Q: If real GDP increased from $19,610 billion in 2021 to $20,018 billion in 2022, what is the percentage change in real GDP?

$ \frac{20,018 - 19,610}{19,610} \times 100 = 2.08\% $

Question 1

Which of the following best describes the concept of scarcity in economics?

Accepted Answer

Scarcity is a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Question 2

A government decides to increase taxes on high-income earners to fund welfare programs for the poor. Which economic trade-off does this policy illustrate?

Accepted Answer

The trade-off between efficiency and equity.

Question 3

Which of the following is an example of a positive economic statement?

Accepted Answer

Raising taxes on gasoline will reduce gasoline consumption.

Question 4

Suppose a firm can produce a good using either more labor and less capital, or more capital and less labor. Which basic economic question does this scenario address?

Accepted Answer

How will the goods and services be produced?

Question 5

If the production of one good increases, causing the production of another good to decrease due to limited resources, what economic concept does this illustrate?

Accepted Answer

Trade-off

Question 6

Which of the following best defines a market economy?

Accepted Answer

An economy in which households and firms interacting in markets determine the allocation of resources.

Question 7

A market is considered allocatively efficient if:

Accepted Answer

Production is in accordance with consumer preferences, and every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Question 8

Which of the following is a source of productive efficiency in a market economy?

Accepted Answer

Competition among firms

Question 9

Suppose the price of a product increases from $10 to $12, and the quantity sold decreases from 100 units to 80 units. What is the slope of the line connecting these two points on a price-quantity graph?

Accepted Answer

$ \frac{12-10}{80-100} = \frac{2}{-20} = -0.1 $

Question 10

A government policy unintentionally causes colleges to increase tuition. This is an example of:

Accepted Answer

An unintended consequence due to changes in economic incentives

Question 11

Which of the following best describes voluntary exchange?

Accepted Answer

A situation in which both the buyer and the seller of a product are made better off by the transaction.

Question 12

If real GDP increased from $19,610 billion in 2021 to $20,018 billion in 2022, what is the percentage change in real GDP?

Accepted Answer

$ \frac{20,018 - 19,610}{19,610} 	imes 100 = 2.08\% $

Question 13

Which of the following is NOT a key assumption typically made when analyzing markets?

Accepted Answer

All resources are distributed equally.

Question 14

Which of the following best describes a mixed economy?

Accepted Answer

An economy in which most economic decisions result from the interaction of buyers and sellers in markets, but the government plays a significant role in the allocation of resources.

Question 15

Which of the following is an example of a normative economic statement?

Accepted Answer

The government should provide universal healthcare.

Question 16

If a firm’s total revenue is represented by the area of a rectangle on a graph, and the base is 125,000 units and the height is $2 per unit, what is the total revenue?

Accepted Answer

$ 125,000 	imes 2 = 250,000 $

Question 17

Which of the following best explains why economists use models?

Accepted Answer

To analyze real-world economic situations using simplified versions of reality.

Question 18

Which of the following is a step in the process of developing an economic model?

Accepted Answer

Formulate a testable hypothesis.

Question 19

A graph shows a positive relationship between two variables. Which of the following statements is true?

Accepted Answer

As one variable increases, the other variable also increases.

Question 20

Which of the following best describes the difference between causality and correlation in economic analysis?

Accepted Answer

Causality means that a change in one variable directly leads to a change in another, while correlation means the variables move together but one does not necessarily cause the other.

Macroeconomics Chapter 1: Foundations and Models – Study Notes

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