econ study guide
When higher taxes discourage whatever activity is being taxed that is called
A negative incentive effect
consider the cost function above. if this business faces a constant price of $12, then it can reach a maximum profit of ___ by producing ___
$10 ; 20 units
If the spending multiplier is 1.2 then $100 billion increase in government spending will increase GDP by
$120 billion
in 2018, the gross domestic product of the united states was
$20.5 trillion
refer to the table above. what was the real gdp per capita in 1999
$38,551
In the private sector, all transactions are voluntary, so
Presumably all parties benefit
a wage price spiral occurs when
a business boost prices and wages faster and faster to try to stay ahead of higher than expected inflation
the wage and price controls of 1971 were an example of
a command and control approach
which is not an example of intermediate input
a computer chip factory built in arizona
for a given market, a profit maximizing monopolist would always charge ______ a firm in perfect competition
a higher price than
in the past 50 years, the economy of the united states has grown, causing
a higher standard of living for most citizens
a zero sum economy would result from
a lack of real economic growth
a market where there is only one seller, and buyers have no good alternative, is called
a monopoly
output divided by the number of hours worked or by the number of workers is called
average product
the effect of crowding out over the long run is
bad because businesses have less access to loans
why are intermediate inputs left out of gdp calculations
because intermediate inputs are part of final goods and services
why do individuals and businesses have to make decisions
because resources are scarce
imposing a tax on a market generally hurts
both buyers and sellers
The excess of the federal government's spending over its revenues is called the
budget deficit
the technology or knowledge necessary for a production process is called
business know how
which is not a category of goods included in the BLS's consumer market basket
business office supplies
the individual quantity demanded is the amount of _______ is willing to ______ at a given price
buyer ; purchase
who competes with whom in a market
buys compete with other buyers and sellers compete with other sellers
which component of gdp captures goods that are produced but not sold in a given year
changes in private inventories
if two or more oligopolistic companies work together to keep their prices high and split the market between them, this is called
collusion
what is the cpi
consumer price index
if tax cuts are stimulative, tax increases are
contractionary
nonresidential investment does not include
copy paper
rent seeking behavior can sometimes cause
corruption in public officials
what word describes the money that a business pays for its inputs
cost
goods that are produced but not immediately sold
count in the GDP as a change in private inventories
if an american company, such as intel, produced output in ireland, this output
counts in the irish gdp
suppose the government decides to eliminate some, but not at all, of the rules that govern how investment banks conduct their business. this would be an example of
deregulation
if you add too much of any one input, your business is likely to experience
diminishing marginal product
Amount of income people have left over after taxes is called
disposable income
The law of demand suggests that most demand curves will be
downward sloping
which of the following is an example of a negative network externality
driving on a crowded highway during rush hour
the education and skills of works are factors driving
economic growth
The price at which quantity supplied equals quantity demanded is the
equilibrium price
on the basic supply demand graph, the point at which the demand curve and the supply curve intersect is located at
equilibrium price and equilibrium quantity
globalization is the exchange of ________ among countries
goods, services, ideas, and people
GDP per capita means
gross domestic product per person
Economic growth generally leads to
higher living standards
which of the following is not mentioned in the textbook as a constraint that affects the economy
households must make purchasing choices based on government regulations
The Keynesian recommendation for a policy response to a recession consists of
increase government spending with tax cuts
If a foreign car manufacturer builds a plant in the United States, the new plant will
increase the US GDP by the value of the cars produced
as one of the new deal programs, the WPA was a government agency that
increased employment through construction projects
which of the following is not an example of a barrier to entry
lower costs
marginal revenue is generally ________ for businesses that do not operate under conditions of perfect competition
lower than the price
the demand schedule reports the quantity demanded at
many different prices
in perfect competition, a profit maximizing business will expand production until its ______ equals the market price
marginal cost
As the market price of a good rises, businesses will respond by producing more of that good because
marginal revenue exceeds marginal cost after the price increase
what will happen as a result of a decrease in demand
Equilibrium price and quantity both fall
core inflation is defined as
Inflation that does not take energy and food into account
Supply side economics theory focuses on the
Marginal tax rate
The overall boost to economic activity that results from a government spending increase is called the
Multiplier effect
The total of all past government borrowing minus government budget surplus is called the
Public debt
Market equilibrium is the point where quantity supplied and_______are equal
Quantity demanded
what word describes the money that customers pay for the output of a business
revenue
in a market where businesses are earning high profits, new entrants will cause the supply curve to shift to the ____ and thus cause the market price to ________
right ; fall
one of the purchases a business can make that would count directly in the gdp is
software
what might happen if the market price for haircuts increased
some hair salons might hire more stylists
what will happen in the long run if businesses in perfect competition are experiencing losses
some sellers will go out of business, causing supply to decrease and prices to rise
In a movement along the demand curve, the demand schedule
stays the same, but the price changes
the airline deregulation act
subjected new airlines only to safety regulations
If a new major oil field is discovered in Africa, world _____ curve for oil woud shift to the ______
supply ; right
Inflation can be defined as
sustained upward movement in the average level of prices
the real growth rate is calculated by
the BEA adjusting the GDP for inflation
one of the biggest benefits of a market based economy is
the ability to adapt quickly to change
which of the following is not an example of a good or service provided by a market
the air we breathe
on a PPF with two products, health care and housing, what would occur in a stagnant economy if the amount of health care output increased
the amount of housing would decrease
the production possibility frontier represents
the different possible combinations of output
according to the aggregate production function, when inputs increase
the economy grows
most markets if left alone or trend towards
the equilibrium price
imposing a tax on a market typically hurts sellers because
they receive less than they would in a competitive equilibrium
a demand schedule illustrates the quantities of a particular product or service that are demanded at different prices
true
advertising a brand can help create a reputation effect
true
economics is the study of how individuals, businesses, and governments make decisions and trade offs in the face of scarce resources
true
history suggests that economic competition is the most consistent force for economic growth and progress
true
variable costs are short term costs, and fixed costs are long term costs
true
world war II increased the amount of government spending and economic intervention in the united states
true
consider the cost function above. if the price that this business faces is $25, how much output should this business produce in order to maximize profit
two units
offficial gdp numbers do not include the activity of the _________ economy, which includes illegal activities and off the book transactions
underground
a laissez-faire economy has
very little government regulation of the economy
hyperinflation is
very rapid increase in prices from year to year
Simon Kuznets
was the first economist to construct an overall measurement of the US economy
between 2000 and 2018, which of the following experienced a negative inflation rate
wireless phone service
money illusion occurs when we compare dollar amounts
without adjusting for inflation
Closed economies generally do ______ open economies, in the _______ run.
worse than; long
suppose kyra purchases and downloads an eBook from Amazon.com does this count as a market transaction
yes because there is voluntary exchange of money for a good or service
refer to the table, which shows the number of energy drinks demanded per day by the students at a certain university. does this demand schedule conform to the law of demand?
yes, because as the price falls, the quantity demanded rises
From World War II to the early 1970s, GM, Ford, and Chrysler enjoyed
market power
_____________ is the ability to raise prices above the level that perfect competition would produce by restricting the quantity supplied
market power
the main objective of a business in a market economy is to
maximize profit
as of 2014, the average household earned $53,657. in 1979 the average household earned $16461. although it appears as though incomes have more than tripled, other prices have risen too. this illustrates a concept known as
money illusion
in recent years, china and india have prospered economically by introducing
more competition through markets
A good example of monopolistic competition is
neighborhood restaurants
which of the categories of gdp were negative for the united states in 2018
net exports
A profitable business will attract
new competitors
opportunity cost is defined as the value or benefit of the
next best alternative
volunteers in the workforce have what effect on the GDP
none because they are not counted
financial markets do not include which of the following
nonprofit organizations
what is one negative effect of growth
obesity due to falling food prices
raw materials include which of the following
oil
Inflation
one of the key measures of the health of an economy
when you have to give up one opportunity in order to choose another, the value of the opportunity not chosen is called the
opportunity cost
In a simple lawn-mowing business where you have a push mower and labor as inputs, what would the impact on output of adding an additional unit of capital in the form of a gas powered self propelled mower
output would increase
The transfer of domestic economic stimulus to foreign markets is known as
overseas leakage
in the long run, monopolistic competition starts to look like
perfect competition
which of the following is not part of an economy's financial markets
political action committees
which of the following is mentioned in the textbook as a deficiency in private markets for which government action can provide a remedy
pollution
the potential profit from new technological advancements and innovations
gives the private sector a better incentive to commercialize new technologies
some goods have become less expensive due to
globalization and technology
the textbook provides examples of markets that are
local, national, and global
refer to the table above, which gives farmer mccolls's marginal cost function for barley. if farmed mccoll is currently production 25 bushels of barley, which of the following could be the market price for a bushel of barley
$0.75
the CPI in november 2015 was equal to 237.3, and in 2016 it was equal to 241.4. this means that the inflation rate between november 2015 and november 2016 was equal to
1.7 percent
according to most estimates, the size of the underground economy in the united states could be as large as
10 percent of GDP
in order to create an index for consumer prices, the BLS chose
100 to represent the average 1982 1984 price level
refer to the table above, which gives the daily supply and demand schedules for cups of coffee at a kiosk in a shopping mall. if there is not tax placed on coffee, how many cups of coffee will be bought and sold?
120
the governments share of unemployment peaked during the
1940's
the bureau of labor statistics has chosen the price level from ___________ to be the base price level used in calculating the CPI
1982 to 1984
Stricter loan standards in the mortgage Lending sector could cause
A demand shift to the left in the housing markets
In recent years the demand curve for IT workers has moved to the right. what does this mean?
At any price, the quantity demanded is now higher
It's a portion of each additional dollar of income that household spend is called
Marginal propensity to consume
In a growing economy ________enjoy a rising standard of living
Both rich and poor
Hurricane Katrina cost refineries and oil rigs in New Orleans and in the Gulf of Mexico to close down. In the market for gasoline, hurricane Katrina caused
Decrease in supply
Tax cuts tend to boost
Disposable income
Some economists argue Tap the spending multiplier is actually less than one dollar if the spending multiplier is 0.8 then a $200 billion Increase in government spending will cause private sector spending to
Fall by 40 billion
if the supply of a good increases, the equilibrium price of that good
Falls while quantity demanded rises
GDP stands for
Gross Domestic Product
An increase in government spending is likely to lead to increasing inflation
If the economy is doing well
Inferior goods are characterized by________demand as a result of increased income
Lower
After Hurricane Katrina, the supply curve for gasoline
Shifted to the left
The main statistical agencies in Washington are
The bureau of economic analysis, the bureau of labor statistics, the census bureau, and the federal reserve board
The inputs used in the aggregate production function do not include which of the following?
average price levels
a relative price shift occurs when
The inflation rate of a good or service is significantly higher or lower than the overall inflation rate
during a recession, the budget deficit generally increases because tax revenues weaken while expenditures rise. this increase is known as the
automatic stabilizer
who makes decisions and trade offs in the face of scarce resources
all of these choices are correct
the number of markets is
always changing
an increase in living standards is shown by which of the following
an increase in real gdp per capita
Besides the gross domestic product, another measure of how well an economy is doing is:
annual household income
the federal trade commission is responsible for enforcing
antitrust law
global markets consist of buyers and sellers
anywhere in the world
an oligopoly occurs when there
are only a few sellers in a market
questions of exactly where to draw the line on government interference in the economy
are the subject of intense political and economic dispute
if the interest rates on a new car loans increase, the quantity of new cars supplied will
decrease
When the demand curve shifts right
demand has increased, so equilibrium price increases, and equilibrium quantity increases
the demand curve is the graphical counterpart to the
demand schedule
differentiating ones product from the products of ones competitions is a way to
escape perfect competition
refer to the table, if the current price in the market is $3, then there is
excess supply and pressure on the price to fall
in a market, buyers and sellers
exchange goods and services for money
Net exports are
exports minus imports
Cost is what a business receives after subtracting expenses from revenue.
false
With inferior goods, demand will increase with an increase in income
false
crude oil is sold in a local market
false
if there is moderate growth, we have a zero sum economy
false
perfect competition requires a non standardized product
false
real gdp per capita is real gdp divided by the number of workers in a country
false
under president lyndon johnson, the federal government actually decreased its involvement in the economy
false
which of the following is not a type of tax
family tax
the single biggest federal tax is the
federal income tax
a growing economy can result in
fewer newborn deaths
what word describes the goods and services that are used to produce outputs for a business
inputs
the goods or services purchased by a business for immediate use in the production process are known as
intermediate inputs
Referred to the table. In this market, the equilibrium price
is between $2 and $3
refer to the table above, which gives hypothetical data on price changes for three goods. which goods became relatively more expensive for buyers
it depends on the overall rate of inflation in the economy
the US tv series survivor has awarded $1 million check to the shows winner for more than 35 seasons, dating back to 2000. which of the following is true about that top prize
it has decreased in value, since there has been overall inflation in the united states since 2000
what happens to the market price that buyers face as a result of taxation
it is greater than before the tax was imposed
if at the market price of $10 price per lawn Maya is willing to mow 15 lawns, and at the market price of $15 per lawn maya is willing to mow 25 lawns, what does maya's supply curves look like
it slopes up and to the right
_________ originally proposed the use of government spending to stimulate the economy in the 1930's during the great depression
john maynard keynes
government social benefits paid to individuals are
known as transfer payments and are typically used to find personal consumption
households are generally buyers in the markets for products and sellers in _______ markets
labor
inputs used by a business in the production process include
labor
the hours of work supplied by various types of workers are referred to by economists as
labor
The time it takes to recognize a recession and implement a spending stimulus is called a
lag
monopolistic competition is characterized by
large numbers of sellers with similar products
Top-down management of an economy by the government generally
leads to low rates of economic growth
the new deal was
legislation passed by the roosevelt administration
what name is given to the process of turning inputs into outputs that a business will sell to customers
production
the ___ summarized the output of the business, given the level of inputs
production function
what is the difference between revenue and cost
profit
which of the following formulas is correct
profit = revenue - cost
investment in physical capital means
purchasing equipment and buildings
a country's standard of living is measured by its
real gdp per capita
the inefficiency of taxation means that imposing a tax on a good or service typically
reduces the amount produced
expected inflation is
the inflation rate that consumers and businesses expect will hold for some time in the future
natural monopolies include
the local water company
the average price level is equivalent to
the price of a market basket of goods
since 2000, the relative price of rental housing has risen because
the price of rental housing has risen faster than the overall price level
demand is inelastic if
the quantity demanded does not change very much even if the price changes dramatically.
what causes the decline in demand for red delicious apples
the taste of the apples
the market for smartphones did not exist 30 years ago because
the technology did not exist to produce smartphones
Supply and demand are examples of
the tools of economics
in a centrally planned economy, decisions are made by
the top level government officials
GDP is defined as the dollar value of _______ in a given year
the total output of the economy
after a tax is placed on a good or service, which of the following does not occur
the total volume of sales of the good or service increases
market price
the typical price at which a good or service sells
which of the following is not one of the programs through which the US government attempts to redistribute income to the poor
the works progress administration WPA
if goods are produced domestically but sold overseas
they are still counted in our gdp
