Introduction to Macroeconomics Honors - Multiple Choices with Key | ECON 2110, Study notes of Introduction to Macroeconomics

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con 2110, Review 1 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. The basic problem of economics arises when there are unlimited resources available to fulfill society's limited wants. a. True b. False ____ 2. The study of economics would be superfluous if __________ did not exist. a. demand b. capital c. corporations d. profit e. scarcity ____ 3. Economics is a. the study of the markets for stocks and bonds b. the study of choice under conditions of scarcity c. exclusively the study of business firms d. fundamentally the same as sociology e. applicable only when scarcity is not a problem ____ 4. Individuals must make choices because a. resources are scarce and wants are limited b. resources and wants are unlimited c. assets and wealth are distributed unevenly d. resources are scarce and wants are unlimited e. inflation usually outpaces income growth ____ 5. Under capitalism, individuals are forced to make choices due to a. scarce time, but not scarce spending power b. scarce spending power, but not scarce time c. neither scarce time nor scarce spending power d. both scarce time and scarce spending power e. a low material standard of living ____ 6. The economic behavior of government is constrained by a. limited budgets b. the absence of prices on most government output c. moral philosophy of the community d. low voter participation rates e. political self interest ____ 7. The knowledge that students gain while in college is referred to by economists as human capital. a. True b. False ____ 8. The term capital, as used by economists, refers to a. money b. the physical space in which production occurs c. the time allocated to producing goods and services d. financial securities such as stocks and bonds e. long-lasting tools used to produce goods and services

____ 9. Macroeconomics focuses on the behavior of economic agents such as the consumer, a business firm, or a specific market. a. True b. False ____ 10. If the president of Chile commented that "the crime rate in Chile is currently too high," this would be an example of a normative statement. a. True b. False ____ 11. Economists tend to disagree primarily over positive statements about the economy. a. True b. False ____ 12. Which of the following is the study of what "should be" rather than the study of what "is"? a. positive economics b. law and economics c. microeconomics d. development economics e. normative economics ____ 13. The opportunity cost of any activity can be measured by the a. value of the best alternative that is given up b. price (or monetary costs) of the activity c. level of technology d. time needed to select among various alternatives e. fringe benefits associated with the activity ____ 14. Grant has four hours of time to divide between studying for a physics exam and a geology exam. Figure B-1 shows his estimates of the grades (on a scale of 0 to 100) that he could earn from studying a particular number of hours on each subject. If he plans on spending two hours studying each subject, what would be his opportunity cost of an additional hour studying physics? a. 10 points on his geology exam b. 20 points on his geology exam c. 80 points on his geology exam d. 25 points on his physics exam e. 85 points on his physics exam ____ 15. Due to resource scarcity, a. some economic activities have an opportunity cost b. all economic activities have an opportunity cost c. no economic activities have an opportunity cost d. economic activities have opportunity costs equal to their market prices e. economic activities have opportunity costs generally lower than their market prices

____ 16. Combinations of goods on the production possibilities curve a. are unattainable without additional resources b. can be produced using currently available resources and technology c. reflect minimum normative value allocations d. will meet society's needs but not its wants e. are attainable only through international trade ____ 17. Combinations of goods outside the production possibilities curve a. are unattainable given society's technology and resources b. are combinations that have already been consumed c. go beyond basic necessities d. result from involuntary unemployment e. are the result of economic recessions ____ 18. Assume that U.S. agricultural land is used either to raise cattle for beef or to grow wheat. Figure B-3 represents the production possibility frontier for beef and wheat. Production at point H is a. unattainable given currently available technology and resources b. attainable by more fully employing already available resources c. attainable by using better technology which is already available d. attainable if beef production drops to zero e. attainable if all available resources are used to produce wheat ____ 19. Production is technically efficient when a. the maximum possible output is being produced from a given collection of inputs b. people are working their hardest c. no more capital can be substituted for labor d. technological innovation is no longer desirable e. workers perform their duties at the expected level, even if they are physically capable of doing more ____ 20. The world's total output will be greater the more self- sufficient each of the world's economies becomes. a. True b. False

Econ 2110, Sample Review 2 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. When individuals come together to buy and sell goods and services, they form a(n) a. economy b. market c. production possibilities frontier d. supply curve e. demand curve ____ 2. In a perfectly competitive market, a. there can be few or many buyers and sellers b. the price can be driven upward by suppliers holding back on goods and services c. each participant is too small to affect the market price d. government intervention is needed to ensure that prices are fair for consumers e. resources are allocated by a central authority ____ 3. Because price and quantity demanded are inversely related, a. the demand curve is usually upward-sloping b. buyers purchase more of the good as the price rises c. the supply curve must be rising d. price and quantity supplied must be positively related e. the demand curve is usually downward-sloping ____ 4. The demand curve for Beanie Baby dolls shows the quantity of dolls demanded a. by suppliers of those dolls b. by U.S. consumers c. at the equilibrium price for Beanie Baby dolls d. at each level of income e. at each possible price of Beanie Baby dolls ____ 5. Each point along the market demand curve shows a. the quantity of the good that firms would be willing and able to supply at a specific price b. the relationship between the price of the good and total quantity demanded at a series of prices c. the opportunity cost of supplying a given quantity of goods to the market d. the quantity of the good that consumers would be willing and able to purchase at a specific price e. how population changes affect the quantity demanded at a specific price ____ 6. Figure C-1 shows the market demand schedule for compact disks. If the price per disk rises from $10 to $12, the a. demand will decrease by 2.2 million disks b. quantity demanded will decrease by 2.2 million disks c. supply will rise by 2.8 million disks d. quantity demanded will decrease by 3.5 million disks e. demand curve will shift to the left

____ 7. A decrease in the price of a particular good, with all other variables constant, causes a. a shift to a different demand schedule with higher quantities demanded b. a shift to a different demand schedule with lower quantities demanded c. a movement along a given demand curve to a lower quantity demanded d. a movement along a given demand curve to a higher quantity demanded e. no movement along a given demand curve unless supply also changes ____ 8. Which of the following could explain a movement from point F to point G in Figure C-2? Assume that the good represented is an inferior good. a. all of the following are correct b. an increase in buyers' incomes c. a decrease in the expected future price of the good d. an increase in the price of the good e. an increase in the price of a complement ____ 9. In Figure C-4, the equilibrium price is a. $ b. $ c. $ d. $ e. $ ____ 10. The demand curve for a product will shift rightward when the price of a substitute decreases. a. True b. False ____ 11. If the demand for new automobiles falls when income falls, automobiles are said to be normal goods. a. True b. False

____ 12. If the price of ground beef falls, the demand for hamburger buns will a. increase because the two goods are substitutes b. decrease because the two goods are complements c. decrease because the two goods are substitutes d. increase because the two goods are complements e. not change unless the price of hamburger buns also changes ____ 13. An increase in buyers' incomes a. increases the quantity demanded of a good b. decreases the quantity demanded of a good c. increases the demand for a normal good d. increases the demand for an inferior good e. decreases the quantity demanded of a normal good ____ 14. Which of the following is assumed constant along the demand curve for gasoline? a. the price of gasoline and the prices of related goods b. the price of gasoline, buyers' incomes, and tastes c. all variables affecting demand other than the price of gasoline d. all variables affecting demand other than the supply of gasoline e. buyers' incomes and tastes, but not the prices of related goods ____ 15. In Figure C-5, a movement from point G to point H would represent a. a change in demand b. the impact of a decrease in the price of a substitute good c. higher prices for the inputs used to produce this product d. a change in demand plus a change in quantity demanded e. a change in quantity demanded ____ 16. Which of the following best defines quantity supplied? a. the amount of a good sellers would choose to produce, in a given set of circumstances b. the amount of a good sellers will be able to sell, in a given set of circumstances c. the various amounts of a good sellers would like to sell over various sets of circumstances d. the amount of a good sellers would like to sell if they could choose the price for which it sold e. the amount of a good that sellers would be able to sell if they could choose the price for which it sold ____ 17. Of the following, which is true of the relationship between the quantity of a good supplied and its price? a. as price increases, the quantity supplied usually decreases b. as price increases, the quantity supplied usually increases c. as price increases, supply increases d. when demand increases, so will supply e. they always meet at the point of equilibrium in the market ____ 18. What do supply and demand curves have in common? a. they both usually slope upward

b. they both show a relationship between quantity and price c. they both usually slope downward d. they can both shift in response to changes in income or wealth e. neither of them is influenced by the size of the population ____ 19. The law of supply states that the quantity supplied of a good and a. the price of a key input are inversely related b. its price are inversely related c. the price of a key input are positively related d. its price are positively related e. the price of an alternate good are positively related ____ 20. If sellers decide to sell more calculators by mass producing them and lowering the price so consumers will buy more, the supply and demand curves will both shift to the right. a. True b. False

________________________________________________________________________________________________________ con 2110, Sample Review 3 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. GDP is measured and reported each a. month b. month, but reported at an annual rate c. year d. quarter e. quarter, but reported at an annual rate ____ 2. When people buy land, their purchases are included in GDP. a. True b. False ____ 3. Gross domestic product (GDP) is a. the total value of all goods and services produced for the marketplace during a given year, within the nation's borders b. the total value of all final goods and services produced for the marketplace during a given year, by a nation's citizens and businesses c. the total value of all final goods and services produced for the marketplace during a given year, within a nation's borders d. the total value of all goods and services produced for the marketplace during a given year, by a nation's citizens and businesses e. the total value of all goods, services and inputs produced for the marketplace during a given year, within a nation's borders ____ 4. Which of the following would be counted in U.S. GDP? a. the purchase of an old house b. the purchase of a new textbook c. the purchase of a $1,000 government savings bond d. washing your car in the driveway e. the purchase of 50 shares of IBM stock ____ 5. Which of the following is a flow variable? a. all of the cars registered in the U.S. b. the number of unemployed workers this week c. your total net worth yesterday d. the government debt this year e. a salary of $4,000 per month ____ 6. An example of a service counted in this year's GDP is a. buying shampoo to give your pet a bath b. cleaning your house c. trimming your own hair d. hiring a gardener to weed your garden e. polishing your friend's car as a friendly gesture ____ 7. Transfer payments are included in government budgets as spending, but are not included in the government purchases category of GDP. a. True b. False ____ 8. Which of the following would be classified as private investment spending? a. a family's purchase of a new home b. an automobile producer's purchase of steel for use in building new cars c. a paper company's purchase of timber d. a household's purchase of AT&T stock e. the government's purchase of a new office building

____ 9. Which of the following four elements contribute to GDP in the expenditure approach? a. consumption spending, private investment, government purchases, net exports b. consumption spending, business investment, government purchases, imports c. consumption of services, private investment, government consumption, exports d. consumption of goods, private investment, government investment, government consumption e. consumption of durable goods, private investment, government purchases, net exports ____ 10. Personal consumption spending now comprises approximately what fraction of GDP? a. one-third b. one-sixth c. three-quarters d. one-quarter e. one-half ____ 11. Which of the following describes the relationship between GDP and government spending? a. government spending = GDP + consumption + private investment - exports - imports b. government spending = GDP - consumption - private investment - exports - imports c. government spending = GDP - consumption - private investment + exports + imports d. government spending = GDP - consumption - private investment - exports + imports e. government spending = GDP + consumption - private investment + exports - imports ____ 12. Which of the following is (are) included in private investment spending? a. both c and e b. all of the following c. business purchases of plant and equipment d. new home construction e. changes in business firms' inventory stocks ____ 13. Which of the following would be included in the expenditures approach to calculating U.S. GDP? a. wage and salary payments to U.S. workers b. interest paid on borrowed funds c. government payments of social security benefits d. purchases of new trucks by Federal Express e. wage payments to U.S. citizens working outside the U.S. ____ 14. Using the table below, calculate GDP. Consumption spending $1, Wages and salaries $ 800 Rent $ 100 Government purchases $ 200 Profit $ 300 Exports $ 400 Interest $ 250 Private investment spending $ 400 Imports $ 550 Based on the above information, GDP in this year was a. $1, b. $2, c. $2, d. $2, e. $4, ____ 15. The factor payments measure of GDP

a. can be expressed as GDP = C + I + G + NX b. is found by summing all expenditures on final goods and services during the year c. calculates how much value was added at each stage of production d. is found by summing all interest, rent, profit, and wages and salaries generated during the year e. calculates how much workers paid for goods and services during the year ____ 16. Real GDP is nominal GDP a. plus depreciation b. adjusted for changes in the price level c. minus depreciation d. minus taxes e. minus inflation ____ 17. We need to calculate real GDP because a. it is a much better measure of economic behavior than nominal GDP b. the value of the dollar is increasing c. it allows us to make comparisons between countries d. nominal GDP has no theoretical foundation e. nominal GDP ignores inflation ____ 18. The United States will always have unemployment. a. True b. False ____ 19. Yuan recently completed his college degree and is entering the labor market for the first time. He has been submitting applications and has been interviewed twice in the last two weeks, but so far has not found a job. Yuan could be classified as a. frictionally unemployed b. seasonally unemployed c. structurally unemployed d. cyclically unemployed e. not yet in the labor force ____ 20. All else equal, what is likely to happen to the unemployment rate during a recession? a. it increases as GDP increases b. it decreases as GDP remains the same c. it increases as GDP decreases d. it decreases as cyclical unemployment decreases e. it decreases as GDP decreases