MACROECON CHAPTER 1

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.

Answer: B B. buyers and sellers.

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

Answer: A Reference: interest rates

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

Answer: B Command Economy

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. Answer: A Reference: Explanation:

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

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

Answer: A Division of Labor

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

Answer: A Government

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

Answer: A Market-Oriented Economy

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

Answer: A government spending

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.

Answer: A Reference: A. the profit maximizing decisions of an individual manufacturer.

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

Answer: 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

Answer: B Cuba and North Korea

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

Answer: B International Trade

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

Answer: B Reference:

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

Answer: B Reference: B. a study of how tax cuts stimulate aggregate production

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

Answer: B Reference: Explanation:

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

Answer: B Reference: The MacroEconomy

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

Answer: C Environmental Pollution

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

Answer: C unemployed people

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.

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

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

Answer: C Reference: goods and services

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

Answer: C Reference: 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

Answer: C Reference: low inflation

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. Answer: D Reference: Explanation:

Answer: D (Both A & B) 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.

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.

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

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.

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

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. Answer: B Reference: Explanation:

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 Explanation:

B. economy Answer: B Reference:

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 Answer: C Reference:

C. Economies of scale

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. Answer: C Reference: Explanation:

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. Answer: C Reference: Explanation:

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

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 Answer: D Reference:

D. a decrease in the unemployment rate Answer: D Reference: