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PRINCIPLES OF MACROECONOMICS
QUESTIONS WITH DETAILED VERIFIED
ANSWERS
An economist notices that sunspot activity is high just prior to recessions
and concludes that sunspots cause recessions. The economist has Ans:
confused association with and causation.
Which of the following is a statement of normative economics? Ans: The
minimum wage is good because it raises wages for the working poor.
Scarcity exists Ans: in all countries in the world.
Which of the following would eliminate scarcity as an economic problem?
Ans: None of these because scarcity cannot be eliminated.
Microeconomics approaches the study of economics from the viewpoint of
Ans: individuals or specific markets.
Computer programs, or software, are an example of Ans: capital.
A review of the performance of the U.S. economy during the 1990's is
primarily the concern of Ans: macroeconomics.
Which of the following is not a resource? Ans: money
Which of the following is a statement of positive economics? Ans: The
income tax system collects a lower percentage of the incomes of the
poor.
Economics is the study of Ans: people making choices because of the
problem of scarcity.
On a production possibilities curve, the opportunity cost of good X, in
terms of good Y, is represented by the: Ans: movement along the curve.
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This economy cannot currently produce 70 washers and 70 dryers
because Ans: it does not have the resources and technology to produce
that level of output.
In the following exhibit, the production possibilities curve demonstrates:
Ans: the law of increasing opportunity costs.
In the following exhibit, movement between which of the following points
represents an increase in economic efficiency? Ans: C to D
The opportunity cost of an action is: Ans: the value of the best
opportunity that must be sacrificed in order to take the action.
In the following exhibit, inefficient resource use is shown by which of the
following points? Ans: P
Production is efficient if the economy is producing at a point Ans: on the
production possibilities curve.
In the following exhibit, if the economy moves from point L to point M,
the opportunity cost of producing 10 more capital goods is: Ans: 15 less
consumer goods.
When a production possibilities frontier is bowed outward, the
opportunity cost of producing an additional unit of a good Ans: increases
as more of the good is produced.
In the following exhibit, which of the following could have caused the
production possibilities curve of an economy to shift from the one labeled
A to the one labeled B? Ans: An advance in technology
Which of the following will cause a movement along the supply curve?
Ans: A change in the market price of a good, other things held constant.
An increase in the wages paid to fishermen will have what effect on the
fish market equilibrium? Ans: Price will increase, and quantity will
decrease.
The price of a good will fall when: Ans: there is a surplus of the good.
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Which of the following would shift the demand curve for autos to the
right? Ans: A fall in the price of auto insurance.
Which of the following could cause the supply of carrots to decrease?
Ans: Fertilizer costs increase.
If the demand for a good decreased, what would be the effect on the
equilibrium price and quantity? Ans: Price would decrease, and quantity
would decrease.
If a government-imposed price floor legally sets the price of milk above
market equilibrium, which of the following will most likely happen? Ans:
There will be a surplus of milk.
An increase in demand and a decrease in supply cause which of the
following? Ans: Equilibrium price rises.
If a price ceiling is imposed, then: Ans: a shortage of product will result.
Other things being equal, the effects of an increase in the price of
computers would best be represented by which of the following? Ans: A
movement up along the demand curve for computers.
Gross domestic product is officially measured by adding together the:
Ans: market value of all final goods and services produced within the
borders of a nation.
GDP Expenditures and Income Components
Personal consumption expenditures
$5,207
Interest
425
Corporate profits
PRINCIPLES OF MACROECONOMICS
QUESTIONS WITH DETAILED VERIFIED
ANSWERS
An economist notices that sunspot activity is high just prior to recessions
and concludes that sunspots cause recessions. The economist has Ans:
confused association with and causation.
Which of the following is a statement of normative economics? Ans: The
minimum wage is good because it raises wages for the working poor.
Scarcity exists Ans: in all countries in the world.
Which of the following would eliminate scarcity as an economic problem?
Ans: None of these because scarcity cannot be eliminated.
Microeconomics approaches the study of economics from the viewpoint of
Ans: individuals or specific markets.
Computer programs, or software, are an example of Ans: capital.
A review of the performance of the U.S. economy during the 1990's is
primarily the concern of Ans: macroeconomics.
Which of the following is not a resource? Ans: money
Which of the following is a statement of positive economics? Ans: The
income tax system collects a lower percentage of the incomes of the
poor.
Economics is the study of Ans: people making choices because of the
problem of scarcity.
On a production possibilities curve, the opportunity cost of good X, in
terms of good Y, is represented by the: Ans: movement along the curve.
, Page | 2
This economy cannot currently produce 70 washers and 70 dryers
because Ans: it does not have the resources and technology to produce
that level of output.
In the following exhibit, the production possibilities curve demonstrates:
Ans: the law of increasing opportunity costs.
In the following exhibit, movement between which of the following points
represents an increase in economic efficiency? Ans: C to D
The opportunity cost of an action is: Ans: the value of the best
opportunity that must be sacrificed in order to take the action.
In the following exhibit, inefficient resource use is shown by which of the
following points? Ans: P
Production is efficient if the economy is producing at a point Ans: on the
production possibilities curve.
In the following exhibit, if the economy moves from point L to point M,
the opportunity cost of producing 10 more capital goods is: Ans: 15 less
consumer goods.
When a production possibilities frontier is bowed outward, the
opportunity cost of producing an additional unit of a good Ans: increases
as more of the good is produced.
In the following exhibit, which of the following could have caused the
production possibilities curve of an economy to shift from the one labeled
A to the one labeled B? Ans: An advance in technology
Which of the following will cause a movement along the supply curve?
Ans: A change in the market price of a good, other things held constant.
An increase in the wages paid to fishermen will have what effect on the
fish market equilibrium? Ans: Price will increase, and quantity will
decrease.
The price of a good will fall when: Ans: there is a surplus of the good.
, Page | 3
Which of the following would shift the demand curve for autos to the
right? Ans: A fall in the price of auto insurance.
Which of the following could cause the supply of carrots to decrease?
Ans: Fertilizer costs increase.
If the demand for a good decreased, what would be the effect on the
equilibrium price and quantity? Ans: Price would decrease, and quantity
would decrease.
If a government-imposed price floor legally sets the price of milk above
market equilibrium, which of the following will most likely happen? Ans:
There will be a surplus of milk.
An increase in demand and a decrease in supply cause which of the
following? Ans: Equilibrium price rises.
If a price ceiling is imposed, then: Ans: a shortage of product will result.
Other things being equal, the effects of an increase in the price of
computers would best be represented by which of the following? Ans: A
movement up along the demand curve for computers.
Gross domestic product is officially measured by adding together the:
Ans: market value of all final goods and services produced within the
borders of a nation.
GDP Expenditures and Income Components
Personal consumption expenditures
$5,207
Interest
425
Corporate profits
