macro unit 1 practice
To calculate GDP it is necessary to add up the market value of all the ________ produced within a country during a year. A. final goods and services produced B. intermediate goods and services produced and all the final goods and services produced C. goods but not services produced D. intermediate goods and services produced E. goods and services produced
A. final goods and services produced
Productive efficiency occurs when production ________. A. is on the production possibilities frontier B. is at any attainable point C. is on the production possibilities frontier or inside it D. is at a point beyond the production possibilities frontier
A. is on the production possibilities frontier
Macroeconomics differs from microeconomics in that: A. macroeconomics focuses on the national economy and the global economy. B. macroeconomics studies the decisions of individuals. C. macroeconomics studies the behavior of government while microeconomics looks at private corporations. D. microeconomics looks at the economy as a whole.
A. macroeconomics focuses on the national economy and the global economy.
The benefit that arises from a one-unit increase in an activity is called _______. A. marginal benefit B. making a decision at the margin C. marginal increase D. a marginal activity
A. marginal benefit
The basic coordinating mechanism in a free-market system is // In a market economy, the answers to the three fundamental questions are primarily determined by A. price. B. quantity. C. the corporation. D. a central government authority.
A. price.
When drawing a production possibilities frontier, which of the following is held constant? A. the available amount of resources and the state of technology B. the quantity of the goods and services that are produced. C. the amount of money in the economy D. the prices of goods and services E. None of the above because nothing is held constant when drawing the production possibilities frontier.
A. the available amount of resources and the state of technology
As an economy enters a recession and begins to experience some cyclical unemployment, A. the economy moves from a point on the PPF to a point inside the PPF B. the PPF shifts outward. C. the economy moves from a point inside the PPF to a point closer to or on the PPF. D. the economy's point of production moves along the PPF. E. the PPF shifts inward.
A. the economy moves from a point on the PPF to a point inside the PPF
Increasing opportunity cost while moving along a production possibilities frontier is the result of A. the fact that resources are not equally productive in alternative uses. B. taxes. C. firms' needs to produce profits. D. the fact that it is more difficult to use resources efficiently the more society produces.
A. the fact that resources are not equally productive in alternative uses.
An example of household production excluded from GDP is A. tree trimming you provide at your parent's home. B. childcare provided by a certified nanny. C. household cleaning services provided by Merry Maids Incorporated. D. lawn care provided by a local lawn care company. E. plumbing work completed by Joe Fix-it.
A. tree trimming you provide at your parent's home.
According to the income approach to measuring GDP, the largest income category is A. wages. B. interest. C. profits. D. consumption expenditure. E. rent.
A. wages.
GDP includes the goods and services produced A. within a country's borders by citizens and by non−citizens. B. within a country's borders by citizens and non−citizens plus goods produced abroad by the country's citizens. C. by a country's legal citizens regardless of where in the world they are located. D. by a country's citizens but not by non−citizen's within the country's borders. E. within a country's borders by citizens and by non−citizens minus the production abroad by the country's citizens.
A. within a country's borders by citizens and by non−citizens.
Suppose you are analyzing the production possibilities between two goods or services. If you are asked to calculate the opportunity cost of one of the goods or services, A. you must always report the numeric value and the units. B. you only need to report the numeric value. C. you must report either the numeric value or the units. D. you only need to report the units.
A. you must always report the numeric value and the units.
As the economy recovers from a recession, a decrease in the cyclical unemployment rate A.moves the economy from a point inside the PPF to a point closer to or on the PPF. B. shifts the PPF outward. C. moves the economy's point of production along the PPF. D. shifts the PPF inward. E. moves the economy from a point on the PPF to a point inside the PPF.
A.moves the economy from a point inside the PPF to a point closer to or on the PPF.
Label each of the following news items as a positive or a normative statement. A. Nuclear energy is cleaner than coal and oil based energy B. More police on inner-city streets will lower the crime rate C. Flat screen is better than traditional television D. The PlayStation is better than the XBox E. Work hours are too long
A: Positive B. Positive C. Normative D. Normative E: Normative
If a firm does not sell all of the goods that it produces in a given time period, then the goods A. count in GDP the period they are sold to the final user. B. count positively in GDP as inventory investment. C. do not count in GDP ever. D. count negatively in GDP as inventory investment. E. do not count in GDP for that time period but always count next period.
B. count positively in GDP as inventory investment.
U.S. real GDP A. precisely measures the improving standard of living in the United States. B. excludes the value of underground production and leisure time. C. includes the value of underground production but excludes the value of leisure time. D. is not as accurate as nominal GDP when measuring standard of living changes over time. E. measures the change in the price level over time.
B. excludes the value of underground production and leisure time.
Which of the following is included as investment in GDP? i. cars produced during the year but unsold at the end of the year ii. new capital equipment produced and purchased during the year iii. purchases of a company's stocks and bonds A. i only B. i and ii C. iii only D. i, ii, and iii E. ii only
B. i and ii
Which of the following is included in Germany's GDP? i. BMWs produced in a German owned factory in South Carolina ii. the value of the stocks sold on the German stock exchange, the Frankfurt Stock Exchange iii. china produced by the English owned Wedgewood Company at a factory in Berlin, Germany A. i only. B. iii only. C. ii only. D. i and iii. E. i and ii.
B. iii only.
A point inside a production possibilities frontier A. is unattainable. B. indicates that some resources are unemployed. C. implies that too much capital and not enough labor is being used. D. is more efficient than points on the production possibilities frontier.
B. indicates that some resources are unemployed.
In order to determine whether to major in economics, a rational individual compares the ________ of the decision. A. normative benefits and positive costs B. marginal benefit and marginal cost C. self−interest and social−interest D. positive benefits and normative costs E. opportunity cost and the sunk cost
B. marginal benefit and marginal cost
If the price of carrots is below the equilibrium price, the A. quantity demanded of carrots exceeds the quantity supplied and a surplus exists. B. quantity demanded of carrots exceeds the quantity supplied and a shortage exists. C. quantity supplied of carrots exceeds the quantity demanded and a surplus exists. D. quantity supplied of carrots equals the quantity demanded. E. quantity supplied of carrots exceeds the quantity demanded and a shortage exists.
B. quantity demanded of carrots exceeds the quantity supplied and a shortage exists.
When the price of almonds falls A. the demand for almonds decreases, ceteris paribus. B. the quantity demanded of almonds increases, ceteris paribus. C. the demand for almonds increases, ceteris paribus. D. the quantity demanded of almonds decreases, ceteris paribus.
B. the quantity demanded of almonds increases, ceteris paribus.
Gross domestic product understates the total production of final goods and services because of the omission of A. exports. B. the underground economy / household production C. intermediate goods. D. inflation.
B. the underground economy / household production
Which of the following is NOT included in the expenditure approach to calculating GDP? A. net exports of goods and services B. wages C. consumption expenditure D. investment E. government expenditures on goods and services
B. wages
Suppose we want to compare the standard of living across countries. In order to make an accurate comparison, we should use A. Nominal GDP per capita B. Nominal GDP C. Real GDP per capita D. Real GDP E. the GDP deflator
C. Real GDP per capita
Which of the following goods is directly counted in GDP? A. the lettuce that Subway purchases for its sandwiches B. the bread that Subway purchases for its sandwiches C. a 12 inch Subway sandwich purchased by a student D. the plastic bags that Subway purchases to wrap its sandwiches
C. a 12 inch Subway sandwich purchased by a student
The GDP deflator is a measure of the A. total production of the economy unadjusted for inflation. B. total production of the economy adjusted for inflation. C. average level of prices of final goods and services in the D. average level of prices of intermediate goods and services in the economy.
C. average level of prices of final goods and services in the
An economic system in which the government decides what, how, and for whom to produce, directs workers to jobs, and owns all the land and capital is A. a mixed economy. B. market capitalism. C. centrally planned socialism. D. supported by economists as the best system available.
C. centrally planned socialism.
Investment, as defined by economists, would include the purchase of a A. government bond. B. corporate bond. C. computer by an accounting firm. D. share of stock in ExxonMobil.
C. computer by an accounting firm.
Normative statements i. describe how the world is. ii. describe how the world ought to be. iii. depend on people's values and cannot be tested. A. i and iii. B. iii only. C. ii and iii. D. ii only. E. i only.
C. ii and iii.
When the production possibilities frontier is bowed outwards, the opportunity cost of producing more of one good A. decreases in terms of the amount foregone of the other good. B. remains constant. C. increases in terms of the amount foregone of the other good. D. cannot be determined.
C. increases in terms of the amount foregone of the other good
The 3 key economic questions include all of the following EXCEPT A. "who consumes the products?". B. "how do we produce these products?". C. "what products do we produce?". D. "where should these products be produced?".
D. "where should these products be produced?".
Economics studies choices that arise from one fact. What is that fact? A. Resources exceed wants B. too much of the world's oil is in the Middle East C. The rich are too rich and the poop are too poor D. Scarcity E. We must distringuish between right and wrong
D. Scarcity
Honda has an assembly plant for Civics in Ohio. The production of U.S.-made Civics is A. added to Japan's GDP because Honda is a Japanese company. B. added to U.S. GDP only if the Civic is sold in the United States in the year it is produced. C. not included in either the U.S. or Japanese GDP. D. added to both U.S. GDP, because the car is produced in the United States, and to Japan's GDP, because Honda is a Japanese company. E. added to U.S. GDP.
E. added to U.S. GDP.
A change in a marginal benefit or cost will A. cause an individual to make a rational choice. B. decrease production. C. increase consumption. D. increase sunk costs. E. change incentives.
E. change incentives.
According to the expenditure approach to measuring GDP, in the United States , the largest component of GDP is A. net exports of goods and services. B. government expenditure on goods and services. C investment. D. wages.. E. consumption expenditure.
E. consumption expenditure.
The largest expenditure category in the United States is A. net exports of goods and services. B. government expenditure on goods and services. C. investment. D. wages. E. consumption expenditure.
E. consumption expenditure.
Market equilibrium i. can never occur because there are always people who want a good but cannot afford it. ii. occurs at the intersection of the supply and demand curves. iii. is the point where the price equals the quantity. A. iii only B. i and ii C. i only D. ii and iii E. ii only
E. ii only
Ceteris paribus means A. after this, therefore because of this. B. people must make choices. C. variables are correlated. D. social interest is the same as self interest. E. other things remaining the same.
E. other things remaining the same.
Nominal GDP measures the value of goods and services produced in a given year valued using A. constant prices. B. base year prices. C. future prices. D. no prices. E. prices of the same year
E. prices of the same year
The production possibilities frontier shifts inward if A. the labor force increases. B. technology improves. C. unemployment increases. D. the capital stock increases. E. resources are destroyed.
E. resources are destroyed.
As the price of a product falls, the demand for the product increases, ceteris paribus.1 True False
False
If the demand and supply for a product both increase, the equilibrium price of the product must also increase. True False
False
What is an economic model? A. It is a simplified version of some aspect of economic life used to analyze an economic issue. B. It is a detailed version of some aspect of economic life used to analyze an economic issue. C. It is a description of an economic issue based on official government information. D. It is a description of an economic issue that includes all possible related information.
A. It is a simplified version of some aspect of economic life used to analyze an economic issue.
Which of the following are assumptions of the PPF model? (Check all that apply). A. Resources are held constant. B. Technology is held constant. C. Consumers want to maximize utility. D. Two Goods E. The economy is operating at full employment and productive efficiency. F. Producers want to maximize profit.
A. Resources are held constant. B. Technology is held constant. D. Two Goods E. The economy is operating at full employment and productive efficiency.
What is comparative advantage? A. The ability to produce a good or service at a lower opportunity cost than other producers. B. The ability to produce more of a good or service than competitors using the same amount of resources. C. The gain from consuming a product whose benefit is greater than its cost. D. The gain from selling a product for more than it costs to produce that product. E. The ability to use all available resources to produce output.
A. The ability to produce a good or service at a lower opportunity cost than other producers.
The phrase "demand has increased" means that A. a demand curve has shifted to the right. B. a demand curve has shifted to the left. C. there has been a downward movement along a demand curve. D. there has been an upward movement along a demand curve.
A. a demand curve has shifted to the right.
Items bought by businesses to help produce other goods and services are called A. consumption goods and services. B. capital goods. C. productive goods. D. exports of goods and services. E. government goods and services.
B. capital goods.
In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income? A. Domestic expenditures on imports generally equal foreign expenditures on U.S. exports. B. Every penny spent on a good or service must end up as someone's income. C. Peopl tend to spend all of their income on goods and services. D. Taxes on the production of goods and services are determined according to individual income.
B. Every penny spent on a good or service must end up as someone's income.
Suppose a house is built and sold in the year 2000. If the house is resold in the year 2009, is the value of the house included in Gross Domestic Product (GDP) for 2009? A. No. GDP for 2009 includes only the market value of final goods. A house resold in 2009 is an intermediate good. B. No. GDP for 2009 includes only production that occurs during 2009. C. Yes. The value of the house is included in Gross Private Domestic Investment for 2009. D. Yes. The value of the house is included in Personal Consumption Expenditures for 2009.
B. No. GDP for 2009 includes only production that occurs during 2009.
Which of the following is true of resources? A. Their availability is unlimited. B. They are inputs used to produce goods and services. C. When resource availability is increased, scarcity is eliminated. D. Both b and c.
B. They are inputs used to produce goods and services.
Productive efficiency means that all of the economy's resources A cannot be fully employed using the current technology. B. are fully employed using the current technology. C. will be fully employed using the current technology. D. are fully employed but not using the current technology. E. cannot be fully employed unless new technology were developed.
B. are fully employed using the current technology.
Gross Domestic Product measures the A. market value of the final goods and services consumed by households in a given year within a country. B. quantity of the goods and services produced in a given year, listed item by item, within a country. C. market value of the final goods and services produced in a given year within a country. D. market value of the domestic labor in a given year within a country. E. market value of all goods and services produced in a given year within a country.
C. market value of the final goods and services produced in a given year within a country.
In broad terms the difference between microeconomics and macroeconomics is that A. they use different sets of tools and ideas. B. microeconomics studies the effects of government taxes on the national unemployment rate. C. microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy. D. macroeconomics studies the effects of government regulation and taxes on the price of individual goods and services whereas microeconomics does not.
C. microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy.
A PPF bows outward because A. entrepreneurial talent is more abundant than human capital. B. consumers prefer about equal amounts of the different goods. C. not all resources are equally productive in all activities. D. resources are used inefficiently.
C. not all resources are equally productive in all activities.
When calculating GDP, purchases of used goods are A. included by taking the original price and subtracting the (current) used price. B. included at the original price. C. not included. D. included at the (current) used price. E. included at the original price minus any depreciation.
C. not included.
If you make dinner for yourself, A. none of what you bought to prepare for dinner is included in GDP. B. your service in preparing the meal is valued at a cook's wage and added to GDP. C. only the market value of ingredients that you purchased is added to GDP. D. the market value of your dinner is added to GDP. E. the difference between the cost of the ingredients that you purchased and the market value of the dinner is added to GDP
C. only the market value of ingredients that you purchased is added to GDP.
Suppose you are analyzing the production possibilities between pineapples and coconuts. If you are asked to calculate the opportunity cost of coconuts, you would report the answer in terms of: A. coconuts B. euros C. pineapples D. dollars
C. pineapples
To examine how the total production of an economy has changed over time, it would be better to examine A. the GDP deflator. B. GDP at current prices. C. real GDP. D. nominal GDP.
C. real GDP.
Which of the following is a final good or service? A. the taco shells purchased by Taco Bell for use in their tacos B. tires purchased by Ford for use on one of their SUV's C. the pepperonis on a home-made pizza D. the hair gels used by a hair stylist at the local hair salon E. the butter used by a chef to make butter cream frosting
C. the pepperonis on a home-made pizza
Capital, as a factor of production, refers to A. the production technology used by firms. B. stocks, and bonds but not money. C. the physical goods used to produce other goods and services. D. the production factors imported from abroad. E. money, stocks, and bonds.
C. the physical goods used to produce other goods and services.
A demand curve is defined as the relationship between A. the price of a good and the quantity of that good that producers are willing to sell. B. the income of consumers and the quantity of a good that producers are willing to sell. C. the price of a good and the quantity of that good that consumers are willing to buy. D. the income of consumers and the quantity of a good that consumers are willing to buy.
C. the price of a good and the quantity of that good that consumers are willing to buy.
The Law of Supply states that A. producers are legally required to make necessary items available in the marketplace. B. producers should only sell the items when the price is right. C. there is a positive relationship between price and quantity supplied, ceteris paribus. D. producers should only produce what they can sell.
C. there is a positive relationship between price and quantity supplied, ceteris paribus.
Is it possible for a country to have a comparative advantage in producing a good without also having an absolute advantage? A country without an absolute advantage in producing a good A. will have a comparative advantage if it devotes more resources toward that good's production. B. will have a comparative advantage if it is able to produce that good at a low total cost. C. will have a comparative advantage if it has a lower opportunity cost of producing that good. D. will not have a comparative advantage because it has fewer resources. E. will have a comparative advantage if it produces more efficiently.
C. will have a comparative advantage if it has a lower opportunity cost of producing that good.
On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is A. not clear because not enough information is given. B. zero because you do not have to pay money to use the library. C. working out at the gym. D. working out at the gym, having breakfast with friends, and sleeping late.
C. working out at the gym.
What is absolute advantage? A. The gain from selling a product for more than it costs to produce that product. B. The ability to produce a good or service at a lower opportunity cost than other producers. C. The ability to use all available resources to produce output. D. The ability to produce more of a good or service than competitors using the same amount of resources. E. The gain from consuming a product whose benefit is greater than its cost.
D. The ability to produce more of a good or service than competitors using the same amount of resources.
How are the fundamental economic decisions determined in Cuba? A. Individuals, firms, and the government interact in a market to make these economic decisions. B. These decisions are made by the country's elders who have had much experience in answering these questions. C. The United Nations decides because Cuba is a developing economy. D. The government decides because Cuba is a centrally planned economy.
D. The government decides because Cuba is a centrally planned economy.
To make things simpler and to focus attention on what really matters, economists would A. Ignore all variables. B. Think at the margin C. Respond to incentives D. Use assumptions
D. Use assumptions
Investment, as defined by economists, would not include which of the following? Ford A. adds 1,000 new cars to inventories. B. buys a new robotic machine (from a plant in Ohio) to assemble cars. C. builds another assembly plant in the United States. D. buys U.S. government bonds.
D. buys U.S. government bonds.
If nominal GDP increases this year, then real GDP A. could either increase or not change but cannot decrease. B. must not change. C. must decrease. D. could increase, decrease, or not change. E. must increase.
D. could increase, decrease, or not change
A mixed economic system is best described an economy with a mix of A. state and federal governments. B. for−profit organizations and not−for−profit organizations. C. domestic and foreign firms. D. free markets and government control.
D. free markets and government control
Economists try to isolate the effect of one variable at a time. They do so by A. assuming that every economic variable changes simultaneously. B. looking only at decisions made on the margin. C. imagining a real world. D. holding all other relevant factors the same. E. keeping all variables constant.
D. holding all other relevant factors the same.
Nominal GDP can change A. only if prices change. B. only if prices increase. C. only if the quantities of goods and services change. D. if either prices or the quantities of goods and services change. E. only if prices and the quantities of the goods and services change
D. if either prices or the quantities of goods and services change.
Huey has eaten two hamburgers and is considering a third. The marginal benefit in his decision is the pleasure from consuming A. the two previous hamburgers. B. the third hamburger minus the pleasure from consuming zero hamburgers. C. just the second hamburger. D. just the third hamburger. E. all three hamburgers.
D. just the third hamburger.
If an economy is operating at a point inside the production possibilities frontier, then A. the PPF curve will shift inward. B. society's resources are being used to produce too many consumer goods. C. economic policy must retard further growth of the economy. D. society's resources are being inefficiently utilized.
D. society's resources are being inefficiently utilized.
Economics is best defined as the study of A. financial decision−making. B. inflation, unemployment, and economic growth. C. how consumers make purchasing decisions. D. the choices made by people faced with scarcity
D. the choices made by people faced with scarcity
Suppose, in 2016, you purchased a house built in 2003. Which of the following would be included in the gross domestic product for 2016? A. the value of the house in 2003 B. the value of the house in 2016 C. the value of the house in 2016 minus depreciation D. the value of the services of the real estate agent
D. the value of the services of the real estate agent
Depreciation is A. the value of the addition to the capital stock. B. the value of the decrease in business inventory stocks. C. the decline in the value of the stock market, net of dividends. D. the value of worn−out equipment, machinery, and buildings.
D. the value of worn−out equipment, machinery, and buildings.
The purchase of the financial assets, such as stocks and bonds, is not included in GDP because A. they are too expensive. B. taxes are paid on them. C. The question errs because the purchase of financial assets is counted as part of GDP. D. they don't represent the production of goods or services. E. brokerage firms don't want them to be included.
D. they don't represent the production of goods or services.
Nominal GDP is GDP in a given year A. valued in the prices of the base year. B. adjusted for inflation. C. adjusted for anticipated inflation. D. valued in the prices of that year.
D. valued in the prices of that year.
What is the most basic economic problem? A. Profit B. Productivity C. The theory of Demand and Supply D. Greed E. Scarcity F. Economic Growth
E. Scarcity
Which of the following best defines rational behavior? A. Analyzing the total costs of a decision B. Analyzing the total benefits of a decision C. Undertaking an activity as long as the total benefit exceeds the total cost D. Undertaking an activity as long as the marginal benefit exceeds zero E. Undertaking an activity as long as the marginal benefit exceeds or equals the marginal cost
E. Undertaking an activity as long as the marginal benefit exceeds or equals the marginal cost
In order to make a rational choice, people must A. decide quickly without wasting time. B. compare marginal costs and marginal benefits. C. only know what they want. D. determine what is in the social interest. E. be able to afford the choice decided upon.
compare marginal costs and marginal benefits.
