ECON 1040 Macro Economics Ohio University

Which of the following is not one of the three core economic issues that must be resolved?

a. how to produce the goods we select
b. what to produce with unlimited resources
c. who should get the goods and services we produce
d. what to produce with unlimited resources

b

The fundamental problem of economics is....

a. the law of increasing opportunity cost
b. the scarcity of resources relative to human wants
c. how to get government to operate efficiently
d. how to create employment for everyone

b

Given that resources are scarce....

a. a "free lunch" is possible, but only for a limited number of people
b. Opportunity costs are experienced whenever choices are made
c. Poor countries must make choices, but rich countries with abundant resources do not have to make choices.
d.Some choices involve opportunity costs while other choices do not.

b

The basic factors of production include...

a. Land, labor, money, and capital.
b. Land, labor, money, and inputs.
c. Labor and money.
d. Land, labor, capital, and entrepreneurship.

d

Which economist argued that free markets unleashed the "animal spirits" of entrepreneurs, propelling innovation, technology, and growth?

a.Lord Kelvin.
b. Kenneth Olsen.
c. Irving Fisher.
d. John Maynard Keynes.

d

The "guns versus butter" dilemma that all nations confront is that...

a. Guns and butter can be produced using the same resources at the same time.
b. An increase in national defense implies more sacrifices of civilian goods and services.
c. An increase in national defense is possible only if we produce more butter.
d. All of the choices are correct.

b

When an economy is producing efficiently, it is

a. Producing a combination of goods and services beyond the production possibilities curve.
b. Getting the maximum goods and services possible from the available resources.
c. Experiencing decreasing opportunity costs.
d. Producing equal amounts of all goods.

b

Adam Smith's invisible hand is now called...

a. Economic growth.
b. The market mechanism.
c. Opportunity cost.
d. Laissez faire.

b

Macroeconomics focuses on the performance of...

a. Individual consumers.
b. Government agencies.
c. The overall economy.
d. All of the choices are correct.

c

Government failure occurs when government intervention fails to improve economic outcomes or makes them worse.

True or False

true

If a person literally had "nothing else to do,"

What would be the opportunity cost of doing this homework?

The opportunity cost would be the person's time.

If a person literally had "nothing else to do,"

What is the likelihood of actually having nothing else to do?

The likelihood is zero or close to zero.

The United States has roughly how much of the world's population?

a. 5 percent.
b. 10 percent.
c. 15 percent.
d. 20 percent.

a

The best definition of GDP is...

a. The sum of the physical amounts of goods and services in the economy.
b. A dollar measure of final output produced during a given time period within a nation's borders.
c. A measure of the per capita economic growth rate of the economy.
d. A physical measure of the capital stock of the economy.

b

Which of the following statements is true about the U.S. economy?

a. The United States produces nearly one-fifth of the world's production.
b. The United States has the world's third largest economy.
c. The United States produces less than half as much as China does.
d. The United States produces less than one-third as much as Japan does.

a

Per capita GDP is....

a. The sum of consumer goods, investment goods, government services, and net exports.
b. A dollar measure of the economic growth rate of a country.
c. The value of the factors of production used to produce output in a country.
d. The dollar value of GDP divided by total population.

d

What percentage of the world's population subsists on incomes of less than $2 a day?

a. 33 percent.
b. 50 percent.
c. 60 percent.
d. 70 percent.

a

Per capita GDP will definitely rise if...

a. The population falls and GDP does not fall.
b. The rate of economic growth falls.
c. The rate of economic growth is less than the rate of population growth.
d. There is a decrease in the size of the working population.

a

Economic growth...

a. Is an increase in output or real GDP.
b. Causes a contraction in the production possibilities curve.
c. Involves reduced capacity in the short run.
d. None of the choices are correct.

a

The current U.S. economy is based primarily on the production of..

a. Agricultural goods.
b. Goods for federal government use.
c. Manufacturing goods.
d. Services.

d

Which of the following is considered a service in the calculation of GDP?

a. Manufacturing reclining chairs.
b. Constructing new homes.
c. Tax preparation.
d. Manufacturing automobiles.

c

A capital-intensive production process is one that...

a. Has a high ratio of labor to capital.
b. Has a high ratio of capital to labor.
c. Is used only in the United States.
d. All of the choices are correct.

b

Human capital is defined as the...

a. Amount of machinery, factories, and buildings an individual owns.
b. Dollar value of all the stocks and bonds an individual owns.
c. Knowledge and skills workers possess.
d. None of the choices are correct.

c

The government establishes the rules of the game for economic transactions in order to.....

a. Legitimatize and enforce contracts.
b. Discourage the production of capital.
c. Discourage the ownership of property.
d. Encourage spillover costs.

a

The term externalities refers to...

a. Black-market economic activity.
b. The impact on markets of imported goods.
c. The costs or benefits of a market activity borne by a third party.
d. The inequitable distribution of income.

c

The richest 20 percent of the families in the United States receive approximately ______ percent of total income.

a. 10
b. 20
c. 50
d. 90

c

The goal of the business firms in a market economy is to maximize..

a. Total profits.
b. Total sales.
c. Total utility.
d. Total welfare.

a

A factor market is any place or process where...

a. Finished goods are bought and sold.
b. Land, labor, or capital is bought and sold.
c. Finished services are bought and sold.
d. None of the choices are correct.

b

According to the law of demand, during a given period of time, the quantity of a good demanded...

a. Increases as its price rises, ceteris paribus.
b. Increases as its price falls, ceteris paribus.
c. Decreases as its price falls, ceteris paribus.
d. Does not change when price changes.

b

According to the law of demand, a demand curve...

a. Has a negative slope.
b. Is a horizontal or flat line.
c. Has a positive slope.
d. Exceeds the economy's ability to produce.

a

Ceteris paribus, which of the following would generally cause an increase in the demand curve for new automobiles?

a. A decrease in the price of new automobiles.
b. An increase in consumers' income.
c. The new models being perceived as ugly compared with old models.
d. Consumer expectations that the price of new automobiles will be lower next year.

b

Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, then right now there should be...

a. An increase in the demand for airline tickets.
b. A decrease in the supply of airline tickets.
c. A decrease in the demand for airline tickets.
d. No change in the supply of or demand for airline tickets because the price is not changing right now.

c

Assume that pencils and pens are substitutes. If the price of pencils rises, then we will see..

a. An increase in the demand for pens.
b. A decrease in the demand for pens.
c. An increase in the supply of pens.
d. A decrease in the supply of pens.

a

Ceteris paribus means....

a. Holding everything constant except for the variables you are interested in examining.
b. Allowing the free market to decide, not government.
c. Changing prices to see how demand or supply shifts.
d. Holding constant the determinant of demand or supply that you are interested in examining.

a

Which of the following is a determinant of supply?

a. Consumer tastes or preferences.
b. The prices of the factors of production.
c. Income.
d. Number of buyers.

b

A shift in supply is defined as a change in...

a. Price.
b. Quantity supplied because of a change in price.
c. Equilibrium quantity.
d. Supply because of a change in a determinant of supply.

d

A market is said to be in equilibrium when....

a. Demand is fully satisfied at all alternative prices.
b. The buying intentions of all consumers are realized.
c. The supply intentions of all sellers are realized.
d. The quantity demanded equals the quantity supplied.

d

A ballet performance had many empty seats. This implies that the...

a. Hall where the performance was being held was very large.
b. Price of the tickets must have been very low because of the low demand.
c. Ballet group was not very well known.
d. Price of the tickets must have been above the equilibrium price.

d

In most markets, the equilibrium price is achieved...

a. Through detailed databases.
b. Using an equilibrium price formula.
c. Through government mandate.
d. Through trial and error.

d

Ceteris paribus, an increase in the number of sellers of running shoes causes equilibrium price to....

a. Decrease and equilibrium quantity to increase.
b. Decrease and equilibrium quantity to decrease.
c. Increase and equilibrium quantity to increase.
d. Increase and equilibrium quantity to decrease.

a

Suppose a friend claims he is helping the economy by throwing trash on the street rather than in trash cans because the extra expenditures necessary to clean up the streets will increase GDP. Your friend is....

A) Wrong. GDP will not be affected because this is not a socially desirable use of resources and will therefore not be included in GDP.

B) Right. GDP will increase, ceteris paribus.

C) Wrong. GDP will not be affected because nothing new is being produced.

D) Wrong. GDP will decline because the neighborhood will be less clean.

b

To calculate real GDP, we....

A) Estimate future prices of goods and services.

B) Adjust the market value of goods and services for changing prices.

C) Measure in the prices of goods and services of that period.

D) None of the choices are correct.

b

If the price level is 100 for 2005 and the price level is 106.5 in 2007, a nominal GDP in 2007 of $15,600 billion would mean that real GDP in 2007 (in 2005 prices) would be closest to.....

A) $15,600.0 billion.
B) $13,971.2 billion.
C) $14,647.9 billion.
D) $14,751.3 billion.

c

Peanut butter and jelly are complements. A decrease in the price of one will result in...

A) An increase in the quantity demanded of the other.

B) A decrease in the demand for the other.

C) An increase in the demand for the other.

D) A decrease in the quantity demanded of the other

c

Which of the following is a determinant of supply?

A) Income.
B) Number of buyers.
C) Consumer tastes or preferences.
D) The prices of the factors of production.

d

A change in demand means there has been a shift in the demand curve, and a change in quantity demanded.....

A) Means that price has changed and there is movement along the demand curve.

B) Results from a change in price of other goods.

C) Also means demand has shifted.

D) Means a shortage or surplus will result from holding prices constant.

a

Which of the following events would cause a rightward shift in the market supply curve for automobiles?

A) A decrease in the number of sellers.

B) A technological improvement that reduces the cost of production.

C) A higher sales tax on automobiles.

D) An increase in the wages of autoworkers.

b

A leftward shift of the market demand curve for HDTVs, ceteris paribus, causes equilibrium price to.....

A) Decrease and quantity to increase.
B) Increase and quantity to increase.
C) Increase and quantity to decrease.
D) Decrease and quantity to decrease.

d

Economic growth....

A) Is an increase in output or real GDP.

B) Involves reduced capacity in the short run.

C) Causes a contraction in the production possibilities curve.

D) None of the choices are correct.

a

The term externalities refers to....

A) The negative costs and positive benefits of a market activity borne by a third party.

B) Only positive benefits of a market activity borne by a third party.

C) Only negative costs of a market activity borne by a third party.

D) None of the choices are correct.

a

Human capital is defined as the....

A) Dollar value of all the stocks and bonds an individual owns.

B) Knowledge and skills workers possess.

C) Amount of machinery, factories, and buildings an individual owns.

D) None of the choices are correct.

b

Which of the following countries (or regions) produces the most output annually?

A) China.
B) Japan.
C) United States.
D) Germany.

c

In economics, scarcity means that....

A) A production possibilities curve cannot accurately represent the trade-off between two goods.

B) A shortage of a particular good will cause the price to fall.

C) Society's desires exceed the want-satisfying capability of the resources available to satisfy those desires.

D) The market mechanism has failed.

c

Opportunity cost is

A) The difficulty associated with using one good in place of another.

B) The best alternative that must be given up in order to get something else.

C) Measured only in dollars and cents.

D) The total dollar cost to society of producing the goods.

b

The "guns versus butter" dilemma that all nations confront is that.....

A) An increase in national defense is possible only if we produce more butter.

B) Guns and butter can be produced using the same resources at the same time.

C) An increase in national defense implies more sacrifices of civilian goods and services.

D) All of the choices are correct.

c

The doctrine of laissez faire is based on the belief that....

A) Government directives are likely to do a better job of allocating resources than markets.

B) Markets are likely to do a better job of allocating resources than government directives.

C) Government failure does not exist.

D) Markets result in an unfair distribution of income.

b

If population growth is less than output growth for a country,.....

A) Average living standards will decrease.
B) Real GDP has decreased.
C) GDP must have fallen at a fairly rapid rate.
D) The per capita living standard will increase.

d

19) Which of the following has been a century-long trend in the United States?

A) Relative decline in service sector to manufacturing.
B) Decline of total value of world trade.
C) Relative increase in farming to manufacturing.
D) Relative decline in manufacturing to the service sector.

d

A capital-intensive production process is one that....

A) Has a high ratio of capital to labor.
B) Is used only in the United States.
C) Has a high ratio of labor to capital.
D) All of the choices are correct.

a

The United States has a larger real GDP than China because.....

A) The U.S. population is larger but works in labor-intensive jobs.

B) The U.S. population is smaller but works in capital-intensive jobs.

C) The U.S. population is larger but works in capital-intensive jobs.

D) The U.S. population is smaller but works in labor-intensive jobs.

b

According to economists, which of the following is NOT a factor of production?

A) Labor.
B) Entrepreneurship.
C) Land.
D) Money.

d

The goal of the business firms in a market economy is to maximize

A) Total utility.
B) Total profits.
C) Total sales.
D) Total welfare.

b

Which of the following statements is correct concerning GDP and GNP?

A) GNP measures output within the nation's borders only.

B) GNP measures output outside a nation's borders, but not inside it.

C) GDP measures output produced by a nation's factors even if they are outside the nation's borders.

D) GDP measures output within the nation's borders only.

d

Which of the following would not be included in the calculation of GDP?

A) Income earned by a CPA.

B) Tips earned by a bartender who does not report them to the IRS.

C) Income earned by an attorney.

D) Contract work performed by an electrician.

b