Macro midterm review

1. Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

B. international trade

2. In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?

B. the macroeconomy

3. If macroeconomics looks at the economy as a whole, it focuses on which of the following?

C. unemployed people

In the , households work and receive payment from firms.

C. labor market

5. In the , households receive goods and services and pay firms for them.

C. goods and services market

6. Which of the following best describes a monetary policy tool?

A. interest rates

7. Which of the following best describes a fiscal policy tool?

A. government spending

8. When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:

C. low inflation

9. The basic difference between macroeconomics and microeconomics is:

C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy

10. Which of the following is most likely a topic of discussion in macroeconomics?

D. a decrease in the unemployment rate

11. Which of the following statements most likely lies within the realm of microeconomics?

D. An increase in labor costs will increase the additional cost of producing another bus.

12. Macroeconomic topics do not usually include:

A. the profit maximizing decisions of an individual manufacture

13. Macroeconomics primarily examines:

C. broad issues such as national output, employment and inflation.

14. Specialization:

B. can lead to an increase in overall production

15. Which of the following statements most likely lies within the realm of macroeconomics?

C. Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.

16. Which of the following lies primarily within the realm of macroeconomics?

B. a study of how tax cuts stimulate aggregate production

17. Macroeconomics:

D. is concerned with the expansion and contraction of the overall economy.

18. The basic difference between macroeconomics and microeconomics is that:

C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

19. In the circular flow diagram model:

A. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.

B. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.

20. Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __ doesn't change.

B. economy

C. Economies of scale

a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

23. As depicted in _, it is necessary to give up some of one good to gain more of the other good.

A. the production possibilities frontier

27. The slope of the ___ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

C. budget constraint

28. The marginal benefit of a slice of pizza is the:

C. maximum amount that a consumer is willing to pay for the slice

29. The general pattern that consumption of the first few units of any good tends to bring a higher level of _ to a person than consumption of later units is a common pattern.

A. utility

33. As a person receives more of a good, the _ from each additional unit of the good declines.

C. marginal utility

34. Which of the following would most likely shift the production possibilities curve inward?

B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

35. The lesson of __ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.

A. sunk costs

36. Most real-world choices aren't about getting all of one thing or another, instead, most choices involve ___, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

D. marginal analysis

37. GDP is:

D. the value of all final goods and services produced domestically.

38. Final goods or services used to compute GDP refer to:

C. goods and services purchased by the ultimate users.

39. Consumption in the United States is about of GDP, and it moves relatively little over time.

C. 68%

40. The demand measure of GDP accounting adds together:

B. consumption, investment, government purchases, and trade balance.

41. Which of the following are most likely classified by economists as consumer durable goods?

C. automobiles, furniture

42. Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:

A. exports exceed imports by $50 billion.

43. The value of what businesses provide to other businesses is captured in the final products at the end of the __ chain.

C. production

Inventories

is a small category that refers to the goods produced by one business that have yet to be sold to consumers, and are either still sitting in warehouses and on store shelves.

45. In order to avoid double counting, statisticians just count the

B. final goods and services

46. Which of the following is included in the calculated Gross Domestic Product?

C. A local ice cream store sells $17,000 worth of cones and sundaes on July 1

B. Services

are now the largest single component of the supply side of GDP, representing over half of GDP.

48. To compare the GDP of two different countries with different currencies, it is necessary to use

A. an exchange rate

Consumption

is about two-thirds of the demand side of GDP, but it moves relatively little over time.

GDP does not directly include:

B. the value of intermediate goods sold during a period

51. GDP in the United States in 2012 was about

C. $16.2 trillion

52. Investment (I) includes:

A. the amount spent on new factories and machinery.

53. Middle-income countries, which include much of Latin America, Eastern Europe, and some countries in East Asia, have per capita GDP in the range of

C. $6,000 to $12,000

54. A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are:

D. expansion, peak, recession, trough

T/F The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.

T

56. For most high-income countries of the world, GDP ___ over time.

B. has risen gradually

If imports exceed exports, as in recent years, then __ exists.

B. a trade deficit

58. The gap between exports and imports in a nation's economy is called the

B. trade balance

T/F GDP includes spending on recreation and travel, but it does not cover leisure time.

T

60. The difference between nominal GDP and real GDP is:

C. real GDP adjusts for inflation

61. The nominal value of any economic statistic refers to the number that is actually announced at that time, while the __ refers to the statistic after it has been adjusted for inflation.

C. real value

The Industrial Revolution

a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.

63. To achieve a high standard of living, a nation should:

B. promote economic growth.

64. In the long run, the most important source of increase in a nation's standard of living is a:

B. high rate of economic growth.

65. In macroeconomics, the connection from inputs to outputs for the entire economy is called _.

B. an aggregate production function

66. The value of what is produced per worker, or per hour worked, is called .

C. productivity

67. When society has a higher level of capital per person, it is called .

C. capital deepening

68. A nation can achieve higher economic growth if:

A. it devotes more resources to research and development.

Productivity

is output per hour in the business sector.

70. Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age __.

30

71. When discussing economic growth, it is often useful to focus on , to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis.

B. GDP per capita

T/F Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.

T

Investment in human capital:

B. can be acquired through on-the-job training.

C. is an important source of economic growth.

Economists typically measure economic growth by tracking:

D. real GDP per capita.

Which of the following is most likely to contribute to economic growth as measured by GDP per capita?

B. increased capital formation

In the long run, the most important source of increase in a nation's standard of living is a:

B. high rate of economic growth.

T/F Increased investment alone will guarantee economic growth.

D. This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.

A nation can achieve higher economic growth if:

D. it devotes more resources to research and development

Which of the following best describes the relationship between economic growth and literacy?

C. Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.

Which of the following is unlikely to affect the rate of economic growth?

C. the level of government spending

Which of the following did not result in economic growth?

D. Many citizens emigrating from Zimbabwe when a politically repressive regime took office.

Which of the following factors contribute to economic growth?

D. an increase in the proportion of the population that is college educated

Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that __ is typically the most important contributor to U.S. economic growth.

C. technology

Which of the following factors contribute to economic growth?

C. the discovery of new oil reserves

Some prominent members of the slow-economic growth country club include a high-income country like _.

B. Germany

A nation's prosperity is sometimes measured in terms of ___.

C. GDP per capita

89. An economy's rate of productivity growth is closely linked to the growth rate of its , although the two aren't identical.

C. GDP per capita