Product and Resource Market


Why are economists concerned about inflation?

​Inflation lowers the standard of living for people whose income does not increase as fast as the price level

​Real GDP is necessarily falling when there is inflation

​Inflation generally causes unemployment rates to rise

​Inflation increases the value of peoples’ saving and encourages overspending on goods and services


​Two major virtues of the market system are that it:

​results in an equitable personal distribution of income and always maintains full employment

​results in price level stability and a fair personal distribution of income

​allocates resources efficiently and allows economic freedom

​eliminates discrimination and minimizes environmental pollution


Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that:

​the income and substitution effects associated with each are equal

​their marginal and total utilities are proportionate

​their total utilities are the same

​their marginal utilities are the same


​Macroeconomics approaches the study of economics from the viewpoint of:

​governmental units

​the entire economy

​individual firms

​the operation of specific product and resource markets

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