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1 ECON 2010 FALL 2010 Study Guide Chapters 1-2-3 Chapter 1 1. Which statement would best complete a short definition of economics? "Economics is the study of: A. The production and distribution of capital goods" B. How the economy generates incomes for people" C. The optimal use of scarce productive resources" D. How the stock market creates wealth for investors" 2. Which of the following statements is the best definition of macroeconomics? A. Macroeconomics is the study of the entire economy B. Macroeconomics is the study of how firms maximize their profits C. Macroeconomics is the study of how individual prices are determined D. Macroeconomics is the study of the consumption patterns of low-income households 3. Which of the following is a normative economic statement? A. The Federal budget surplus rose by 10 billion dollars B. A fall in the unemployment rate was forecast for next month C. A trade deficit of 20 billion dollars will harm the economy D. The Federal funds rate was reduced by half a percentage point 4. Which of the following would be a positive economic statement? A. Rents for apartments in this city are too high and must be controlled by city government to keep landlords from making too much profit B. Bankers are now charging higher interest rates on credit cards to cover the increased cost of loaning funds to consumers C. The United States should be more aggressive in its trade negotiations with its major trading partners to help reduce the trade deficit D. More money should be allocated by the Federal government to social programs and less money to national defense 5. Which is one of the four simplifying assumptions made in the chapter about the construction of the production possibilities model? A. The state of technology is constantly changing B. More than two products are produced C. The economy is fully employed and is using least-cost methods of production D. The quantities of all resources available to the economy are not fixed, but are variable 2 ... View Full Document

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