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1. Macroeconomists study
a. the decisions of individual households and firms.
b. the interaction between households and firms.
c. economy-wide phenomena.
d. regulations imposed on firms and unions.
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2. The basic tools of supply and demand are
a. useful only in the analysis of economic behavior in individual markets.
b. useful in analyzing the overall economy, but not in analyzing individual markets.
c. central to microeconomic analysis, but seldom used in macroeconomic analysis.
d. central to macroeconomic analysis as well as to microeconomic analysis.
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3. Which of the following statistics is usually regarded as the best single measure of a society’s
economic well-being?
a. the unemployment rate
b. the inflation rate
c. gross domestic product
d. the trade deficit
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4. GDP
a. is used to monitor the performance of the overall economy but is not the single
best measure of a society’s economic well-being.
b. is used to monitor the performance of the overall economy and is the single best
measure of a society’s economic well-being.
c. is not used to monitor the performance of the overall economy but is the single
best measure of a society’s economic well-being.
d. is not used to monitor the performance of the overall economy and is not the single
best measure of a society’s economic well-being.
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5. Disposable income is
a. the total income earned by a nation’s permanent residents.
b. the total income earned by a nation’s residents in the production of good and
services.
c. the income that households and non-corporate businesses receive.
d. the income that households and businesses have remaining after satisfying their
obligations to the government.
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6. The consumption component of GDP includes spending on
a. durable goods and nondurable goods, but not spending on services.
b. durable goods and services, but not spending on nondurable goods.
c. nondurable goods and services, but not spending on durable goods.
d. durable goods, nondurable goods, and services.
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7. Which of the following is an example of a durable good?
a. a refrigerator
b. a quart of motor oil
c. a business suit
d. a can of soup
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8. What word do economists use to refer to the purchase of goods that will be used in the future to
produce more goods and services?
a. capital
b. consumption
c. investment
d. costs
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9. In the United States in 2009, consumption represented approximately
a. 60 percent of GDP.
b. 70 percent of GDP.
c. 80 percent of GDP.
d. 90 percent of GDP.
____ 10. If the prices of all goods and services produced in the economy rose while the quantity of all
goods and services stayed the same, which would rise?
a. both real GDP and nominal GDP
b. real GDP but not nominal GDP
c. nominal GDP but not real GDP
d. neither nominal GDP nor real GDP
____ 11. The term economists use to describe a situation in which the economy’s overall price level is
rising is
a. growth.
b. inflation.
c. recession.
d. expansion.
____ 12. A recession has traditionally been defined as a period during which
a. nominal GDP declines for two consecutive quarters.
b. nominal GDP declines for four consecutive quarters.
c. real GDP declines for two consecutive quarters.
d. real GDP declines for four consecutive quarters.
____ 13. GDP is used as the basic measure of a society's economic well-being. A better measure of the
economic well-being of individuals in society is
a. saving per person.
b. GDP per person.
c. government expenditures per person.
d. investment per business firm.
____ 14. The consumer price index is used to
a. monitor changes in the level of wholesale prices in the economy.
b. monitor changes in the cost of living over time.
c. monitor changes in the level of real GDP over time.
d. monitor changes in the stock market.
____ 15. The inflation rate is calculated
a. by determining the change in the price index from the preceding period.
b. by adding up the price increases of all goods and services.
c. by computing a simple average of the price increases for all goods and services.
d. by determining the percentage increase in the price index from the preceding period.
____ 16. A COLA automatically raises the wage when
a. GDP increases.
b. taxes increase.
c. the consumer price index increases.
d. the producer price index increases.
____ 18. The level of real GDP person
a. differs widely across countries, but the growth rate of real GDP per person is similar
across countries.
b. is very similar across countries, but the growth rate of real GDP per person differs widely
across countries.
c. and the growth rate of real GDP per person are similar across countries.
d. and the growth rate of real GDP per person vary widely across countries.
____19. The one variable that stands out as the most significant explanation of large variations in living standards
around the world is
a. productivity.
b. population.
c. preferences.
d. prices.
____20. Productivity is defined as the quantity of
a. labor required to produce a nation’s GDP.
b. labor required to produce one unit of goods and services.
c. goods and services produced from each unit of labor input.
d. goods and services produced per unit of time.