Chapter 23 (A)

1. Macroeconomists study

• A.decisions of households and firms.
• B.economy-wide phenomenA.
• C. the interaction of households and firms.
• D.regulations of firms and unions.

2. Which of the following headlines would be more closely related to what microeconomists study than what macroeconomists study?

• A.Unemployment rate rises from 5 percent to 5.5 percent.
• B.Real GDP grows by 3.1 percent in the third quarter.
• C. Retail sales at stores show large gains.
• D.The price of oranges rises after an early frost.

3. Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?

• A.Why do prices in general rise by more in some countries than others?
• B.Why do wages differ across industries?
• C. Why do production and income increase in some periods and not in others?
• D.Why has average income increased over time?

4. Macroeconomics includes the study of topics such as

• A.national output, the inflation rate, and the trade deficit.
• B.the price of Cisco stock, wage differences between genders, and antitrust laws.
• C. differences in market structure, and how consumers maximize utility.
• D.None of the above are correct.

5. The goal of macroeconomics is

• A.to explain how economic changes affect prices of particular goods.
• B.to devise policies to deal with market failures such as externalities and monopoly.
• C. to explain changes that affect households and firms in general.
• D.None of the above are correct.

6. 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. not particularly useful in either macroeconomic or microeconomic analysis.
• D.central to macroeconomic analysis as well as to microeconomic analysis.

7. Which of the following statistics is the best single measure of an economy’s well-being?

• A.the unemployment rate
• B.the inflation rate
• C. GDP
• D.the trade deficit

8. Which of the following is correct for an economy?

• A.Income is greater than production.
• B.Production is greater than income.
• C. Income always equals production.
• D.Income equals production only when saving is zero.

9. Robert works as a lawyer.

• A.GDP computations should be made using his income from providing legal services, not his production of legal services.
• B.GDP computations should be made using his production, not his income from providing legal services.
• C. GDP computations should include both his income and his production.
• D.GDP computations should include either his income or his production, but not both.

10. If GDP rises,

• A.income and production must both rise.
• B.income and production must both fall.
• C. income must rise, but production may rise or fall.
• D.production must rise, but income may rise or fall.