Microeconomics and Macroeconomics. Positive and Normative Economics.

18. The key difference between microeconomics and macroeconomics is that microeconomics:

1. examines decision making

2. focus on individual units in the economy

3. deals with scarcity

4. looks at resource choices

5. does not take government into the account

18. Which of the following is a microeconomic statement?

1. The real national output increased by 2.5%.

2. Unemployment was 7,5% last year.

3. The price of imported cars increased in 1998.

4. The inflation rate was 8,4% last year.

5. All statements are macroeconomics.

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

1. The Dow Jones reached over 7000 in May 1999

2. 10% of the population lines below poverty level

3. The Russian budget deficit has reached alarming levels

4. Moscow had a budget surplus last year

5. The students has paid $2000 as a tuition fee.

18. Which of the following is not an example of a positive economic statement?

1. Welfare spending is too high.

2. Social security is the biggest entitlement program in Russia.

3. The trade deficit was over $20 billion last year.

4. The interest rate is 5.6% currently.

5. The inflation rate is 1.2% per month this year.

Economic models.

1. Economic models are

1. created to duplicate reality.

2. built with assumptions.

3. usually made of wood and plastic.

4. useless if they are simple.

5. useless if they are not simple.

2. In which of the following cases is the assumption most reasonable?

1. To estimate the speed at which a beachball falls, a physicist assumes that it falls in a vacuum.

2. To address the impact of money growth on inflation, an economist assumes that money is strictly coins.

3. To address the impact of taxes on income distribution, an economist assumes that everyone earns the same income.

4. To address the benefits of trade, an economist assumes that there are two people and two goods.

5. No true answer.

Nominal and real economic variables. Growth rates.

3. If nominal economic variable increases while corresponding price index decreases, the real economic variable:

1. grows faster than nominal variable;

2. grows but more slowly than nominal variable;

3. grows at the same rate as nominal variable;

4. can either grow or fall;

5. falls in compliance with decrease of the price index.

4. The annual time series of the gross nominal output of the food industry are given. You may calculate the annual gross real output of this industry while having annual data on:

1. the gross producer price index;

2. the gross price index of the all food industry production;

3. the price index of one commodity of the food industry;

4. the consumer price index;

5. the exchange rate.

5. The annual data of the growth rate of the consumer demand on some services are given. The period average ogrowth rate of the consumer demand is:

1. the simple average of the annual growth rates;

2. the geometrical mean of the annual growth rates;

3. mean square of the annual growth rates;

4. harmonic mean of the annual growth rates;

5. the coefficent of linear trend of growth of the consumer demand.

6. The monthly increments of the beer production in Russia increase but the growth rates decrease. The following function fits this kind of dinamics:

1. logarithmic

2. linear

3. power

4. exponential

5. hyperbola

Production possibility frontier.

7. The production possibilities frontier:

1. Shows all of those levels of production which are cosistent with a stable price level.

2. Indicates that any combination of goods lying outside the curve is economically inefficient.

3. Is a frontier between all combinations of two goods which can be produced and those combinations which cannot be produced.

4. Shows all of those combinations of two goods which are most preferred by society.

5. All of the above are true.

8. The production possibilities frontier illustrates the basic principle that:

1. The production of more of any one good will in time require smaller and smaller sacrifices of other goods.

2. An economy will automatically seek that level of output at which all of its resources are employed.

3. If all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

4. An economy's capacity to produce increases in proportion to its population size.

5. All of the above are true.

9. If the economy is operating on the production possibility frontier,

1. it cannot move to another point on the frontier without making someone in the economy worse off

2. it does not imply that it has achieved productive efficiency

3. it can attain some point outside the frontier if the government redistributes income in the economy

4. there are no idle resources in the economy

5. none of the above

10. A point lying inside a production possibilities frontier of an economy illustrates

1. the least costly level of production

2. the most profitable level of production

3. the best combination of production alternatives

4. unattainable production alternatives

5. unemployed resources

11. If the production possibilities curve is a straight line, this would imply that:

1. The two productions will sell at the same market prices.

2. Economic resources are perfectly shiftable between the production of the two products.

3. The two products are equally important to consumers.

4. Equal quantities of the two products will be produced at each possible point on the curve.

5. It is impossible.

12. Economic growth is depicted by

1. a movement along a production possibilities frontier toward capital goods.

2. a shift in the production possibilities frontier outward.

3. a shift in the production possibilities frontier inward.

4. a movement from inside the curve toward the curve.

5. Non of the above.

13. Which of the following will not entail an outward shift of the production possibilities curve?

1. An upgrading of the quality of a nation's homan resources.

2. The reduction of unemployment.

3. An increase in the quantity of a society's labour force.

4. The improvement of a society's technological knowledge.

5. All of the above will shift the curve outwards.

UNITS OF GOOD Y

A

H B

G C

E F D UNITS OF GOOD X

14. The graph above shows an economy's production possibilities frontier for the production of two goods, X and Y. Assume that the economy is currently at point B. The opportunity cost of moving from point B to point C is

1. AH units of good Y

2. HG units of good Y

3. OG units of good Y

4. EF units of good X

5. OF units of good X

Answer the next five questions on the baiss of the data given in the following production possibilities table.

Production possibiliies
	A	B	C	D	E	F
Capital goods	5	4	3	2	1	0
Consumer goods	0	5	9	12	14	15

15. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be:

1. 4 units of capital goods

2. 2 units of capital goods

3. 3 units of capital goods

4. 1/3 of a unit of capital goods

5. 1 unit of capital goods

16. As compared to production alternative D, the choice of alternative C would:

1. Tend to generate a more rapid growth rate

2. Be unattainable

3. Entail unemployment

4. Tend to generate a slower growth rate

5. Entail waste of capital resources

17. A total output of 3 units of capital goods and 4 units of consumer goods:

1. Is irrelevant because the economy is capable of producing a larger total output.

2. Will result in the maximum rate of growth available to this economy.

3. Would involve an inefficient use of the eocnomy's scauce resources.

4. Is unobtainable in this economy.

5. Is irrational for this economy.

18. In order for this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must:

1. Achieve economic growth.

2. Use its resources more efficiently than the data in the table now indicate

3. Allocate its available resources most efficiently among alternative uses.

4. Achieve the full employment of available resources.

5. No true answer.

19. In this illustration the law of increasing opportunity costs is reflected in the fact that:

1. Human wants in the aggregate are insatiable and all the combinations of consumer goods and capital goods the economy can produce are finite amounts.

2. The amount of consumer goods which must be sacrified to get more capital goods diminishes beyond a point.

3. Larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.

4. The production possibilities data would graph as a straight downsloping line.

5. The economy's resources are presumed to be scarce.

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