Macroeconomics Quiz 1

Economists, like mathematicians, physicists and biologists

• make use of the scientific method

• try to address their subject with a scientists objectivity

• all of the choices are correct

• devise theories, collect data and then analyze these data in an attempt to verify or refute their theories

A circular flow diagram is a model that show all but one of the following. indicate the exception

• helps to explain the role of the household in the economy

• incorporates all aspects of the real economy

• helps to explain how the economy is organized

• helps to explain how participants in the economy interact with one another

factors of production are

• assumed to be owned by firms in the circular flow diagram

• abundant in most economies

• also called output

• used to produce goods and services

which markets are represented in the simple circular flow diagram

• markets for goods and services and markets for imports and exports

• markets for factors of production and markets for financial assets

• markets for goods and service and market for factors of production

• markets for goods and services and markets for financial assets

Which of the following is an example of a normative statement?

• Fewer people die in larger cars than in smaller cars.

• Car prices should be affordable.

• If wages increase, firms will fire some workers

• If cars become more expensive, fewer people will buy them.

When an economy is operating inside its production possibilities frontier, we know that

• there are unused resources or inefficiencies in the economy.

• all of the economy's resources are fully employed.

• economic growth would have to occur in order for the economy to move to a point on the frontier.

• in order to produce more of one good, the economy would have to give up some of the other good.

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the

• market price of the additional amount produced.

• amount of resources that must be devoted to its production.

• number of dollars that must be spent to produce it.

• amount of the other good that must be given up.

Economists believe that production possibilities frontiers are often bowed because

• of improvements in technology.

• resources are not completely adaptable.

• trade-offs inevitably create unemployment.

• opportunity costs are constant.

A production possibilities frontier can shift outward if

• there is a technological improvement

• resources are shifted from the production of one good to the production of the other good.

• the economy abandons inefficient production methods in favor of efficient production methods.

• government increases the amount of money in the economy .

A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the following concepts cannot be illustrated by this model?

• the flow of dollars between sellers of jewelry and clothing and buyers of jewelry and clothing

• an efficient combination of jewelry and clothing production

• the opportunity cost of clothing in terms of jewelry

• the tradeoff between production of jewelry and production of clothing