Chapter 1

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

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

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 behavior. 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

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

Which of the following best describes a monetary policy tool? A. Interest rates B. Taxes C. Household savings D. Government spending

A. Interest rates

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

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

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

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

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

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

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

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

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

_____________ - 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

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

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

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

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).

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