Econ 1101 - Final Exam Review (Compilation of all Chapter Exam Reviews)
Check Exam 3-19 for Diagram (for question 6-7) Refer to the above diagram. A shortage of 160 units would be encountered if the price was:
$0.50
Check exam 3-19 for Diagram Refer to the diagram. The equilibrium price and quantity in this market will be:
$1.00 and 200
Check Exam 3-19 for Diagram (for question 6-7) Refer to the above diagram. A surplus of 160 Units would be encountered if the price was:
$1.60
Inflation refers to:
THe pressure for prices to rise in most markets in an economy
The following are all determinants of growth, except:
The allocation factor
The word "economy" comes from the Greek word oikonomos, which means
"one who manages a household"
Digital cameras and memory cards are:
Completmentary goods
A shift of the right in the demand curve for product A can be most reasonably explained by:
Consumer preferences have changed in favor of A so that they now want to buy more at each possible price point
Suppose an excise tax is imposed on product Z. We can expect this tax to:
Decrease the demands for complementary good Y and increase the demand for substitute product Z
Other things equal, an excessive increase in the money supply will:
Decrease the purchasing power of each dollar
Name the three traditional tools of monetary policy used by the Federal Reserve:
47. Open market operations, 48. Changing the reserve requirements, 49. Changing the discount rate
Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 workers are employed, the unemployment rate is
6 percent
Answer the next question(s) on the basis fo the following information about the hypotheticla economy of Econoland. All figures are in millions. UNEMPLOYED: 7 TOTAL POPULATION: 145 EMPLOYED: 95 DISCOURAGED WORKERS: 3 9. Refer to the above information. The unemployment rate in Econoland is:
6.9 percent
The Board of Governors of the Federal Reserve is composed of how many members:
7
Suppose that lenders want to receive a real rate of interest of 5 percent, and they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge what rate of interest?
7 percent
Which of the following will not cause the demand for product K to change?
A change in the price of K (Wrongs answers: a change in the price of close-subsitute product J, an increase in incomes of buyers of product K, and a change in consumer tastes for K)
The deposits of $100,000 or more are:
A component of M2 and not M1
Cyclical unemployment results from:
A decline in total spending on goods and services in the economy
two goods are compliments:
A decrease in the price of one will increase the demand for the other
Which of the following would cause the money supply in the U.S. to expand?
A decrease in the reserve requirements
IF you write a check on a bank to purchase your textbooks, you are using money primarily as:
A medium of exchange
Which of hte following statments is correct:
A nation acquires more capital by saving some of its income and uses it for economic investments
A college graduate, using the summer following graduation to search for a job would best be classified as:
A part of the frictional unemployment group
Micheal rents 5 movies per month when the price is $3 per rental and 7 movies per month when the price is $2 per rental. Micheal's action demonstrates the law of:
Demand
The United States' economy is considered to be at full employment when:
About 4-5 percent of the labor force is unemployed
In the United States, the rate of unemployment is highest for:
African-American teenagers
Who is least likely to be hurt by unanticipated inflation?
An owner of a small business (Wrong answers: disabled laborer who is living off accumulated savings, a pension steelworker, and a secretary)
The members of the Board of Governors of the Federal Reserve System are:
Appointed by the President with the confirmation of the Senate
The top four categories of government expenditures account for __________% of all federal spending.
Approximately 73%
In the United States, monetary plicy is the responsibility of the:
Board of Governors of the Federal Reserve
The ability of low GDP/capita countries to 'catch up' with high GDP/capita countries is called:
Convergence
Inflation initiated by increases in wages or other resource prices is labelled:
Cost-push inflation
Rising per-unit production costs are most directly associted with:
Cost-push inflation
THe type of unemployment associated with recessions is called:
Cyclical unemployment
If the unemployment rate is 9 per cent and the natural rate of unemployment is 5 per cent, then the:
Cyclical unemployment rate if 4 percent
Graph (y= capital goods, x= consumer goods) curves downwards (parabola opening downwards) with the following points: (A: on the line, located towards the top) (B: on the line, located towards the middle) (C: on the line, towards the bottom) (D: below the line) (E: Above the line) Refer to the above diagram. This economy will experience unemployment if it produces at point:
D
The relationship between quantity supplied and price is _____ and the relationship between quantity demand and price is _____.
Direct, inverse
The largest stage/local expenditure is for:
Education
Net exports are:
Exports less imports
The paper money used in the United States is
Federal REserve Notes
A $20 bill is a:
Federal Reserve Note
In the U.S. economy, the money supply is controlled by the:
Federal Reserve SYstem
Macroeconomies focuses on the following policy(s) within the government
Fiscal and Monetary Policy
The use of government taxation and expenditures to achieve macroeconomic goals is called:
Fiscal policy
In the modern economic growth process, it is typical to find that:
Follower countries can grow faster than leader countires
What is the length of the term of the members of the Board of Governors of the Federal Reserve System?
Fourteen years
Assume Kyle is temporarily unemployed because he voluntarily quit his job with company A and will begin a better job next month with company B. Kyle wil be considered as:
Frictionally unemployed
Which of the following statements is correct:
If supply increases and demand decreases, equilibrium price will fall
A market is in equilibrium:
If the amount producers want to sell is equal to the amount consumers want to buy
In 2007-2009, the United States experienced what has come to be known as the:
Great Recession
Critics of growth argue the following, except:
Growth cannot be controlled
The federal government has a number of options when trying to stimulate the economy. The most direct option is:
Increase government spending
Other things equal, an excise tax on a product will:
Increase its price
An economist who favoured expanded government, would recommend:
Increases in government spending during a recession and tax increases during inflation
The correct order of magnitude of government spending currently is:
Healthcare, Social Security, National Defense, Interest on the Debt
Gross domestic product (GDP) measures and reports output:
In dollar amounts
Economists are particularly adept at understandign that people respond to
Incetnives
Coins in people's pockets and purses are:
Included both in M1 and M2
A demand curve:
Indicates the quantity demanded at each price in a series of prices
The largest source of federal revenue comes from:
Individual income taxes
If both the real interest rate and the nominal interest aret are 3 percent, then the:
Inflation premium is zero
Modern economic growth began:
Informally around 1776 when James Watt perfected the steam engine
Discretionary fiscal policy refers to:
Intentional changes in taxes and/or government expenditures made by Congress to stabilize the economy
Price floors and ceiling prices:
Interfere with the rationing function of prices
The Federal Reserce's primary goal is to maintain:
Low unemployment and low inflation
A market:
Is an institution that brings buyers and sellers together
The Federal Reserve System:
Is basically an independent agency of the federal government
Expansionary fiscal policy is so named because it:
Is designed to expand the GDP
A nation's gross domestic product (GDP):
Is the dollar value of all final goods and services produced within the borders of the nation
Which of the following does not correclty characterize modern economic growth?
It has not affected the average lifespan of human beings
The current Chairman of the Federal Reserve is:
Janet Yellon
The presence of discouraged workers:
May cause the official unemployment rate to understate the true amount of unemployment
The Bureau of Labor Statistics (BLS) collects and reports on the number of jobs in the economy. They collect information:
Monthly
Check Exam 3-19 for Diagram (for question 4-5) Refer to the above diagram. A decrease in quantity demanded is depicted by a:
Move from point x to point y
Check Exam 3-19 for Diagram (for question 24-25) An increase in the quantity supplied is depicted by a:
Move from point y to point x
Recently, a labor union argued that the standards of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been acquiring increasing in the nominal wages of its members through collective bargaining. Is the critic correct?
No, because real income may fall if prices increase more proportionately than the increase in nominal income
Real GDP is preferred to nominal GDP as a measure of economic performance because:
Nominal GDP uses current prices and thus may over or understa
Strong property rights are important for modern economic growth because:
People are more likely to invest if they don't fear that others can take their returns on investment
During peridos of hyperinflation:
People tend to hold goods rather than money
The primary source of revenue for the federal government is:
Personal income taxes
The demand curve shows the realtionship between:
Price and quantity demanded
The law of demand states that, other things equal:
Price and quantity demanded are inversely related
The location of the product supply curve depends on the:
Production technology
During the Great Recession of 2007-08 the Federal Reserve adopted a new, innovative and nontraditional policy of purchasing private mortgage-backed securities to make credit (liquidity) available in order to stimulate aggregate demand. That policy was called:
Quantitative Easing
Before the period of modern economic growth:
Rates of population growth virtually matched rates of output growth
Real income can be determined by:
Reduing nominal income by the inflation rate
An effective ceiling price will:
Result in a product shortage
Suppose that a person's nominal income rises from $10,000 to $12,000 and the conumer price index increases from 110 to 105. The person's real income will:
Rise by about 15 percent
Assume a drought in the Great Plains reduces the supply of wheat. Noting wheat is a basic ingredient in bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:
Rise, the supply of bread to decrease, and the demand for potatoes to increase
In the United Stats, business cycles have occured against a backdrop of a long-run trend of:
Rising real GDP
Senator Smith argues that replacing the income tax with a national sales tax would increase the level of output. Senator Wells objects that this policy would benefit the rich at the expense of the poor.
Senator Smith's argument is primarily about efficiency, while Senator Well's argument is primarily about equality
Check Exam 3-19 for Diagram (for question 4-5) Refer to the above diagram. A decrease is demanded is depicted by a:
Shift from D2 to D1
Check Exam 3-19 for Diagram (for question 24-25) A decrease in supply is depicted by a:
Shift from S1 to S2
An economist who favours smaller government would recommend:
Tax cuts during a recession and reductions in government spending during inflationary times.
Each of the following is a determinant (shifter) of demand, except:
Technology (Wrong answers are: tastes, expectations, and prices of related goods)
The natural rate of unemployment is:
That rate of unemployment occuring when the eocnomy is at the potential output
The unemployment rate that results from the combination of economic, social and political factors which exist at a time of normal economic conditions is called:
The "natural rate of unemployment"
The Federal Open Market Committee (FOMC) voting membership consists of:
The Board of Governors, the President of the New York Fed and four of the remaining Federal Reserve Bank Presidents
The election of the Chairman and Vice-chairman is made by:
The President of the United States
When current tax revenues exceed current government expenditures and the economy is at full employment:
The cyclically adjusted budget has a surplus
Which of the following would most likely increase the current demand for gasoline?
The expectation by consumers that gasoline prices will be higher in the future
Graphically, the market demand curve is:
The horizontal sum of the individual demand curves
People are willing to pay more for a diamond than for a bottle of water because
The marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water
The unemployment rate is calculated as follows:
The number of unemployed pepole divided by the labor force
Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five millon of the part-time workers become full-time. As a result:
The official unemployment rate will remain unchanged
In representing the idea of a demand curve, economists presume that the most important variable in determining the quantity demanded is:
The price of the product itself
Which of the following is not an economic investment:
The purchase of 100 shares of AT&T by a retired business executive (Wrong answers: purchase of a new drill press, construction of a suburban housing project, increase in inventories on a grocer's shelf)
Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect:
The supply to increase as farmers plant more corn
The phase of hte busienss cycle in which real GDP is at a minium is caleld:
The trough
The opportunity cost of going to college is
The value of the best opportunity a student gives up attending college
To say that coins are "token money" means that
Their fave value is greater than their commodity value
Which one of the following is true about the U.S. Federal Reserve System?
There are 12 regional Federal Reserve Banks
The demand for a good or service is determined by
Those who buy the good or service
The cost-of-living adjustment clauses in labor contracts (COLAs):
Tie wag e increases to change in the price level
Why are high rates of unemployment of concern to economists?
There is lost output that could have been produced if the unemployed had been working
Which of the following statements best describe the 12 Federal Reserve Banks?
They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general welfare
Checkable deposits are classified as money because:
They can be readily used in purchasing goods and services or paying debts
When two variables, such as in the "Law of Supply," have a positive correlation:
They tend to move in the same direction
The FOMC operations is the:
Tool most often used by the Federal Reserve to alter th einterest rates and money supply
The primary securities held as assets by the Federal Reserve Banks consists mainly of:
Treasury bills, notes and bonds
Official unemployment statistics:
Understate unemployment because discouraged workers are not counted as unemployed
A $70 price tag on a sweater in a department store window is an example of money functioning as a:
Unit of account
Before the advent of modern economic growth, living standards in the world:
Were relatively stagnant for very long periods of time
To say money is socially defined means that:
Whatever performs the functions of money well is considered to be money
The study of economics entails:
a comparison of marginal benefits and marginal costs in decision making
The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the
amount of the other good that must be given up
The circular-flow diagram is an example of
an economic model
John Maynard Keynes referred to economics as an easy subject,
at which very few excel
In drawing the production possibilities curve (frontier) we assume that:
technology is fixed
Your professor loves his work, teach economics. He has been offered other position in the corporate world that would increase his income by 25 percent, but he has decided to continue working as a professor. His decision would not change unless the marginal
cost of teaching increased
A normative statement is one that:
is based on value judgements
The phenomenon of scarcity stems from the fact that
resources are limited
Economics deals primarily with the concept of
scarcity
Reources are
scare for households and scare for economies
When economists are trying to explain the world, they are
scientists
The opporutnity cost of an item is
what you give up to get that item
When economists say that people act rationally in their self interest, they mean that individuals:
look for and pursue opportunities to increase their utility
Currency held in the valut of the First National Bank is:
Counted as part of M2 but not M1
In the United States, the money supply (M1) is comprised of:
Coins, paper currency, and checkable deposits
Answer the question on the basis of the following data. All figures are in billions of dollars: Gross Investment: 18 National Income: 100 Net Exports: 2 Personal Income: 85 Personal Consumption Expenditures: 70 Saving: 5 Government Purchases: 20 Net Domestic Product: 105 Statistical Discrepancy: 0 The gross domestic product for the above economy is:
$110
The Obama dministration, in cooperation and support of the Congress, enacted the American Recovery and Reinvestment Acct of 2009. The amount to funds allocated to this program was:
$787 billion
(1) Qd [50, 60, 80, 90, 100] (2) Qd [40, 50, 60, 70, 80] (3) Qd [10, 9, 8, 7, 6] (4) Qd [70, 60, 50, 40, 30] (5) Qd [80, 70, 60, 50, 40] Refer to the table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5), equilibrium price and quantity will be:
$8 and 60 units
If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is:
11 percent
Answer the Following question based upon the information below: Full-Time Employed: 80 million Part-Time employed: 25 million Unemployed: 15 million Discouraged Workers: 5 million Members of Underground Economy: 6 million Consumer Price Index: 110% The unemployment rate is
12.5 percent
The U.S. dollar in 2014 had the same purchasing power as:
18 cents in 1972
The Federal Reserve Bank was created in:
1913
A reserve requirement of 5 percent implies a potential money multiplier of:
20
At the depth of the Great Depression, the unemplyment rate in the United States was approximately:
25 percent
In 2009, the federal government incurred the single largest fiscal eficit in its history. The amount was:
1.4 trillion
Approximately what percentage of the world"s economics experience scarcity
100%
Answer the next question(s) on the basis fo the following information about the hypotheticla economy of Econoland. All figures are in millions. UNEMPLOYED: 7 TOTAL POPULATION: 145 EMPLOYED: 95 DISCOURAGED WORKERS: 3 8. Refer to the above information. The labor force in Econoland is:
102 million
The following table contains some production possibilities for an economy for a given year Cars [ 10, 12, 14 ] Newspapers [ 400, 360, ? ] if the production possibilities frontier is bowed outward, then "?" could be
320
The Federal Reserve System divides the United States into a number of districts. Name the regional headquarter city for six of those districts.
41. New York, 42. Atlanta, 43. Boston, 44. Chicago, 45. Dallas, 46. San Francisco
Currency (paper money plus coins) contains approximately:
45 percent of the U.S. M1 money supply
The following objects have been used as commodity money, excpet:
All have functioned as a medium of exchange (money) (A. cocoa beans, B. cigarettes, C. cowrie shells)
In implementing fiscal policy, there are problems and complicates associated with:
All of the above (A. Recognition lag, B. Legislative lag, C. Implementation lag)
Money functions as a:
All of the above (A. store of value, B. Unit of account, C. Medium of exchange)
Government policies can change the costs and benefits that people face. Those policies have the potential to
All of the above are correct (a. alter people's behaviour, b. alter people's decision at the margin, c. produce results that policymakers did not intend)
Which of these statements about economics models is correct?
All of the above are correct (a. for economists, economic models provide insights about the world, b. economic models are built with assumptions, c. economic models are often composed of equations and diagrams)
The principle that "people face tradeoffs" applies to
All of the above are correct (a. individuals, b. families, c. societies)
Economists, like mathematician, physicists, and biologists,
All of the above are correct (a. make use of the scientific method, b. try to address their subject with ascientist's objectivity, c. devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories)
The production possibilities frontier is used to illustrate some basic economic ideas, including
All of the above are correct (a. scarcity, b opportunity cost, c. economic growth)
The government surplus of the late 1990"s is attributed to:
All of the these. (A. The "Y2K phenomenon, B. The sharp rise in personal income. C. The drop in required government transfer payments.)
The largest component of the money supply (M1) is:
Checkable deposits
Inflation is undesirable because it:
Arbitrarily redistributes real income and wealth
Small-denomination time deposits, by definition:
Are less than $100,000
In order to show a consistent relationship with respect to our national debt, most economists relate our continued deficit spending:
As the relationship of Debt to Gross Domestic Product, (Debt/GDP)
Figure 2-1 I tried, but I still don't understand this figure so I won't be able to explain it, and I can't upload an img. of it. You'll have to look at your own exam to see the graph. Refer to Figure 2-1. Which arrow represents the flow of goods and services?
B, not that it matters since I can't comprehend the figure
Macroeconomics consider the following the most important goals, except:
Balanced budgets
According ot the Bureau lof Labor Statistics, to be officially unemployed, a person must:
Be in the labor force
During periods of very rapid inflation (hyperinflation), money may cease to work as a medium of exchange:
Because people and businesses will not want to accept it in financial transactions
"Crowding out" refers to the situation in which:
Borrowing by the federal government raises interest rates and causes companies to invest less
Currency in circulation is part of:
Both M1 and M2
Recurring up and down swings in an economy's real Gross Domestic PRoduct (GDP_ over time, are called
Business cycles
If the Fed wanted to expand the money supply as part of an antirecession strategy, it could:
Buy U.S. securities in the open market
The money supply of the United States is backed:
By the government's ability to control the supply of money and the universal faith and trust
Given the annual rate of inflation, the "rule of 70" allows one to:
Calculate the number of years required for the price level to double
A nation's Gross Domestic Product (GDP)
Can be found by summing up C+I+G+Xn
The rationing function of prices refer to the:
Capacity of a competitive market to equalize quantity demand and quantity supplied
If Z is an inferior good, an increase in money income will shift the:
Demand curve for Z to the left
The phrase, "too much money chasing too few goods," best describes:
Demand-pull inflation
The interest rate at which the Federal Reserve Banks lend to commercial banks is called the:
Discount rate
The number of years required for real GDP to double can be found by:
Dividing the annual growth rate into 70
The terms of the members of the Board of Governors were set to provide all of the following except:
Easy rotation of the majority of the members
Macroeconomics is studied from all of these perspectives, except:
Economics budgets (Wrong answers: economic goals, policies, and framework/models)
Which of the following is correct?
Economists study the management of scarce resources
Which of the following is true?
Efficiency refers to the size of the economic pie; equality refers to how the pie is divided
Economic growth is best defined as an increase in:
Either real GDP or real GDP per capita
All of the following factors are critical for economic growth, except:
Eminent domain
Kara voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara is presently:
Fictionally unemployed
If the MPS (marginal propensity to save) in an ecnomy is .10, making the multiplier effect of 10, the government could shift the aggregate demand curve rightward by $40 billion by:
Increasing government spending by $4 billion
Which of the following does not explain what supports the money supply in the United States:
It is backed by the government's gold supply (Wrong answers: B. it is widely accepted in transactions of all forms, C. It is designated "legal tender" by the federal government, D. It is relatively scarce)
Economists face an obstacle that many other scientists do not face. What is that obstacle?
It is often difficult and sometimes impossible to perform experiments in economics
The quality of "Human Capital" includes:
Knowledge, experience, and education
The annual rate of inflation can be found by subtracting:
Last year's price index form this year's price index and dividing the difference by last year's price index
Assuming no other changes, if checkable deposits increases by $40 billion and currency in ciruclation decreasesbt $40 billion, the:
M1 money supply will not change
"near-monies" are included in:
M2 only
If the current prices of all goods and services rose, but quantity produced remained unchanged, what would happen to nominal and real GDP?
Nominal GDP would rise, but real GDP would be unchanged
If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?
Nominal GDP would rise, but real GDP would be unchanged
Under which of the following circumstances would we observe the greatest increase in real income
Nominal income falls by 2 percent and the price level falls by 10 percent (Wrong answers: variations of the correct answer but with lower real income)
ALex works in his home as a homemaker and full-time caretaker of his children. Officially he is:
Not in the labor force
Demand-pull inflation
Occurs when total spending exceeds the economy's ability to provide output at the existing price level
Demand-pull inflation:
Occurs when total spenidng in the ceocnomy is excessive
The Federal Reserve has three traditional tools to implement monetary policy:
Open market operations, changing the reserve requirements, and changing the discount rate
The term "ceteris paribus" means:
Other things equal
The supply curve shows the relationship between:
Price and quantity supplied
Paper money (currency) in the United States is:
Printed by the Bureau of Engraving and issued by the Federal Reserve Banks
The law of supply indicates that, other things equal:
Producers will offer more of a product at a high prices than at low prices
Camille's Creations and Julia's Jewls both sell breads in a competitive market. If at the market price of $5 both are running out of bread to sell (they can't keep up with the quantity demanded at that price) then we would expect both Camille and Julia to:
Raise their price and increase their quantity supplied
The principle measurement of the eocnomic sucess of a nation is:
Real GDp per capita
Modern economic growth refers to countries that have experienced an increase in:
Real output per person (per capita).
Cost-push inflation:
Reduced real output
Unanticipated inflation:
Reduces the real burden of the public debt to the government
In 2010, Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6 percent. WE can conclude that Tatum's real income:
Rose by approximately 3 percent
The business cycle depicts:
Significant fluctuations in economic output and employment
Efficiency means that
Society is getting the maximum benefits from its scarce resources
A leftward shift of a product supply curve might be caused by:
Some firms leaving an industry
Unemployment involving a mismatch of the skills of unemployed workers and the skill required for current available jobs is called:
Structural unemployment
There are a number of people who fall into a category called "hidden unemployment." They are all of the following, except:
Students
The Federal budget deficit is found by:
Subtracting government tax revenues from government spendig in a particular year
The forces that make market economies work are:
Supply and demand
If you are estimating your total expenses for school next semester, you are using money primarily as
Unit of account
Which of the following institutional arrangements is most likely to promote economic growth?
Unrestricted trade between nations
Which of the following is most likely to be an inferior good:
Used clothing
A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words the society faces a tradeoff between
efficiency and equality
The labor force includes:
employed workers and persons who are officially unemployed
Which of the following concepts cannot be illustrated by the production possibilities frontier
equality
When an economist evaluates a positive statement, he or she is primarily
examining evidence
In the simple circular-flow diagram, the participants in the economy are
households and firms
Graph (y= capital goods, x= consumer goods) curves downwards (parabola opening downwards) with the following points: (A: on the line, located towards the top) (B: on the line, located towards the middle) (C: on the line, towards the bottom) (D: below the line) (E: Above the line) Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of future growth if:
it chooses point A
Production is efficient if the economy is producing at a point
on the production possibilities frontier line
A rational decision maker takes an action only if the
marginal benefit is greater than the marginal cost
Which of the following phrases best captures the notion of efficiency?
minimum waste
In the circular-flow diagram, which of the following is not a factor of production?
money
Guns and butter are used to represent the clasical societal tradeoff between spending on
national defence and consumer goods
A positive statement is one which is:
objective and is based on facts
Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that
people face trade-offs
The adage, "There is no such thing as a free lunch," means
people face tradeoffs
For economists, statements about the world are two types:
positive statements and normative statements
Economics may be best defined as the:
social science concerned with how individuals, institutions, and society make optimal choices
A microeconomist - as opposed to a macroeconomist - might study
the effect of rising oil prices on employment in the airline industry
Macroeconomics approaches the study of economics from the viewpoint of:
the entire economy
Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that
the nation is not using all available resources or is using inferior technology or both