MACROECONOMICS, 14TH CANADIAN Edition Test Bank

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ExamName___________________________________MULTIPLE CHOICE.Choose the one alternative that best completes the statement or answers the question.1)The economic concept that serves as the basis for the study of economics is:1)_______A)unemployment.B)money.C)scarcity.D)inflation.2)As a consequence of the condition of scarcity:2)_______A)things which are plentiful have relatively high prices.B)production has to be centrally planned.C)there is always enough of everything.D)individuals and communities have to make choices among alternatives.3)In every economic system, choices must be made because resources are:3)_______A)limited, and so are economic wants.B)unlimited, but economic wants are limited.C)infinite, but economic wants are finite.D)finite, but economic wants are insatiable.4)Opportunity cost is best defined as:4)_______A)the value of the best foregone alternative.B)marginal cost minus marginal benefit.C)the money cost of an economic decision.D)the time spent on an economic activity.5)Tammie makes $150 a day as a bank clerk. She takes off two days of work without payto fly to another city to attend the concert of her favourite music group. The cost oftransportation for the trip is $250. The cost of the concert ticket is $50. The opportunitycost of Tammie's trip to the concert is:5)_______A)$450B)$500C)$300D)$6006)When a provincial government chooses to build more roads, the required resources areno longer available for spending on public education. This dilemma illustrates theconcept of:6)_______A)marginal analysis.B)opportunity cost.C)full production.D)full employment.7)Specialization and trade are beneficial to society because:7)_______A)the output of economic goods may be increased with no increase in resources.B)a division of labour lowers prices for products.C)scarce resources are utilized more efficiently.D)all of the above are correct.8)When economists describe "a market," they mean:8)_______A)information networks that allow individuals to keep in touch with each other.B)a mechanism which coordinates actions of consumers and producers to establishequilibrium prices and quantities.C)a place where stocks and bonds are traded.D)a hypothetical place where the production of goods and services takes place.

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9)The institution that coordinates actions of consumers and producers to establish pricesfor goods and services is known as:9)_______A)a production possibilities curve.B)a monopoly.C)consumer sovereignty.D)a market.10)A major argument for economic growth is that it:10)______A)leads to a higher standard of living.B)protects common property resources.C)creates an equal distribution of income.D)reduces the amount of taxation.11)One of the basic economic defences of economic growth rests on the conclusion that:11)______A)a growth-oriented society has a relatively equitable income distribution.B)growth makes workers less obsolete and more secure in employment.C)growth makes the gap between unlimited wants and scarce resources less acute.D)growth reduces the cost of "common property" resources to society.12)Concern about the general level of prices in an economy is primarily a concern about theeconomic goal of:12)______A)economic efficiency.B)economic security.C)equity.D)price-level stability.13)Assume that a tradeoff exists in the short run between inflation and unemployment. Thisrelationship means that:13)______A)less unemployment can be achieved with more inflation.B)the unemployment rate always equals the inflation rate.C)less unemployment can be achieved with less inflation.D)a low rate of unemployment causes a low rate of inflation.14)The study of economics is primarily concerned with:14)______A)demonstrating that capitalistic economies are superior to socialistic economies.B)keeping private businesses from losing money.C)choices which are made in seeking to use scarce resources efficiently.D)determining the most equitable distribution of society's output.15)The assertion that "There is no free lunch" means:15)______A)all production involves the use of scarce resources and thus the sacrifice ofalternative goods.B)there are always tradeoffs between economic goals.C)choices do not need be made if behaviour is rational.D)marginal analysis is not used in economic reasoning.16)The study of economics exists because:16)______A)resources are overly abundant as compared to wants; thus, an allocation problemexists.B)the market system is an obstacle to the efficient use of plentiful resources to satisfyconstrained wants.C)government interferes with the efficient allocation of scarce resources.D)resources are scarce in relation to human material wants.17)Economics may best be defined as:17)______

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A)the study of the behaviour of people and institutions in the production, distribution,and consumption of scarce goods.B)the use of policy to refute facts and hypotheses.C)the interaction between macro and micro considerations.D)the empirical testing of value judgments through the use of induction and deduction.18)Purposeful behaviour suggests that:18)______A)everyone will make identical choices.B)individuals make decisions with some desired outcome in mind.C)resource availability exceeds material wants.D)an individual's economic goals cannot involve tradeoffs.19)Consumers spend their incomes to get the maximum benefit or satisfaction from thegoods and services they purchase. This is a reflection of:19)______A)the tradeoff problem which exists between competing goals.B)purposeful behaviour.C)resource scarcity and the necessity of choice.D)marginal costs which exceed marginal benefits.20)The "economic perspective" refers to:20)______A)microeconomic phenomena, but not macroeconomic phenomena.B)unlimited resources in a context of limited material wants.C)the making of rational decisions in a context of marginal costs and marginalbenefits.D)macroeconomic phenomena, but not microeconomic phenomena.21)The "economic perspective" entails:21)______A)rational behaviour by individuals and institutions.B)the altering of behaviour when marginal benefits and marginal costs change.C)a comparison of marginal benefits and marginal costs in decision making.D)all of the above.22)The economic perspective used in customer decision making at fast-food restaurants isreflected in:22)______A)all customer lines tending to be of equal length.B)customers leaving rather than waiting if all lines are long.C)customers selecting the shortest line.D)all of the above.23)How is the economic perspective reflected in lines for fast food?23)______A)The set of food choices is often too complex for most customers and thus createslong lines.B)Customers select the shortest line because they have perfect information.C)Lines will typically be of unequal length because of the inefficiencies in counterservice.D)Customers select the shortest line because they believe it will reduce their time costof obtaining food.24)From an economic perspective, when consumers leave a fast-food restaurant because thelines to be served are too long, they have concluded that the:24)______A)marginal cost of waiting is less than the marginal benefit of being served.

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B)management is exhibiting irrational behaviour by not maximizing profits.C)marginal cost of waiting is greater than the marginal benefit of being served.D)management is making an assumption that other things are equal.25)Consumers might leave a fast-food restaurant without being served because:25)______A)they conclude that the marginal cost (monetary plus time costs) exceeds themarginal benefit.B)the lines waiting for service are not of equal length.C)the environment is not conducive to a rational choice.D)they are misinformed about the marginal cost and marginal benefits of the foodbeing served.26)At fast-food restaurants:26)______A)decisions entail comparisons of marginal costs and marginal benefits.B)benefits always exceed costs.C)consumers enjoy complete and accurate information.D)decisions are usually made by trial and error.27)Economics involves "marginal analysis" because:27)______A)marginal benefits always exceed marginal costs.B)most decisions involve changes in the status quo.C)much economic behaviour is irrational.D)marginal costs always exceed marginal benefits.28)You should decide to go to a movie:28)______A)if the marginal benefit of the movie exceeds its marginal cost.B)if the marginal cost of the movie exceeds its marginal benefit.C)if your income will allow you to buy a ticketD)because movies are inherently good products.29)Marginal costs exist because:29)______A)most decisions do not involve sacrifices or tradeoffs.B)the decision to produce more of some product means the sacrifice of other products.C)households and businesses make rational decisions.D)wants are scarce relative to resources.30)Even though local newspapers are very inexpensive, people rarely buy more than one ofthem each day. This fact:30)______A)contradicts the economic perspective.B)implies that reading should be taught through phonics rather than the wholelanguage method.C)implies that, for most people, the marginal benefit of reading a second newspaper isless than the marginal cost.D)is an example of irrational behaviour.31)The process of developing hypotheses, testing them against facts, and using the results toconstruct theories is called:31)______A)marginal analysis.B)microeconomics.C)the scientific method.D)opportunity cost calculation.32)A "hypothesis" is:32)______

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A)the same as a normative statement.B)always the result of induction.C)a fundamental truth which all economists accept.D)a tentative, untested principle.33)From the perspective of economists, which term provides the highest degree ofconfidence for explaining economic behaviour?33)______A)an assumptionB)a hypothesisC)an economic principle or a lawD)a fact34)In constructing models, economists:34)______A)make simplifying assumptions.B)must use mathematical equations.C)include all available information.D)attempt to duplicate the real world.35)Economic models:35)______A)are unrealistic and therefore of no practical consequence.B)are of limited use because they cannot be tested empirically.C)emphasize basic economic relationships by abstracting from the complexities of thereal world.D)are limited to variables which are directly related to one another.36)An economic model is:36)______A)built using theory.B)a value judgment.C)built on correlations.D)a fact.37)The term "ceteris paribus" means:37)______A)that economics deals with facts, not values.B)prosperity inevitably follows recession.C)other things equal.D)that if event A precedes event B, A has caused B.38)Suppose an economist says that "Other things equal, the lower the price of bananas, thegreater the amount of bananas purchased." This statement indicates that:38)______A)the quantity of bananas purchased determines the price of bananas.B)all factors other than the price of bananas (for example, consumer tastes andincomes) are assumed to be constant.C)one cannot generalize about the relationship between the price of bananas and thequantity purchased.D)economists can conduct controlled laboratory experiments.39)The term "other things equal" means that:39)______A)many variables affect the variable under consideration.B)when variable X increases so does related variable Y.C)the associated statement is normative.D)the assumption that factors other than those being considered do not change.40)The basic purpose of the "other things equal" assumption is to:40)______A)allow one to reason about the relationship between variables X and Y without theintrusion of variable Z.B)determine whether X causes Y or vice versa.C)allow one to focus upon macro variables by ignoring micro variables.

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D)allow one to focus upon micro variables by ignoring macro variables.41)Microeconomics is concerned with:41)______A)the aggregate or total levels of income, employment, and output.B)the establishing of an overall view of the operation of the economic system.C)the concealing of detailed information about specific segments of the economy.D)a detailed examination of specific economic units which comprise the economicsystem.42)Microeconomics:42)______A)is concerned with individual economic units and specific markets.B)is concerned with the aggregate or total levels of income, employment, and output.C)is not concerned with details, but only with the overall "big picture" of theeconomy.D)describes the aggregate flows of output and income.43)Which of the following is a microeconomic statement?43)______A)Unemployment was 8.3 percent of the labour force last year.B)The real domestic output increased by 2.5 percent last year.C)The price of personal computers declined last year.D)The general price level increased by 4 percent last year.44)Macroeconomics approaches the study of economics from the viewpoint of:44)______A)the operation of specific product and resource markets.B)governmental units.C)individual firms.D)the entire economy.45)Which of the following is associated with macroeconomics?45)______A)a study of the trend of pecan prices since World War IIB)an empirical investigation of the general price level and unemployment rates in the2000sC)an examination of the incomes of the University of Toronto Business SchoolgraduatesD)a case study of pricing and production in the textbook industry46)The problems of aggregate inflation and unemployment are:46)______A)major topics of microeconomics.B)not relevant to the Canadian economy.C)peculiar to socialistic economies.D)major topics of macroeconomics.47)Which of the following statements pertains to macroeconomics?47)______A)The national productivity rate grew by 1.4 percent last year.B)Because the minimum wage was raised, Mrs. Beepath decided to enter the labourforce.C)A decline in the price of soybeans caused farmer Wanek to plant more land inwheat.D)The Pumpkin Center Chartered Bank increased its interest rate on consumer loansby 1 percent.

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48)Macroeconomics can best be described as the:48)______A)study of how supply and demand determine prices in individual markets.B)study of the large aggregates of the economy or the economy as a whole.C)analysis of how firms attempt to maximize their profits.D)analysis of how a consumer tries to spend income.49)Which of the following is a macroeconomic statement?49)______A)The gross profits of all Canadian businesses were $70 billion last year.B)The productivity of steelworkers increased by 1 percent in 2012.C)General Motors' profits increased in 2012.D)The price of beef declined by 3 percent last year.50)A positive statement is one which is:50)______A)objective and is based on facts.B)subjective and is based on a value judgment.C)suggestive of what should be done.D)derived by an abstract generalization.51)Which of the following is a positive statement?51)______A)I enjoy summer evenings when it cools off.B)The humidity is too high today.C)The temperature is 30 degrees today.D)It is too hot to jog today.52)A positive statement is concerned with:52)______A)what is.B)some goal which is desirable to society.C)what should be.D)the formulation of economic policy.53)A normative statement is one which:53)______A)pertains only to macroeconomics.B)is based upon value judgments.C)is based on the law of averages.D)pertains only to microeconomics.54)Which of the following is a normative statement?54)______A)The temperature is high today.B)It is too hot to play tennis today.C)It will cool off later this evening.D)The humidity is high today.55)Normative statements are concerned with:55)______A)rational choice involving costs and benefits.B)what is.C)what ought to be.D)facts and theories.56)Most of the disagreement among economists involves:56)______A)theories.B)positive statements.C)facts.D)normative statements.57)Economics is concerned with using scarce productive resources efficiently in attemptingto satisfy society's material wants. This statement is:57)______A)positive and correct.B)normative and correct.

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C)normative, but incorrect.D)positive, but incorrect.58)Ben says that "An increase in the tax on beer will raise its price." Holly argues that"Taxes should be increased on beer because college students drink too much." We canconclude that:58)______A)Both statements are normative.B)Ben's statement is normative, but Holly's is positive.C)Both statements are positive.D)Holly's statement is normative, but Ben's is positive.59)The global financial crisis that spread to Canada in late 2008 has been dubbed:59)______A)The housing bubble crash.B)The great depression.C)The great recession.D)The great financial crisis.60)The individuals and society both face an economic problem. This problem arises fromthe fact that:60)______A)individuals and institutions behave only in their self-interest.B)resources are scarce relative to individual's wants.C)both wants and resources are unlimited.D)wants are limited but the resources are not.61)The individual's limited income problem:61)______A)has been eliminated in affluent societies such as Canada and the United States.B)exists because material wants are limited.C)persists only because countries have failed to achieve continuous full employment.D)has been solved in all industrialized nations.62)When an economist says that material wants are insatiable, this means that:62)______A)these wants are virtually unlimited and therefore incapable of complete satisfaction.B)economic resources—land, labour, capital, and entrepreneurial ability—are scarce.C)economic resources are valuable only because they can be used to produceconsumer goods.D)the structure of consumer demand varies from time to time and from country tocountry.63)As used in economics, the notion of scarce resources means that:63)______A)mineral deposits are only available in finite amounts.B)resources are not so plentiful that all individuals' material wants can be fulfilled.C)the quantities available of some resources exceed the demand for them.D)some resources are free while others have price tags on them.64)The budget line shows:64)______A)all equilibrium points on an indifference map.B)all possible combinations of two goods which can be purchased, given moneyincome and the prices of the goods.C)the amount of product A which a consumer is willing to give up to obtain one moreunit of product B.D)all possible combinations of two goods which yield the same level of utility to theconsumer.65)The price ratio of the two products is the:65)______

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A)elasticity of demand for the two products.B)point of tangency for equilibrium.C)marginal rate of substitution.D)slope of the budget line.66)Refer to the budget line shown in the diagram below. If the consumer's money income is$20, the:66)______A)consumer can obtain a combination of 5 units of both C and D.B)price of C is $4 and the price of D is $2.C)price of C is $2 and the price of D is $4.D)prices of C and D cannot be determined.67)Refer to the diagram below, suppose you have a money income of $10 all of which youspend on Coke and boxes of popcorn. The prices of Coke and popcorn respectively are:67)______A)$.50 and $1.00.B)$.40 and $.50.C)$1.00 and $2.00.D)$1.00 and $.50.68)In moving along a given budget line:68)______A)each point on the line will be equally satisfactory to consumers.B)the prices of both products and money income are assumed to be constant.C)money income varies, but the prices of the two goods are constant.D)the prices of both products are assumed to vary, but money income is constant.

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69)In drawing a budget line it is assumed that:69)______A)money income is fixed.B)consumer willingness to substitute between the two products is fixed.C)the prices of the two products are variable.D)consumer preferences are fixed.70)Any combination of goods lying outside of the budget line:70)______A)yields less utility than any point on the budget line.B)implies that the consumer is not spending all of his income.C)is unattainable, given the consumer's income.D)yields less utility than any point inside the budget line.71)The budget line shift from cd to ab in the below figure is consistent with:71)______A)an increase in money income.B)an increase in the price of M and a decrease in the price of N.C)decreases in the prices of both M and N.D)a decrease in money income.72)A leftward shift of a consumer's budget line to a position parallel with the original onecould indicate that the:72)______A)marginal utilities derived from both products have decreased.B)prices of both products have decreased in the same proportion.C)consumer's money income has increased but the prices of both products haveincreased proportionately more.D)price of one product has decreased in relation to the other.73)Which of the following statements is not correct?73)______A)A reduction in money income will shift the budget line to the right.B)An increase in money income will shift the budget line to the right.C)An increase in product prices will shift the budget line to the left.D)A reduction in money income accompanied by an increase in product prices willnecessarily shift the budget line to the left.74)The society must also make choices under conditions of scarcity. This problem arisesfrom the fact that:74)______

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A)society's wants are limited but the resources are not.B)resources are scarce relative to society's wants.C)society's wants and resources are both unlimited.D)societies behave only in their self-interest.75)The fundamental problem of economics is:75)______A)to achieve a more equitable distribution of money income in order to mitigatepoverty.B)to establish a democratic political framework for the provision of social goods andservices.C)the scarcity of productive resources relative to material wants.D)the establishment of prices which accurately reflect the relative scarcities ofproducts and resources.76)Economic resources are also called:76)______A)free gifts of nature.B)consumption goods.C)factors of production.D)units of money capital.77)Money is not considered to be an economic resource because:77)______A)the terms of trade can be determined in non-monetary terms.B)money, as such, is not productive.C)idle money balances do not earn interest income.D)money is a free gift of nature.78)Which of the following is real capital?78)______A)a pair of stockingsB)a savings accountC)a dump truckD)a share of TD Bank stock79)The main function of the entrepreneur is to:79)______A)purchase capital.B)make routine pricing decisions.C)create market demand.D)innovate.80)The following production possibilities table represents an economy which is producingtwo products, tanks and autos. Refer to the table, in moving from possibility C to D, thecost of a tank in terms of autos is:80)______A)300B)200C)50D)100(The following economy produces two products.)Production Possibilities Table

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81)Refer to the above table. A change from possibility C to B means that:81)______A)2 units of steel are given up to get 75 units of wheat.B)2 units of steel are given up to get 15 more units of wheat.C)1 unit of steel is given up to get 15 more units of wheat.D)1 unit of steel is given up to get 75 units of wheat.82)Refer to the above table. In moving from possibility C to D, the cost of a unit of steel interms of a unit of wheat is:82)______A)30B)20C)25D)1083)Refer to the above table. A change from possibility B to C means that:83)______A)75 units of wheat are equal to one unit of steel.B)10 units of wheat are given up to get one more unit of steel.C)15 units of wheat are equal to one unit of steel.D)15 units of wheat are given up to get one more unit of steel.84)The production possibilities curve represents which of the following?84)______A)the amount of goodsattainable with variable resourcesB)the maximum amount of goods attainable with variable resourcesC)the amount of goods attainable if prices declineD)maximum combinations of goods attainable with fixed resources85)The production possibilities curve represents:85)______A)the maximum amount of labour and capital available for production.B)the maximum rate of growth of capital and labour in an economy.C)combinations of goods and services among which consumers are indifferent.D)maximum combinations of products available with fixed resources and technology.86)The construction of a production possibilities curve assumes:86)______A)technology is fixed.B)full employment and full production are being realized.C)the quantities of all resources are fixed.D)all of the above.87)Assume an economy is operating at some point on its production possibilities curvewhich shows civilian and military goods. If the output of military goods is increased, theoutput of civilian goods:87)______A)must be decreased.B)must also be increased.C)will remain unchanged.D)may be either increased or decreased.88)The production possibilities curve shows:88)______A)the ideal, but unattainable, combinations of two goods which would maximizeconsumer satisfactions.

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B)the various combinations of two goods which can be produced when someresources are unemployed.C)the minimum outputs of two goods which will sustain a society.D)the various combinations of two goods which can be produced when society uses itsscarce resources efficiently.89)The negative slope of the production possibilities curve is a graphical way of indicatingthat:89)______A)consumers buy more when prices are low than they do when prices are high.B)to produce more of one product we must accept less of another.C)the principle of increasing opportunity costs does not apply to the economy as awhole.D)any economy "can have its cake and eat it too."90)If an economy is operating on its production possibilities curve for consumer goods andcapital goods, this means that:90)______A)it is impossible to produce more consumer goods.B)more consumer goods can only be produced at the cost of fewer capital goods.C)resources cannot be reallocated between the two goods.D)it is impossible to produce more capital goods.91)In drawing a production possibilities curve we hold constant:91)______A)both technology and resource suppliesB)resource supplies only.C)the money supply.D)the consumer price index.92)The production possibilities curve tells us:92)______A)that costs do not change as society varies its output.B)what specific combinations of two products is most desired by society.C)what combinations of two goods can be produced with society's available resources.D)costs are irrelevant in a society which has fixed resources.93)When an economy is operating with maximum efficiency, the production of more ofcommodity A will mean the production of less of commodity B because:93)______A)material wants are insatiable.B)of the law of decreasing opportunity costs.C)resources are not specialized and are imperfectly substitutable.D)resources are limited.94)The production possibilities curve:94)______A)shows all of those combinations of two goods which are most preferred by society.B)shows all of those levels of production which are consistent with a stable pricelevel.C)is a frontier between all combinations of two goods which can be produced andthose combinations which cannot be produced.D)indicates that any combination of goods lying outside the curve is economicallyinefficient.95)The production possibilities curve illustrates the basic principle that:95)______A)an economy's capacity to produce increases in proportion to its population size.

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B)an economy will automatically seek that level of output at which all of its resourcesare employed.C)if all the resources of an economy are in use, more of one good can be producedonly if less of another good is produced.D)the production of more of any one good will in time require smaller and smallersacrifices of other goods.96)A production possibilities curve illustrates:96)______A)consumer preferences.B)scarcity.C)market prices.D)the distribution of income.97)A production possibilities curve shows:97)______A)that resources are unlimited.B)combinations of capital and labour necessary to produce specific levels of output.C)that people prefer one of the goods more than the other.D)the maximum amounts of two goods which can be produced assuming the full andefficient use of available resources.98)In drawing the production possibilities curve we assume that:98)______A)unemployment exists.B)economic resources are unlimited.C)technology is fixed.D)wants are limited.99)Which of the following is assumed in constructing a typical production possibilitiescurve?99)______A)the economy is using its resources inefficiently.B)the economy is engaging in international trade.C)production technology is fixed.D)resources are perfectly shiftable among alternative uses.100)Which of the following is not correct? A typical production possibilities curve:100)_____A)specifies how much of each product society should produce.B)reveals how much each additional unit of one product will cost in terms of the otherproduct.C)indicates that to produce more of one product society must give up larger and largeramounts of the other product.D)indicates how much of two products a society can produce.101)Which one of the following statements is correct?101)_____A)Most production possibilities curves are convex as viewed from the origin.B)Relative scarcity is no longer a central notion in economics because we are in anage of abundance.C)The central concept underlying the production possibilities curve is that of limitedresources.D)The production possibilities curve shows society's preferences for consumer goodsrelative to capital goods.102)The typical production possibilities curve is:102)_____A)a downward sloping line which is concave to the origin.B)a straight upward sloping line.C)an upward sloping line which is concave to the origin.D)a downward sloping line which is convex to the origin.

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103)Refer to the diagram below. Points A, B, C, D, and E show:103)_____A)that the opportunity cost of computers increases, while that of bicycles is constant.B)that society's demand for computers is greater than its demand for bicycles.C)that the opportunity cost of bicycles increases, while that of computers is constant.D)combinations of bicycles and computers which society can produce by using itsresources efficiently.104)Refer to the following production possibilities curves. Curve (a) is the current curve forthe economy. Given production possibilities curve (a), the combination of capital andconsumer goods indicated by point L:104)_____A)would entail substantial unemployment.B)is beyond the productive capacity of this society.C)would entail an inefficient use of society's resources.D)suggests the productive capacity of the system is declining.

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