Chapter 1 Welcome to Economics

A map of the United States is an example of: a model that simplifies the complexities of the country. a theory that simplifies the complexities of the country. an exact representation of the complex details of the country. a version of the circular flow diagram.

a model that simplifies the complexities of the country.

Specialization: leads to greater self-sufficiency. can lead to an increase in overall production. allows workers to develop skills by working on a large number of tasks. is always the result of an inefficient use of resources.

can lead to an increase in overall production.

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. Multiple Choice government market firm business sector

government

In the goods and services market: households supply and firms demand. households and firms demand. households demand and firms supply. households and firms supply.

households demand and firms supply.

Primarily, economics is the study of: how people make decisions in the presence of scarcity. international trade and currency exchange rates. money, finance, and business. how people make decisions in the face of shortages.

how people make decisions in the presence of scarcity.

When economists consider determinants of a country's standard of living, or what causes an economy to speed up or slow down, they are studying __________. Multiple Choice international economics development economics microeconomics macroeconomics

macroeconomics

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. Multiple Choice market economy macroeconomy microeconomy command economy

market economy

The basic difference between macroeconomics and microeconomics is: microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

In heavily regulated economies, buyers and sellers often make transactions illegally, without the government's approval. These economies are called: traditional economies. market-oriented economies. underground economies. inverted economies.

underground economies.

Which of the following lies primarily within the realm of macroeconomics? A study of the demand for gasoline A study of how tax cuts stimulate aggregate production An analysis of supply and demand conditions in the electricity market A study of the impact of "mad cow" disease on the price of beef worldwide

A study of how tax cuts stimulate aggregate production.

In countries like _____________, the command economy predominates. China and Vietnam Cuba and North Korea South Africa and Kenya Germany and France

Cuba and North Korea

"Virtually every problem facing the world today, from international terrorism to climate change, and from professional sports to poverty has an economic dimension." This statement answers which general question? Why should we increase military spending? Why should we impose harsh regulation on businesses that pollute? Which professional sports team will win the championship this year? Why should you study economics?

Why should you study economics?

Why is the circular flow diagram considered a model? It simplifies the complex relationship that exists between households and firms. It is a model because it is the exact opposite of a theory. It captures perfectly all of the complex nuances that exist between households and firms. John Maynard Keynes called it a model.

It simplifies the complex relationship that exists between households and firms.

What part of economics covers the theory of the firm? Macroeconomics Microeconomics Money and Banking Developmental Economics

Microeconomics

Which component part of economics covers the theory of consumer behavior? Microeconomics Macroeconomics Money and Banking Developmental Economics

Microeconomics

An economic system based on private enterprise where businesses supply goods and services based on demand, is called a traditional economy. a command economy. an international economy. a market economy.

a market economy.

Identify the phrase that describes the following statement: "As production increases, the average cost of producing each unit decreases." Economies of scale Economies of scope Increasing returns to scale Diseconomies of scale

Economies of scale

Which of the following best describes a fiscal policy tool? Multiple Choice Government spending Bank lending Financial capital markets Household spending

Government spending

The size of the total production in an economy is called: Multiple Choice Gross Domestic Product. Gross Imported Product. Gross Domestic Private Investment. Gross Value Added.

Gross Domestic Product.

Suppose you hear that a country's central bank is going to change interest rates. You can conclude that this is which type of policy? Multiple Choice Fiscal Policy Banking Policy Monetary Policy Lending Policy

Monetary Policy

Indicate the entity that conducts U.S. monetary policy. The President The Federal Reserve The U.S. Treasury Congress

The Federal Reserve

Macroeconomics primarily examines: the behavior of individual households and firms. how prices are determined within individual markets. broad issues such as national output, employment and inflation. the output levels that maximize the profits of business firms.

broad issues such as national output, employment and inflation.

The basic difference between macroeconomics and microeconomics is that: microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

Most economies in the world are: market economies, where supply and demand are the sole determinants of what goods are produced, the means of production, and price at which the goods sell. mixed economies, where the economic system contains a combination of both pure market economies, and some level of government control and oversight. command economies, where the nation's government determines what is produced, how much is produced, the means of production, and the price. traditional economies, where the means of production are based largely on tradition.

mixed economies, where the economic system contains a combination of both pure market economies, and some level of government control and oversight.

People have different skill sets and, therefore, are better at some jobs than others. If people _________ and produce what they do best, they will be more productive than if they produce a variety of things. diversify categorize specialize integrate

specialize