Macroeconomics Principles Applications and Tools 8th Edition – Test Bank

Macroeconomics Principles Applications and Tools 8th Edition – Test Bank Macroeconomics: Prin., Apps, & Tools, 8e (O’Sullivan) TB1 Chapter 1 Introduction: What Is Economics? 1.1 What Is Economics? 1) Economics is best defined as the study of 1. A) financial decision-making. 2. B) how consumers make purchasing decisions. 3. C) the choices made by people faced with scarcity. 4. D) inflation, unemployment, and economic growth. Answer: C Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 2) Economics is the study of 1. A) how to invest in the stock market. 2. B) how society uses limited resources. 3. C) the role of money in markets. 4. D) how government officials decide which goods and services are produced. Answer: B Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 3) Scarcity can best be defined as a situation in which 1. A) there are no buyers willing to purchase what sellers have produced. 2. B) there are not enough goods to satisfy all of the buyers’ demand. 3. C) the resources we use to produce goods and services are limited. 4. D) there is more than enough money to satisfy consumers’ wants. Answer: C Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 4) An arrangement that allows buyers and sellers to exchange things is called 1. A) a contract. 2. B) a market. 3. C) money. 4. D) efficient. Answer: B Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 5) Because resources are limited 1. A) only the very wealthy can get everything they want. 2. B) firms will be forced out of business. 3. C) the availability of goods will be limited but the availability of services will not. 4. D) people must make choices. Answer: D Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 6) Tradeoff is 1. A) allowing the government and other organizations to choose for us. 2. B) sacrificing one thing for another. 3. C) deciding who consumes the products produced in an economy. 4. D) holding other variables fixed. Answer: B Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 7) Resources are all of the following EXCEPT 1. A) unlimited and in abundance. 2. B) the things we use to produce goods and services. 3. C) limited in quantity and can be used in different ways. 4. D) scarce and therefore require choices to be made. Answer: A Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 8) The knowledge and skills acquired by a worker through education and experience is a description of which factor of production? 1. A) physical capital 2. B) human capital 3. C) labor 4. D) entrepreneurship Answer: B Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 9) The physical and mental effort people use to produce goods and services is a description of which factor of production? 1. A) physical capital 2. B) human capital 3. C) labor 4. D) entrepreneurship Answer: C Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 10) The effort used to coordinate the factors of production is a description of 1. A) physical capital. 2. B) human capital. 3. C) labor. 4. D) entrepreneurship. Answer: D Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 11) All of the following are considered natural resources EXCEPT 1. A) a coral reef. 2. B) gold. 3. C) labor. 4. D) a redwood forest. Answer: C Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 12) Normative economics 1. A) is the focus of most modern economic reasoning. 2. B) answers the question “What ought to be?” 3. C) predicts the consequences of alternative actions. 4. D) answers the question “What is?” Answer: B Diff: 1 Topic: Positive versus Normative Analysis Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 13) Which of the following is an example of a normative question? 1. A) How will an increase in the inheritance tax affect tax revenues? 2. B) What fraction of an income tax cut will be spent on imported goods? 3. C) Should Florida implement a state income tax to reduce its deficit? 4. D) How will an increase in unemployment benefits affect the unemployment rate? Answer: C Diff: 1 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 14) Which of the following is a question answered with positive economic analysis? 1. A) Should the college reduce tuition for out-of-state residents? 2. B) Should the college charge higher tuition for part-time students? 3. C) If the college increased its eligibility requirements for enrollment, will class sizes decline? 4. D) Should the college eliminate its athletic program to cut its costs? Answer: C Diff: 2 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 15) Which of the following is a question answered with normative economic reasoning? 1. A) If the college offers free textbooks for students, will more students read their textbooks? 2. B) If the college provided less financial aid for out-of-state students, would more in-state students benefit? 3. C) If the college increased its enrollment requirements, would class size decline? 4. D) Should the college increase tuition to fund its athletic programs? Answer: D Diff: 2 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 16) The 3 key economic questions include all of the following EXCEPT 1. A) “what products do we produce?” 2. B) “how do we produce these products?” 3. C) “where should these products be produced?” 4. D) “who consumes the products?” Answer: C Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 17) Deciding how a society’s products are distributed among its citizens answers the economic question of 1. A) who consumes the products produced. 2. B) what products will be produced. 3. C) where will the products be consumed. 4. D) how will the products be produced. Answer: A Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 18) Deciding if a company will produce automobiles by robotics or manual labor answers the economic question of 1. A) who consumes the products produced. 2. B) what products will be produced. 3. C) where will the products be consumed. 4. D) how will the products be produced. Answer: D Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 19) Deciding if a power company will generate electricity from wind power or coal answers the economic question of 1. A) who consumes the products produced. 2. B) what products will be produced. 3. C) where will the products be consumed. 4. D) how will the products be produced. Answer: D Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 20) An economic model is a 1. A) realistic version of an economic environment. 2. B) detailed version of an economic issue. 3. C) fictional representation of an entire economy. 4. D) simplified representation of an economic environment. Answer: D Diff: 1 Topic: Economic Models Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 21) Economic models are used to 1. A) explain every detail of an economic theory. 2. B) explore decision making by individuals, firms and other organizations. 3. C) build physical renditions of government construction projects. 4. D) represent the complexities of economic environments. Answer: B Diff: 1 Topic: Economic Models Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 22) Talking about alternatives is the first step in a process that helps us make better choices about how we use our resources. Answer: TRUE Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 23) In the past few centuries, choices have led to a substantial decline in the standards of living around the globe. Answer: FALSE Diff: 1 Topic: What Is Economics? Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 24) Scarcity is a situation in which resources are unlimited in quantity and can be used in different ways. Answer: FALSE Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 25) Positive economics answers the question, “What ought to be?” Normative economics predicts the consequences of alternative actions, answering the questions, “What is?” or “What will be?” Answer: FALSE Diff: 1 Topic: Positive versus Normative Analysis Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 26) Normative economics answers the question, “What ought to be?” Positive economics predicts the consequences of alternative actions, answering the questions, “What is?” or “What will be?” Answer: TRUE Diff: 1 Topic: Positive versus Normative Analysis Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 27) Most modern economic analysis is normative in nature, but involves questions with positive aspects. Answer: FALSE Diff: 1 Topic: Positive versus Normative Analysis Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 28) Economists will always reach the same conclusion in their positive analyses. Answer: FALSE Diff: 1 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 29) One of the key economic questions is “where should products be produced?” Answer: FALSE Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 30) One of the key economic questions is “who consumes the products?” Answer: TRUE Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 31) An economic model is a detailed version of an economic environment. Answer: FALSE Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 32) Economic models explore decision making by individuals, firms and other organizations. Answer: TRUE Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 33) Would an economist consider clean air a scarce resource? Explain. Answer: Yes, because the air had alternative uses. We can choose to use it to either breathe or to undertake activities that pollute it. The more we want to breathe clean air the more we must limit the production of pollutants. The more we pollute the air the less we can breathe clean air. Diff: 2 Topic: What Is Economics? Skill: Analytical AACSB: Analytic Skills Learning Outcome: Micro-1 34) List and briefly describe the five factors of production. Answer: Natural resources—those resources provided by nature. Labor—the physical and mental effort used by people to produce goods and services. Physical capital—the infrastructure, equipment, machines and structures used to produce goods and services. Human capital—the knowledge and skills obtained by workers through education and experience. Entrepreneurship— the organizing and coordination of the other four factors of production needed to produce and sell products. Diff: 2 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 35) Give an example of something that is scarce in your life and explain the choices you’ve made because of scarcity. Answer: Responses are numerous and will vary by students. Diff: 1 Topic: What Is Economics? Skill: Analytical AACSB: Analytic Skills Learning Outcome: Micro-1 36) Positive economic analysis answers what question? Answer: Positive economic analysis answers the question “what is” or “what will be.” Diff: 1 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 37) Normative economic analysis answers what question? Answer: Normative economic analysis answers the question “what ought to be.” Diff: 1 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 38) Richard runs a pizza delivery restaurant. List the three basic types of decisions studied in economics and give an example from Richard’s restaurant. Answer: How to produce? With what resources will the pizzas be produced? What to produce? What sorts of pizza do people order? Who consumes the products? Which people decided to come to the restaurant on a given day? Diff: 2 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Analytical AACSB: Analytic Skills Learning Outcome: Micro-1 1.2 Economic Analysis and Modern Problems 1) According to the Texas Transportation Institute, the typical U.S. commuter wastes approximately how much time per year due to traffic congestion? 1. A) 14 hours 2. B) 22 hours 3. C) 47 hours 4. D) 96 hours Answer: C Diff: 1 Topic: Economic View of Traffic Congestion Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 2) In the final two decades of the twentieth century, average per capita global income 1. A) increased by approximately 35 percent. 2. B) remained relatively unchanged. 3. C) decreased by approximately 6 percent. 4. D) increased by more than 75 percent. Answer: A Diff: 1 Topic: Economic View of Poverty in Africa Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 3) In the final two decades of the twentieth century, per capita income in sub- Saharan Africa 1. A) increased by approximately 35 percent. 2. B) remained relatively unchanged. 3. C) decreased by approximately 6 percent. 4. D) increased by more than 75 percent. Answer: C Diff: 1 Topic: Economic View of Poverty in Africa Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 4) Prior to the financial crisis and recession which began in 2007, credit for mortgages was , creating a . 1. A) virtually unavailable; housing bubble 2. B) only available to borrowers with high credit scores; shortage of affordable housing 3. C) easily obtained; housing boom 4. D) unavailable to low-income borrowers; large demand for rental properties Answer: C Diff: 1 Topic: Economic View of the Current World Recession Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 5) The financial crisis and recession which began in 2007 1. A) impacted only high-income countries. 2. B) was only severe in the United States. 3. C) had a global impact. 4. D) impacted only low-income countries. Answer: C Diff: 1 Topic: Economic View of the Current World Recession Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 6) Congestion taxes tend to cause an increase in traffic volume during rush hours. Answer: FALSE Diff: 1 Topic: Economic View of Traffic Congestion Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 7) In the 1980s and 1990s, average per capita income increased by a greater percentage in sub-Saharan Africa than it did in the rest of the world. Answer: FALSE Diff: 1 Topic: Economic View of Poverty in Africa Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 1.3 The Economic Way of Thinking 1) Who is associated with the following summary of the economic way of thinking: “The theory of economics does not furnish a body of settled conclusions immediately acceptable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its processer draw correct conclusions.” 1. A) John Maynard Keynes 2. B) Alfred Marshall 3. C) Adam Smith 4. D) President Harry Truman Answer: A Diff: 1 Topic: The Economic Way of Thinking Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 2) To make things simpler and focus attention on what really matters, economists would 1. A) use assumptions. 2. B) ignore all variables. 3. C) think at the margin. 4. D) respond to incentives. Answer: A Diff: 1 Topic: Use Assumptions to Simplify Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 3) A variable measures 1. A) something that always has the same value. 2. B) something that can take on different values. 3. C) factors that occur with high degrees of uncertainty. 4. D) the degree to which something varies over time. Answer: B Diff: 1 Topic: Isolate Variables – Ceteris Paribus Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 4) The Latin phrase ceteris paribus means that when a relationship between two variables is being studied, 1. A) both are treated as unpredictable. 2. B) neither of those two variables is allowed to change. 3. C) all other variables are held fixed. 4. D) we recognize that some factors are unknown. Answer: C Diff: 1 Topic: Isolate Variables – Ceteris Paribus Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 5) To think at the margin means to consider 1. A) how nothing remains constant over time. 2. B) how a small change in one variable affects another variable. 3. C) how people behave in their own self-interest. 4. D) how people will decide what to purchase. Answer: B Diff: 1 Topic: Think at the Margin Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 6) Jerome has a “C” average in his philosophy course and a “B” average in his economics course. He decides to study an extra hour for his philosophy exam. This is an example of 1. A) thinking at the margin. 2. B) using assumptions to simplify. 3. C) ceteris paribus. 4. D) caveat emptor. Answer: A Diff: 1 Topic: Think at the Margin Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 7) A small change in a variable is 1. A) an average change. 2. B) a ceteris paribus 3. C) an efficient change. 4. D) a marginal change. Answer: D Diff: 1 Topic: Think at the Margin Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 8) Adam Smith 1. A) is considered the founder of economics. 2. B) introduced the concept of ceteris paribus to the discussion of supply and demand. 3. C) is responsible for refining the model of supply and demand. 4. D) is the author of this text. Answer: A Diff: 1 Topic: Rational People Respond to Incentives Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 9) When economists assume that people are rational and respond to incentives, they mean 1. A) people act with kindness. 2. B) people are altruistic. 3. C) people act in their own self-interest. 4. D) people are selfish. Answer: C Diff: 1 Topic: Rational People Respond to Incentives Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 10) When deciding to implement a congestion tax, economists and the government would use the elements of the economic way of thinking to primarily determine 1. A) if the tax would be allocated equitably. 2. B) what tax amount should be charged. 3. C) who should be exempt from the tax. 4. D) how much revenue will the tax generate. Answer: B Diff: 1 Topic: Example: London Addresses its Congestion Problem Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 11) After the implementation of the congestion tax in London, traffic volume was reduced and travel time for cars and buses was cut in half. This is an example of 1. A) responding to incentives. 2. B) the role of pricing in allocating resources. 3. C) caveat emptor. 4. D) comparative advantage. Answer: A Diff: 1 Topic: Example: London Addresses its Congestion Problem Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 12) When determining an appropriate congestion tax, economists would use which of the following elements of the economic way of thinking? 1. A) thinking at the margin 2. B) isolating variables 3. C) making assumptions 4. D) all of the above Answer: D Diff: 2 Topic: Example: London Addresses its Congestion Problem Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 Recall the Application about the increase in purchases of hybrid vehicles to answer the following question(s). 13) According to the Application, one factor which was responsible for roughly one-fifth of hybrid vehicles purchased in 2007 was a federal subsidy of up to $3,400 per hybrid vehicle. The increase in sales due to this subsidy is an example of which element of the economic way of thinking? 1. A) responding to incentives 2. B) thinking at the margin 3. C) isolating variables 4. D) using assumptions to simplify Answer: A Diff: 1 Topic: Application 1, Incentives to Buy Hybrid Vehicles Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 14) According to the Application, one factor which was responsible for roughly one-third of hybrid vehicles purchased in 2007 was an increase in the price of gasoline. The increase in sales due to higher gasoline prices describe the economic concept of 1. A) using assumptions to simplify. 2. B) ceteris paribus. 3. C) marginal thinking. 4. D) rational self interest. Answer: D Diff: 1 Topic: Application 1, Incentives to Buy Hybrid Vehicles Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 15) According to the Application, the average cost of abating one ton of CO2 emissions through the hybrid subsidy is $177, but a switch from coal to natural gas in power plants would reduce CO2 emissions at less than one-third the cost of the hybrid subsidy. The increase in cost associated with the reduction of one ton of CO2 emissions (assuming that each unit of CO2 emissions is measured in tons) describes the economic concept of 1. A) using assumptions to simplify. 2. B) ceteris paribus. 3. C) marginal thinking. 4. D) rational self interest. Answer: C Diff: 1 Topic: Application 1, Incentives to Buy Hybrid Vehicles Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 Recall the Application about unwanted commercial e-mail, or spam, to answer the following question(s). 16) According to the Application, the economic approach to spam is to 1. A) establish a price for commercial e-mail. 2. B) ignore the spam issue because it has no economic implications. 3. C) have it legislated on the local level since it is a microeconomic issue. 4. D) ban all e-mail from international servers. Answer: A Diff: 2 Topic: Application 2, The Economic Solution To Spam Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 17) According to the Application, the amount of e-mail spam would significantly decrease if 1. A) the cost of sending spam exceeded its profitability. 2. B) states passed laws making spam illegal. 3. C) e-mail filters were developed to separate spam from legitimate e- mail. 4. D) more people responded to spam e-mails. Answer: A Diff: 2 Topic: Application 2, The Economic Solution To Spam Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 18) Using assumptions to make things simpler and focus attention on what really matters is like using a road map to plan a trip. Answer: TRUE Diff: 1 Topic: Use Assumptions to Simplify Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 19) Ceteris paribus means “Let the buyer beware.” Answer: FALSE Diff: 1 Topic: Isolate Variables – Ceteris Paribus Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 20) Ceteris paribus is the same as rise / run. Answer: FALSE Diff: 1 Topic: Isolate Variables – Ceteris Paribus Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 21) A small, one-unit change in value is called a marginal change. Answer: TRUE Diff: 1 Topic: Think at the Margin Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 22) A key assumption of most economic analysis is that people act rationally, meaning they respond to incentives. Answer: TRUE Diff: 1 Topic: Rational People Respond to Incentives Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 23) A key assumption of most economic analysis is that people are altruistic, meaning that they act in their own self-interest. Answer: FALSE Diff: 1 Topic: Rational People Respond to Incentives Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 24) Economists assume that individuals make informed decisions and act in their own self-interest. Answer: TRUE Diff: 1 Topic: Rational People Respond to Incentives Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 25) The congestion tax implemented in London reduced traffic volume and cut travel time for cars and buses in half. Answer: TRUE Diff: 1 Topic: Example: London Addresses its Congestion Problem Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 26) To determine an appropriate congestion tax, an economist has to assume that people respond to incentives. Answer: TRUE Diff: 1 Topic: Example: London Addresses its Congestion Problem Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 Recall the Application about unwanted commercial e-mail, or spam, to answer the following question(s). 27) According to the Application, one idea to reduce the volume of e-mail spam is to charge the sender for each commercial e-mail sent. Answer: FALSE Diff: 1 Topic: Application 2, The Economic Solution To Spam Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro-1 28) What is meant by the term “marginal change”? Answer: A marginal change is a small, one unit change in value. Diff: 1 Topic: Think at the Margin Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro-1 1.4 Preview of Coming Attractions: Macroeconomics 1) Macroeconomics is best described as the study of 1. A) very large issues. 2. B) the choices made by individual households, firms, and governments. 3. C) the nation’s economy as a whole. 4. D) the relationship between inflation and wage inequality. Answer: C Diff: 1 Topic: Preview of Coming Attractions: Macroeconomics Skill: Definition AACSB: Reflective Thinking Learning Outcome: Macro-1 2) Which of the following is a macroeconomic question? 1. A) Should we have a constitutional amendment requiring the government to implement a national consumption tax to replace the current income tax? 2. B) Why did a leading computer manufacturer establish call centers in India? 3. C) Why does a pharmaceutical manufacturer try to lower its production costs? 4. D) Should the government put a tax on alcohol in an attempt to assist in the funding of support groups like Alcoholics Anonymous? Answer: A Diff: 2 Topic: Preview of Coming Attractions: Macroeconomics Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Macro-1 3) Which of the following is NOT a macroeconomic question? 1. A) Should we have a constitutional amendment requiring the federal government to balance the budget each year? 2. B) Should restaurants be required to list the number of calories for each product on their menus? 3. C) How does a fiscal stimulus package affect gross domestic product? 4. D) Should Congress enact tougher immigration laws to reduce unemployment? Answer: B Diff: 2 Topic: Preview of Coming Attractions: Macroeconomics Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Macro-1