TEST BANK FOR MACROECONOMICS, 23RD
EDITION BY CAMPBELL MCCONNELL |ALL
CHAPTERS | ANSWERS WITH RATIONALES
NEWEST VERSION
,CHAPTER 1: INTRODUCTION TO MACROECONOMICS – TEST BANK
1. If a country’s resources are scarce relative to the wants of its population, the
economy must decide:
A) how to eliminate scarcity completely.
B) which goods and services to produce, how to produce them, and who receives
them.
C) which countries to trade with.
D) how to print more money to satisfy demand.
Answer: B
Rationale: Scarcity requires choices about allocation: what to produce, how, and
for whom. This is the fundamental economic problem.
2. Economics is primarily concerned with:
A) the study of money only.
B) unlimited resources in the face of limited wants.
C) the allocation of scarce resources to satisfy unlimited wants.
D) maximizing government revenue.
Answer: C
Rationale: Economics studies how scarce resources are allocated to meet
unlimited human wants, focusing on choice and trade-offs.
3. A normative economic statement:
A) describes how the economy actually works.
B) is based on factual evidence.
C) expresses a value judgment about what ought to happen.
D) cannot be challenged or debated.
Answer: C
Rationale: Normative statements express opinions or value judgments, unlike
positive statements which are factual.
,4. Opportunity cost refers to:
A) the price of a product in the market.
B) the benefit lost by choosing one alternative over another.
C) the total resources in an economy.
D) the revenue earned by a firm.
Answer: B
Rationale: Opportunity cost is the value of the next best alternative forgone when
a choice is made.
5. Which of the following best illustrates scarcity?
A) A factory has 10 machines and produces 10,000 units per month.
B) A country has limited oil reserves but unlimited desire for gasoline.
C) A person chooses to save money instead of spending it.
D) A store offers a sale on shoes.
Answer: B
Rationale: Scarcity exists when resources are limited relative to human wants;
limited oil with high demand is a classic example.
6. The “guns versus butter” model is used to illustrate:
A) how governments regulate trade.
B) the trade-off between military and civilian goods.
C) the production of luxury versus necessity goods.
D) the benefits of international specialization.
Answer: B
Rationale: The “guns vs. butter” model demonstrates opportunity costs and the
trade-offs in allocating resources between defense and consumer goods.
, 7. Which of the following is NOT a key economic question every society faces?
A) What goods and services should be produced?
B) How should these goods and services be produced?
C) Who will consume the goods and services?
D) How can money supply be increased without limit?
Answer: D
Rationale: Money supply issues relate to monetary policy, not the basic allocation
questions central to all economies.
8. A positive economic statement:
A) is always true.
B) can be tested and verified with evidence.
C) expresses opinions.
D) is unimportant in policy decisions.
Answer: B
Rationale: Positive statements describe facts or cause-and-effect relationships and
can be tested empirically.
9. The production possibilities frontier (PPF) illustrates:
A) the maximum output combinations achievable with existing resources.
B) the level of government intervention in an economy.
C) how much money a country should invest abroad.
D) consumer demand trends over time.
Answer: A
Rationale: The PPF shows all possible combinations of two goods that an
economy can produce using available resources efficiently.
EDITION BY CAMPBELL MCCONNELL |ALL
CHAPTERS | ANSWERS WITH RATIONALES
NEWEST VERSION
,CHAPTER 1: INTRODUCTION TO MACROECONOMICS – TEST BANK
1. If a country’s resources are scarce relative to the wants of its population, the
economy must decide:
A) how to eliminate scarcity completely.
B) which goods and services to produce, how to produce them, and who receives
them.
C) which countries to trade with.
D) how to print more money to satisfy demand.
Answer: B
Rationale: Scarcity requires choices about allocation: what to produce, how, and
for whom. This is the fundamental economic problem.
2. Economics is primarily concerned with:
A) the study of money only.
B) unlimited resources in the face of limited wants.
C) the allocation of scarce resources to satisfy unlimited wants.
D) maximizing government revenue.
Answer: C
Rationale: Economics studies how scarce resources are allocated to meet
unlimited human wants, focusing on choice and trade-offs.
3. A normative economic statement:
A) describes how the economy actually works.
B) is based on factual evidence.
C) expresses a value judgment about what ought to happen.
D) cannot be challenged or debated.
Answer: C
Rationale: Normative statements express opinions or value judgments, unlike
positive statements which are factual.
,4. Opportunity cost refers to:
A) the price of a product in the market.
B) the benefit lost by choosing one alternative over another.
C) the total resources in an economy.
D) the revenue earned by a firm.
Answer: B
Rationale: Opportunity cost is the value of the next best alternative forgone when
a choice is made.
5. Which of the following best illustrates scarcity?
A) A factory has 10 machines and produces 10,000 units per month.
B) A country has limited oil reserves but unlimited desire for gasoline.
C) A person chooses to save money instead of spending it.
D) A store offers a sale on shoes.
Answer: B
Rationale: Scarcity exists when resources are limited relative to human wants;
limited oil with high demand is a classic example.
6. The “guns versus butter” model is used to illustrate:
A) how governments regulate trade.
B) the trade-off between military and civilian goods.
C) the production of luxury versus necessity goods.
D) the benefits of international specialization.
Answer: B
Rationale: The “guns vs. butter” model demonstrates opportunity costs and the
trade-offs in allocating resources between defense and consumer goods.
, 7. Which of the following is NOT a key economic question every society faces?
A) What goods and services should be produced?
B) How should these goods and services be produced?
C) Who will consume the goods and services?
D) How can money supply be increased without limit?
Answer: D
Rationale: Money supply issues relate to monetary policy, not the basic allocation
questions central to all economies.
8. A positive economic statement:
A) is always true.
B) can be tested and verified with evidence.
C) expresses opinions.
D) is unimportant in policy decisions.
Answer: B
Rationale: Positive statements describe facts or cause-and-effect relationships and
can be tested empirically.
9. The production possibilities frontier (PPF) illustrates:
A) the maximum output combinations achievable with existing resources.
B) the level of government intervention in an economy.
C) how much money a country should invest abroad.
D) consumer demand trends over time.
Answer: A
Rationale: The PPF shows all possible combinations of two goods that an
economy can produce using available resources efficiently.
