macro quiz 1

Question 1

what is macroeconomics

Answer 1

Macroeconomics studies the economy as a whole, including national income and economic growth

Question 2

what is microeconomics

Answer 2

microeconomics focuses on individual consumers and firms.

Question 3

How do economic models help in understanding economic behavior?

Answer 3

They simplify complex economic activities, allowing economists to predict and analyze outcomes.

Question 4

Define opportunity cost

Answer 4

the value of the next best alternative that is forgone when making a decision

Question 5

How does specialization improve efficiency in an economy?

Answer 5

It allows individuals and businesses to focus on tasks they are best at, increasing productivity and trade benefits.

Question 6

What does the Production Possibilities Frontier (PPF) illustrate?

Answer 6

It shows the trade-offs between two goods and the efficient use of resources.

Question 7

What are the key phases of a business cycle?

Answer 7

Expansion, peak, contraction, and trough.

Question 8

what is nominal data

Answer 8

Nominal data is measured in current prices

Question 9

what is real data

Answer 9

real data is adjusted for inflation.

Question 10

How do economists use data to develop theories and models?

Answer 10

They analyze historical trends and empirical evidence to formulate predictive models.

Question 11

Why is it important to distinguish between correlation and causation?

Answer 11

Correlation shows a relationship between two variables, but causation proves one variable directly affects the other.

Question 12

What are the ethical considerations in economic decision-making?

Answer 12

They include fairness, equity, and unintended consequences of policies.

Question 13

Define economic rationality

Answer 13

Economic rationality assumes individuals make decisions to maximize utility.

Question 14

What factors influence demand in a market?

Answer 14

Income, preferences, substitutes/complements, expectations, number of buyers.

Question 15

What factors influence supply in a market?

Answer 15

Production costs, technology, expectations, number of sellers.

Question 16

How do price ceilings and price floors affect market equilibrium?

Answer 16

Price ceilings create shortages, while price floors create surpluses.

Question 17

What is market equilibrium and how is it determined?

Answer 17

It’s the price where quantity demanded equals quantity supplied.

Question 18

Define elasticity and explain its significance in supply and demand.

Answer 18

Elasticity measures responsiveness of demand or supply to price changes. High elasticity means significant changes in quantity for small price changes.

Question 19

How is GDP calculated using the expenditure approach?

Answer 19

GDP = Consumption + Investment + Government Spending + Net Exports (Exports - Imports).

Question 20

What are the main types of unemployment and their causes?

Answer 20

Frictional (job transitions), Structural (skills mismatch), Cyclical (economic downturns).

Question 21

How does inflation impact purchasing power?

Answer 21

Higher inflation reduces purchasing power by making goods more expensive over time.

Question 22

What is the difference between nominal and real GDP?

Answer 22

Nominal GDP is measured in current prices, while real GDP is adjusted for inflation.

Question 23

How do nominal and real interest rates differ?

Answer 23

Real interest rate = Nominal interest rate - Inflation rate.