Question 1

Suppose a student decides to spend an extra hour studying for their macroeconomics exam instead of working at a part-time job that pays $15 per hour. What is the opportunity cost of studying for the extra hour?

Accepted Answer

$15, the wage they forgo by not working.

Question 2

Which of the following best describes human capital?

Accepted Answer

The economic value of a person's knowledge, skills, education, and health.

Question 3

The Production Possibilities Frontier (PPF) illustrates all of the following EXCEPT:

Accepted Answer

How to eliminate scarcity entirely.

Question 4

If the marginal cost (MC) of producing a good increases as more is produced, which economic law is being demonstrated?

Accepted Answer

Law of Increasing Marginal Cost

Question 5

Which of the following scenarios best demonstrates allocative efficiency?

Accepted Answer

An economy produces the mix of goods most valued by society.

Question 6

In the PPF model, which of the following would cause an outward shift of the entire frontier?

Accepted Answer

A technological innovation that increases productivity.

Question 7

Country A can produce either 10 cars or 20 computers with its resources, while Country B can produce either 8 cars or 16 computers. Which country has the absolute advantage in both goods?

Accepted Answer

Country A

Question 8

Which of the following is the correct formula for GDP using the expenditure approach?

Accepted Answer

$$GDP = C + I + G + (X - M)$$

Question 9

If the price of a good increases, which of the following will occur, ceteris paribus?

Accepted Answer

Quantity demanded will decrease, moving along the demand curve.

Question 10

A market is experiencing a surplus. What will happen to the price and why?

Accepted Answer

Price will fall because quantity supplied exceeds quantity demanded.

Question 11

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

The value of household production, such as home-cooked meals.

Question 12

If nominal GDP increases by 5% but real GDP increases by only 2%, what does this imply?

Accepted Answer

Prices have increased, indicating inflation.

Question 13

Which of the following best explains why trade allows countries to consume beyond their own PPF?

Accepted Answer

Trade enables specialization based on comparative advantage.

Question 14

Which of the following is the income earned by the factor of production 'capital'?

Accepted Answer

Interest

Question 15

A country’s GDP measured by the value-added approach is calculated as:

Accepted Answer

$$GDP = Value\ of\ Output - Value\ of\ Intermediate\ Goods$$

Question 16

Which of the following would cause a rightward shift in the demand curve for electric vehicles?

Accepted Answer

An increase in consumer income, assuming electric vehicles are normal goods.

Question 17

If the U.S. economy is described as being 'based on private consumption,' what does this mean?

Accepted Answer

Household spending is the largest component of GDP.

Question 18

Which of the following best describes the Lucas Wedge?

Accepted Answer

The cumulative loss of potential GDP due to slower-than-optimal economic growth.

Question 19

Suppose the U.S. labor market is cooling, unemployment is rising from 4.0% to 4.3%, and inflation remains above the Federal Reserve's target. According to the study materials, which is the main economic concern?

Accepted Answer

Inflation is the main challenge, while unemployment is a secondary but increasing concern.

Question 20

Which of the following statements about comparative and absolute advantage is correct?

Accepted Answer

Trade is driven by comparative advantage, not absolute advantage.

Macroeconomics Exam 1 Review – Step-by-Step Study Guidance

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