Macroeconomic c1

Labour, land and capital are called:

• goods and services.

• entrepreneurship.

• outputs.

• factors of production.

The production possibilities frontier shows that:

• scarcity can be eliminated.

• all output combinations are possible

• an economy that is operating efficiently can have more of one good without giving up some of another good.

• some of one good must be given up to get more of another good in an economy that is operating efficiently.

Which of the following moves from one point to another in Exhibit 2.7 would represent an increase in economic efficiency?

• Z to W.

• W to Y.

• Z to X.

• X to W.

A point outside a production possibilities curve reflects:

• efficiency.

• an impossible choice.

• inefficiency.

• unemployment.

What do incentives do in the context of macroeconomics?

• 
  Are insignificant in decision-making

• Discourage financial responsibility

• Motivate individuals and firms

• Slow down economic growth

What term is used to describe the general increase in prices of goods and services in an economy over time?

• Inflation

• Deflation

• Stagnation

• Recession

What is the primary focus of economics?

• How to maximize profits for firms

• How to eliminate poverty

• How society manages its scarce resources

• How to increase government revenue

What is the significance of trade in economics?

• 
  It creates competition among countries

• It can make everyone better off

• 
  It leads to market failures

• 
  It reduces the variety of goods available

What is an externality?

• A government regulation

• 
  A market failure

• The impact of one person's actions on the well-being of a bystander

• A benefit received by a third party

What does the short-run trade-off between inflation and unemployment imply?

• 
  Inflation and unemployment are unrelated

• Policies can influence both inflation and unemployment in opposite directions

• Lower inflation leads to lower unemployment

• Higher inflation always leads to higher unemployment