1. All other things being equal, an additional unit of capital invested in a capital-rich economy will lead to _____ increase in output as compared with a unit of capital invested in a capital-poor economy.

a. a smaller
b. a larger
c. about the same sized
d. an unknowable

2. Investment is _____

a. the source of the supply of loanable funds.
b. the source of the demand for loanable funds.
c. not a relevant macroeconomic topic, because it is related to microeconomic decision making by individuals and households.
d. none of the above

3. Foreign investment _____

a. is very beneficial to an economy, by increasing the amount of capital available.
b. is a tool of imperialism and colonialism.
c. decreases the amount of capital available and increases local interest rates.
d. none of the above

4. Government budget deficits tend to ________

a. Increase the interest rates
b. Decrease the interest rates
c. Decrease employment
d. Decrease prices

5. Everything else held constant, when the price of a product increases _______

a. The quantity demanded decreases
b. The quantity demanded increases
c. The quantity supplied decreases
d. The quantity supplied stays the same

6. Saving is _____

a. the source of the supply of loanable funds.
b. the source of the demand for loanable funds.
c. not a relevant macroeconomic topic, because it is related to microeconomic decision making by individuals and households.
d. none of the above

7. Stock is _____

a. a share of ownership in a corporation.
b. another name for bond.
c. a legal fiction created by capitalists to deprive workers of the fruits of their labors.
d. a very large amount of cash.

8. Economics studies ______

a. How society manages its scarce resources
b. Social welfare
c. Ethical use of resources
d. Pprotection of workers' rights

9. What important concept is illustrated with the Production Possibilities Frontier (PPF)?

a. Limited resources
b. Opportunity cost
c. Comparative Advantage
d. All of the above

10. The largest component of a country's GDP is _____.

a. Private investment
b. Government spending
c. Trade deficit
d. Private consumption

11. All other things being equal, when the demand for money decreases _____

a. interest rates decrease.
b. interest rates increase.
c. the government prints more money.
d. the government takes money out of circulation.

12. When the demand of a product increases ______

a. The equilibrium price and quantity will decrease
b. The equilibrium price and quantity will increase
c. The equilibrium price will increase and the equilibrium quantity will decrease
d. The equilibrium price will decrease and the equilibrium quantity will increase

13. The principle of comparative advantage states that individuals, firms, and national economies should produce _____

a. what they are able to produce most efficiently.
b. only those things that they can produce more efficiently than anyone else.
c. whatever they want for their own consumption.
d. enough necessities to ensure self-sufficiency.

14. The Consumer Price Index is _____

a. a measure of stock market activity that investors use to help make investment decisions.
b. a measure of the aggregate price level that is used to estimate the rate of inflation.
c. set by the Bureau of Labor Statistics as a signal to producers, telling them how much to supply.
d. none of the above

15. Bonds are _____

a. money posted by politicians and corporate executives to stay out of jail.
b. financial ties that prevent wealthy individuals from expatriating.
c. debt issued by firms and governments, when they borrow money from the public.
d. money placed in escrow by corporations as insurance against lawsuits.

16. Tastes affect prices, because _____

a. changes in taste lead to changes in demand.
b. people with superior taste are role models for individuals who have inferior taste.
c. marginal utility increases as more individuals embrace new fashions.
d. taste is subjective and cannot be compared between any two individuals

17. In free and competitive markets, shortages always lead to _______

a. Lower prices
b. Higher prices
c. No change in prices
d. Any of the above

18. Financial intermediaries include _____

a. salesmen and brokers.
b. regulatory agencies.
c. depository institutions and investment funds.
d. none of the above

19. When doing research, Economists _______

a. Follow the scientific method: observation, theory, and more observation
b. Cannot use experiments, as they are often done in areas like Physics and Chemistry.
c. Have to use whatever data the world happens to give them
d. All of the above

20. GDP _____.

a. is the Gross Domestic Price index
b. measures the total output of final goods and services produced in the US in a given year
c. measures the cost of inputs to factories in a given year
d. measures the unemployment rate.