Macroeconomics System Quiz Questions

2.

The United States is best known as a

Command and control system
Mixed economic system
Pure price system
Dictatorship

Correct Answer

A. Mixed economic system

Explanation

A mixed economic system is a combination of both market and command economies, where the government and private individuals both play a role in determining economic decisions. In the United States, there is a mix of government intervention and free market principles. The government regulates certain industries and provides public goods and services, while private individuals and businesses have the freedom to engage in economic activities and make profit-driven decisions. This system allows for both competition and some level of government control, making it an accurate description of the United States' economic system.

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3.

Economists assume people behave

Rationally
Instinctively
Irrationally
Greedily

Correct Answer

A. Rationally

Explanation

Economists assume that people behave rationally because it is believed that individuals make decisions based on their own self-interests and try to maximize their utility. This assumption is based on the idea that individuals weigh the costs and benefits of different choices and make rational decisions to achieve their goals. It is also believed that individuals have access to all relevant information and possess the cognitive ability to process and analyze this information to make rational choices. This assumption of rational behavior forms the basis for many economic theories and models.

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4.

The author of the book The Wealth of Nations is:

Thorstein Velben
Milton Friedman
Alan Greenspan
Adam Smith

Correct Answer

A. Adam Smith

Explanation

Adam Smith is the correct answer because he is widely recognized as the author of the book "The Wealth of Nations." Published in 1776, this influential book laid the foundation for modern economics and advocated for free markets, division of labor, and the invisible hand theory. Smith's ideas have had a significant impact on economic theory and policy, making him one of the most important figures in the field of economics.

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5.

In order to study how changing price affects consumer decisions, we must assume all other factors, such as income and prices of other goods are constant. This assumption is best known as:

Ceteris paribus
Normative economics
Behavioral economics
Rationality

Correct Answer

A. Ceteris paribus

Explanation

Ceteris paribus is a Latin phrase that means "all other things being equal." In the context of this question, it refers to the assumption that all other factors, such as income and prices of other goods, remain constant when studying the effect of changing prices on consumer decisions. This assumption allows researchers to isolate and analyze the specific impact of price changes on consumer behavior without the interference of other variables.

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6.

Positive economics

Is objective
Was not used by nineteenth century economists
Is concerned with the economic policies that should be implented
Always gives an optimistic spin to economic news

Correct Answer

A. Is objective

Explanation

Positive economics is a branch of economics that focuses on objective analysis and the study of economic facts and phenomena. It aims to understand and explain economic behavior without making value judgments or recommendations. Unlike normative economics, which deals with subjective opinions and policy prescriptions, positive economics is concerned with describing and predicting economic phenomena based on empirical evidence and data. Therefore, the statement "is objective" is an accurate description of positive economics.

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7.

A fundamental principle in demand analysis is that a change in price leads to

A movement along the demand curve
A complementary movement on the supply curve
A rightward shift on the demand curve
A leftward shift on the demand curve

Correct Answer

A. A movement along the demand curve

Explanation

A change in price leads to a movement along the demand curve because the demand curve represents the relationship between price and quantity demanded. When the price changes, consumers will adjust their quantity demanded accordingly, resulting in a movement along the curve. This is because the law of demand states that as price increases, quantity demanded decreases, and vice versa. Therefore, a change in price will cause a movement along the demand curve rather than a shift in the curve itself.

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8.

Which of the following will cause a rightward shift of the demand curve?

A decrease in the price of the good
A decrease in the cost of production
An increase in the expected future price of the good
All of the above

Correct Answer

A. An increase in the expected future price of the good

Explanation

An increase in the expected future price of the good will cause a rightward shift of the demand curve. This is because consumers anticipate that the price of the good will be higher in the future, so they will demand more of it in the present to take advantage of the lower price. As a result, the demand curve will shift to the right, indicating a higher quantity demanded at each price level.

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9.

An increase in the number of consumers in a market would cause

An increase in supply
An increase in quantity supplied
An increase in quantity demanded
An increase in demand

Correct Answer

A. An increase in demand

Explanation

An increase in the number of consumers in a market would cause an increase in demand. This is because more consumers would be interested in purchasing the product or service, leading to a higher demand for it. As a result, businesses would need to produce and supply more of the product or service to meet the increased demand.

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10.

If the price of gasoline rises sharply and the demand for sports utility vehicles falls then the two goods are

Normal goods
Inferior goods
Substitutes
Complements

Correct Answer

A. Complements

Explanation

If the price of gasoline rises sharply, it becomes more expensive to fuel a sports utility vehicle (SUV). As a result, the demand for SUVs falls because consumers are less willing to pay the higher cost of fueling them. This indicates that the price of gasoline and the demand for SUVs are inversely related, meaning they are complements. When the price of one good (gasoline) increases, the demand for the other good (SUVs) decreases, showing that they are complements rather than substitutes, normal goods, or inferior goods.

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11.

A per-unit government subsidy to producers of a good tends to

Reduce the supply of the good
Not have any effect on the good's supply
Increase the supply of the good
Shift the supply curve to the left

Correct Answer

A. Increase the supply of the good

Explanation

A per-unit government subsidy to producers of a good tends to increase the supply of the good. This is because the subsidy acts as an incentive for producers to increase their production, as they will receive additional funds for each unit produced. As a result, the supply curve shifts to the right, indicating an increase in the quantity of the good supplied at each price level.

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12.

Suppose the price of cement goes up in the United States. What happens in the market for new homes

Supply shifts upward and to the left
Demand shifts to the right
Supply shifts downward and to the right
Demand shifts left

Correct Answer

A. Supply shifts upward and to the left

Explanation

When the price of cement goes up, it becomes more expensive for builders to produce new homes. This leads to a decrease in the supply of new homes, as builders are less willing and able to supply homes at the higher cost. As a result, the supply curve shifts upward and to the left.

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13.

With respect to the market clearing price and the equilibrium quantity for good X, an an increase in the demand for and and a decrease in the supply of the good definitely will

Decrease the market clearing price and the equilibrium quantity of good X
Increase the market clearing price of good X but lower the equilibrium quantity of X
Increase the market clearing price and the equilibrium quantity of good X
Increase the market clearing price of good X but have and uncertain impact on the equilibrium quantity of X

Correct Answer

A. Increase the market clearing price of good X but have and uncertain impact on the equilibrium quantity of X

Explanation

An increase in demand for good X will lead to an increase in the market clearing price of the good. On the other hand, a decrease in the supply of good X will also lead to an increase in the market clearing price. However, the impact on the equilibrium quantity of good X cannot be determined with certainty. It could either increase or decrease depending on the magnitude of the changes in demand and supply.

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Macroeconomics System Quiz Questions

The fundamental questions that an economic system attempts to solve include:

Quiz Preview

The United States is best known as a

Economists assume people behave

The author of the book The Wealth of Nations is:

In order to study how changing price affects consumer decisions, we must assume all other factors, such as income and prices of other goods are constant. This assumption is best known as:

Positive economics

A fundamental principle in demand analysis is that a change in price leads to

Which of the following will cause a rightward shift of the demand curve?

An increase in the number of consumers in a market would cause

If the price of gasoline rises sharply and the demand for sports utility vehicles falls then the two goods are

A per-unit government subsidy to producers of a good tends to

Suppose the price of cement goes up in the United States. What happens in the market for new homes

With respect to the market clearing price and the equilibrium quantity for good X, an an increase in the demand for and and a decrease in the supply of the good definitely will