macro prep 1,2,6,7

11. Which of the following is included in the calculated Gross Domestic Product? A. Farmer Freddie sells his second tractor to his son. B. Suzanne buys a love seat and chair for $85 at the yard sale on the corner. C. A local ice cream store sells $17,000 worth of cones and sundaes on July 1. D. Mr. Farkle buys a used lawn mower from his neighbor, Mr. Sparkle.

C. A local ice cream store sells $17,000 worth of cones and sundaes on July 1.

7. Why is there scarcity? A. Because the opportunity set determines this. B. Because theory dictates it. C. Because our unlimited wants exceed our limited resources D. Because human wants are limited.

C. Because our unlimited wants exceed our limited resources

4. Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: A. A to B B. B to E C. C to F D. G to F

C. C to F

24. Which of the following statements most likely lies within the realm of macroeconomics? A. An increase in the price of automobiles will lead to a decrease in the quantity of automobiles demanded. B. Due to process innovations in computer chip manufacturing, the market supply of computers increased. C. Due to an economic recession, manufacturing firms began implementing layoffs of their workforces. D. Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook

C. Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.

32. _____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. A. Skill B. Specialization C. Economies of scale D. Division of labor

C. Economies of scale

32. Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP for each country. A. Ethiopia = $14.50 Costa Rica = $2250.00 B. Ethiopia = $14.50 Costa Rica = $225.00 C. Ethiopia = $145.00 Costa Rica = $2250.00 D. Ethiopia = $1450.00 Costa Rica = $22,500.00

C. Ethiopia = $145.00 Costa Rica = $2250.00

35. A nation's prosperity is sometimes measured in terms of ___________. A. GNP B. GDP C. GDP per capita D. economic output

C. GDP per capita

37. An economy's rate of productivity growth is closely linked to the growth rate of its ______________, although the two aren't identical. A. GNP B. output C. GDP per capita D. technology

C. GDP per capita

19. The marginal benefit of a slice of pizza is the: A. total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices B. difference between the value of the slice to the consumer and the price of the slice. C. maximum amount that a consumer is willing to pay for the slice. D. price of the slice of pizza

C. maximum amount that a consumer is willing to pay for the slice.

32. Which of the following factors contribute to economic growth? A. a decrease in the quantity of labor due to emigration B. a decrease in the productivity of labor C. the discovery of new oil reserves D. a decline in the stock of physical capital

C. the discovery of new oil reserves

27. Which of the following is unlikely to affect the rate of economic growth? A. the quality of available resources B. the quantity of available resources C. the level of government spending D. technological change

C. the level of government spending

10. If macroeconomics looks at the economy as a whole, it focuses on which of the following? A. households B. business firms C. unemployed people D. the division of labor

C. unemployed people

33. In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income. A. budget constraint B. opportunity set C. utility D. production possibilities frontier

C. utility

11. "If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: A. $0 B. $4 C. $40 D. $44

D. $44

34. The Czech Republic has a GDP of 2,000 billion koruny. The exchange rate is 20 koruny per U.S. dollar. The Czech population is 20 million. Calculate the per capita GDP of the Czech Republic in U.S. dollars. A. $5 B. $100,000 C. $500 D. $5000

D. $5000

39. The change in inventories, a component of aggregate supply, comprises roughly __________ of GDP. A. 20% B. 10% C. 1% D. 0.5%

D. 0.5%

30. In 1980 Denmark had a GDP of $70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of $160 billion (measured in U.S. dollars) s and a population of 5.3 million. By what percentage did Denmark's GDP per capita rise between 1980 and 2000? A. 45.4% B. 219% C. 128% D. 120%

D. 120%

5. Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: A. Point B B. Point C C. Point D D. All points on the production possibilities frontier are equally efficient.

D. All points on the production possibilities frontier are equally efficient.

19. Which of the following statements most likely lies within the realm of microeconomics? A. Unemployment rises during a recession and falls during an expansion. B. An increase in government spending will increase the aggregate demand for goods and services in the economy. C. A rapid acceleration of the supply of money may create inflation. D. An increase in labor costs will increase the additional cost of producing another bus.

D. An increase in labor costs will increase the additional cost of producing another bus.

38. In the early 2000s, the illiteracy rate for girls between the ages of 15 and 24 was __________ and the illiteracy rate for males in this age group was ______________. A. 78%; 75% B. 80%; 83% C. 67%; 70% D. 72%; 69%

A. 78%; 75%

8. A nation can achieve higher economic growth if: A. it devotes more resources to research and development. B. the productivity of labor declines C. taxes are imposed on investment in capital. D. more resources are allocated to consumption goods.

A. it devotes more resources to research and development.

6. In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. A. market-oriented economy B. macroeconomy C. microeconomy D. command economy

A. market-oriented economy

1. Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. A. normative statement B. budget constraint C. trade-off D. opportunity cost

A. normative statement

34. The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible. A. opportunity set B. consumption choice C. time value of money D. risk premium

A. opportunity set

32. The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A. sunk costs B. opportunity costs C. marginal analysis D. budget constraints

A. sunk costs

23. Investment (I) includes: A. the amount spent on new factories and machinery. B. the amount spent on stocks and bonds. C. the amount spent on consumer goods that last more than one year. D. the amount spent on purchases of art.

A. the amount spent on new factories and machinery.

12. The opportunity cost of attending university is likely to include all except which of the following? A. the cost of haircuts received during the school term B. the income you forgo in order to attend classes C. tuition fees D. the cost of required textbooks

A. the cost of haircuts received during the school term

33. In 1990, the GDP of Canada was $680 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 85 U.S. cents. In 2000, the GDP of Canada was $1000 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 69 U.S. cents. By what percentage did the GDP of Canada increase from 1990 to 2000 in Canadian dollars? A. 19.4% B. 47% C. 68% D. 147%

B. 47%

5. In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________. A. a production function B. an aggregate production function C. human capital D. physical capital

B. an aggregate production function

22. The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. A. consumption set B. budget constraint C. original budget D. income cap

B. budget constraint

23. In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: A. all consumers. B. buyers and sellers. C. producers and input suppliers. D. producers and government planning committees.

B. buyers and sellers.

22. Specialization: A. leads to greater self-sufficiency. B. can lead to an increase in overall production. C. allows workers to develop skills by working on a large number of tasks D. is always the result of an inefficient use of resources

B. can lead to an increase in overall production.

13. Which of the following is not included in GDP? A. the payments for a chiropractor's services B. cash income paid to a day laborer that is not reported to the tax authorities C. the replacement of brake pads on your six-year-old vehicle D. the fees for legal services rendered by your lawyer

B. cash income paid to a day laborer that is not reported to the tax authorities

33. Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. A. financial capital market B. circular flow diagram C. financial investment market D. Specialization Model

B. circular flow diagram

4. The demand measure of GDP accounting adds together: A. wages and salaries, rent, interest, and profit. B. consumption, investment, government purchases, and trade balance. C. consumption, government purchases, wages and salaries, and trade balance. D. consumption, interest, government purchases, and trade balance.

B. consumption, investment, government purchases, and trade balance.

19. Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able. A. triple B. double C. one-half D. one-fourth

B. double

31. Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change. A. market B. economy C. production D. firm

B. economy

10. In order to avoid double counting, statisticians just count the __________________. A. final inventories B. final goods and services C. intermediate goods and services D. durable goods and nondurable goods

B. final goods and services

33. Some recent economic research has suggested that African countries' economic growth may have been limited by __________________ . A. population B. geography and climate C. government interventionism D. technological challenges

B. geography and climate

15. The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending. A. business B. government C. household D. capital market

B. government

27. For most high-income countries of the world, GDP _________________ over time. A. has proven to be stable B. has risen gradually C. has declined slightly D. has sharply risen

B. has risen gradually

20. In the long run, the most important source of increase in a nation's standard of living is a: A. zero rate of population growth. B. high rate of economic growth. C. high rate of consumption. D. high rate of labor force growth.

B. high rate of economic growth.

4. In the long run, the most important source of increase in a nation's standard of living is a: A. zero rate of population growth B. high rate of economic growth. C. high rate of consumption. D. high rate of labor force growth.

B. high rate of economic growth.

7. Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then: A. exports exceed imports by $50 billion. B. imports exceed exports by $50 billion. C. imports exceed exports by $150 billion. D. exports exceed imports by $150 billion.

B. imports exceed exports by $50 billion.

16. Which of the following is most likely to contribute to economic growth as measured by GDP per capita? A. the imposition of tariffs and quotas on imported goods B. increased capital formation C. rapid population growth D. an increase in marginal tax rates

B. increased capital formation

4. Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? A. division of labour B. international trade C. economies of scale D. command economy

B. international trade

9. Scarcity implies that: A. consumers would be willing to purchase the same quantity of a good at a higher price. B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. C. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. D. consumers are too poor to afford the goods and services available.

B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

21. GDP does not directly include: A. the value of goods produced domestically and sold abroad. B. the value of intermediate goods sold during a period. C. the value of services rendered during a period. D. the value of final goods and services produced, but not sold, during a period.

B. the value of intermediate goods sold during a period.

35. The gap between exports and imports in a nation's economy is called the ___________. A. trade surplus B. trade balance C. trade deficit D. trade inventor

B. trade balance

22. GDP in the United States in 2012 was about __________. A. $162 billion B. $1.62 trillion C. $16.2 trillion D. $162 trillion

C. $16.2 trillion

31. India has a GDP of 23,000 billion Indian rupees, and a population of 1.1 billion. The exchange rate is 50 rupees per U.S. dollar. Calculate the GDP per capita of India as measured in U.S. dollars. A. $20.90 B. $20,909 C. $418 D. $4.18

C. $418

24. Middle-income countries, which include much of Latin America, Eastern Europe, and some countries in East Asia, have per capita GDP in the range of ___________. A. $60 to $120 B. $600 to $1200 C. $6,000 to $12,000 D. $60,000 to $120,000

C. $6,000 to $12,000

37. Once every __________, the Census Bureau does a comprehensive survey of housing and residential finance. A. month B. 5 years C. 10 years D. 20 years

C. 10 years

29. A country will roughly double its GDP in twenty years if its annual growth rate is: A. 12 percent. B. 7.5 percent. C. 3.5 percent. D. 2.5 percent.

C. 3.5 percent.

17. Durable goods and non-durable goods comprise approximately ________ of the supply side of the GDP. A. 1% B. 20% C. 45% D. 80%

C. 45%

12. Of the world's population of 6.7 billion people, _________ are scraping by on incomes that average less than $2 per day. A. 260 million B. 2.6 billion C. 5 billion D. 6.2 billion

C. 5 billion

3. Consumption in the United States is about ____________ of GDP, and it moves relatively little over time. A. 10% B. 33% C. 68% D. 90%

C. 68%

14. Investment in human capital: A. is of minor importance to economic growth. B. can be acquired through on-the-job training. C. is an important source of economic growth. D. is characterized by both b) and c).

D. is characterized by both b) and c).

26. Macroeconomics: A. is concerned with the expansion of a small business into a large corporation. B. is narrower in scope than microeconomics. C. analyzes mergers and acquisitions between firms. D. is concerned with the expansion and contraction of the overall economy.

D. is concerned with the expansion and contraction of the overall economy.

24. A nation can achieve higher economic growth if: A. more resources are allocated to consumption goods. B. taxes are imposed on investment in capital. C. the productivity of labor declines. D. it devotes more resources to research and development.

D. it devotes more resources to research and development.

35. Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. opportunity cost C. benefit analysis D. marginal analysis

D. marginal analysis

15. Economists typically measure economic growth by tracking: A. the employment rate. B. the unemployment rate. C. averaged GDP growth D. real GDP per capita.

D. real GDP per capita.

19. Which of the following is included in GDP calculations? A. sales revenue received from a yard sale B. cash income received by a self-employed landscaper that is not reported to the IRS C. a crisp $50 bill received on your birthday D. the university tuition paid to enroll in a course

D. the university tuition paid to enroll in a course

1. GDP is: A. the sum of all currency and coins in circulation. B. the value of all final goods and services produced by a government. C. the value of all final good and services produced anywhere in the world by a nation's firms. D. the value of all final goods and services produced domestically.

D. the value of all final goods and services produced domestically.

8. Scarcity exists because of: A. the market mechanism. B. specialization and division of labor. C. the allocation of goods by prices D. unlimited wants and limited resources.

D. unlimited wants and limited resources.

1. During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year. A. 2% B. 12% C. 22% D. 32%

A. 2%

10. Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age __________. A. 30 B. 40 C. 50 D. 60

A. 30

38. On the supply side of the GDP, Structures account for around __________ of U.S. GDP. A. 7% B. 17% C. 37% D. 57%

A. 7%

40. Which of the following statements is true? A. GDP includes spending on recreation and travel, but it does not cover leisure time. B. GDP does not include production that is exchanged in the market, but it does cover production that is not exchanged in the market. C. GDP does not include newly produced goods and services, but counts the buying and selling of previously existing assets D. GDP includes production that is not exchanged in the market

A. GDP includes spending on recreation and travel, but it does not cover leisure time.

9. ___________ is a small category that refers to the goods produced by one business that have yet to be sold to consumers, and are either still sitting in warehouses and on store shelves. A. Inventories B. Services C. Structures D. Durable goods

A. Inventories

37. The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________. A. allocative efficiency B. the production possibilities frontier C. trade-offs D. scarcity

A. allocative efficiency

15. To compare the GDP of two different countries with different currencies, it is necessary to use _________________________. A. an exchange rate B. foreign currency C. currency rates D. per capita GDP

A. an exchange rate

18. Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs C. acquiring the information relevant to a choice before making that choice D. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake

A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

9. In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. A. division of labor B. interconnected economy C. task economy D. modern economy

A. division of labor

28. The circular flow diagram of economic activity is a model of the: A. flow of goods, services, and payments between households and firms. B. influence of government on business behaviour. C. role of unions and government in the economy. D. interaction among taxes, prices, and profits.

A. flow of goods, services, and payments between households and firms.

3. In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. A. government B. market C. firm D. business sector

A. government

14. Which of the following best describes a fiscal policy tool? A. government spending B. bank lending C. financial capital markets D. household spending

A. government spending

21. Which of the government policies below is most unlikely to encourage per capita economic growth? A. high taxes on companies that spend a lot on capital formation B. the use of tax revenues for investment and capital formation C. special subsidies for capital-intensive forms of production D. promotion of education and training programs for workers

A. high taxes on companies that spend a lot on capital formation

5. Consumption is the purchase of goods and services by: A. households. B. government. C. business firms. D. foreign buyers.

A. households.

13. Which of the following best describes a monetary policy tool? A. interest rates B. taxes C. household savings D. government spending

A. interest rates

3. As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. A. the production possibilities frontier B. allocative efficiency C. scarcity D. utility

A. the production possibilities frontier

20. Macroeconomic topics do not usually include: A. the profit maximizing decisions of an individual manufacturer. B. the rate of inflation. C. the rate of unemployment. D. economic growth.

A. the profit maximizing decisions of an individual manufacturer.

12. Which of the following is not counted as a part of GDP? A. the purchase of 100 shares of AT&T stock by your grandfather. B. the purchase of a snow plough by the city of Minneapolis. C. the unsold additions to inventory at an appliances store D. the purchase of a loaf of bread by a consumer

A. the purchase of 100 shares of AT&T stock by your grandfather.

20. The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. A. utility B. marginal benefit C. opportunity cost D. sunk costs

A. utility

36. In certain African countries like Niger, Tanzania, Nigeria, and Sudan, for example, GDP per capita at the start of the 2000s was still less than $___________. A. 30 B. 300 C. 3000 D. 30,000

B. 300

29. Which of the following best characterizes the circular flow of income? A. Businesses buy resources from the government, and households buy goods and services from businesses. B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. C. The government purchases resources from businesses and households and then sells goods and services to businesses and households. D. Households buy factors of production from businesses, and businesses buy goods and services from households.

B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

16. ___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time. A. Government B. Consumption C. Investment D. Services

B. Consumption

2. In which of the following countries will the national government have the greatest influence with respect to the nation's economy? A. China B. Cuba C. Canada D. Chile

B. Cuba

1. In countries like _____________ the command economy predominates. A. China and Vietnam B. Cuba and North Korea C. South Africa and Kenya D. Germany and France

B. Cuba and North Korea

11. When discussing economic growth, it is often useful to focus on ____________, to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis. A. economic growth B. GDP per capita C. living standards D. consumption and expenditures

B. GDP per capita

34. Some prominent members of the slow-economic growth country club include a high-income country like _________. A. Somalia B. Germany C. Bolivia D. Nigeria

B. Germany

13. Which of the following is correct? A. An increase in the quantity of labor always leads to economic growth. B. Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital. C. A decrease in the productivity of labour leads to economic growth. D. Third World countries are rich in human capital

B. Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.

18. _________ is calculated by taking _________ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year. A. GNP; NNP B. NNP; GNP C. GDP; NNP D. NNP; GDP

B. NNP; GNP

9. _________ is output per hour in the business sector. A. Net exports B. Productivity C. Investment D. GDP per capita

B. Productivity

14. _________ are now the largest single component of the supply side of GDP, representing over half of GDP. A. Durable goods B. Services C. Nondurable goods D. Structures

B. Services

2. _____________________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s. A. GDP per capita B. The Industrial Revolution C. The living standard D. Investment and inventions

B. The Industrial Revolution

26. Which of the following is true? A. A depression is a recession that is mild and relatively brief. B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. C. The timing of business fluctuations is regular and therefore easily predictable. D. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.

B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.

7. Which of the following best denotes the reason for the existence of substantial black markets? A. a market-oriented economy B. a command economy C. government laws and rules D. the microeconomy

B. a command economy

29. Which of the following would most likely shift the production possibilities curve inward? A. an increase in the number of hours factories are in use B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time C. an increase in the production of capital goods D. technological progress

B. a decrease in the average number of hours worked per week as

25. Which of the following lies primarily within the realm of macroeconomics? A. a study of the demand for gasoline B. a study of how tax cuts stimulate aggregate production C. an analysis of supply and demand conditions in the electricity market D. a study of the impact of "mad cow" disease on the price of beef worldwide

B. a study of how tax cuts stimulate aggregate production

28. If imports exceed exports, as in recent years, then __________ exists. A. a trade surplus B. a trade deficit C. a trade imbalance D. trade disequilibrium

B. a trade deficit

36. Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines. A. law of trade-offs B. law of diminishing marginal utility C. production possibilities frontier D. law of increasing marginal utility

B. law of diminishing marginal utility

17. Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. marginal analysis C. the budget constraint D. consumption

B. marginal analysis

18. Country Alpha and Country Beta initially have the same real GDP per capita. Country Alpha experiences no economic growth, while Country Beta grows at a sustained rate of 5 percent. In 14 years, Country Alpha's GDP will be approximately _________ that of Country Beta. A. one-fourth B. one-half C. double D. triple

B. one-half

26. Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be. A. negative statements B. positive statements C. tradeoffs D. utilitarianism

B. positive statements

3. To achieve a high standard of living, a nation should: A. increase the tax deduction for child dependents. B. promote economic growth. C. use less capital and more labor in the production process. D. increase welfare payments to the poor.

B. promote economic growth.

21. The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A. marginal utility B. sunk costs C. marginal analysis D. budget constraints

B. sunk costs

20. Which of the following is included in GDP? A. revenue from the sale of a three-year old car B. the fees charged for a stock broker's services C. the receipts from a sale of land D. the value of lawn care service provided by a sixteen-year-old as part of his weekly chores

B. the fees charged for a stock broker's services

5. In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers? A. wage levels B. the macroeconomy C. the firm's income D. household income

B. the macroeconomy

25. Which of the following best describes the relationship between economic growth and literacy? A. As the economy grows, literacy declines because it becomes less and less useful in a developed economy. B. Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines. C. Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education. D. There is no correlation between economic growth and literacy.

C. Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.

26. ____________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s. A. Technology B. Living standard C. Industrial Revolution D. Capital deepening

C. Industrial Revolution

6. Which of the following are most likely classified by economists as consumer durable goods? A. food, clothing B. drugs, toys, magazines, books C. automobiles, furniture D. stocks, bonds

C. automobiles, furniture

21. Macroeconomics primarily examines: A. the behaviour of individual households and firms. B. how prices are determined within individual markets. C. broad issues such as national output, employment and inflation. D. the output levels that maximize the profits of business firms

C. broad issues such as national output, employment and inflation.

16. The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. personal preference B. utility level C. budget constraint D. opportunity set

C. budget constraint

30. The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. Opportunity cost B. productive efficiency C. budget constraint D. production possibilities frontier

C. budget constraint

7. When society has a higher level of capital per person, it is called ______________. A. physical capital B. human capital C. capital deepening D. technological gains

C. capital deepening

27. The law of ____________________________ explains why people and societies rarely make all-or-nothing cho A. consumption B. marginal analysis C. diminishing marginal utility D. utility

C. diminishing marginal utility

8. Which of the following is generally accepted as a valid criticism of the production of useful goods and services? A. government involvement B. the black market C. environmental pollution D. economic freedom

C. environmental pollution

12. In the ______________, households receive goods and services and pay firms for them. A. labor market B. financial capital market C. goods and services market D. savings market

C. goods and services market

2. Final goods or services used to compute GDP refer to: A. the sum of all wages paid to laborers. B. the factors of production used to produce output. C. goods and services purchased by the ultimate users. D. the value of outstanding shares of stock of manufacturing firms.

C. goods and services purchased by the ultimate users.

29. On the demand side of GDP, consumption by _____________ is the largest component of GDP, accounting for about two-thirds of the GDP in any year. A. services B. businesses C. households D. government

C. households

11. In the ____________, households work and receive payment from firms. A. financial investment market B. financial capital market C. labor market D. savings market

C. labor market

16. When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: A. balanced budget B. prudent monetary policy C. low inflation D. assuring competition between firms

C. low inflation

28. As a person receives more of a good, the _______________ from each additional unit of the good declines. A. utility B. sunk costs C. marginal utility D. budget constraint

C. marginal utility

17. The basic difference between macroeconomics and microeconomics is: A. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. B. microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. D. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

27. The basic difference between macroeconomics and microeconomics is that: A. microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). B. macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). D. macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

2. Attending college is a case where the ________________ exceeds the monetary cost. A. budget constraint B. marginal analysis C. opportunity cost D. marginal utility

C. opportunity cost

31. In many cases, it is reasonable to refer to the ________________ as the price. A. budget constraint B. sunk cost C. opportunity cost D. budget constraint

C. opportunity cost

8. The value of what businesses provide to other businesses is captured in the final products at the end of the __________ chain. A. service B. value C. production D. supply

C. production

22. Over the long run, ____________ per hour is the most important determinant of the average wage level in any economy. A. demand B. dollars C. productivity D. supply

C. productivity

6. The value of what is produced per worker, or per hour worked, is called ____________. A. economic growth B. human capital C. productivity D. GDP per capita

C. productivity

17. To achieve a high standard of living, a nation should: A. increase welfare payments to the poor. B. use less capital and more labor in the production process. C. promote economic growth. D. increase the tax deduction for child dependents.

C. promote economic growth.

41. The difference between nominal GDP and real GDP is: A. nominal GDP measures actual productivity B. nominal GDP adjusts for inflation C. real GDP adjusts for inflation D. real GDP excludes imports and exports

C. real GDP adjusts for inflation

42. The nominal value of any economic statistic refers to the number that is actually announced at that time, while the ________________ refers to the statistic after it has been adjusted for inflation. A. empirical value B. adjusted value C. real value D. net value

C. real value

31. Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth. A. human capital B. physical capital C. technology D. a market orientation

C. technology

10. Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing, because he enjoys playing basketball more than studying. B. the increase in skill he obtains from playing basketball for that hour. C. the benefit to his grades from studying for an hour D. nothing, because he had a free pass into the sports complex to play basketball.

C. the benefit to his grades from studying for an hour

30. In the circular flow diagram model: A. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. B. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. C. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. D. Both (a) and (b) are correct

D. Both (a) and (b) are correct

36. _______________, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country. A. Trade balance B. Inflation C. Education D. Economic growth

D. Economic growth

28. Which of the following did not result in economic growth? A. Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California. B. The invention of a threshing machine for harvesting grains. C. Increased government funding of post-secondary education. D. Many citizens emigrating from Zimbabwe when a politically repressive regime took office.

D. Many citizens emigrating from Zimbabwe when a politically repressive regime took office.

6. Refer to Figure 2-1. The most inefficient point depicted is: A. Point A B. Point C C. Point D D. Point G

D. Point G

23. Increased investment alone will guarantee economic growth. A. This is a true statement, because growth occurs only with savings. B. This is a true statement, because money is the only resource needed for growth. C. This is a false statement, because an economy must rely on capital injections from abroad. D. This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.

D. This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.

18. Which of the following is most likely a topic of discussion in macroeconomics? A. an increase in the price of a hamburger B. a decrease in the production of DVD players by a consumer electronics company C. an increase in the wage rate paid to automobile workers D. a decrease in the unemployment rate

D. a decrease in the unemployment rate

30. Which of the following factors contribute to economic growth? A. an increase in the average wage rate paid to workers B. an increase in the standard of living C. a decrease in the productivity of labor D. an increase in the proportion of the population that is college educated

D. an increase in the proportion of the population that is college educated

23. The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if: A. the economy moves along the production possibilities in the direction of a greater quantity of defense. B. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. C. the production possibilities frontier shifts outward due to an improvement in technology. D. either b) or c) occurs, but not as a result of a).

D. either b) or c) occurs, but not as a result of a).

25. A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are: A. trough, expansion, recession, peak B. contraction, recession, expansion, boom C. expansion, trough, recession, peak D. expansion, peak, recession, trough

D. expansion, peak, recession, trough

15. The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action.

D. is a subjective valuation that can be determined only by the individual who chooses the action.