Macroeconomics Test One
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The multiple choice questions, each worth 2 points For each question, circle the best answer.
- 1.
- 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.
- 2.
- 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.
- 3.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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?
- 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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 16.
- 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.
- 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.
- 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.
- 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.
- 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
- 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.
- 22.
- 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.
- 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
- 24.
- 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.
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