Macroeconomics Review Chapters 1-3

The US produced approx. ______ worth of goods and services in 2011.

$15 trillion

In the US, the poorest 20% of households earn roughly _____ percent of the income

3%

In the US, the poorest 20% of households receive about _____ percent of total income

3%

In the US, the richest 20% of households receive about _____ percent of total income.

50%

Capital (factor of production) includes: A.) money borrowed from a bank B.) a company's stocks and bonds C.) tools, buildings, and machine tools D.) toys, t-shirts, CD players, pencils E.) money in a savings account

C

Which of the following is NOT a normative statement? A.) States should reduce the tax on heating fuel oil during the winter. B.) People over the age of 75 should 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

What is the opportunity cost of economic growth?

Current period consumption goods

An example of capital as a factor of production is A.) money B.) stocks C.) bonds D.) machines E.) education

D

Which of the following is not considered one of the factors of production? A.) land B.) labor C.) capital D.) technology E.) entrepreneurship

D

Which of the following is the best definition of economic growth? A.) the investment in capital and consumption goods by an economy B.) the opportunity cost of capital C.) the opportunity cost of consumption D.) increased development of land and entrepreneurship E.) the sustained expansion of production possibilities

E

A statement that "All children should receive free health care" is an example of what kind of statement?

Normative statement

What is the reason that all economic issues and problems occur?

Scarcity

The functional distribution of income measures what?

The distribution of earnings by the factors of production

The personal distribution of income measures what?

The distribution of income among households

What is a topic studied in macroeconomics?

The effect on economic growth if the government raises taxes.

Which of the following statements is correct? i. As the economy grows, the opportunity costs of economic growth decrease. ii. Economic growth has no opportunity cost. iii. The opportunity cost of economic growth is current consumption forgone.

The opportunity cost of economic growth is current consumption forgone

True or False: In a production possibilities graph, the cost of producing more units a good is measured by the amount of the other good or service that must be forgone

True

True or False: The production possibilities frontier illustrates the maximum combinations of goods and services that can be produced.

True

True or False: When drawing a production possibilities frontier, the available factors of production and the state of technology are held constant.

True

An item that is purchased to increase businesses' productive resources is

a government good

Production efficiency is represented by _____ a production possibilities frontier

all points on

Economists measure opportunity cost

as the best thing given up

Items bought by businesses to help produce other goods and services are called

capital goods

The difference between consumption goods and capital goods is that

capital goods are used to produce additional goods while consumption goods are not

Microeconomics includes the study of

choices made by individuals and businesses

Decision making on the margin involves

comparing the marginal cost and marginal benefits when making a decision.

Items that are purchases by the individuals for their own enjoyment are called

consumption goods and services

The largest share of total production in the US is

consumption goods and services

When the total US production of goods and services is divided into consumption goods and services, capital goods, government goods and services, and export goods and services, the largest component is

consumption goods and services

Normative statements

describe how to the world ought to be and depend on people's values and cannot be tested

The sustained expansion of production possibilities is called

economic growth

When a country's production possibilities frontier shifts outward over time, the country is experiencing

economic growth

If there is unemployment in an economy, then the

economy is producing at a point inside the production possibilities frontier

Human capital can be increased through

education, on-the-job training, and work experience

The productive resource that organizes the labor, land, and capital is

entrepreneurship

Goods produced in the US and sold in other countries are called

exports

The US possesses a large amount of human capital. As a result of this fact, in the US there is a

highly skilled and educated labor force

Economic growth depends upon which of the following? i. improving the quality of labor ii. technological advancement iii. increasing the amount of capital

i, ii, and iii

Which of the following is an assumption used when drawing a production possibilities frontier? i. Human wants and desires are limited to what is available ii. Only two goods are considered iii. The level of technology is fixed and unchanging.

ii and iii

As an economy grows

its PPF shifts outward

If a nation devotes a larger share of its current production to consumption goods, then

its economic growth will slow down

Which of the following is an example of capital (factor of production)? i. $1,000 in money ii. 100 shares of Microsoft stock iii. $10,000 in bonds issued by General Motors iv. A drill press in you local machine shop

iv

Dividing the nation's income among the four factors of production, the largest percentage is paid to

labor

In the US, the productive factor that, as a group, receives the largest fraction of the nation's total income was

labor

Which factor of production does human capital enhance? i. land ii. labor iii. capital

labor

Wages are paid to _____ and interest is paid to _____.

labor, capital

The productive resource that includes all the "gifts of nature" is called

land

What are the four factors of production?

land, labor, capital, and entrepreneurship

Scarcity means we

make choices

A positive statement

makes a statement about how the world operates and can be tested against the facts

A positive statement

might be right or wrong

When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods

must decrease

Macroeconomics is the study of

national or global economies

If a society moves from a period of time with significant unemployment to a time with full employment, its production possibilities frontier will

not change

If an economy cannot produce more of one good without producing less of another good, this implies that which of the following has been achieved?

production efficiency

Factors of production are the

productive resources used to produce goods and services

The income earned by entrepreneurs is

profit or loss

Payments to the four factors of production are

rent, wages, interest, and profit or loss

A reason the production possibilities exists is

scarcity of resources

A production possibilities frontier shows

the attainable and unattainable points for an economy

An opportunity cost is

the benefits of the highest-valued alternative forgone.

The opportunity cost of economic growth is

the decrease in the current production of consumption goods

Entrepreneurship (factor of production) refers to

the human resource that organizes labor, land, and capital

In a production possibilities frontier diagram, the attainable productions points are shown as

the points inside and on the production possibilities frontier

The concept of human capital describes

the quality of labor

Capital, as a factor of production, refers to

the tools and instruments used to produce other goods and services

The majority of the income earned in the US is paid in

wages