MacroEcon Exam 1 Review

Which of the following represents a positive economic statement?

• The unemployment rate is 4.8 percent.

• The government should extend unemployment benefits.

• The unemployment rate is too high.

• Taxes should not be increased since that will lower spending.

Which of the following represents a normative economic statement?

• The government ought to lower taxes so people have more money.

• The government will have a larger deficit if unemployment benefits are extended.

• The unemployment rate is higher than it was last year.

• Higher taxes will lower spending.

Some large hardware stores, such as Home Depot, boast of carrying as many as 20,000 different products in each store. This volume of goods is the result of

• the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits.

• the purchasing agents at Home Depot who have determined what goods consumers want.

• the purchasing agents at Home Depot who have determined what goods producers have available.

• the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to satisfy their wants.

How does the market system answer the following fundamental question: How will the goods and services be produced?

• In ways that minimize the cost per unit of output.

• By using traditional methods of production.

• By using labor and capital accumulation.

• In combinations that take advantage of related markets.

How does the market system answer the following fundamental question: How will the goods and services be produced?

• In ways that minimize the cost per unit of output.

• By using traditional methods of production.

• By using labor and capital accumulation.

• In combinations that take advantage of related markets.

The "invisible hand" concept refers to the

• guiding function of prices in a market system.

• implicit influence that the government has on the actions of firms.

• regulatory structure that markets must operate in.

• underlying money flows that promote the trading of goods and services.

True or False

According to the circular flow model of the market system, when resource-owners' money income is rising, then the costs to business firms that employ their resources must be falling.

• True

• False

True or False

(Consider This) Without government subsidized property insurance, people are more likely to be cognizant of the risks of building and living in fire-prone or flood-prone areas because their insurance costs will be higher.

• True

• False

If the income of buyers increases, and good A is a normal good, the ______ will ______.

This will cause the equilibrium price to ________ and the equilibrium quantity to ______.

• demand for good A, increase, increase, increase

• quantity demanded for good A, increase, decrease, increase

• demand for good A, decrease, decrease, decrease

• quantity demanded for good A, increase, increase, increase

A market

• reflects upsloping demand and dowsloping supply curves.

• entails the exchange of goods, but not services.

• is an institution that brings together buyers and sellers.

• always requires face-to-face contact between buyer and seller.