Foundations of Macroeconomics, 7e (Bade/Parkin)
Chapter 1 Getting Started
1.1 Deinition and Questions
1) Scarcity exists because
A) human wants exceed the resources available to satisfy them.
B) some individuals have low income.
C) the costs of production are high.
D) some people make bad economic decisions.
E) people take too much leisure time.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
2) Scarcity
A) is the inability to satisfy all our wants.
B) leads to higher prices.
C) applies only to people living in poverty.
D) is not something that afects very rich people.
E) used to exist everywhere but has been eliminated in advanced economies.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
3) Scarcity requires that we
A) produce eiciently.
B) learn to limit our wants.
C) have the most rapid economic growth possible.
D) have unlimited resources.
E) make choices about what goods and services to produce.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
1
4) Scarcity means that
A) what we can produce with our resources is greater than our material wants.
B) resources are unlimited.
C) wants are greater than what we can produce with our resources.
D) governments must make up for shortages in resources.
E) choices made in self-interest cannot be the same as those made in the social interest.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Revised
AACSB: Relective thinking
5) Because human wants are insatiable and unlimited while available resources are limited,
people are said to face the problem of
A) scarcity.
B) why to produce.
C) macroeconomics.
D) microeconomics.
E) social interest versus self-interest.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
6) Which of the following statements best describes the study of economics? Economics
studies how
A) to organize production so that scarcity does not occur.
B) irms make proits.
C) we make choices in the face of scarcity.
D) to create incentives so that scarcity does not exist.
E) businesses reach decisions.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
2
7) Scarcity forces people to
A) choose among available alternatives.
B) cheat and steal.
C) be unwilling to help others.
D) live at a low standard of living.
E) consume as much as they can as quickly as they can.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
8) Scarcity means we must
A) consume less.
B) produce less.
C) make choices.
D) earn more.
E) work more.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
9) What is the reason that all economic issues and problems occur?
A) All nations use some form of money to buy and sell goods and services.
B) Humans are always wasteful and ineicient in production and consumption.
C) Powerful governments are able to control production and consumption.
D) Human wants exceed the resources available to satisfy them.
E) People seek only their own self–interest.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
3
10) The study of economics is best described as a study of
A) the factors that inluence the stock and bond markets.
B) capitalism.
C) the choices made in producing goods and services.
D) coping with scarcity, and choices made as a result of scarcity in a society.
E) how people earn a living.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
11) Which of the following statements best describes the study of economics? Economics
studies how
A) to organize production so that scarcity does not occur.
B) irms make proits.
C) we make choices in the face of scarcity.
D) to create incentives so that scarcity does not exist.
E) businesses reach decisions.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
12) Which of the following best deines economics?
A) Economics teaches how to limit our wants.
B) Economics studies how to choose the best alternative when coping with scarcity.
C) Economics helps you earn as much money as possible.
D) Economics analyzes all aspects of human behavior in general.
E) Economics is concerned with prices and quantities of goods and services, both at the
individual level and at the industry level.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
4
13) Economics is the social science that studies
A) the real reasons people buy goods and services.
B) the psychology of individuals and businesses.
C) whether a nation has enough natural resources.
D) how people make choices to cope with scarcity.
E) how choices made in the social interest could eliminate scarcity.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
14) Economics is best deined as the social science that studies
A) how a person can get everything he or she wants.
B) the reason money exists.
C) the way to eliminate choices in our decisions.
D) the choices that societies, and the people and institutions that make up societies, make
in dealing with the issue of scarcity.
E) how choices made in the social interest must conlict with choices made in the self–
interest.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
15) Microeconomics includes the study of the
A) aggregate efects on the national economy.
B) recessions and inlation in the global economy.
C) choices made by individuals and businesses.
D) reasons why the government changes interest rates.
E) nationwide unemployment rate.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
5
16) The primary focus of microeconomics is
A) to examine the operation of the entire (aggregate) economy.
B) to examine the behavior and operation of the individual units or sectors that make up
the economy.
C) our government’s monetary policy.
D) the levels of employment and inlation.
E) to study how we managed to eliminate scarcity.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
17) Which of the following is a microeconomic issue?
A) The price of gasoline increases in the United States this year.
B) The Brazilian economy experiences rapid economic growth.
C) The unemployment rate soars in Spain.
D) Inlation skyrockets in Russia.
E) The U.S. government cuts taxes to combat a recession.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
18) Which of the following is a microeconomic issue?
A) Growth in the U.S. economy slowed.
B) Increased federal government expenditures have lowered the unemployment rate.
C) The inlation rate fell this year.
D) The quantity of wheat grown in the United States increases this year.
E) The U.S. government cuts taxes to combat a recession.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
6
19) Which of the following is a microeconomic topic?
i. K-Mart’s decision to close stores that are not making a proit
ii. Home Depot’s choice to hire more full-time employees because its sales increased
iii. Delta Airlines changes its fares.
A) i only
B) ii only
C) i and iii
D) ii and iii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
20) Which of the following is a microeconomic topic?
A) Northwest Airlines analyzes the beneits of adding one more light to Salt Lake City.
B) Unemployment soars as taxes increase.
C) The government leaves interest rates unchanged as the economy improves.
D) Germany’s government increases taxes to avoid a budget deicit.
E) Chinese economic growth slows.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
21) Which of the following is a microeconomic topic?
i. Gas prices increase after a hurricane hits the gulf coast.
ii. Xavier starts a new business designing web pages.
iii. Abby decides to practice an extra hour of soccer instead of studying.
A) i, ii and iii
B) i only
C) ii and iii
D) ii only
E) i and ii
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
7
22) Macroeconomics is the study of
A) the actions of individual consumers.
B) national or global economies.
C) the actions of individual businesses.
D) the government.
E) how ceteris paribus afects causation.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
23) Which of the following BEST describes macroeconomics?
A) It analyzes the aggregate efects on the national economy of the choices made by
individuals, irms, and governments.
B) It studies the choices that individuals and businesses make when coping with scarcity.
C) It examines how the choices that individuals afect governments.
D) It is not a social science because its predictions cannot be tested.
E) Proving causation is never a problem for macroeconomics.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
24) Which of the following is a topic studied in macroeconomics?
A) the pricing decisions in the computer hardware industry
B) the efect on economic growth if the government raises taxes
C) how the wheat industry determines how much wheat to grow
D) the impact of labor unions on wages
E) the impact of higher prices for gasoline on the number of SUVs people buy
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
8
25) Which of the following is a macroeconomic topic?
A) The federal government’s decision to spend more on environmental protection
B) The county government’s decision to increase the sales tax for your county
C) Why did production and jobs expand slowly in 2011?
D) General Motors decides what prices to set for their new models.
E) The efect of loods in agricultural areas on the price and quantity of wheat
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Revised
AACSB: Relective thinking
26) Which of the following is a macroeconomic issue?
A) The price of a ticket to Walt Disney World in Orlando is increased.
B) The National Football League signs a new television contract.
C) The number of jobs and production in Zimbabwe increase.
D) The Iowa corn harvest is smaller than normal.
E) Utilities are required to install more anti-pollution devices.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
27) Which of the following is a macroeconomic topic?
i. China increases interest rates to slow its economic growth.
ii. Congress lowers tax rates to try and lower the unemployment rate.
iii. Nissan decides to produce more electric Leaf models and fewer Altima sedans.
A) i and ii
B) i, ii and iii
C) iii only
D) i and iii
E) ii and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
9
28) When you make the decision to spend your time attending class, which economic
question are you answering?
A) What?
B) How?
C) For whom?
D) Why?
E) Is this in the social interest?
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
29) Of the three major economic questions, which of the following is the best example of a
“What?” question?
A) Should automobiles be produced using workers or robots?
B) Should higher-income or lower-income people buy SUVs?
C) Should we make faster microprocessors or pest-resistant corn?
D) Should migrant workers or domestic workers be used to pick grapes?
E) What should doctors be paid?
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
30) When Ford decides to increase production of hybrid cars, it directly answers the
________ question.
A) what
B) how
C) for whom
D) where
E) why
Skill: Level 2: Using deinitions
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
10