Macroeconomics Lesson 2

The outer loop of the circular-flow diagram represents the flow of dollars in the economy. Which of the following is not measured in dollars and therefore does not appear on the outer loop?

• Wages

• Income

• Capital

• Rent

Which of the following would likely be studied by a microeconomist rather than a macroeconomist?

• The effect of a national healthcare program on the nation's unemployment rate

• The impact of minimum-wage laws on employment in the fast food industry

• A comparison of alternative tax policies and their respective impacts on the rate of the nation's economic growth

• The effect of a war on government spending

The production possibilities frontier provides an illustration of the principle that:

• A) trade can make everyone better off.

• B) governments can sometimes improve market outcomes.

• C) people face trade-offs.

• D) people respond to incentives.

Based on Table 2-3, what is the opportunity cost of producing 500 more bushels of corn when moving from 1,000 to 1,500 bushels?

• 100 bushels of wheat

• 200 bushels of wheat

• 300 bushels of wheat

• 400 bushels of wheat

Which of the following statements is correct about the roles of economists?

• When economists are trying to explain the world, they are in the realm of macroeconomics rather than microeconomics.

• When economists are trying to improve the world, they are in the realm of normative economics rather than positive economics.

• Economists are best viewed as policy advisers.

In trying to improve the world, economists are policy advisers.

• True

• False

In the early 19th century, the Russian government sent doctors to southern Russian villages to provide assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died. Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the correlation between doctors and deaths is most likely a problem of:

• omitted variables.

• bias.

• reverse causality.

• government propaganda.

Refer to Figure 2-3. Efficient production is represented by which point(s)?

• A) C, D

• B) B

• C) C, D, and B

• D) C, D, and A

If households are buyers in the markets represented by Box C of this circular-flow diagram, then

• Box C must represent the markets for the factors of production.

• Box D must represent the markets for goods and services.

• Box D must represents firms.

• firms are sellers in the markets represented by Box C.

Refer to Figure 2-4, Graph (a). Production at point Q is

• possible and efficient.

• possible but inefficient.

• impossible but efficient.

• impossible and inefficient.