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Macroeconomics chapters 1-9

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quiz on macroeconomics from the textbook "Macroeconoics:priciples, problems, and policies." 19th edition by McConnell, Brue, and Flynn. Chapters 1-9
Jess Todd
Quiz by Jess Todd, updated more than 1 year ago
Jess Todd
Created by Jess Todd over 9 years ago
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Resource summary

Question 1

Question
Economics is a social science concerned with:
Answer
  • the best use of scarce resources to achieve the maximum satisfaction of economic wants
  • increasing the level of productive resources so there is a minimum level of income
  • increasing the level of productive resources so there is a maximum output in society
  • the best use of scarce resources paid for at the minimum level of cost to consumers and businesses

Question 2

Question
a person should consume more of something when its marginal:
Answer
  • Benefit exceeds is marginal cost
  • cost exceeds its marginal benefit
  • cost equals its marginal benefit
  • benefit is still positive

Question 3

Question
the process of developing hypotheses, testing them against facts, and using the result to construct theories is called:
Answer
  • opportunity cost calculation
  • microeconomics
  • marginal analysis
  • the scientific method

Question 4

Question
which is an illustration of a microeconomic question?
Answer
  • what is the current national rate of unemployment?
  • is the economy experiencing a decline in the rate of inflation?
  • will a new type of television set increase the number of buyers?
  • is the production of goods and services in the economy greater this year than last year?

Question 5

Question
A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is:
Answer
  • a tradeoff
  • a budget line
  • a tangent point
  • an optimal output

Question 6

Question
which of the following is real capital?
Answer
  • a pair of stockings
  • a construction crane
  • a savings account
  • a share of IBM stock

Question 7

Question
a point inside a production possibilities curve best illustrates:
Answer
  • unemployment
  • the efficient use of resources
  • the use of best-available technology
  • unlimited wants

Question 8

Question
A normative statement is one that:
Answer
  • is based on the law of averages
  • applies only to microeconomics
  • applies only to macroeconomics
  • is based on value judgments.

Question 9

Question
the problems of aggregate inflation and unemployment are:
Answer
  • major topics of macroeconomics
  • not relevant to the u.s. economy
  • major topics of microeconomics.
  • peculiar to command economics

Question 10

Question
On a production possibilities curve, the single optimal or best combination of output for any society:
Answer
  • is at a point near the top of the curve
  • is at the precise midpoint of the curve
  • is at a point near the bottom of the curve
  • depends upon the preferences of society

Question 11

Question
which statement best describes a command economy
Answer
  • the production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by the government.
  • the production of goods and services is determined primarily by government, but the allocation of goods and services is determined by markets.
  • the production and allocation of goods and services is determined primarily through markets.
  • the production and allocation of goods and services is determined primarily through government.

Question 12

Question
which statement is correct?
Answer
  • Freedom of choice and enterprise are essential elements of the market system
  • producers are "kings" in a market economy because they determine what is produced.
  • the market system is efficient at allocation of resources, but not consumer goods to their most valued uses.
  • the operation of a market system eventually results in an equal distribution of income.

Question 13

Question
In a competitive economy, prices:
Answer
  • influence consumers in their purchases of goods and services.
  • influence businesses in their purchases of economic resources.
  • influence workers in making occupational choices.
  • do all of these.

Question 14

Question
the competitive market system:
Answer
  • encourages innovation because government provides tax breaks and subsidies to those who develop new products or new productive techniques.
  • discourages innovation because it is difficult to acquire additional capital in the form of new machinery and equipment.
  • discourages innovation because firms want to get all the profits possible from existing machinery and equipment.
  • encourages innovation because successful innovators are rewarded with economic profits.

Question 15

Question
which is not one of the Five Fundamental Questions?
Answer
  • how will the goods and services be produced?
  • how should the system accommodate change?
  • who is to receive the output of the system?
  • what goods and services should be produced by government?

Question 16

Question
The idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of:
Answer
  • the guiding function of prices
  • Capital accumulation
  • the "Invisible hand"
  • "Dollar votes"

Question 17

Question
which of the following is a limitation of the simple circular flow model?
Answer
  • product markets are ignored.
  • resource markets are ignored.
  • the determination of product and resource prices is not explained.
  • households are included, but not businesses.

Question 18

Question
households and businesses are:
Answer
  • both buyers in the resource market.
  • both sellers in the product market.
  • sellers in the resource and product markets respectively.
  • sellers in the product and resource markets respectively.

Question 19

Question
The influential book written by Adam Smith was:
Answer
  • The Worldly Philosophers
  • The Wealth of Nations
  • The Age of the Economist
  • The Affluent Society

Question 20

Question
the circular flow model:
Answer
  • assumes that central planning is taking place
  • illustrates how natural resources are created
  • illustrates how money is created by the banking system
  • illustrates the interdependence of businesses and consumers

Question 21

Question
the law of demand is illustrated by a demand curve that is:
Answer
  • vertical
  • horizontal
  • upward sloping
  • downward sloping

Question 22

Question
which would cause a decrease in the quantity of computers supplied?
Answer
  • An increase in the demand for computers
  • a decrease in the demand for computers
  • an increase in the incomes of consumers
  • a decrease in the price of parts for making computers

Question 23

Question
when the price of oil declines significantly, the price of gasoline also declines. the latter occurs because of a(n):
Answer
  • increase in the demand for gasoline
  • decrease in the demand for gasoline
  • increase in the supply of gasoline
  • decrease in the supply of gasoline

Question 24

Question
a schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called:
Answer
  • Quantity supplied
  • Quantity demanded
  • Supply
  • Demand

Question 25

Question
if the quantity supplied of a product is less than the quantity demanded then:
Answer
  • there is a shortage of the product
  • there is a surplus of the product
  • the product is a normal good
  • the product is an inferior good

Question 26

Question
if the market price is above the equilibrium price:
Answer
  • a shortage will occur and producers will produce more and lower prices
  • a surplus will occur and producers will produce less and lower prices
  • a surplus will result and consumers will bid prices up
  • producers make extremely high profits

Question 27

Question
a competitive market will:
Answer
  • achieve an equilibrium price.
  • produce shortages
  • produce surpluses
  • create disorder

Question 28

Question
a product market is in equilibrium:
Answer
  • when there is no surplus or the product
  • when there is no shortage of the product
  • when consumers want to buy more of the product than producers offer for sale
  • where the demand and supply curves intersect

Question 29

Question
a headline reads "storms destroy half of the lettuce crop." this situation would lead to a(n):
Answer
  • increase in the price of lettuce and quantity purchased
  • decrease in the price of lettuce and quantity purchased
  • increase in the price of lettuce and decrease in the quantity purchased
  • decrease in the prices of lettuce and increase in the quantity purchased

Question 30

Question
government-set price floors and price ceilings:
Answer
  • Do not affect the rationing function of price in a free market
  • interfere with the rationing function of price in a free market
  • result in surpluses of products in markets where they are used
  • result in shortages of products in markets where they are used

Question 31

Question
a perfectly inelastic demand schedule:
Answer
  • rises upward and to the right, but has a constant slope
  • can be represented by a line parallel to the vertical axis
  • cannot be shown on a two-dimensional graph.
  • Can be represented by a line parallel to the horizontal axis.

Question 32

Question
when the percentage change in price is greater than the resulting percentage change in quantity demanded:
Answer
  • a decrease in price will increase total revenue.
  • demand may either be elastic or inelastic.
  • an increase in price will increase total revenue
  • demand is elastic

Question 33

Question
demand is said to be inelastic when:
Answer
  • an increase in price results in a reduction in total revenue
  • a reduction in price results in an increase in total revenue
  • a reduction in price results in a decrease in total revenue
  • the elasticity coefficient exceeds one

Question 34

Question
in which of the following instances will total revenue decline?
Answer
  • price rises and supply is elastic
  • price falls and demand is elastic
  • price rises and demand is inelastic
  • price rises and demand is elastic

Question 35

Question
the main determinant of elasticity of supply is the:
Answer
  • number of close substitutes for the product available to consumers
  • amount of time the producer has to adjust inputs in response to a price change
  • urgency of consumer wants for the product
  • number of uses for the product

Question 36

Question
price elasticity of supply is:
Answer
  • positive in the short run but negative in the long run
  • greater in the long run than in the short run
  • greater in the short run than in the long run
  • independent of time

Question 37

Question
Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:
Answer
  • the price of some other product
  • the price of that same product
  • income
  • the general price level

Question 38

Question
a remote island nation is discovered, and on this island the cross elasticity of demand for coconut milk and fruit punch is 1.0 this indicates that these two goods are:
Answer
  • normal
  • inferior
  • complements
  • substitutes

Question 39

Question
consumer surplus arises in a market because:
Answer
  • at the market price, quantity supplied is greater than quantity demanded
  • at the current market price, quantity demanded is greater than quantity supplied
  • some consumers are willing to pay more than the equilibrium price but do not need to do so
  • some consumers are willing to pay less than the equilibrium price but do not need to do so

Question 40

Question
negative externalities arise:
Answer
  • when firms pay more than the opportunity cost of resources
  • when the demand curve for a product is located too far to the left
  • when firms "use" resources without being compelled to pay for their full costs
  • only in capitalistic societies

Question 41

Question
rivalry and excludability are the main characteristics of:
Answer
  • capital goods
  • private goods
  • public goods
  • consumption goods

Question 42

Question
the market system does not produce public goods because:
Answer
  • there is no need or demand for such goods.
  • private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them
  • public enterprises can produce such goods at a lower cost than can private enterprises.
  • their production seriously distorts the distribution of income

Question 43

Question
a demand curve for a public good is determined by:
Answer
  • summing vertically the individual demand curves for the public good
  • summing horizontally the individual demand curves for the public good
  • combining the amounts of the public good that the individual members of society demand at each price
  • multiplying the per-unit cost of the public good by the quantity made available

Question 44

Question
cost-benefit analysis attempts to:
Answer
  • compare the real worth, rather than the market values, of various goods and services.
  • compare the relative desirability of alternative distributions of income
  • determine whether it is better to cut government expenditures or reduce taxes
  • compare the benefits and costs associated with any economic project or activity

Question 45

Question
at the optimal quantity of a public good:
Answer
  • Marginal benefit exceeds marginal cost by the greatest amount
  • total benefit equals total cost
  • marginal benefit equals marginal cost
  • marginal benefit is zero

Question 46

Question
an important problem in evaluating public projects through the use of cost-benefit analysis is that:
Answer
  • real costs cannot be stated in monetary terms.
  • one must decide whether to compare total costs and total benefits or marginal costs and marginal benefits.
  • positive and negative externalities associated with such projects may be difficult to measure.
  • the funding of such projects is inherently inflationary.

Question 47

Question
from the economist's perspective, "market failures" basically arise when:
Answer
  • the quantity demanded for a good or service is greater than the quantity supplied of the good or service
  • the quantity supplied of a good or service is greater than the quantity supplied of the good or service
  • demand and supply do not accurately reflect all the benefits and all the costs of production
  • the market system is unable to adapt to or to accommodate change

Question 48

Question
when production of a product creates external costs greater than external benefits, a market economy will:
Answer
  • not produce the product without government intervention
  • produce a socially optimal allocation of resources
  • allocate too few resources to production of the product
  • allocate too many resources to production of the product

Question 49

Question
Real gross domestic product...
Answer
  • is a measure of inflation
  • will increase if there is an increase in the price level
  • will increase if there is an increase in the level of output
  • can change from one year to the next even if there is no change in output

Question 50

Question
suppose that real GDP increases by 5% while the population of a country increases by 7%. then...
Answer
  • output per person necessarily increases
  • output per person necessarily decreases
  • output per person necessarily remains unchanged
  • there is not enough information to determine what happens to output per person

Question 51

Question
which of the following is the best example of financial investment?
Answer
  • Ford Motor Co. builds a new manufacturing plant
  • a student pursues an MBA degree
  • a retiree purchases Google stock
  • a young couple purchases a new home

Question 52

Question
in economics, the word "shocks" refers to...
Answer
  • situations where firms' expectations are unmet
  • any changes in the demand for goods and services
  • any changes in the supply of goods and services
  • a decrease in real GDP

Question 53

Question
higher oil prices are most likely to lead to...
Answer
  • a negative demand shock
  • a positive demand shock
  • a negative supply shock
  • a positive supply shock

Question 54

Question
the business cycle depicts:
Answer
  • fluctuations in the general price level
  • the phases a business goes through from when it first opens to when it finally closes
  • the evolution of technology over time
  • short run fluctuations in output and employment

Question 55

Question
which of the following statements is most accurate about advanced economies?
Answer
  • economies experience a positive growth trend over the short run, but experience significant variability in the long run.
  • economies experience a positive growth trend over the long run, but experience significant variability in the short run.
  • economies experience positive and stable growth over both the long run and short run
  • economies experience little long-run growth in output, but can experience significant growth in the short run.

Question 56

Question
before the period of modern economic growth:
Answer
  • only civilizations such as the roman empire experienced economic growth
  • rates of population growth virtually matched rates of output growth
  • most economies realized high rates of growth in output per person
  • output and population growth were stagnant.

Question 57

Question
what is the difference between financial investment and economic investment?
Answer
  • there is no difference between the two.
  • financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods.
  • economic investment is adjusted for inflation; financial investment is not.
  • financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

Question 58

Question
if an economy wants to increase its current level of investment, it must:
Answer
  • sacrifice future consumption
  • print more money
  • offer more stocks and bonds to financial investors
  • sacrifice current consumption.

Question 59

Question
suppose the total monetary value of all final goods and services produced in a particular country in 2008 is $500 billion and the total monetary value of final goods and services sold is $450 billion. we can conclude that:
Answer
  • GDP in 2008 is $450 billion
  • NDP in 2008 is $450 billion
  • GDP in 2008 is $500 billion
  • inventories in 2008 fell by $50 billion

Question 60

Question
if depreciation (consumption of fixed capital) exceeds domestic investment, we can conclude that:
Answer
  • nominal GDP is rising, but real GDP is declining
  • net investment is negative
  • the economy is importing more than it exports
  • the economy's production capacity is expanding

Question 61

Question
Real GDP measures:
Answer
  • current output at current prices
  • current output at base year prices
  • base year output at current prices
  • base year output at current exchange rates

Question 62

Question
Real GDP and nominal GDP differ because the real GDP:
Answer
  • is adjusted for changes in the volume of intermediate transactions.
  • includes the economic effects of international trade
  • has been adjusted for the changes in the price level
  • excludes depreciation charges

Question 63

Question
the GDP tends to:
Answer
  • overstate economic welfare because it does not include certain non-market activities such as the productive work of housewives
  • understate economic welfare because it includes expenditures undertaken to offset or correct pollution.
  • understate economic welfare because it does not take into account increases in leisure.
  • overstate economic welfare because it does not reflect improvements in product quality.

Question 64

Question
the monetary value of all final goods and services produced by the united states economy during a year is:
Answer
  • NDP
  • GDP
  • NI
  • DI

Question 65

Question
which would be considered an investment according to economists?
Answer
  • the purchase of newly-issued shares of stock in Microsoft
  • the construction of a new computer chip factory by Intel
  • the purchase of shares of stock by Fidelity, a mutual fund company
  • the sale of government bonds by the nation's central bank

Question 66

Question
consumer price index attempts to measure changes in:
Answer
  • the price of all goods and services produced by the U.S. economy
  • the price of a select market basket of goods and services
  • the spending patterns of all consumers in the United States
  • the spending patterns of consumers worldwide

Question 67

Question
which is a demand factor in economic growth?
Answer
  • more human and natural resources
  • technological progress and innovation
  • an increase in the economy's stock of capital goods
  • an increase in total spending in the economy

Question 68

Question
the entry of women into the workforce since the 1960's resulted in:
Answer
  • a shift outward in the production possibilities curve or the united states
  • a shift inward in the production possibilities curve of the unites states
  • a movement along the existing production possibilities curve in the united states
  • a falling real wage for women workers of the united states

Question 69

Question
a decline in a nation's rate of productivity growth will:
Answer
  • reduce the inflation rate
  • increase education and training
  • slow the growth of the standard of living
  • make industry more competitive in world markets

Question 70

Question
which is best considered a supply factor for long-run economic growth?
Answer
  • government spending
  • the stock of capital goods
  • full employment of resources
  • personal consumption expenditures

Question 71

Question
Real GDP per capita:
Answer
  • cannot grow more rapidly than real GDP
  • cannot grow more slowly than real GDP
  • necessarily grows more rapidly than real GDP
  • can grow either more slowly or more rapidly than real GDP

Question 72

Question
growth is advantageous to a nation because it:
Answer
  • promotes faster population growth
  • lessens the burden of scarcity
  • eliminates the economizing problem
  • slows the growth of wants

Question 73

Question
increases in the value of a product to each user, including existing users, as the total number of users rises are called:
Answer
  • information cascades
  • learning effects
  • network effects
  • scale economies

Question 74

Question
economists who believe that the recent increase in the average productivity growth rate may be permanent claim that the above-normal economic growth in the united states between 1995 and 2009 was caused by:
Answer
  • increases in the rate of personal saving
  • increased entrepreneurial activity, application of information technology, and global competition.
  • rising Federal budget surpluses that reduced real interest rates
  • expansionary monetary policy.

Question 75

Question
critics of economic growth:
Answer
  • contend that growth and industrialization reduce pollution
  • argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth
  • point out that growth results in greater economic security for workers
  • say that its benefits accrue nearly exclusively to white males

Question 76

Question
the rate of unemployment when the economy is at its potential output is called the:
Answer
  • full employment rate of unemployment
  • natural rate of unemployment
  • structural rate of unemployment
  • frictional rate of unemployment

Question 77

Question
Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:
Answer
  • cyclical
  • frictional
  • structural
  • natural

Question 78

Question
the industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are:
Answer
  • military goods and capital goods
  • services and non-durable consumer goods
  • clothing and education
  • capital goods and durable consumer goods

Question 79

Question
in which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
Answer
  • expansion
  • recession
  • peak
  • trough

Question 80

Question
during periods of full employment the:
Answer
  • burden of unemployment is quite evenly distributed among males and females, african-americans and whites, and young and old workers.
  • unemployment rate for teenagers is below the rate for the labor force as a whole
  • unemployment rate for women is considerably lower than that for men
  • unemployment rate for african-americans is about twice the rate for whites

Question 81

Question
a college graduate using the summer following graduation to search for a job would best be classified as:
Answer
  • not officially a member of the labor forces
  • a part of structural unemployment
  • a part of cyclical unemployment
  • a part of frictional unemployment
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