ECN 351 Essentials of Economics Review Exam Q & A 2024 1. In microeconomics, the law of demand states that: A. consumers will buy more of a good at higher prices B. consumers will buy less of a good at lower prices C. consumers will buy the same amount regardless of price D. consumers will only buy goods that are on sale Answer: B. consumers will buy less of a good at lower prices Rationale: The law of demand states that as the price of a good decreases, the quantity demanded for that good will increase, and vice versa. 2. The concept of opportunity cost in economics refers to: A. the value of the next best alternative that is foregone B. the cost of produc ing an additional unit of a good C. the total cost of all resources used in production D. the highest price that a consumer is willing to pay for a good Answer: A. the value of the next best alternative that is foregone Rationale: Opportunity cost is the value of the next best alternative that is foregone when a decision is made to allocate resources towards a particular choice. 3. The production possibility frontier represents: A. the maximum possible output that can be produced with current resources B. the minimum possible output that can be produced with current resources C. the average level of output that can be produced with current resources D. the total output that can be produced with unlimited resources Answer: A. the maximum possible output that can be produced with current resources Rationale: The production possibility frontier shows the maximum possible output that can be produced with current resources and technology. 4. In macroeconomics, the consumer price index (CPI) is used to measure: A. the rate of inflation B. the rate of unemployment C. the rate of economic growth D. the rate of interest Answer: A. the rate of inflation Rationale: The consumer price index (CPI) measures changes in the price level of a basket of goods and services purchased by households, and is used to calculate the rate of inflation. 5. Gross domestic product (GDP) is the total monetary value of: A. imports and exports B. government spending C. all final goods and services produced within a country in a given period D. all goods and services produced within a country in a given period Answer: C. all final goods and services produced within a country in a given period Rationale: GDP measures the total monetary value of all final goods and services produced within a country in a given period. 6. Aggregate demand in macroeconomics represents: A. the total quantity of goods and services demanded in an economy at different price levels B. the total quantity of goods and services supplied in an economy at different price levels C. the total income earned by households in an economy D. the total expenditure on imports and exports Answer: A. the total quantity of goods and services demanded in an economy at different price levels Rationale: Aggregate demand represents the total quantity of goods and services demanded in an economy at different price levels, taking into account consumption, investment, government spending, and net exports.
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