Question 1

What is the difference between microeconomics and macroeconomics?&#10;A) Microeconomics deals with the economy with a country; macroeconomics deals with the global economy.&#10;B) Microeconomics deals with small firms; macroeconomics deals with large firms.&#10;C) Microeconomics deals with individual firms, consumers, etc.; macroeconomics deals with the economy as a whole.&#10;D) Microeconomics deals with small countries; macroeconomics deals with large countries.

Accepted Answer

Microeconomics focuses on analyzing the behavior of individual consumers, firms, and industries in making economic decisions. It also deals with the study of specific markets such as the labor market, housing market, etc. On the other hand, macroeconomics focuses on the study of the economy as a whole, analyzing aggregate measures such as Gross Domestic Product (GDP), inflation, unemployment, and fiscal and monetary policies aimed at stabilizing and regulating the overall economy.

Question 2

The Great Depression occurred&#10;A) during the 1890s and lasted for 20 years.&#10;B) during the 1930s and last for 10 years.&#10;C) during the 1970s and lasted for 5 years&#10;D) during the 1990s and lasted for 1 year.

Accepted Answer

The Great Depression occurred during the 1930s and lasted for approximately 10 years, from 1929 to the late 1930s. Option A is incorrect as the 1890s saw a severe economic depression, but it was not referred to as "The Great Depression." Option C is also incorrect as the 1970s experienced a period of high inflation and slow economic growth, but it was not as severe as the Great Depression. Option D is incorrect as there was no major economic depression during the 1990s.

Question 3

What is a bank panic?&#10;A) Bankers become very nervous and refuse to take deposits.&#10;B) Everyone rushes to the bank to put his or her money in before closing time.&#10;C) Banks go out of business because they fail to make enough loans.&#10;D) Banks are unable to repay all depositors who want to withdraw their money.

Accepted Answer

A bank panic occurs when depositors lose faith in the banking system and rush to withdraw their funds, often leading to a situation where banks cannot meet the demand for withdrawals and are forced to close their doors. This can have a domino effect, leading to a widespread financial crisis.

Question 4

To qualify as &#34;money,&#34; a commodity must&#10;A) be valuable.&#10;B) be nonperishable.&#10;C) be accepted as a medium of exchange.&#10;D) be a precious metal such as gold or silver.

Accepted Answer

The most important characteristic of money is that it is accepted as a medium of exchange. While it is helpful for money to be valuable, nonperishable, and based on a precious metal, these characteristics are not essential for something to function as money. For example, paper currency is not valuable in and of itself, but it is accepted as a medium of exchange because people have confidence in its worth.

Question 5

In early economies, goods were often exchanged through a barter system. What is a barter system?&#10;A) Prices are agreed after bargaining or negotiation between buyer and seller.&#10;B) Goods are exchanged through a central clearing house called a &#34;barter.&#34;&#10;C) Goods are exchanged for goods without the use of money.&#10;D) Goods are exchanged at fixed prices set by the government.

Accepted Answer

A barter system is a system of exchange where goods or services are directly exchanged for other goods or services without the use of money as a medium of exchange. In a barter system, the exchange rate between two goods is negotiated between the parties involved. There is no central clearing house or fixed government price involved in this system.

Question 6

The most important work of classical economic liberalism is&#10;A) The Wealth of Nations by Adam Smith published in 1776.&#10;B) The General Theory of Employment, Interest and Money by John M. Keynes published in 1937.&#10;C) The Communist Manifesto by Karl Marx published in 1848.&#10;D) Capitalism and Freedom by Milton Friedman published in 1982.

Accepted Answer

The Wealth of Nations by Adam Smith is considered the foundational work of classical economic liberalism, providing the intellectual groundwork for concepts such as free markets, division of labor, and limited government intervention in economic affairs. It has had a significant and lasting impact on economic thought and policy around the world. The other options are either critiques of classical liberalism or perspectives that emerged after classical liberalism's development in the 18th and 19th centuries.

Question 7

According to Adam Smith, the &#34;invisible hand&#34; will create a situation where&#10;A) Business owners will prefer investing in their own country to investing in foreign countries.&#10;B) Business owners will not care whether they invest at home or abroad.&#10;C) Business owners will prefer to invest in projects that they already invested in before.&#10;D) Business owners will only invest in projects that the King endorses.

Accepted Answer

According to Adam Smith's theory of the invisible hand, individuals pursuing their own self-interest in a free market will unintentionally work towards the common good of society as a whole. Therefore, business owners will prefer investing in their own country as it serves their self-interest, thereby leading to economic growth and development domestically.

Question 8

Capitalist economic institutions were fully developed in England&#10;A) by the end of the eighteenth century.&#10;B) by the end of the sixteenth century.&#10;C) by the end of the seventeenth century.&#10;D) by the end of the fifteenth century.

Accepted Answer

Capitalist economic institutions were fully developed in England by the end of the eighteenth century, following the Industrial Revolution which began in the mid-18th century, significantly transforming the economy and society.

Question 9

The philosophy of leaving and allowing the market to operate without the intervention of government is called&#10;A) laissez-faire&#10;B) c'est la vie&#10;C) &#224; chacun son go&#251;t&#10;D) comme ci, comme &#231;a

Accepted Answer

Laissez-faire is a French term that means "leave alone" or "let do." It is a philosophy that advocates for minimal government intervention in economic affairs, allowing the market to operate freely without regulation or interference.

Question 10

What do progressive economists mean by the term, &#34;institutions&#34;?&#10;A) Business associations such as the Chamber of Commerce.&#10;B) International organizations such as the United Nations.&#10;C) Social systems, habits and customs that influence human behavior.&#10;D) Major governmental bodies such as the Congress and the Supreme Court.

Accepted Answer

Progressive economists use the term "institutions" to refer to social systems, habits and customs that influence human behavior. This can include things like cultural norms, social structures, and political and economic systems. They believe that these institutions shape individual behavior and play a critical role in determining economic outcomes.

Question 11

Business cycles&#10;A) occur in every type of economy.&#10;B) occur only in capitalism.&#10;C) occur in capitalism and feudalism.&#10;D) occur only in socialism.

Accepted Answer

The answer of Business cycles&#10;A) occur in every type of...

Question 12

Suppose the United States produced $12 trillion of goods and services in 2005. According to Say's law&#10;A) the economy will produce more than $12 trillion in 2006.&#10;B) the supply of $12 trillion goods will lead to a general glut of goods if consumer demand falls.&#10;C) the supply of $12 trillion in goods and services will be matched by $12 trillion in spending.&#10;D) the economy will be able to save about $1 trillion for future consumption.

Accepted Answer

The answer of Suppose the United States produced $12 trillion...

Question 13

An economy in which most output is produced for sale on the market is&#10;A) a feudal economy.&#10;B) a capitalist economy.&#10;C) a communal economy.&#10;D) a socialist economy.

Accepted Answer

The answer of An economy in which most output is...

Question 14

According to conservative economists, how does the economy recover from an external shock?&#10;A) Government policy can help to stabilize the economy.&#10;B) The economy will restore itself to equilibrium automatically.&#10;C) Another outside shock will counteract the first shock.&#10;D) External shocks have no impact on an economy as large as the United States.

Accepted Answer

The answer of According to conservative economists, how does the...

Deck 1: What Is Macroeconomics and the Evolution of Capitalism