Macro Practice Test 1

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| Attempts: 334

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61) Which of the following would be an example of a pair of complements? A) gasoline and automobiles B) apples and bananas C) cooking oil and golf balls D) shoes and sandals.
- A
- B
- C
- D

About This Quiz

Macro Practice Test 1 assesses understanding of basic economic concepts such as scarcity, market operations, and rational behavior. It explores how individuals and markets respond to various economic incentives and constraints.

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2.

1) Scarcity
- A) is found only in developing nations.
- B) occurs because there are too many people.
- C) occurs because of unlimited wants and limited resources available to fulfill these wants.
- D) is not a problem for the wealthy.
Correct Answer

A. C) occurs because of unlimited wants and limited resources available to fulfill these wants.

Explanation

Scarcity occurs because of unlimited wants and limited resources available to fulfill these wants. This means that there is a mismatch between the desires and needs of individuals and the resources available to satisfy them. It is not limited to developing nations or caused by the number of people. Even the wealthy can experience scarcity because their wants and desires are also unlimited, and there are always limitations on the resources available to fulfill them.

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3.

62) Which of the following would be an example of substitute goods? A) computers and printers B) gasoline and automobiles C) automobiles and motorcycles D) cooking oil and golf balls
- A
- B
- C
- D
Correct Answer

A. C

Explanation

Automobiles and motorcycles would be an example of substitute goods because they serve a similar purpose and can be used interchangeably. If the price of automobiles increases, consumers may choose to purchase motorcycles instead as a substitute. Similarly, if the price of motorcycles increases, consumers may choose to purchase automobiles instead.

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4.

104) What is globalization? A) An effort to produce economic growth by high tariffs. B) A process of encouraging nations to become more open to foreign trade and investment. C) Move to unify the world under a single government. D) None of these accurately define globalization.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

Globalization is the process of encouraging nations to become more open to foreign trade and investment. It involves promoting economic integration and interdependence among countries, allowing for the free flow of goods, services, capital, and ideas across borders. This can lead to increased economic growth, cultural exchange, and technological advancement. The other options, such as high tariffs or unifying the world under a single government, do not accurately define globalization.

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5.

128) The underground or informal economy can be described as A) production of infrastructure that spurs growth in the rest of the economy. B) economic activity that is hidden from the government to avoid taxes or because the activity is illegal. C) production of intermediate goods and services. D) economic production that includes mining.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

The correct answer is B) economic activity that is hidden from the government to avoid taxes or because the activity is illegal. This answer accurately describes the underground or informal economy, which consists of economic activities that are not reported to the government in order to evade taxes or because the activities are illegal. This can include activities such as undeclared work, smuggling, and black market transactions.

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6.

4) Where are buyers and sellers brought together? A) Only in cities, towns, and villages. B) A market, which can be a location or an electronic connection. C) A market, which has to be a physical location. D) Only in shopping malls.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

Buyers and sellers are brought together in a market, which can be either a physical location or an electronic connection. This means that they can meet in traditional markets in cities, towns, and villages, as well as in online marketplaces. The correct answer is B.

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7.

27) What points are unattainable on a production possibilities frontier? A) Points along the production possibilities frontier. B) Points outside the production possibilities frontier. C) Points within the production possibilities frontier. D) None of these sets of points on a production possibilities frontier.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

The correct answer is B) Points outside the production possibilities frontier. This means that any combination of goods or services that is not achievable given the current resources and technology is considered unattainable. The production possibilities frontier represents the maximum potential output of an economy, so any point beyond that frontier would require more resources or improved technology.

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8.

57) The income effect occurs when A) buyers buying more of a good because their real income has increased. B) buyers buy more of a relatively cheaper good when the price of a substitute rises. C) sellers hire more workers because buyers incomes have increased. D) sellers producing more output because their profit has increased.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

The income effect refers to the phenomenon where buyers increase their consumption of a good when their real income (purchasing power) increases. This means that as individuals have more money to spend, they are able to afford and purchase more of a particular good. This is different from the substitution effect, where buyers switch to a cheaper alternative when the price of a substitute rises. The other options, hiring more workers due to increased buyer incomes and producing more output due to increased profit, are not related to the income effect.

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9.

88) If a nation has an comparative advantage in producing a good or service, this means that A) using the same amount of resources, this nation can produce the good at a lower opportunity cost than any other nation. B) the nation is the only possible producer of the good in the world. C) the nation has a monopoly in the production of the good. D) using the same amount of resources, this nation can produce more of the good than any other nation.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

If a nation has a comparative advantage in producing a good or service, it means that using the same amount of resources, this nation can produce the good at a lower opportunity cost than any other nation. This means that the nation can produce the good more efficiently and effectively compared to other nations, allowing it to specialize in the production of that particular good or service. This can lead to increased productivity, economic growth, and trade advantages for the nation.

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10.

130) The unemployment rate is A) the percentage of the labor force that is employed. B) the percentage of the labor force that is unemployed. C) the percentage of the number employed that is unemployed. D) the percentage of the working age population that is employed. E) the percentage of the working age population that is unemployed.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

The correct answer is B) the percentage of the labor force that is unemployed. The unemployment rate is a measure of the proportion of the labor force that is actively seeking employment but unable to find a job. It does not include those who are not in the labor force, such as students, retirees, or stay-at-home parents. Therefore, option B accurately describes the unemployment rate as the percentage of the labor force that is unemployed.

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11.

29) Which of the following terms means the highest valued alternative given up when a person chooses to engage in an activity? A) opportunity cost B) accounting cost C) dollar cost D) none of these
- A
- B
- C
- D
Correct Answer

A. A

Explanation

The term that means the highest valued alternative given up when a person chooses to engage in an activity is "opportunity cost". This refers to the value of the next best alternative that is forgone when making a choice. It represents the potential benefits or profits that could have been obtained if a different decision had been made.

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12.

22) How can the influence of a third variable be shown on a two dimensional graph? A) By drawing a third axis coming out of the two axes. B) By allowing the position of the relationship line or curve to shift on the graph. C) It can't because the graph only has two dimensions. D) None of these.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

The influence of a third variable can be shown on a two dimensional graph by allowing the position of the relationship line or curve to shift on the graph. This means that as the third variable changes, the relationship between the two variables on the graph will also change, indicating the influence of the third variable. This allows for a visual representation of how the third variable affects the relationship between the two variables being plotted.

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13.

24) Why do people trade with each other instead of living on what they themselves produce? A) So you can take advantage of others and maybe get something for nothing. B) By engaging in trade people can raise their standard of living. C) To be able to amass large amounts of money like Scrooge. D) Because that is what everybody else does.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

Engaging in trade allows people to specialize in producing what they are most efficient at, while also being able to obtain goods and services that they cannot produce themselves. This leads to increased productivity and efficiency, ultimately raising the standard of living for individuals and society as a whole.

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14.

59) Which of the following means everything else held constant? A) carpe diem B) post hoc, proctor hoc C) ceterius paribus D) none of these
- A
- B
- C
- D
Correct Answer

A. C

Explanation

The correct answer is C) ceterius paribus. This Latin phrase means "all other things being equal" or "everything else held constant." It is often used in economics and other social sciences to isolate the effect of a specific variable by assuming that all other factors remain unchanged.

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15.

2) Economics is the study of
- A) supply and demand.
- B) how to make money in a market economy.
- C) the choices everybody makes to attain their goals, given their scarce resources.
- D) how to make money in the stock market.
Correct Answer

A. C) the choices everybody makes to attain their goals, given their scarce resources.

Explanation

Economics is the study of the choices that individuals, businesses, and governments make in order to achieve their goals, given the limited resources available to them. It involves analyzing how people allocate their resources, such as time, money, and labor, in order to maximize their satisfaction or utility. This includes studying topics such as supply and demand, market behavior, production, consumption, and distribution of goods and services. Therefore, option C accurately describes the scope and focus of economics.

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1
16.

19) Why are so many graphs used in economics? A) Complications can be more easily overcome by abstract simplifications made possible using graphs. B) All of these reasons are why so many graphs are used in economics. C) Graphs illustrate and simplify economic ideas. D) Graphs highlight key economic relationships.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

Graphs are used in economics for several reasons. They help to illustrate and simplify economic ideas, allowing for a clearer understanding of complex concepts. Graphs also highlight key economic relationships, making it easier to identify patterns and trends. Additionally, complications in economics can be more easily overcome by using abstract simplifications made possible through graphs. Therefore, all of these reasons contribute to why so many graphs are used in economics.

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17.

111) An example of final good would be A) a soy latte sold by Starbucks to a student. B) the coffee beans sold to Starbucks. C) the whipped cream sold to Starbucks. D) the soy milk sold to Starbucks.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

An example of a final good would be a soy latte sold by Starbucks to a student. This is because the soy latte is the end product that is directly consumed by the customer. The coffee beans, whipped cream, and soy milk are all intermediate goods that are used in the production process of the soy latte, but they are not the final product that is sold to the customer.

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18.

112) Home Depot sells new and used doors to contractors who build new homes.. Home Depot also sells new and used doors to homeowners. Which of the following would be counted in GDP? A) The sale of a new door to homeowner. B) The sale of a used door to TapKon construction for installation into a new home. C) The sale of a new door to TapKon construction for installation into a new home. D) The sale of a used door to a homeowner.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

The sale of a new door to a homeowner would be counted in GDP because it represents a transaction of a final good or service within the domestic economy.

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19.

132) The labor force participation rate is defined as A) the percentage of the working-age population in the labor force. B) the percentage of the working-age population that is employed. C) the percentage of the labor force that is employed. D) the percentage of the labor force that is unemployed. E) the percentage of the working-age population that is unemployed.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

The labor force participation rate is defined as the percentage of the working-age population in the labor force. This means it includes both employed and unemployed individuals who are actively seeking employment. Option A accurately describes this definition, making it the correct answer. Option B refers specifically to the employment rate, which only includes those who are employed. Option C refers to the employment-to-population ratio, which measures the percentage of the labor force that is employed. Option D refers to the unemployment rate, which measures the percentage of the labor force that is unemployed. Option E refers to the unemployment-to-population ratio, which measures the percentage of the working-age population that is unemployed.

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20.

9) What forces humans to make tradeoffs? A) productive inefficiency B) confusion C) scarcity D) more than one political party
- A
- B
- C
- D
Correct Answer

A. C

Explanation

Humans are forced to make tradeoffs because of scarcity. Scarcity refers to the limited availability of resources, such as time, money, and natural resources, in relation to the unlimited wants and needs of individuals and society. Due to this scarcity, individuals must make choices and tradeoffs in order to allocate their limited resources effectively. This means that when humans choose to prioritize one thing, they must give up or tradeoff other things.

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21.

131) A full time student who is not working is categorized as A) not in the labor force. B) a discouraged worker. C) frictionally unemployed. D) unemployed. E) employed.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

A full-time student who is not working is categorized as "not in the labor force" because they are not actively seeking employment or available for work. They are not considered unemployed because they are not actively looking for a job, and they are not considered employed because they are not currently working.

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22.

6) What does the adjective marginal mean in economics? A) Something done at the edge of a market, like buying a table at a garage sale. B) Buying something that is illegal to buy. C) Incremental, additional, or extra of some action. D) None of these illustrate how the word marginal is used in economics.
- A
- B
- C
- D
Correct Answer

A. C

Explanation

The adjective "marginal" in economics means incremental, additional, or extra of some action. It refers to the small changes or additions made to a certain activity or decision. This term is commonly used to analyze the effects of small changes in variables such as production, cost, or revenue on the overall economic outcome.

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23.

8) Every society faces economic tradeoffs, which means A) if one political party controls the government, the other party can't. B) some people live better than others do. C) producing less of one good means more of another good can be produced. D) none of these.
- A
- B
- C
- D
Correct Answer

A. C

Explanation

Every society faces economic tradeoffs, which means that producing less of one good means more of another good can be produced. This implies that resources are limited and choices have to be made on how to allocate them. By choosing to produce more of one good, society has to give up the production of another good. This concept of tradeoffs is fundamental to economics and highlights the need for efficient resource allocation.

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24.

17) Which of the following is a positive economic statement? A) If the price of gasoline rises, a smaller quantity of it will be bought. B) The government should close income tax loopholes. C) Everyone should live at the same standard of living. D) U.S. firms should not be allowed to practice outsourcing.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

The correct answer is A) If the price of gasoline rises, a smaller quantity of it will be bought. This statement is a positive economic statement because it describes a cause-and-effect relationship in the economy. It states that when the price of gasoline increases, the quantity demanded will decrease, which is a basic economic principle.

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25.

36) Without an increase in the supplies of factors of production, how can a nation grow economically? A) By lowering the price of factors of production. B) Through technological advance which enables more output with the same resource supplies. C) It cannot. D) By increasing the price of factors of production.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

Technological advance allows a nation to produce more output with the same amount of resources. This means that even without an increase in the supplies of factors of production, the nation can still grow economically by becoming more efficient and productive through the use of technology.

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26.

68) If the demand for a good increases when there is high unemployment, we can conclude that the commodity is A) an inferior good. B) a normal good. C) a good for which the law of demand does not apply. D) a luxury good.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

If the demand for a good increases when there is high unemployment, it suggests that the good is an inferior good. Inferior goods are those for which demand decreases when consumer income increases. In this case, the increase in demand during high unemployment suggests that people are likely purchasing this good because they can no longer afford more expensive alternatives.

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27.

76) At the market equilibrium, A) quantity supplied is greater than quantity demanded. B) quantity demanded is greater than quantity supplied. C) quantity demanded is equal to quantity supplied. D) none of these is correct.
- A
- B
- C
- D
Correct Answer

A. C

Explanation

At the market equilibrium, quantity demanded is equal to quantity supplied. This means that the quantity of a good or service that consumers are willing and able to buy is exactly equal to the quantity that producers are willing and able to sell. This balance is achieved when the market price reaches a point where both consumers and producers are satisfied with the quantity being exchanged.

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28.

93) What is outsourcing? A) Exporting a good or service to buyers in other countries. B) Foreign workers are hired by a domestic firm to produce something sold domestically. C) Importing a manufactured good made by a foreign firm. D) None of these correctly describes outsourcing.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

Outsourcing refers to the practice of hiring foreign workers by a domestic firm to produce goods or services that are then sold domestically. This involves delegating specific tasks or processes to external parties, often in countries where labor costs are lower. This allows companies to benefit from cost savings, access specialized skills, and focus on core competencies. Option B accurately describes outsourcing as it involves hiring foreign workers to produce something sold domestically.

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29.

12) Which of the following is a problem inherent in centrally planned economies? A) Production managers do not satisfy consumer wants but the government's orders. B) There are no problems, everyone including consumers are satisfied. C) Too much production of low-cost, high-quality goods and services. D) None of these describe the problem inherent in a centrally planned economy.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

In centrally planned economies, production managers prioritize fulfilling the government's orders rather than satisfying consumer wants. This can lead to a mismatch between what consumers actually need and what is being produced, resulting in goods and services that may not meet consumer demands or preferences.

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30.

20) Which of the following is correct? A) All of these are correct. B) A direct relationship has a positive slope value. C) An inverse relationship has a negative slope value. D) A curved line has slope values that change at every point.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

The correct answer is A) All of these are correct. This means that all of the statements given in options B, C, and D are true. A direct relationship does have a positive slope value, an inverse relationship does have a negative slope value, and a curved line does have slope values that change at every point. Therefore, option A is the correct answer because it encompasses all of the correct statements.

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31.

135) The short term unemployment arising from the process of matching workers with jobs is called A) unnatural unemployment. B) frictional unemployment. C) seasonal unemployment. D) cyclical unemployment. E) structural unemployment.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

Frictional unemployment refers to the temporary unemployment that occurs when individuals are in the process of transitioning between jobs. This can happen when someone voluntarily leaves their job to search for a new one or when someone is laid off and is actively seeking new employment. It is called "frictional" because it is a natural part of the job market and occurs due to the time it takes for individuals to find suitable job opportunities.

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32.

113) Which of the following transactions would be included in the official calculation of GDP? A) A student buys a used text book at the bookstore. B) You illegally download music off the Internet to put on your new iPod. C) You buy a new iPod. D) Firestone sells $2 million worth of tires to General Motors. E) You wash and wax your father's car as a favor to him.
- A
- B
- C
- D
Correct Answer

A. C
33.

14) What explains the efficiency of markets? A) They always result in equity. B) Markets promote equal standards of living. C) The government stays out. D) Markets promote competition and voluntary exchange.
- A
- B
- C
- D
Correct Answer

A. D

Explanation

The correct answer is D) Markets promote competition and voluntary exchange. This explanation suggests that the efficiency of markets is due to the fact that they encourage competition among businesses, which leads to innovation and lower prices for consumers. Additionally, markets allow for voluntary exchange, meaning that individuals are free to choose what they buy and sell, leading to a more efficient allocation of resources.

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34.

30) The production possibilities frontier model can be applied to which of the following? A) a firm B) the whole economy C) an individual D) all of these
- A
- B
- C
- D
Correct Answer

A. D

Explanation

The correct answer is D) all of these. The production possibilities frontier model can be applied to a firm, the whole economy, or an individual. This model illustrates the different combinations of goods and services that can be produced given the available resources and technology. It helps to analyze trade-offs and opportunity costs in production decisions. Therefore, it is applicable to all levels of economic analysis, from microeconomic decisions of a firm or individual to macroeconomic decisions of the whole economy.

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35.

90) If nation A can produce 20 units of good X and 16 of good Y while nation B can produce 18 units of X and 12 of Y, what is B's opportunity cost to produce a unit of X? A) 1.5 units of Y B) 0.666 of a unit of Y. C) 12 units of Y D) Impossible to determine without more information.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

The opportunity cost of producing a unit of X for nation B can be calculated by dividing the units of Y that nation B can produce by the units of X that nation B can produce. In this case, nation B can produce 12 units of Y and 18 units of X. Therefore, the opportunity cost of producing a unit of X for nation B is 0.666 of a unit of Y.

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36.

38) What is the reason people trade with each other? A) All of these reasons. B) By specializing in one activity our production increases. C) Specialization by individual people implies trade by everyone. D) People who specialize must trade with others for what they want to consume.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

People trade with each other for various reasons. By specializing in one activity, our production increases, which leads to economic growth. Specialization by individuals implies trade by everyone, as individuals cannot produce everything they need. People who specialize in certain goods or services must trade with others to obtain what they want to consume. Therefore, all of these reasons contribute to why people trade with each other.

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37.

58) If the price of a product increases from $12 to $15, which of the following will occur? A) Demand for the product will decrease. B) Quantity demanded for the product will increase. C) Quantity demanded for the product will decrease. D) Demand for the product will increase.
- A
- B
- C
- D
Correct Answer

A. C

Explanation

When the price of a product increases, it usually leads to a decrease in the quantity demanded for the product. This is because consumers are less willing to purchase the product at a higher price, resulting in a decrease in demand. Therefore, the correct answer is C) Quantity demanded for the product will decrease.

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38.

74) As more firms produce a product, which of the following happens? A) Production costs necessarily increase. B) A higher market price. C) An increase in market demand. D) Increased market supply.
- A
- B
- C
- D
Correct Answer

A. D

Explanation

As more firms produce a product, the market supply increases. This is because there are more producers adding their products to the market, leading to a higher quantity of goods available. Increased market supply can result in lower prices and more options for consumers.

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39.

85) Shortly after the price of beef increases, the price of chicken increases also because A) the goods are all complements and the higher price of beef increases demand for chicken. B) buyers are irrational. C) the goods are all substitutes and the higher price of beef increases demand for chicken. D) sellers are taking advantage of consumers.
- A
- B
- C
- D
Correct Answer

A. C

Explanation

The correct answer is C because beef and chicken are considered substitutes, meaning that they can be used interchangeably in a consumer's preferences. When the price of beef increases, consumers may choose to buy chicken instead, leading to an increase in demand and therefore an increase in price for chicken. This is a common phenomenon in the market when substitute goods are involved.

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40.

87) Which of the following is characteristic of international trade? A) It enables consumers to consume products that would be impossible to make at home. B) It is a two way street with imports from and exports to other countries. C) Lower priced competitive products can be imported. D) All of these are characteristic of international trade.
- A
- B
- C
- D
Correct Answer

A. D

Explanation

International trade is characterized by all of the options mentioned in the answer. It enables consumers to access products that cannot be produced domestically, it involves both imports and exports, and it allows for the importation of lower priced competitive products. Therefore, option D is the correct answer.

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41.

117) The largest component of spending in GDP is A) investment spending. B) government spending. C) consumption spending. D) net export spending.
- A
- B
- C
- D
Correct Answer

A. C

Explanation

Consumption spending refers to the expenditure made by individuals and households on goods and services. It includes purchases of durable goods (such as cars and appliances), non-durable goods (such as food and clothing), and services (such as healthcare and education). Since individuals and households make up a significant portion of the economy, their spending has a major impact on the overall GDP. Therefore, consumption spending is the largest component of spending in GDP.

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42.

129) The labor force is the sum of A) employed workers and unemployed workers. B) unemployed workers and the working age population. C) employed workers and discouraged workers. D) employed workers and and individuals not looking for work. E) employed workers and the working age population.
- A
- B
- C
- D
Correct Answer

A. A

Explanation

The labor force is defined as the total number of people who are either employed or actively looking for work. Option A correctly states that the labor force is the sum of employed workers (those who have a job) and unemployed workers (those who are actively seeking employment but currently do not have a job). Therefore, option A is the correct answer.

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43.

100) What does an import quota specify? A) Who is allowed to buy an imported good. B) The quality of an imported good. C) The tax on an imported good. D) The maximum number of units of a good that can be imported.
- A
- B
- C
- D
Correct Answer

A. D

Explanation

An import quota specifies the maximum number of units of a good that can be imported.

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44.

105) Why do many groups oppose globalization? A) To decrease foreign competition from producers with comparative advantages. B) Some oppose globalization because they think it tends to destroy distinctive cultures. C) Many believe that globalization favor the more developed nations as the expense of the less developed ones. D) All of these have been stated as reasons to oppose globalization.
- A
- B
- C
- D
Correct Answer

A. D

Explanation

Many groups oppose globalization for a variety of reasons. Some argue that it leads to increased foreign competition, which can be detrimental to domestic producers with comparative advantages. Others believe that globalization threatens the preservation of distinctive cultures. Additionally, many people argue that globalization disproportionately benefits more developed nations at the expense of less developed ones. Therefore, all of these reasons have been stated as arguments against globalization.

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45.

108) When firms buy or build facilities in foreign countries they are engaging in A) foreign direct investment B) international law breaking C) foreign portfolio investment D) none of these
- A
- B
- C
- D
Correct Answer

A. A

Explanation

When firms buy or build facilities in foreign countries, they are engaging in foreign direct investment. Foreign direct investment refers to the investment made by a company in a foreign country to establish a physical presence, such as a manufacturing plant or office, in order to control and manage operations directly. This allows the company to have greater control over its operations, access new markets, and take advantage of cost efficiencies or resources available in the foreign country. Foreign direct investment is different from foreign portfolio investment, which refers to investing in foreign financial assets like stocks or bonds.

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46.

114) Which of the following are not considered part of government purchases? A) a bridge purchased by the state government B) teacher's salaries paid by a local government C) a tank purchased by the federal government D) welfare benefits
- A
- B
- C
- D
Correct Answer

A. D

Explanation

Welfare benefits are not considered part of government purchases because they are not the acquisition of goods or services by the government. Government purchases refer to the spending on goods and services by the government, such as infrastructure projects (like a bridge), salaries for government employees (like teachers), and the purchase of military equipment (like a tank). Welfare benefits, on the other hand, are cash or in-kind transfers provided to individuals or families in need, which do not involve the acquisition of goods or services.

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47.

134) If the number employed is 190 million, the number unemployed is 10 million, and the working age population is 250 million, then the labor force participation rate is A) 60% B) 80% C) 4% D) 5.2% E) 76%
- A
- B
- C
- D
Correct Answer

A. B

Explanation

The labor force participation rate is calculated by dividing the number employed and unemployed by the working age population and multiplying by 100. In this case, the labor force participation rate is (190 million + 10 million) / 250 million * 100 = 80%. Therefore, the correct answer is B) 80%.

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48.

136) Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs (often due to technological change and/or globalization) is called A) cyclical unemployment. B) structural unemployment. C) frictional unemployment. D) unnatural unemployment. E) seasonal unemployment.
- A
- B
- C
- D
Correct Answer

A. B

Explanation

Structural unemployment refers to the unemployment that occurs when there is a mismatch between the skills and characteristics of workers and the requirements of available jobs. This type of unemployment is often caused by technological advancements or globalization, which can make certain skills obsolete or shift job opportunities to different regions. Therefore, option B is the correct answer.

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49.

7) What does marginal analysis involve? A) Comparing total costs to total benefits. B) Subtracting total costs from total benefits. C) Comparing average costs to average benefits. D) Comparing marginal costs to marginal benefits.
- A
- B
- C
- D
Correct Answer

A. D

Explanation

Marginal analysis involves comparing the additional or incremental costs and benefits associated with a decision or action. It focuses on the changes in costs and benefits rather than the total amounts. By comparing marginal costs to marginal benefits, individuals or businesses can make more informed decisions about whether the additional costs are worth the additional benefits gained. This approach allows for a more precise evaluation of the costs and benefits of different options and helps in optimizing decision-making.

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Macro Practice Test 1

61) Which of the following would be an example of a pair of complements? A) gasoline and automobiles B) apples and bananas C) cooking oil and golf balls D) shoes and sandals.

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1) Scarcity

62) Which of the following would be an example of substitute goods? A) computers and printers B) gasoline and automobiles C) automobiles and motorcycles D) cooking oil and golf balls

104) What is globalization? A) An effort to produce economic growth by high tariffs. B) A process of encouraging nations to become more open to foreign trade and investment. C) Move to unify the world under a single government. D) None of these accurately define globalization.

4) Where are buyers and sellers brought together? A) Only in cities, towns, and villages. B) A market, which can be a location or an electronic connection. C) A market, which has to be a physical location. D) Only in shopping malls.

29) Which of the following terms means the highest valued alternative given up when a person chooses to engage in an activity? A) opportunity cost B) accounting cost C) dollar cost D) none of these

22) How can the influence of a third variable be shown on a two dimensional graph? A) By drawing a third axis coming out of the two axes. B) By allowing the position of the relationship line or curve to shift on the graph. C) It can't because the graph only has two dimensions. D) None of these.

59) Which of the following means everything else held constant? A) carpe diem B) post hoc, proctor hoc C) ceterius paribus D) none of these

2) Economics is the study of

111) An example of final good would be A) a soy latte sold by Starbucks to a student. B) the coffee beans sold to Starbucks. C) the whipped cream sold to Starbucks. D) the soy milk sold to Starbucks.

9) What forces humans to make tradeoffs? A) productive inefficiency B) confusion C) scarcity D) more than one political party

131) A full time student who is not working is categorized as A) not in the labor force. B) a discouraged worker. C) frictionally unemployed. D) unemployed. E) employed.

8) Every society faces economic tradeoffs, which means A) if one political party controls the government, the other party can't. B) some people live better than others do. C) producing less of one good means more of another good can be produced. D) none of these.

68) If the demand for a good increases when there is high unemployment, we can conclude that the commodity is A) an inferior good. B) a normal good. C) a good for which the law of demand does not apply. D) a luxury good.

76) At the market equilibrium, A) quantity supplied is greater than quantity demanded. B) quantity demanded is greater than quantity supplied. C) quantity demanded is equal to quantity supplied. D) none of these is correct.

93) What is outsourcing? A) Exporting a good or service to buyers in other countries. B) Foreign workers are hired by a domestic firm to produce something sold domestically. C) Importing a manufactured good made by a foreign firm. D) None of these correctly describes outsourcing.

20) Which of the following is correct? A) All of these are correct. B) A direct relationship has a positive slope value. C) An inverse relationship has a negative slope value. D) A curved line has slope values that change at every point.

135) The short term unemployment arising from the process of matching workers with jobs is called A) unnatural unemployment. B) frictional unemployment. C) seasonal unemployment. D) cyclical unemployment. E) structural unemployment.

14) What explains the efficiency of markets? A) They always result in equity. B) Markets promote equal standards of living. C) The government stays out. D) Markets promote competition and voluntary exchange.

30) The production possibilities frontier model can be applied to which of the following? A) a firm B) the whole economy C) an individual D) all of these

90) If nation A can produce 20 units of good X and 16 of good Y while nation B can produce 18 units of X and 12 of Y, what is B's opportunity cost to produce a unit of X? A) 1.5 units of Y B) 0.666 of a unit of Y. C) 12 units of Y D) Impossible to determine without more information.

38) What is the reason people trade with each other? A) All of these reasons. B) By specializing in one activity our production increases. C) Specialization by individual people implies trade by everyone. D) People who specialize must trade with others for what they want to consume.

58) If the price of a product increases from $12 to $15, which of the following will occur? A) Demand for the product will decrease. B) Quantity demanded for the product will increase. C) Quantity demanded for the product will decrease. D) Demand for the product will increase.

74) As more firms produce a product, which of the following happens? A) Production costs necessarily increase. B) A higher market price. C) An increase in market demand. D) Increased market supply.

117) The largest component of spending in GDP is A) investment spending. B) government spending. C) consumption spending. D) net export spending.

129) The labor force is the sum of A) employed workers and unemployed workers. B) unemployed workers and the working age population. C) employed workers and discouraged workers. D) employed workers and and individuals not looking for work. E) employed workers and the working age population.

100) What does an import quota specify? A) Who is allowed to buy an imported good. B) The quality of an imported good. C) The tax on an imported good. D) The maximum number of units of a good that can be imported.

108) When firms buy or build facilities in foreign countries they are engaging in A) foreign direct investment B) international law breaking C) foreign portfolio investment D) none of these

114) Which of the following are not considered part of government purchases? A) a bridge purchased by the state government B) teacher's salaries paid by a local government C) a tank purchased by the federal government D) welfare benefits

134) If the number employed is 190 million, the number unemployed is 10 million, and the working age population is 250 million, then the labor force participation rate is A) 60% B) 80% C) 4% D) 5.2% E) 76%

7) What does marginal analysis involve? A) Comparing total costs to total benefits. B) Subtracting total costs from total benefits. C) Comparing average costs to average benefits. D) Comparing marginal costs to marginal benefits.