Deck 1: What Is Macroeconomics and the Evolution of Capitalism

Question 1

What is the difference between microeconomics and macroeconomics?

A) Microeconomics deals with the economy with a country; macroeconomics deals with the global economy.
B) Microeconomics deals with small firms; macroeconomics deals with large firms.
C) Microeconomics deals with individual firms, consumers, etc.; macroeconomics deals with the economy as a whole.
D) Microeconomics deals with small countries; macroeconomics deals with large countries.

Answer 1

C

Question 2

The Great Depression occurred

A) during the 1890s and lasted for 20 years.
B) during the 1930s and last for 10 years.
C) during the 1970s and lasted for 5 years
D) during the 1990s and lasted for 1 year.

Answer 2

B

Question 3

What is a bank panic?

A) Bankers become very nervous and refuse to take deposits.
B) Everyone rushes to the bank to put his or her money in before closing time.
C) Banks go out of business because they fail to make enough loans.
D) Banks are unable to repay all depositors who want to withdraw their money.

Answer 3

D

Question 4

To qualify as "money," a commodity must

A) be valuable.
B) be nonperishable.
C) be accepted as a medium of exchange.
D) be a precious metal such as gold or silver.

Question 5

In early economies, goods were often exchanged through a barter system. What is a barter system?

A) Prices are agreed after bargaining or negotiation between buyer and seller.
B) Goods are exchanged through a central clearing house called a "barter."
C) Goods are exchanged for goods without the use of money.
D) Goods are exchanged at fixed prices set by the government.

Question 6

The most important work of classical economic liberalism is

A) The Wealth of Nations by Adam Smith published in 1776.
B) The General Theory of Employment, Interest and Money by John M. Keynes published in 1937.
C) The Communist Manifesto by Karl Marx published in 1848.
D) Capitalism and Freedom by Milton Friedman published in 1982.

Question 7

According to Adam Smith, the "invisible hand" will create a situation where

A) Business owners will prefer investing in their own country to investing in foreign countries.
B) Business owners will not care whether they invest at home or abroad.
C) Business owners will prefer to invest in projects that they already invested in before.
D) Business owners will only invest in projects that the King endorses.

Question 8

Capitalist economic institutions were fully developed in England

A) by the end of the eighteenth century.
B) by the end of the sixteenth century.
C) by the end of the seventeenth century.
D) by the end of the fifteenth century.

Question 9

The philosophy of leaving and allowing the market to operate without the intervention of government is called

A) laissez-faire
B) c'est la vie
C) à chacun son goût
D) comme ci, comme ça

Question 10

What do progressive economists mean by the term, "institutions"?

A) Business associations such as the Chamber of Commerce.
B) International organizations such as the United Nations.
C) Social systems, habits and customs that influence human behavior.
D) Major governmental bodies such as the Congress and the Supreme Court.

Question 11

Business cycles

A) occur in every type of economy.
B) occur only in capitalism.
C) occur in capitalism and feudalism.
D) occur only in socialism.

Question 12

Suppose the United States produced $12 trillion of goods and services in 2005. According to Say's law

A) the economy will produce more than $12 trillion in 2006.
B) the supply of $12 trillion goods will lead to a general glut of goods if consumer demand falls.
C) the supply of $12 trillion in goods and services will be matched by $12 trillion in spending.
D) the economy will be able to save about $1 trillion for future consumption.

Question 13

An economy in which most output is produced for sale on the market is

A) a feudal economy.
B) a capitalist economy.
C) a communal economy.
D) a socialist economy.

Question 14

According to conservative economists, how does the economy recover from an external shock?

A) Government policy can help to stabilize the economy.
B) The economy will restore itself to equilibrium automatically.
C) Another outside shock will counteract the first shock.
D) External shocks have no impact on an economy as large as the United States.