Macroeconomics Test One
The multiple choice questions, each worth 2 points For each question,circle the best answer.
- 1.
The study of economics is primarily concerned with:
- A.
Keeping private businesses from losing money.
- B.
Keeping economics professors from starving to death.
- C.
Choices that are made in seeking to use scarce resources efficiently.
- D.
Determining the most equitable (fair) distribution of the government's money.
Correct Answer
C. Choices that are made in seeking to use scarce resources efficiently. -
- 2.
Even though the Orlando Sentinel is inexpensive, people rarely buy more than one of them each day.
- A.
Is an example of irrational behavior.
- B.
Implies that reading should be taught through phonics rather than the whole language method.
- C.
Contradicts the economic perspective.
- D.
Implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.
Correct Answer
D. Implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost. -
- 3.
The basic purpose of the "other things equal" (ceteris paribus) assumption is to:
- A.
Allow one to reason about the relationship between price and quantity of X without the intrusion of a change in the price of Z.
- B.
Allow one to focus upon micro variables by ignoring macro variables.
- C.
Allow one to focus upon macro variables by ignoring micro variables.
- D.
Allow one to reason about the relationship between revenues and expenses of a business.
Correct Answer
A. Allow one to reason about the relationship between price and quantity of X without the intrusion of a change in the price of Z. -
- 4.
Which of the following is a microeconomic statement?
- A.
The real U.S. output increased by 2.5 percent last year.
- B.
Unemployment was 6.8 percent of the U.S. labor force last year.
- C.
The price of personal computers declined last year.
- D.
The general price level (inflation) increased by 4 percent last year.
Correct Answer
C. The price of personal computers declined last year. -
- 5.
The problems of aggregate (at the national level) inflation and unemployment are:
- A.
Major topics of macroeconomics.
- B.
Not relevant to the U.S. economy
- C.
Major topics of microeconomics.
- D.
Peculiar to socialistic economies.
Correct Answer
A. Major topics of macroeconomics. -
- 6.
"If you leave a football game at the end of the third quarter, you will avoid traffic and get home more quickly. Therefore, everyone should leave the game early." This illustrates the:
- A.
"sore loser syndrome" (loser doesn't want to see the end of the game when his team is losing.)
- B.
Adverse selection problem.
- C.
Fallacy of division.
- D.
Fallacy of composition.
Correct Answer
D. Fallacy of composition. -
- 7.
If we say that two variables are inversely related, this means that:
- A.
The two graph as an upsloping line.
- B.
An increase in one variable is associated with a decrease in the other.
- C.
An increase in one variable is associated with an increase in the other.
- D.
The resulting relationship can be portrayed by a straight line parallel to the horizontal axis.
Correct Answer
B. An increase in one variable is associated with a decrease in the other. -
- 8.
The fundamental problem of economics is:
- A.
To establish a democratic political framework for the smooth operation of the government.
- B.
The establishment of prices that reflect the relative scarcities of products and resources.
- C.
Dealing with the scarcity of productive resources relative to an unlimited number of economic wants.
- D.
What do I do to get out of poverty?
Correct Answer
C. Dealing with the scarcity of productive resources relative to an unlimited number of economic wants. -
- 9.
Which of the following is real capital (as we define it in economics)?
- A.
A pair of stockings
- B.
A construction crane
- C.
A savings account
- D.
A share of IBM stock
Correct Answer
B. A construction crane -
- 10.
Economics can best be defined as the study of:
- A.
How to profitably invest one's income in stocks and bonds.
- B.
How to use scarce productive resources efficiently.
- C.
How government policies affect businesses and labor.
- D.
Managing business enterprises for profit.
Correct Answer
B. How to use scarce productive resources efficiently. -
- 11.
A production possibilities curve shows:
- A.
That resources are unlimited.
- B.
That people prefer one of the goods more than the other.
- C.
The maximum amounts of two goods that can be produced assuming the full and efficient use of available resources.
- D.
Combinations of labor only necessary to produce specific levels of output.
Correct Answer
C. The maximum amounts of two goods that can be produced assuming the full and efficient use of available resources. -
- 12.
Opportunity cost is best defined as:
- A.
The monetary price of any productive resource.
- B.
The amount of labor that must be used to produce one unit of any product.
- C.
The ratio of the prices of imported goods to the prices of exported goods.
- D.
The amount of one product that must be given up to produce one more unit of another product.
Correct Answer
D. The amount of one product that must be given up to produce one more unit of another product. -
- 13.
"Allocative efficiency" refers to:
- A.
The use of the least-cost method of production.
- B.
The production of the product-mix most wanted by society.
- C.
The full employment of all available resources.
- D.
Production at some point inside of the production possibilities curve.
Correct Answer
B. The production of the product-mix most wanted by society. -
- 14.
A demand curve:
- A.
Shows the relationship between price and quantity supplied.
- B.
Indicates the quantity demanded at each price in a series of prices.
- C.
Graphs as an upsloping line.
- D.
Shows the relationship between income and spending.
Correct Answer
B. Indicates the quantity demanded at each price in a series of prices. -
- 15.
If two goods are complements (like pepperoni pizza and coke):
- A.
They are consumed independently.
- B.
An increase in the price of one will increase the demand for the other.
- C.
A decrease in the price of one will increase the demand for the other.
- D.
They are necessarily inferior goods.
Correct Answer
C. A decrease in the price of one will increase the demand for the other. -
- 16.
If the demand curve for product B shifts to the right as the price of product A declines, then:
- A.
A and B are substitute goods.
- B.
A is a normal good and B is an inferior good.
- C.
A is an inferior good and B is a normal good.
- D.
A and B are complementary goods.
Correct Answer
D. A and B are complementary goods. -
- 17.
An increase in consumer incomes (like when one wins the big Fantasy Five prize) will:
- A.
Increase the demand for an inferior good.
- B.
Increase the demand for an inferior good.
- C.
Increase the demand for a normal good.
- D.
Decrease the supply of a normal good.
Correct Answer
C. Increase the demand for a normal good. -
- 18.
The law of supply:
- A.
Reflects the amounts that producers will want to offer at each price in a series of prices.
- B.
Is reflected in a downsloping supply curve.
- C.
Was enacted by Congress to force businesses to produce goods that society wants.
- D.
Reflects the income and substitution effects of a price change.
Correct Answer
A. Reflects the amounts that producers will want to offer at each price in a series of prices. -
- 19.
At the equilibrium price:
- A.
Quantity supplied may exceed quantity demanded or vice versa.
- B.
There are no pressures on price to either rise or fall.
- C.
There are forces that cause price to rise.
- D.
There are forces that cause price to fall.
Correct Answer
B. There are no pressures on price to either rise or fall. -
- 20.
One can say with certainty that equilibrium quantity of enchiladas bought and sold will increase when:
- A.
Supply and demand both decrease.
- B.
Supply increases and demand decreases.
- C.
The price of the salsa to go with them will go up.
- D.
Supply and demand both increase
Correct Answer
D. Supply and demand both increase -
- 21.
"The 'dollar votes' of consumers ultimately determine the composition of output and the allocation of resources in a market economy." This statement best describes the concept of:
- A.
Political demand.
- B.
Consumer sovereignty.
- C.
"supply creates its own demand."
- D.
Market failure.
Correct Answer
B. Consumer sovereignty. -
- 22.
The "invisible hand" refers to the:
- A.
Fact that the U.S. tax system redistributes income from rich to poor.
- B.
Notion that, under competition, buying and selling decisions motivated by self-interest promote the social interest.
- C.
Tendency of monopolistic sellers to raise prices above competitive levels.
- D.
Hands of shoplifters caught "red-handed" by video cameras at stores such as Wal-Mart.
Correct Answer
B. Notion that, under competition, buying and selling decisions motivated by self-interest promote the social interest. -
- 23.
The personal distribution of income in the United States is such that the richest fifth receives about _____ percent of total personal income.
- A.
5
- B.
30
- C.
50
- D.
95
Correct Answer
C. 50 -
- 24.
The concept of price elasticity of demand measures:
- A.
The number of sellers in a market.
- B.
The number of buyers in a market.
- C.
The extent to which the demand curve shifts as the result of a price decline.
- D.
The sensitivity of consumers to price changes.
Correct Answer
D. The sensitivity of consumers to price changes. -
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