CHAPTER 3

Which of the following best describes macroeconomics?

• Study of individual market transactions

• Analysis of firm-level decision-making

• Study of the economy as a whole, focusing on variables like GDP and inflation

• Pricing strategy for forest products

In the circular flow of income, households provide which of the following to firms?

• Finished goods

• Government subsidies

• Factors of production (land, labor, capital)

• Imports

What are the two main flows in the circular flow of income model?

• Government and foreign flows

• Input and output flows

• Real flows and money flows

• Exports and imports

Which of the following is not a component of GDP expenditure?

• Consumption expenditure

• Depreciation

• Net exports

• Government purchases

What does GDP measure?

• Income inequality in a country

• Total market value of all final goods and services produced in a country in a year

• Total population wealth

• Environmental sustainability

Which of the following best describes net exports?

• Total imports minus government spending

• Total exports plus domestic consumption

• Total exports minus total imports

• Only goods traded between companies

What is the main function of the government in the macroeconomic model?

• Only a tax collector

• Consumer and producer that regulates through fiscal and monetary policy

• Only a price controller

• Sole exporter of domestic goods

What is depreciation in the context of investment?

• Increase in the value of money

• The reduction in the value of capital due to wear and tear

• Increase in capital goods

• Government investment into private firms

One major limitation of GDP as a measure of welfare is that:

• It includes household unpaid work

• It values environmental degradation

• It ignores the underground economy and non-market activities

• It always reflects happiness of citizens

Which of the following policies is not part of fiscal policy?

• Adjusting tax rates

• Controlling government spending

• Regulating interest rates

• Stimulus packages