Economic Concepts and Principles

Macroeconomists study

• the decisions of individual households and firms.

• the interaction between households and firms.

• regulations imposed on firms and unions.

• economy-wide phenomena.

The phenomenon of scarcity stems from the fact that

• most economies' production methods are not very good.

• in most economies, wealthy people consume disproportionate quantities of goods and services.

• governments restrict production of too many goods and services.

• resources are limited.

Economists make assumptions to

• minimize the likelihood that some aspect of the problem at hand is being overlooked.

• teach economics to people who have never before studied economics.

• provide issues for political discussion

• focus their thinking on the essence of the problem at hand.

Which of the following is an example of a positive, as opposed to a normative, statement?

• When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.

• The income tax rate should be increased to offset the budget deficit.

• The United States Department of Justice sued AT&T to block its merger with T-Mobile.

• Antitrust laws should be used to prevent further concentration in the wireless telephone service market.

For an economy as a whole,

• wages must equal profit.

• consumption must equal income.

• income must equal expenditure.

• consumption must equal saving.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

• values of goods and services based on surveys of consumers.

• market prices.

• quantities purchased by a typical urban household.

• profits from producing goods and services.

Because every transaction has a buyer and a seller,

• GDP is more closely associated with an economy's income than it is with an economy's expenditure.

• every transaction contributes equally to an economy's income and to its expenditure.

• the number of firms must be equal to the number of households in a simple circular-flow diagram.

• firms' profits are necessarily zero in a simple circular-flow diagram.

A company sells titanium to a bicycle company for $100. The bicycle company uses the titanium to produce a bicycle, which it sells for $230. Taken together, these two transactions contribute

• $100 to GDP.

• $230 to GDP.

• between $230 and $330 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.

• $130 to GDP.

Which of the following is included in GDP?

• The market value of rental housing services, but not the market value of owner-occupied housing services

• The market value of owner-occupied housing services, but not the market value of rental housing services

• Both the market value of rental housing services and the market value of owner-occupied housing services

• Neither the market value of owner-occupied housing services nor the market value of rental housing services

Changes in real GDP reflect

• only changes in prices

• only changes in the amounts being produced.

• both changes in prices and changes in the amounts being produced

• . neither changes in prices nor changes in the amounts being produced