Exam I Review

Why is there scarcity?

• Because the opportunity set determines this.

• Because theory dictates it.

• Because our unlimited wants exceed our limited resources

• Because human wants are limited.

Which of the following best characterizes the circular flow of income?

• Businesses buy resources from the government, and households buy goods and services from businesses.

• Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

• The government purchases resources from businesses and households and then sells goods and services to businesses and households.

• Households buy factors of production from businesses, and businesses buy goods and services from households.

Which of the following best describes a monetary policy tool?

• interest rates

• taxes

• household savings

• government spending

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

• all consumers.

• producers and input suppliers.

• buyers and sellers.

• producers and government planning committees.

The basic difference between macroeconomics and microeconomics is that:

• microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets).

• macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries.

• macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

• microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

• division of labour

• international trade

• economies of scale

• command economy

As a person receives more of a good, the _______________ from each additional unit of the good declines.

• utility

• marginal utility

• budget constraint

• sunk costs

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

• negative statements

• positive statements

• tradeoffs

• utilitarianism

Refer to Figure 2-1. The most inefficient point depicted is:

• Point A

• Point C

• Point D

• Point G

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:

• balanced budget

• prudent monetary policy

• low inflation

• assuring competition between firms