are particular goods and services produced?

D) What goods and services are produced?

Suppose the price of leather used to produce shoes increases. As a result, there is ____ in the supply of shoes and the supply curve of shoes ____. A) an increase; shifts rightward B) an increase; shifts leftward C) a decrease; shifts rightward D) a decrease; shifts leftward E) no change; does not shift

D) a decrease; shifts leftward

Real GDP is all final goods and services produced in a year within a country valued at: A) market prices prevailing in the current year B) current prices C) nominal prices D) base year prices E) real prices

D) base year prices.

Mike has just been laid off following six months of slow sales at his firm associated with a recession in the economy. Mike is A) frictionally unemployed B) structurally unemployed C) seasonally unemployed D) cyclically unemployed E) natural unemployed

D) cyclically unemployed.

Which of the following best describes comparative advantage? A) being able to produce more output than any other country B) using the fewest number of resources to produce a given amount of output C) having the largest number of resources compared to other countries D) forgoing the fewest units of one product to produce a unit of another product E) it is the same as absolute advantage

D) forgoing the fewest units of one product to produce a unit of another product

Which of the following is correct? i. A surplus puts downward pressure on the price of a good. ii. A shortage puts upward pressure on the price of a good. iii. There is no surplus or shortage at equilibrium. A) i and ii B) i and iii C) ii and iii D) i, ii, and iii E) only iii

D) i, ii, and iii.

The table above shows a nation's production possibilities frontier. If the nation wants to produce 4 robots and 34 pizzas: A) it will shift the production possibilities frontier B) the opportunity cost is 9 pizzas C) the nation will be producing inefficiently D) it will be unable to do so because the production point is unattainable E) the nation will then be producing at a production efficient point

D) it will be unable to do so because the production point is unattainable.

The benefit someone gets from consuming one more glass of lemonade is known as the: A) net benefit B) incremental benefit C) marginal cost D) marginal benefit E) free lunch

D) marginal benefit.

Having an absolute advantage: A) is the basis for specialization and trade B) means having a higher opportunity cost than the trading partner C) means having a lower opportunity cost than the trading partner D) means being able to produce more of each product than the trading partner. E) means having a comparative advantage in production of the same goods

D) means being able to produce more of each product than the trading partner.

If you make dinner for yourself: A) the market value of your dinner is added to GDP B) your service in preparing the meal is valued at a cook's wage and added to GDP C) none of what you bought to prepare for dinner is included in GDP D) only the market value of ingredients that you purchased this year is added to GDP E) the difference between the cost of the ingredients that you purchased this year and the market value of the dinner is added to GDP

D) only the market value of ingredients that you purchased this year is added to GDP.

In economics, there are two types of statements. One describes what is; the other describes what ought to be. These statements are: A) macroeconomic and microeconomic B) fair and unfair C) right and wrong D) positive and normative E) social interest and self-interest

D) positive and normative.

When measuring GDP: A) the government sector is not included because it is the public sector not the private sector B) the government sector is counted, and the value of the government sector in GDP is equal to its tax revenue C) only the federal government's expenditures on goods and services are included D) the expenditures on goods and services by all levels of government are included E) the government sector is not counted because it does not produce goods and services

D) the expenditures on goods and services by all levels of government are included.

The Consumer Price Index market basket contains: A) the minimal dietar requirements of an average urban household B) the US produced goods and services purchased by an average urban household C) the ideal calorie intake of each member of an average urban household D) the goods and services purchased by an average urban household E) the goods and services that the economists working for the BLS believes consumers should buy

D) the goods and services purchased by an average urban household.

Investment is defined as the purchase of A) any financial asset only B) additions to inventories only C) financial assets and inventories only D) the purchase of new capital goods and additions to inventories E) the purchase of new capital goods but not additions to inventories

D) the purchase of new capital goods and additions to inventories.

When cyclical unemployment is zero, A) frictional unemployment is 0 B) cyclical and frictional unemployment are 0 C) structural unemployment is 0 D) the unemployment rate equals the natural unemployment rate E) the natural unemployment rate is 0

D) the unemployment rate equals the natural unemployment rate.

Positive statements are statements about: A) political controversies B) profits C) what ought to be D) what is E) how scarcity can be whipped

D) what is.

Hank requires 1 hour to cut the grass and 3 hours to clean the house. His sister Holly requires 1 hour to cut the grass and 4 hours to clean the house. Which of the following statements is true? A) Hank has a comparative advantage in both cutting the grass and cleaning the house B) Hank and Holly both have a comparative advantage in cutting the grass C) Hank has a lower opportunity cost of cutting the grass D) Hank has an absolute advantage in both cutting the grass and cleaning the house E) Holly has a comparative advantage in cutting the grass

E) Holly has a comparative advantage in cutting the grass.

Which of the following could lead the production possibilities frontier to shift inward? A) an increase in productive resources B) a better educated labor force C) the discovery of new sources of raw materials D) an earthquake that destroys several major factories E) none of the above because the production possibilities frontier can never shift inward

E) None of the above because the production possibilities frontier can never shift inward.

Of the following, the largest expenditure category of the federal government is: A) the purchase of goods and services B) interest on national debt C) grants to states and local governments D) education E) social security

E) Social Security.

You have chosen to take a trip during Spring Break. If you had not gone, you would either have worked at a temporary job or studied for exams. The opportunity cost of your trip is: A) the wages you would have earned from working B) the lower grade earned by not studying C) the wages you would have earned from working and the lower grade earned by not studying D) the value of the trip E) We cannot determine what the opportunity cost is without knowing which alternative, working or studying, you would have preferred.

E) We cannot determine what the opportunity cost is without knowing which alternative, working or studying, you would have preferred.

As measured, GDP omits which of the following? i. Illegal sales of goods and services. ii. Changes in the amount of leisure time. iii. Household production of goods and services. A) i only B) i and ii C) ii and iii D) i and iii E) i, ii, and iii

E) i, ii, and iii.

Economic growth depends upon which of the following? i. Improving the quality of labor. ii. Technological advancement. iii. Increasing the amount of capital. A) i only B) ii only C) iii only D) i and iii E) i, ii, and iii

E) i, ii, and iii.