Explain how microeconomics is different from macroeconomics.
What will be an ideal response?
Microeconomics deals with the smaller units within the economy, such as firms and households. It attempts to understand the decision-making behavior of these units and their interaction in markets for particular goods or services. As a result, microeconomics deals with things like health care, the price of everyday items, and the distribution of income. On the other hand, macroeconomics deals with the total economy. It looks at how economic problems affect the whole of society. Subjects covered in macroeconomics include inflation, unemployment, and business cycles.
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Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities frontiers for the two countries are shown in the graphs below.
Assume that prior to specialization and trade, Italy and Greece preferred points I and G on their respective production possibilities frontiers. As a result of complete specialization according to comparative advantage, the resulting gains in total output will be
A. 10 units of chemicals. B. 5 units of steel and 15 units of chemicals. C. 25 units of steel. D. 15 units of steel and 5 units of chemicals.
Some economists object to having the Fed concentrate solely on price stability because it would
A) make stabilizing the economy more difficult. B) lessen its credibility. C) privatize the Federal Reserve. D) free the Fed from political pressure.
Which of the following is not money?
a. Checks b. Coins c. Federal reserve notes d. Debit cards e. Credit cards
In capitalism,
a. there is no competition b. most property is privately owned c. the government sets most prices d. there is no freedom