CLEP Principles of Macroeconomics Version 1 Questions

1. Which model shows households supplying factors of production and firms supplying goods & services?

A. Circular-flow model Correct

B. Crowding-out effect

C. Comparative-advantage theory

D. Production-possibilities curve

The circular-flow diagram maps the real and money flows between households and firms.

2. Capitalist societies chiefly rely on which mechanism to allocate resources?

A. Government

B. Entrepreneurs only

C. Consumers only

D. Market forces Correct

Prices and competition in markets direct resource use in capitalist economies.

3. Italy has comparative advantage in wine, Greece in olives. We may conclude:

A. Greek olive workers are more productive

B. Greece devotes more resources to olives

C. Italian winemakers are more productive

D. Slopes of PPCs cannot be identical Correct

Different opportunity-cost slopes underlie comparative advantage and mutually beneficial trade.

4. Which unemployment type results from technological change?

A. Frictional

B. Cyclical

C. Seasonal

D. Structural Correct

New tech displaces workersÃ¢â‚¬â€classic structural unemployment.

5. Who is cyclically unemployed?

A. Jason returned to labor force after college

B. Barbara took early retirement

C. Clark lost job to outsourcing

D. Larry lost job in housing slump Correct

Cyclical unemployment follows the business cycle; housing slump = recession-driven.