Chapter 2 - The US Economy: A Global View

Which does not contribute directly to the production of the domestic output of an economy?

A full-time student.

Ceteris paribus, the quantity demanded of a good will decrease in response to:

A higher price for the good.

a buyer is said to have a demand for a good only when:

A) the buyer is both willing and able to purchase the good at alternative prices

the term externalizes refers to:

A) the costs and benefits of a market activity borne by a third party

a determinant of supply:

A) the prices of the factors of production

a market is said to be in equilibrium when:

A) the quantity demanded equals the quantity supplied

a mixed economy

A) utilizes both market and nonmarket signals to allocate goods and services

the term opportunity cost refers to:

A) value of the best alternative given up when a good or service is produced

from an economic standpoint, government intervention is justified:

A) when the market mechanism fails to achieve the optimal mix of output

In a market economy, prices are determined by the consumer; in a planned or command economy, prices are determined by the seller

FALSE

Land, labor, capital, and entrepreneurship are bought and sold in the product market

FALSE

Market price is the same thing as equilibrium price

FALSE

in a market economy, the people who receive the goods and services that are produced are those who

are willing to pay the highest price

a person or gorup of people living in the same residence is called a

household

_______ is the discipline that examines either the economy as a whole or the aggregate

macroeconomics

What incentive do manufacturers have to sell their products?

making profits on sales

What incentive motivates a manufacturer to sell a product?

making profits on sales

economic growth is made possible due to _________that shift the production possibilities curve outward

the factors of production

true or false Scarcity results when available resources cannot satisfy all desired uses of those resources.

true

true or false the competitive market system tends to drive the economy towards productive and allocative efficiency

true

Output combinations that lie inside the production- possibilities curve are characterized by efficient use of resources

FALSE

Technological advance shifts the production- possibilities curve inward

FALSE

The slope of production- possibilities curve is positive

FALSE

When governments privatize they expect to achieve greater efficiency through centralization and public decision making

FALSE

There are never shortages or surpluses when the price in the market is equal to the equilibrium price for the market

TRUE

When a factory pollutes the air we breathe in the market economy, this situation is known in economics as market failure

TRUE

When a seller sells a good, the supply curve shifts to the right

TRUE

When imports are larger then exports, the value of net exports is negative

TRUE

When individual supply curves shift, ceteris paribus, the market supply curve shifts

TRUE

when the number of buyers in a merket changes, the market demand curve for goods and services also changes even if individual demand curves do not shift

TRUE

Which of the following is considered a service in the calculation of GDP?

Tax preparation.

An example of human capital would be:

Teacher

The United States has a larger real GDP than China because

The U.S. population is smaller but works in capital-intensive jobs.

Which of the following statements is true about the U.S. economy?

The United States produces nearly one-fifth of the world's production.

Economic growth is calculated as:

a percentage rate of growth per quarter or per year Percentage rate of growth per quarter or per year.

what country (or region) produces the most output annually?

A) the United States

U.S. GDP for 2015 was approximately:

$ 18 trillion.

All of the choices on the production possibilities curve are equally desirable

FALSE

True or False: Opportunity cost is the value of the alternative purchased.

True

The unemployed are those people who

are not employed but are seeking work

a market shortage is:

A) the amount by which the qty demanded exceeds the quantity supplied at a given price

Comparative advantages refers to the ability to produce output with fewer resources than any other country

FALSE

If nominal GDP was $11,500 billion in 2003 and the price level in 2003 was 111.6, then real GDP would have been approximately

$10,305 billion. (nominal gdp divided by price index x 100)

Which of the following is not a factor of production?

$100,000 cash

As of 2010, to be in the top quintile for income distribution in the United States, a family needed in income at least

$102,000.

Assume that a grower of flower bulbs sells its annual output of bulbs to an Internet retailer for $70,000. The retailer, in turn, brings in $130,000 from selling the bulbs directly to final customers. What amount would these two transactions add to personal consumption expenditures and thus to GDP during the year?

$130,000 (130,000 - 70,000) + 70,000 = 130,000

Approximately how much of the world's output does China produce?

13 percent.

As of 2010, to be in the bottom quintile for income distribution in the United States, a family needed in income no more than

$21,000.

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2, except that business inventories increased by $10 billion. GDP in year 2 is

$210 billion

As of 2010, to be in the bottom quintile for income distribution in the United States, a family needed in income no more than

$23,000

as of 2010, to be in the bottom quintile for income distribution in the United States, a family needed an income no more than

$23,000

As of 2010, to be in the bottom quintile for income distribution in the United States, a family needed in income no more than: -$15,000. -$23,000. -$27,000. -$35,000.

$23,000.

If country A has a total input of labor hours of 20,000 hours and the productivity is $20, then real GDP in country A is ______.

$400,000

If real GDP per person was equal to $2,000 in 1900 and grew at a 1 percent annual rate, what would be the value of real GDP per person 100 years later?

$5,410

In 2015, per capita GDP in the United States was approximately:

$53,000.

Over many years the capital stock in the United States has grown to approximately: -$80 trillion. -$40 trillion. -$90 trillion. -$20 trillion.

$80 trillion.

Which of the following is the correct way to calculate the unemployment rate?

(unemployed/labor force) x 100

GDP in an economy is $11,130 billion. Consumer expenditures are $7735 billion, government purchases are $1989 billion, and gross investment is $1410 billion. Net exports are:

-$4 billion.

In the United States, per capita GDP is:

-determined by dividing total GDP by total population. -four times the world average. -a measure of how much output each person in an economy would get if all of the output of the economy was divided up evenly. -All of the above are true.

Which of the following define ceteris paribus? 1. Other-things-equal assumption 2. The idea that, in a particular analysis, "additional" factors, other than those under consideration, play a significant role in said analysis 3. The idea that factors other than those being considered in a particular analysis do not change. 4. In a particular analysis, "additional" factors, other than those under consideration, are given equal consideration when factored into an analysis

1 & 3

Markets and Prices

-we may wonder why the economy based on self-interest does not collapse in chaos. if consumers want breakfast cereal, but businesses choose to produce running shoes and resource suppliers decide to make computer software, production would seem to be deadlocked by inconsistencies of free choices -in reality, the millions of decisions made by households and businesses are highly coordinated with one another by markets and prices, which are key components of the market system. Market is an institution or mechanism that brings buyers (demanders) and sellers (suppliers) into contact. A market system conveys decisions made by buyers and sellers of products and resources. the decisions made on ea. side of the market deteremine a set of product and resource prices that guide resource owners, entrepreneurs, and consumers as they make and revise their choices and pursue their self-interest -Just as competition is the regulatory mechanism of the market system. the market itself is the organizing and coordinating mechanism. It is an elaborate communication network through which innumerable indv. free choices are recorded, summarized and balanced. those who respond to market signals and heed(pay attention) market dictates are rewarded with greater profit and income. those that ignore are penalized. Through this mechanism society decides what the economy should produce, how productions can be organized efficiently, and how the fruits of production are to be distributed among the various units that make up the economy

Outsourcing leads to

. Increases in total output, but with temporary job losses for some domestic workers.

On average, since 1900 the population of the United States has grown by roughly ____ percent per year.

1

The term "laissez-faire" refers to: 1. Keeping government from interfering in the economy 2. The government acting as a dominant force in the economy 3. Mixed market or mixed capitalism 4. Allowing the government to interfere in the economy

1

The command economies of the former Soviet Union and of Eastern Europe failed due to: 1. Coordination problems 2. Incentive problems 3. The market economic system 4. The invisible hand

1 & 2

Consumers derive personal satisfaction from goods and services by: 1. Acting in a their own self interest 2. Acting in a selfish manner 3. Allocating their time, energy, money and other resources so as to maximize their satisfaction from consuming these goods 4. Making decisions that are unaffected by greed.

1 & 3

As of the year 2000, agriculture accounted for what percentage of total U.S. output?: -1 percent -5 percent -8 percent -None of the choices are correct.

1 percent

Which of the following best describe the concept of laissez-faire capitalism? 1. The role of government is limited to protecting private property 2. The role of government is limited to ensuring the appropriate operation of the market system 3. Capitalism in which the role of government is unlimited 4. Capitalism in which the role of government is to correct market failures

1&2

Which of the following define positive economics? 1. Statements based on facts empirical cause-and-effect relationships 2. Statements based on value judgements 3. Measurable or scientific statements about economic behavior 4. Focus on what the economic outcomes should be like

1&3

A central panning board as a part of a command system government: 1. Makes decisions on the composition and distribution of output 2. Organizes production 3. Makes all decisions concerning the use of resources 4. Encourages competition among producing firms

1,2 & 3

Which of the following are all possible because of private property rights in a market system? 1. Maintenance of property 2. Exchange 3. Innovation 4. Investment 5. Central planning board 6. Economic growth

1,2,3,4, & 6

Which of the following are characteristics of the market system? 1. Markets and prices 2. Private property 3. Allocation by command 4. Self-interest 5. Freedom of enterprise 6. Freedom of choice 7. Competition

1,2,4,5,6 & 7

Which of the following are economic measures are considered in macroeconomic analysis? 1. The unemployment rate 2. A firm's output 3. International trade 4. The level of prices in the economy 5. National Income 6. A firm's income or total revenues

1,3,4 & 5

Which of the following describe the role of government in the United States' form of capitalism? 1. Provides the rules for economic activity 2. A controlled or "hands-on" approach to the market 3. Promotes economic stability and growth 4. Provides certain goods and services that would otherwise be underproduced or not produced at all 5. Modifies the distribution of income

1,3,4 & 5

Property rights encourage: 1. Maintenance of property 2. Socialism 3. Innovation 4. Economic growth 5. Investment 6. Exchange

1,3,4,5 &6

Evaluate whether each of the following statements applies to microeconomics or macroeconomics: 1. The trade deficit between the U.S. and China grew between 2000 & 2009 2. A U.S. software firm laid off 15 workers last month and transferred the work to India 3. Recently, Chase Bank lowered its interest rate on business loans by 2 percentage points 4. The Consumer Price Index (CPI) rose by 3 percent in 2007 5. The real GDP for the United States grew by 2.2 percent in 2007 6. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise

1. Macro 2. Micro 3. Micro 4. Macro 5. Macro 6. Micro

the lowest opportunity cost in table 1.2 for Stealth Bombers is

10 B-1 bombers

Consumers in an economy buy only three general types of products, A, B, and C. Changes in the prices of these items over a period are shown below. Product Quantity Year 1 Year 2 A 10 $10 $8 B 15 $20 $22 C 8 $50 $55 Using year 1 as the base year, the country's Consumer Price Index in year 2 is:

106.25

A nation's average annual real GDP growth rate is 5%. Based on the "rule of 72," the approximate number of years that it would take for this nation's real GDP to double is

14.4 years

suppose the annual growth rate of GDP in the United States is 4% the GDP in the United States will double in

17.5 years

Suppose the annual growth rate of GDP in the United States is 4%. The GDP in the United States will double in:

17.5 years Apply rule of 70 (70 / 4)

approximately how much of the world's output does the United States produce?

18 percent

As of the year 2000, manufacturing, mining, and construction accounted for what percentage of total U.S. output?

19 percent

As of the year 2000, manufacturing, mining, and construction accounted for what percentage of total U.S. output?

19 percent.

As of the year 2000, manufacturing, mining, and construction accounted for what percentage of total U.S. output?

19%

The economic assumption that human behavior reflects rational self-interest is based on the notion that individuals: 1. Seek to minimize their utility for goods and services 2. Weigh the costs and benefits of their decisions 3. Allocate their resources to maximize society's utility 4. Are only looking out for themselves at the expense of others.

2

Choose those characteristics that best describe a command system: 1. Firms produce according to the demands of consumers 2. A central planning board makes all the economic decisions concerning resources 3. The division of output between capital and consumer goods is decided by market forces 4. Government owns resources

2 & 4

Natural Resources, labor, human capital, physical capital and entrepreneurship are all scarce economic resources privately or collectively owned by members of society. Where these scarce resources are used to produce goods or services, there is: 1. No cost borne by society in utilizing these resources to produce goods or services 2. A cost borne by society in utilizing these resources to produce goods or services 3. No opportunity cost 4. No "free lunch"

2 & 4

Which of the following describe a command system? 1. Firms and households acting in their own self-interest 2. A government-appointed central planning board 3. Firms producing what consumers demand 4. Government Ownership of most or all property resources

2&4

Which of the following describes the concept of rational self-interest? 1. Individuals weigh the costs and benefits of others' decisions and pursue the alternative 2. Individuals allocate their resources to maximize their satisfaction 3. Individuals weigh the costs and benefits of their decisions 4. Individuals look for and pursue opportunities to increase their utility or level of personal satisfaction 5. Individuals look for and pursue opportunities to increase society's utility or welfare

2, 3, & 4

Which of the following statements or questions represent positive economics? 1. Should the unemployment rate in the United States be higher than in Mexico? 2. The unemployment rate in Mexico is higher than in the United States. 3. As the price of airfares falls, airlines experience a spike in business. 4. The government ought to increase the minimum wage so that incomes rise. 5. If the government increases the minimum wage, the unemployment rate will rise.

2,3, & 5

Economic principles and models are highly useful in: 1. Explain and predicting 2. Observing economic behavior 3. Determining cause and effect 4. Understanding how the economy operates 5. Supporting normative statements or questions 6. Analyzing economic behavior

2,3,4 & 6

Which of the following statements or questions represent normative economics? 1. When the prices of gas rises, the quantity consumed falls 2. The government should increase the minimum wage. 3. Cable companies should merge because they result in more competitive pricing 4. The government ought to bail out distressed banks 5. What will be the result of a Continental Airlines and United Airlines merger? 6. What should the federal minimum wage be?

2,3,4 & 6

Which of the following are issues most explored in microeconomics? 1. Unemployment & Inflation rates 2. Measuring total revenues of a firm or household 3. The expenditures of a government entity 4. Measuring the price of specific goods 5. The level of public debt 6. A firm's decision to hire more workers

2,3,4, & 6

Approximately how much of the world's output does the United States produce?

20 percent.

A nation's average annual real GDP growth rate is 3%. Based on the "rule of 72," the approximate number of years that it would take for this nation's real GDP to double is

24 years

Suppose Marcus eats nothing but burritos for dinner. He buys 30 burritos each month. During the last couple of weeks, Marcus noticed an increase in the price of burritos. The price of burritos rose from $5.50 per burrito last month to $6.60 per burrito this month. Assume that Marcus has a fixed income of $165 that he can spend on burritos. How many burritos can Marcus afford to buy at the new price of $6.60?

25 burritos

Marginal analysis involves the comparison or evaluation of: 1. total benefits minus total costs of a decision 2. additional benefits minus additional costs of a decision 3. the incremental cost versus the incremental benefit of a decision 4. total costs versus total benefits of a decision

3

On average, since 1900 U.S. output has grown roughly ____ times faster than population growth.

3

n average, since 1900 U.S. output has grown roughly ____ times faster than population growth. Selected Answer: CorrectAnswers: 5 4 3 2

3

The command economies of the Soviet Union, eastern Europe and China prior to its market reforms failed due to which of the following problems: 1. Economic problem 2. Profit problem 3. Coordination problem 4. Incentive problem

3 & 4

Under the rule of 70, if the GDP per capita growth rate in the United States is 2.3%, standards of living double every:

30.43 years (70 / 2.3)

At an output level that is greater than what is optimal: 1. The marginal cost of producing the good is less than the marginal benefit 2. There is equality between the marginal cost and the marginal benefit of producing the good 3. There is an under-allocation of resources towards producing the good. 4. The marginal cost of producing the good is greater than the marginal benefit

4

Which of the following best clarifies the "other-things-equal" assumption? 1. Those variables under immediate consideration for a particular analysis are given equal weight 2. Those variables under immediate consideration for a particular analysis are all held constant. 3. All variables are held constant or do not change for a particular analysis 4. All variables except those under immediate consideration are held constant for a particular analysis 5. All variables in a particular analysis are given equal weight or consideration when used in a particular analysis

4

Yr Alta(rGDP) Zorn(rGDP) Alta(Pop) Zorn (Pop) 1 $2,000 $150,000 200 500 2 2,100 152,000 202 505 3 2,200 154,000 210 508 Between years 1 and 2, real GDP per capita grew by approximately __________ percent in Alta.

4

If the natural rate of unemployment is 4.5% and the actual unemployment rate is 6.5%, then Okun's law indicates that the GDP gap is

4%

What percentage of the world's population subsists on incomes of less than $3 a day? -40 percent -50 percent -60 percent -70 percent

40 percent

it country a has a total and put of labor hours of 20000 hours and the productivity is $20 an hour then the real GDP and Country a

400000

As of 2010, for income distribution in the United States, the minimum family earnings in the top quintile were approximately _______ times the maximum family earnings in the bottom quintile.

5

As of 2010, per capita GDP in the United States was approximately how many times the world average?: -3 -5 -7 -9

5

As of 2015, for income distribution in the United States, the minimum family earnings in the top quintile were nearly _______ times the maximum family earnings in the bottom quintile.

5

The United States has roughly how much of the world's population?

5 percent

The United States has roughly how much of the world's population?: -5 percent. -10 percent. -15 percent. -20 percent.

5 percent

The United States has roughly how much of the world's population?

5%

As of 2010, per capita GDP in the United States was approximately how many times the world average? Selected Answer: Correct Answers: 3. 5. 7. 9.

5.

The bottom 80 percent of the families in the United States receive approximately ______ percent of total income.: -10 -20 -50 -90

50

The bottom 80 percent of the families in the United States receive approximately ________ percent of total income.

50

the bottom 80 percent of the families in the United States receive approximately _____ percent of total income

50

The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for this economy is

6%

Over a 10-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 70, we can say that the average annual rate of inflation over this period was approximately

7%

The law of supply and the law of demand both rely on the concept of opportunity cost

TRUE

Suppose that real GDP per capita in the United States is $49,000. If the long-term growth rate of real GDP per capita is 1.6% per year, how many years will it take for real GDP per capita to reach $98,000?

72/1.6 = 45 years

Suppose that real GDP per capita in Italy is $32,000. If real GDP per capita is growing at a rate of 2.5% per year, how many years will it take for real GDP per capita to reach $64,000?

72/2.5 = 28.8 years

The unemployment rate in an economy is 6%. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is

9 million

"Income" is best defined as: A. the gain derived from the use of human or material resources B. wages and salaries before taxes C. wages and salaries after taxes D. wages, salaries, and returns from investment in securities E. a "Stock", as distinct from a "Flow" of values

A

A decrease in supply is caused by: A. an increase in resource prices B. an increase in the number of sellers in the market C. suppliers' expectations of lower prices in the future D. an advancement in the technology for producing the good E. a decrease in the price of a good using the same resources

A

A total market demand schedule is obtained by adding up the quantities of: A. a single good demanded by all buyers at each price B. a single good demanded by all buyers at the equilibrium price C. a single good demanded by a typical buyer at each price D. a range of goods demanded by a typical buyer at each price E. a range of goods demanded by a typical buyer at the equilibrium price

A

An answer to the question: For whom are goods produced? determines: A. who received the goods that are produced B. how tastes and preferences are determined C. how resourced are combined in the production of goods D. the quantity of society's natural resource endowments E. the types and quantities of goods and services produced

A

Comparative advantage refers to: A. the ability of a country to produce a specific good with fewer resources than another country B. a country's monopoly power in the world market for a specific good. C. when a country's production curve is curved. D. all of the above E. a distribution curve

A

In the absence of international trade, a country's consumption possibilities are: A. Limited to its domestic production possibilities B. More than its terms of trade C. Less than its trade balance D. Greater than with trade E. All of the above

A

Other things remaining the same, an increase in the rice of Chevrolets will cause the demand curve for Fords to: A. shift to the right B. shift to the left C. remain unchanged D. become straighter E. become more curved

A

Scarcity exists because: A. society's resources are limited relative to society's wants B. society's resources are approx. equal to society's wants C. society's resources exceed society's wants D. our economy is too capitalistic E. our economy's resources are not governmental owned

A

Scarcity is a concept which: A. implies that choices must be made B. means that some people will have to live in poverty C. applies only to tangible or "material" things D. doesn't apply to the very rich E. all of the above

A

Specialization usually leads to: A. a greater division of labor B. an increase in self-sufficiency C. a decline in exchange D. less interdependence among the members of society E. a decline in the volume of total output

A

The doctrine of laissez faire is based on the belief that: A. markets are more likely to do a better job of allocating resources than government B. government directives are more likely to do a better job of allocating resources than markets C. government failures do exist D. markets result in an unfair distribution of income E. all of the above

A

The fact that a society's production-possibilities curve is bowed out of concave to the origin of a graph demonstrates the law of: A. increasing cost B. decreasing cost C. constant cost D. fluctuating cost E. concave cost

A

The law of demand operates because: A. people can afford to buy less of a good if its price increases B. people can afford to buy more of a good if its price increases C. the more of a good you consume the more satisfaction it provides D. when the price of one good decreases it increases relative to the prices of other goods E. when the price of one good increases it decreases relative to the prices of other goods,

A

Which of the following is not a factor of production: A. money B. land C. labor D. entrepreneurship E. all of the above

A

Which of the following would not cause a change in the supply of a commodity? A. a change in its price B. a change in the price of a related good C. a change in resource prices D. a change in expectations about future prices E. an improvement in technology

A

An investment in human capital would be represented by:

A college education

A decrease in the price of electricity can best be explained by

A decrease in the population

GDP

A dollar measure of final output produced during a given time period within a nation's borders.

The best definition of GDP is

A dollar measure of final output produced during a given time period within a nation's borders.

Which of the following best illustrates specialization?

A factory that divides production into smaller tasks.

Which of the following is not an example of a personal consumption expenditure?

A fighter jet

Refer to the World View article titled "North Korea's Food Shortage Grows." If North Korea reduces the size of its military and produces more food, this is most consistent with

A movement along the economy's production possibilities curve.

Refer to the World View article titled "North Korea's Food Shortage Grows." On a production possibilities curve between private and public goods, a decrease in military spending in an effort to increase food production could be represented as

A movement along the production possibilities curve toward more private goods.

A model is:

A simplified representation of something complex

If an economy experiences constant opportunity costs with respect to two goods, then the production possibilities curve between the two goods will be?

A straight, downward-sloping line.

the role of the government in establishing how private business can operate includes all of the following except:

A) a)providing legal framework b)PROVIDING RAW MATERIAL TO BUSINESS c)protecting the environment d)protecting consumers

approximately how much of the world's output does the U.S. produce?

A) 20%

the income distribution of the U.S. is basically the nation's answer to the:

A) FOR WHOM question

if bagels and donuts are substitutes, then a decrease in the price of donuts will result in

A) a decrease in the demand for bagels

the best definition for GDP is :

A) a dollar measure of output produced during a given time period

the social security tax is:

A) a regressive tax

ceteris parabus, what would generally cause an increase in the demand for automobiles

A) an increase in consumers' income

at which point is society producing the most output possible with the available resources and technology?

A) at the point on the curve

resources are directed from one industry to another by:

A) changes in market prices

a "free rider" is an individual who reaps:

A) direct benefits from someone else's purchase of a public good

when government directives do not produce better economic outcomes, what has occurred?

A) government failure

the investment in human capital through education and training can result in:

A) greater productivity

according to the law of demand, during a given period of time, the quantity of a good demanded:

A) increases as its price falls, ceteris paribus

the optimal mix of output may not be produced by an economy because of the existence of :

A) inequity

a factor market is any place where:

A) land, labor, or capital is bought and sold

people benefit by participating in the market because:

A) market participation allows individuals to specialize and ultimately, consume more

the most desirable combination of output attainable with existing resources, technology, and social values is known as the:

A) optimal mix of output

the Latin phrase "ceteris paribus" means

A) other things remain equal

what is an indicator of how much output the average person would get if all output were divided up evenly among the population?

A) per capita GDP

the largest single source of revenue for the federal government is:

A) personal income taxes

when economists describe a production process as capital intensive they mean that the:

A) process uses a high ration of machinery and other capital to labor

business firms supply goods and services to____ and purchase factors of production in____.

A) product markets; factor markets

a change in the price of a good:

A) results in a change in quantity supplied

the current U.S. economy is based primarily on the production of:

A) services

how will an increase in the level of human capital, ceteris paribus, affect an economy's production-possibilities curve?

A) shift the curve outward

producing at a point inside the production possibilities curve

A) suggests we are forgoing the opportunity to prodice more goods and services

Which of the following was a free market philosopher who was associated with limited government, laissez-faire, the invisible hand and is also known as the "Father of Economics"?

Adam Smith

Which of the following was a free market philosopher?

Adam Smith

To calculate market demand, we

Add the quantities demanded for each individual demand schedule horizontally.

GDP can be found by:

Adding the monetary value of all final goods and services produced during a given period of time.

GDP can be calculated by all of the following methods except

Adding up all income and expenses by consumers and businesses.

Which component(s) of U.S. real GDP decreased in size relative to total U.S. real GDP from 1950 to 2000?: -Only agriculture. -Only manufacturing. -Agriculture and manufacturing. -Only services.

Agriculture and manufacturing.

GDP is the market value of:

All final goods and services produced in an economy in a given year

A U.S. firm that outsources jobs would be: -Building a factory in Canada and hiring Canadian workers. -Buying raw materials from a -Chinese firm instead of a U.S. firm. -Buying computers assembled in Mexico that used U.S. parts. -All of the choices are correct.

All of the choices are correct.

Although the necessary role of government in the economy is highly debated, many people agree that it should

All of the choices are correct.

Factor mobility aids in economic development when: -A region suffers a natural disaster such as an earthquake or tornado. -A technological advance causes some firms to go out of business. -There is an increase in both outsourcing and insourcing. -All of the choices are correct.

All of the choices are correct.

The government intervenes in the economy to protect labor by

All of the choices are correct.

In The Economy Tomorrow analysis in the text stated that thousands of people were waiting for a kidney transplant. Which of the following statements is true?

Allowing the sale of kidneys at a price greater than zero would likely increase the number of available kidneys.

Average GDP per person is

Also known as per capita GDP.

The standard of living is a measure of:

Amount of goods and services per person.

In general, every society needs to develop _________ to respond to the address the conflict between scarcity and unlimited wants and needs

An economic system

The cost or benefit of a market activity borne by a third party is

An externality

Which of the following will increase the level of human capital in an economy?

An increase in literacy rates.

Which of the following will increase the level of human capital in an economy?: -An increase in land mass. -An increase in literacy rates. -An increase in factory capacity. -A decrease in the population.

An increase in literacy rates.

The "guns versus butter" dilemma that all nations confront is that

An increase in national defense implies more sacrifices of civilian goods and services.

Ceteris paribus, which of the following will cause the demand for pizza to increase in a college town?

An increase in the number of students who eat pizza.

In terms of an economy's production possibilities curve, a decrease in the level of human capital, ceteris paribus, will cause

An inward shift of the curve

In terms of an economy's production possibilities curve, a decrease in the level of human capital, ceteris paribus, will cause

An inward shift of the curve.

The term factor of production refers to

Any resource input used to produce goods and services

The term factor of production refers to

Any resource input used to produce goods and services.

The term factor of production refers to

Any resource used to produce goods and services.

What annual growth rate is needed for a country to double its output in each of the following cases?

Apply the rule of 70. (70 / rate of growth) In 4 years: 17.5% (70 / 4) In 25 years: 2.8% (70 / 25) etc In 100 years: 0.7% In 200 years: 0.35%

The factors of production:

Are the resource inputs used to produce goods and services.

In a market economy, the people who receive the goods and services that are produced are those who

Are willing to pay the highest price.

Which of the following expenditures is an example of a consumer durable good?

Arti buys a new refrigerator from Sears

Which of the following is an example of an external cost?

Automobile exhaust fumes.

Which of the following is an example of an external cost?: -Unemployment. -Unfair pricing behavior by a monopoly. -Automobile exhaust fumes. -Eating a sandwich at a local deli.

Automobile exhaust fumes.

If output growth exceeds population growth for a country,

Average living standards will increase.

A "mixed economy", means one that: A. is confused and fouled B. utilizes a variety of production techniques C. enjoys a two-party system D. combines executive legislative, and judicial branches in gov't E. none of the above

B

A country will not trade unless: A. it has an absolute advantage B. the terms of trade are superior to domestic opportunities C. its balance of trade is in surplus D. all of the above E. none of the above

B

All of the following statements are true EXCEPT: A. economic efficiency cannot be achieved without technical efficiency B. technical efficiency can be achieved without economic efficiency C. technical and economic efficiency may be achievable at the same time. D. in most cases, economic efficiency is socially more desirable than technical efficiency. E. technical efficiency is dependent on consumer preferences whereas economic efficiency is not

B

An increase in demand and a decrease in supply, will lead to ____ in equilibrium quantity and ____ in equilibrium price: A. a decrease ; a decrease B. an indeterminant change ; an increase C. an indeterminant change ; a decrease D. an increase ; an indeterminant change E. a decrease; ; an indeterminant change

B

An increase in supply, with no change in demand, will lead to _____ in equilibrium quantity and _____ in equilibrium price: A. an increase; an increase B. an increase; a decrease C. a decrease; an increase D. a decrease; a decrease E. no change; no change

B

IF the resources of an economy are not fully utilized: A. the economy will not have a production-possibilities curve B. the economy will be at a point inside its production-possibilities curve C. the economy will be at a point outside its production-possibilities curve D. all of the above E. none of the above

B

If the price of a commodity increases, you would expect the: A. supply to increase B. quantity supplied to increase C. quantity supplied to decrease D. supply curve to shift to the right E. supply curve to shift to the left

B

In a standard supply-and-demand diagram, what happens when demand decreases? A. price declines and quantity demanded rises B. price rises and quantity demand declines C. price and quantity supplied rise D. price and quantity demand decline E. price and quantity demanded rise

B

Protectionism achieves which one of the following goals: A. greater consumption possibilities through greater specialization B. protection of infant industries C. protection of comparative advantage D. protection of absolute advantage E. none of the above

B

Terms of trade refer to: A. The opportunity costs incurred in trade B. the rate at which goods are exchanged C. the degree to which one country has an absolute advantage D. which country pays the transportation cost when trade occurs E. all of the above

B

The concept of "economic man" implies that: A. people want to produce the most goods for society B. people are rational and motivated by economic forces C. people are a product of the economic environment in which they live D. people are economical and like to save money E. people have no concerns except economic ones

B

The economic role of gov't can be considered to consist of: A. promotion and regulation of the private sector B. provision of social goods C. accumulating debts D. none of the above E. "a" and "b" only

B

The gov't sector is synonymous with the: A. private sector B. public sector C. household sector D. business sector E. foreign sector

B

The law of demand is illustrated by a demand curve that is: A. horizontal B. downward-sloping C. vertical D. upward-sloping E. directly related to the law of supply

B

The law of supply usually operates because: A. producers are willing to sell less of a good if its price increases B. producers are willing and able to sell more of a good if its price increase C. when the price of one good decreases, it increase relative to the prices of other goods D. when the price of one good increases, it decreases relative to the prices of other goods E. the costs of production decline as more of a good is produced

B

The primary difference between a change in demand and a change in the quantity demanded is: A. a change in demand is a movement along the demand curve and a change in quantity demanded is a shift in the demand curve B. a change in quantity demanded is a movement along the demand curve and a change in demand is a shift in the demand curve C. both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions D. both a change in quantity demanded an a change in demand are movements along the demand curve, only in different directions E. only a change in quantity demanded is related to the demand curve, and a change in demand is related to shifts in the supply curve

B

The providing of national defense is primarily a responsibility of" A. consumers B. government C. businesses D. monetary policy E. those who love a war

B

Which of the following will not cause a change in the demand for a good: A. A change in the price of substitute goods B. a change in the price of the good C. a change in tastes D. a change in income E. a change in the price of complementary goods

B

In order to demand a good, the buyer must:

Be both willing and able to pay for it.

Suppose there are two economies, Alpha and Beta, that have the same production possibilities frontiers. If Beta devotes more resources to produce capital goods than consumer goods as compared to Alpha, then in the future

Beta will experience greater economic growth than Alpha

Select all of the following that will cause productivity to rise.

Better machinery Improvement in motivation Improvement in health, education and training Well organized and managed production Labor is reallocated from less-efficient industries to more-efficient industries

An economy's output and income can increase when there is an increase in the number of ___ and an increase in the ___ of the resources.

Blank 1: resources or inputs Blank 2: productivity or quality

Point F violates which assumption of the Production Possibility Curve?

Both resources and technology are not fixed*

Economic systems must address

Broad social / economic goals.

Which economic institution in a market economy converts raw materials into finished goods and services?

Businesses.

"Wealth" is best defined as: A. a flow of dollars per unit of time B. wages and salaries C. the total value of capital and consumer goods D. anything that has value because it is capable of producing income E. financial instruments, such as stocks and bonds

C

T or F: The three main decisions that must be addressed by an economic system include what goods are to be produced, who will produce them, and where they will be produced.

F

A decrease in supply is caused-by: A. a decrease in resource prices B. an increase in the number of sellers in the market C. suppliers' expectations of higher prices in the future D. an advancement in the technology for producing the good E. a decrease in the price of a good using the same resouces.

C

A scarce resource is one that: A. is free B. is abundant C. has alternative uses D. has no alternative uses E. is unlimited in supply

C

A single proprietorship is a firm owned by: A. a small number of individuals who are liable for the firm's debts and obligations B. many people who own shares/stocks o the firm, but who are not liable for the firm's debt C. one individual who is liable for the firm's obligation and debt D. all of the above E. none of the above

C

An underlying assumption about a production-possibilities curve is that: A. the number of workers available for jobs varies directly with the size of the population B. changes in technology affect the output of capital goods more than consumption goods C. when all resources are fully employed, further increases in the output of one good can be achieved D. trade-offs are made between resources, not between products

C

Capital is best defined as: A. money needed to run a business B. the primary factor in productivity C. produced goods used for further production D. private property E. the lifeblood of an enterprise system

C

Dumping is said to occur when: A. foreign producers sell their goods in the US at prices lower than their marginal cost of production B. foreign producers sell their goods in the US at prices lower than the US average cost of production C. foreign producers sell their goods in the US at prices lower than those prevailing in their own country D. the foreign countries have trade surpluses and the US has a trade deficit E. all of the above

C

Economics is a: A. social science that studies goods with no alternative uses B. natural science that studies goods with no alternative uses C. social science concerned chiefly with the way society employs its limited resources D. natural science concerned chiefly with reasons why society has limited resources E. social science concerned chiefly with reasons why society has unlimited resources

C

If the price of a commodity decreases, you would expect the: A. supply to decrease B. quantity supplied to increase C. quantity supplied to decrease D. supply curve shift to the right E. supply curve shift to the left

C

Market equilibrium is best described as: A. a state of domination of the demand over the supply B. a state of domination of the supply over the demand C. a state of balance between the opposing forces of demand and supply D. a state in which the buyers are able to obtain all of the goods and services they desire E. a state in which the sellers are able to sell all of the goods and services they have available

C

Supply is best defined as: A. a relation showing the various amounts of a commodity that sellers would b able to make avail. for sale at alternative prices during a given period of time B. a relation showing the various amounts of a commodity that sellers would be willing to make available for sale at alternative prices during a given amount of time C. a relation showing the various amounts of a commodity that sellers would be willing and able to make available for sale at alternative prices during a given amount of time D. the amount of a commodity that sellers would be willing and able to make available for sale at a specific quantity of a good

C

Suppose 2 cars take the same resources as producing 1 truck in the U.S. But in Japan 2 cars take the same resources as 3 trucks. In the production of cars, we can concludes: A. Japan has the absolute advantage B. The U.S. has the absolute advantage C. The U.S. has the comparative advantage D. Japan has the comparative advantage E. None of above

C

The combination of federal, state, and local gov't is the: A. income sector B. output sector C. public sector D. private sector E. business sector

C

The expansion of world output as a result of trade is mainly due to the effects of: A. higher trade barriers B. improved terms of trade C. specialization according to comparative advantage D. specialization according to absolute advantage E. all of the above

C

The law of increasing costs says that: A. costs of production always tend to increase B. increase in wages cause increases in the costs of production C. along a production-possibilities curve, increases in the production of one type of good require larger and larger sacrifices of the other type of good D. along a production-possibilities curve, decrease in the production of one type of good require larger and larger sacrifices of the other type of good E. labor unions are the chief cause of rising production costs

C

The primary purpose of NAFTA is to: A. Encourage the development of the Mexican and Canadian economies B. Protect U.S. and Canada workers from unfair competition from Mexico C. Increase employment and income in Mexico, Canada and the U.S. by encouraging free trade. D. Ensure that there are no losers as a result of trade agreements between Mexico, Canada, and the U.S. E. None of the above

C

The two broad types of resources are: A. land resources and capital resources B. material resources and human resources C. physical capital and financial capital D. labor resources and human resources E. labor resources and human capital

C

A trade deficit means that exports exceed imports over some relevant time period

FALSE

When the overall foreign trade account for a balance for a nation is zero: A. merchandise exports equal merchandise imports B. the service trade balance must be zero C. exports equal imports D. national defense is in trouble E. none of the above

C

Which of the following will shift the market demand curve for a product to the left: A. a decrease in buyers' income B. an increase in the number of buyers in the market C. an increase in the price of the product D. a change in technology E. an increase in buyers' incomes

C

Which of the following will shift the market demand curve for a product to the right? A. a decrease in the number of buyers in the market B. a decrease in buyers income C. a decrease in the price of the product D. a change in technology E. an increase in the buyers' income

C

If the actual price in the market for a commodity is below the market equilibrium price: A. the actual price will remain unchanged B. the actual price will decline clear the market C. the quantity supplied exceeds the quantity demanded D. the quantity demanded exceeds the quantity supplied E. the quantity demanded equals the quantity supplied

C. the quantity supplied exceeds the quantity demanded

A factory represents which factor of production?

Capital (K)

As a country's human capital capacity increases, we observe that the relative number of

Capital-intensive production processes increases.

Interest is payment earned from:

Capital.

An example of human capital would be

Carpentry skills.

Specialization in production and then trading with other countries Answers: Change the mix of output for rich countries but not for poor countries. Change the mix of output for each country and increase total world output. Increase the standard of living for rich countries but not for poor countries. Mean that every citizen in every country is better off.

Change the mix of output for each country and increase total world output.

Which of the following is a major measure of economic growth?

Changes in real GDP per capita.

Which of the following is characteristic of a traditional economy?

Children tend to have the same jobs as their parents did

Which of the following countries had the highest average growth rate for per capita GDP from 2000 to 2009?

China

Which of the following countries had the highest average growth rate for per capita GDP from 2000 to 2009?

China.

Economics is the study of

Choices

Transactions made between households and businesses in a market economy are illustrated in which model?

Circular Flow Model

A ______ is a large farm that is leased from the state to groups of peasant farmers

Collective

A central planning board sets the division of output between capital and consumer goods in a ______ system?

Command

Communism is an example of what type of economic system?

Command

An economic system in which a central authority is in command of the economy is called a

Command economy

The economic decisions of different individuals are considered to be rational when these individuals:

Compare benefits and costs

Ceteris paribus, a consumer that purchases a sports car must consider the price of gasoline because these goods are

Complements in consumption

According to your textbook, which of the following spending categories ranks the contribution to GDP in correct order (from largest to smallest for the United States)?

Consumer goods, total government purchases, investment goods, exports.

The power of consumers to decide what gets produced is called

Consumer sovereignty

Who participates in markets?

Consumers and Gov agencies Business Firms consumers

Government intervention may achieve a more optimal outcome than the market mechanism when addressing

Consumption of cigarettes

What should happen to the equilibrium price and quantity in a market as a result of a tariff on imports? Selected Answer: Answers: Equilibrium price and quantity should both go up. Equilibrium price should go up, and equilibrium quantity should go down. Equilibrium price should go down, and equilibrium quantity should go up. Equilibrium price and quantity should both go down.

Correct Equilibrium price should go up, and equilibrium quantity should go down.

A capital-intensive production process is one that Selected Answer: Answers: Has a high ratio of labor to capital. Has a high ratio of capital to labor. Is used only in the United States. All of the choices are correct.

Correct Has a high ratio of capital to labor.

As a nation's average education level increases, the nation's level of productivity Selected Answer: Answers: Increases, and the production possibilities curve shifts to the right. Decreases, and the nation's production possibilities curve shifts to the left. Increases, and the nation moves to a new point on the same production possibilities curve.

Correct Increases, and the production possibilities curve shifts to the right.

In the Circular Flow Model, money flows:

Counter-clockwise.

How does free trade promote economic growth?

Countries who are most efficient produce the good. Countries are able to specialize.

An increase in supply is caused by: A. an increase in resource prices B. a decrease in the number of sellers in the market C. suppliers' expectations of higher prices in the future D. an advancement in the technology for producing the good E. an increase in the price of a good using the same resources

D

Economics, "distribution" refers to the question of: A. retailing, wholesaling, and transportation B. what C. how E. for whom E. none of the above

D

The market price equals the equilibrium price if quantity demanded equals quantity supplied at the market price

TRUE

In the simple, two-sector circular-flow model of the economy, the economic question "what to produce?" is primarily answered by the: A. stock markets B. labor markets C. product markets D. resource markets E. financial markets

D

International trade: A. lowers prices to consumers B. alters the mix of domestic production C. redistributes income from imports-competing industries to export industries D. all of the above E. none of the above

D

Macroeconomics is concerned with: A. the operation of a particular firm B. the labor market C. the individual consumer behavior D. the entire economy E. a detailed examination of how price and output decisions are made in specific markets

D

Macroeconomics is mostly likely to be concerned with the: A. amount of unemployment in a specific industry B. economic behavior of a particular household C. economic behavior of specific parts or units of the economy D. "forest" of economic behavior, rather than the "individual tree" E. "trees" of economic behavior, rather than the "forest"

D

Opportunity cost is: A. only incurred in socialist economies B. only incurred in capitalist economies C. the value or benefit that is foregone by acquiring a free good D. the value of benefit that is foregone by choosing one alternative rather than another E. the value of benefit received by choosing one alternative rather than another

D

The annual total of rent, interest, wages, and profit for a nation is referred to as: A. national debt B. national security C. national income D. national productivity E. none of the above

D

The law of supply is illustrated by a supply curve that is: A. horizontal B. downward sloping C. vertical D. upward-sloping E. directly related to the law of demand

D

The manufactured good that is used to produce other goods is: A. land B. money C. labor D. capital E. entrepreneurship

D

The private sector includes: A. only state and local gov't B. only federal and local gov't C. federal, state, and local gov't D. households, businesses, and a foreign sector E. federal, state, and local gov't, households, businesses and a foreign sector

D

When the United States has a trade deficit: A. exports exceed imports B. the U.S. produces more than it consumes C. trade balance is zero D. none of the above E. all of the above

D

A demand schedule refers to the combinations of price and quantity that represent the:

Desires of consumers.

true

Disposable income is what households have to spend or to save.

A firm that divides production into smaller, more manageable tasks is taking advantage of:

Division of Labor

According to the law of supply, if the price of calculators decreased, the supply of calculators would decrease, ceteris paribus

FALSE

A principal objective of GATT is to: A. equality in the distribution of income B. economic growth C. protect import-competing nations D. economic stability E. reduce barriers of trade

E

An answer to the question "What goods are produced?" determines: A. Who receives the goods that are produced B. How tastes and preferences are determined C. How resources are combined in the production of goods D. The quantity of society's natural resource endowments E. The types and quantities of goods and services produced.

E

Capitalism: A. provides people with incentives to make the best use of their property B. encourages people to accumulate wealth C. makes people depend on one another D. all of the above E. none of the above

E

Demand is best defined as: A. the amount of a commodity that buyers would be willing and able to purchase at a specific price B. the price that buyers would be willing and able to pay for a specific quantity of a good C. a relation showing the various amounts of a commodity that buyers would be willing to purchase at alternative prices during a given period of time D. a relation showing the various amounts of a commodity that buyers would be able to purchase at alternative prices during a given period of time E. a relation showing the various amounts of a commodity that buying would be willing and able to purchase at alternative prices during a given amount of time

E

In a purely capitalistic or market economy, most incomes tend to be distributed according to: A. The decisions of a central authority B. Competitive forces of supply and demand in the resources market C. powers exerted by businesses and unions D. humanitarian considerations, based on the needs of individuals E. the arbitrary decisions of capitalists, since they are the ones who control the amount of wages paid to workers

E

In terms of a society's production-possibilities curve, the optimum of best combination of output, if it exists, is always found at a point locate somewhere: A. inside the curve B. outside the curve C. on or inside the curve D. on or outside the curve E. on the curve

E

In the simple circular-flow model, there are: A. two flows- a physical flow of goods and resources a dollar flow B. Two sets of markets- products markets and resources markets C. two types of suppliers and demanders- households and business firms D. two sets of prices established- one for final goods and services and one for resources E. all of the above

E

The circular flow of income describes: A. the flow of income from domestic firms to the non production sector and back again B. the amount of money in the economy C. the sum of all injections into the economy D. the sum of all withdrawals from the economy E. all of the above

E

The circular-flow model of economic activity shows how: A. firms determine the prices they charge B. wages rates are established by unions and management C. taxes are established by gov't D. prices influence wages and taxes E. sectors of the economy are linked to one another through the economy's markets

E

The factor that organizes production is: A. land B. money C. labor D. capital E. entrepreneurship

E

The term "land," as employed in economics, is best illustrated by: A. land on which factories are located B. land zoned for industrial or commercial, but not residental, use C. farmland D. land suitable for mining E. natural resource used in production

E

________ is a particular set of institutional arrangements and a coordinating mechanism that responds to the allocation of scarce resources to meet unlimited wants and needs.

Economic system

Statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as an:

Economic theory & economic principle

an increase in real GDP per capita over some period of time

Economists define and measure economic growth as:

Externalities measure

Either costs or benefits of a market activity borne by a third party.

The purpose of antitrust policy in the United States is to

Encourage competition among producers.

The government intervenes in the economy to protect labor by

Ensures minimum wages in addition to overtime provisions Ensuring workplace safety conditions Enforcing child labor laws to prevent child exploitation

A scientist that has discovered a new drug represents which factor of production?

Entrepreneurship (E)

Profits are payment earned from:

Entrepreneurship.

Which of the following contributed to increased competition by removing trade protections?

European Union North American Free Trade Agreement World Trade Organization

Full employment is concerned with

Everyone who is willing and able to work has a job

Ceteris paribus, which of the following is most likely to shift both the demand and the supply curves?

Expectations

What is it called when we add up all that was spent to buy total output in a certain year?

Expenditures approach

Which of the following statements correctly explains exports versus net exports?

Exports are goods, services, or resources produced domestically and sold abroad, while net exports are equal to exports minus imports

T or F: Freedom of enterprise enables owners to produce goods and services of their choice and sell them to only those markets directed by the government.

F

T or F: Government owns most of the property resources such as land and capital in a market system

F

T or F: Positive economics encourages value judgements

F

T or F: The command economies of the former Soviet Union, eastern Europe, and China prior to market reforms rewarded innovation, enterprise and entrepreneurship

F

both the supply and demand curves depend on expectations but the supply curve depends on the expectations of the buyer and the demand curve depends on the expectations of the seller

FALSE

the terms of trade between any two countries for two goods cannot be between their respective opportunity cost if there are to be any gains in trade

FALSE

The title to an automobile or the deed to a cattle ranch assures a buyer that the seller is the legitimate owner of that property. This is an example of property rights ______

Facilitating exchange

Market in which firms purchase the factors of production from households is called the

Factor market

One characteristic that has allowed the U.S. economy to change the mix of output in response to consumer demand is the

Factor mobility which is the increased ease with which resources move from one industry to another.

The income people receive for supplying factors of production such as land, labor or capital is called

Factor payments

In the resource market, _______ is purchased by businesses.

Factors of production

The manufacturing share of output has increased in the United States since World War II.

False

True or False: "Capitalism" describes an economic system that uses vast amounts of capital.

False

True or False: A capitalistic economy does not require the institution of private property as long as markets are competitive.

False

True or False: Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not.

False

True or False: Economic growth is the increase in the per capita productive capacity of the nation.

False

True or False: Nations have the same quantities and qualities of economic resources and they also have the same combinations to these economic resources.

False

True or False: Normative statements are expression of facts.

False

True or False: Specialization may expand total output even though the individuals involved may have identical abilities.

False

True or False: The entrepreneur's sole function is to combine other resources in the production of some good or service.

False

True or false: Economic growth has ended sociological problems such as poverty and homelessness.

False

True or false: Government purchases include only federal expenditures on final goods.

False

True or false: Intermediate goods are included in the calculation of GDP.

False

When compared to the average household in most low-income countries, poor people in the United States receive

Far more goods and services.

When compared to the average household in most low-income countries, poor people in the United States, on average, receive

Far more goods and services.

Capital, as economists use the term, refers to

Final goods that are used to produce other goods and services

In the product market, ______ is purchased by households.

Finished goods and services.

An organization that uses resources to produce a product which then sells is called a

Firm

Which of the following statements is correct? For a given real interest rate, the nominal interest must decrease if expected inflation increases. For a given nominal interest rate, the real interest will decrease if inflation decreases. For a given expected inflation rate, the nominal interest must increase if real interest decreases. For a given real interest rate, the nominal interest must increase if expected inflation increases.

For a given real interest rate, the nominal interest must increase if expected inflation increases

For each situation described here, determine the type of unemployment: (a) Steelworkers losing their jobs due to outsourcing. Frictional Structural Cyclical (b) A college graduate waiting to accept a job that allows her to utilize her level of education. Cyclical Frictional Structural (c) The Great Recession of 2008 - 2009. Frictional Cyclical Structural (d) A homemaker entering the labor force. Frictional Structural Cyclical

For each situation described here, determine the type of unemployment: (a) Steelworkers losing their jobs due to outsourcing. Frictional - Structural Cyclical (b) A college graduate waiting to accept a job that allows her to utilize her level of education. Cyclical - Frictional Structural (c) The Great Recession of 2008 - 2009. Frictional - Cyclical Structural (d) A homemaker entering the labor force. - Frictional Structural Cyclical

Private property helps facilitate exchange in which type of economic system?

Free Market

Economic freedom is concerned with

Freedom to choose

The purpose of the U.S. tax-transfer system is to:

Furnish lower income households with more goods and services than the market alone provides.

Using the following NIPA data, compute GDP.

GDP = (personal consumption expenditures + gross private domestic investment + gov't purchases) + (exports - imports)

The table below shows GDP and real GDP in billions of dollars for the United States between 2009 and 2013. Real GDP was computed using 2009 as the base year. Using the information in the table, compute the GDP price index for each year. Year GDP Real GDP 2009 14,418.7 14,418.7 2010 14,964.4 14,783.8 2011 15,517.9 15,020.6 2012 16,163.2 15,369.2 2013 16,768.1 15,710.3

GDP Price Index 2009 - 100 2010 - 101.2 2011 - 103.3 2012 - 105.2 2013 - 106.7

Although GDP is likely the best measure of economic activity in the economy, one reason why GDP is considered to be an imperfect measure is because:

GDP does not include the purchase of illegal goods

The measure of final goods and services produced in the United States is the

GDP of the United States.

Suppose that in 1984 the total output in a single-good economy was 12,000 buckets of chicken and the price of each bucket of chicken was $16. In 2005 the price per bucket of chicken was $20 and 26,000 buckets were produced. Determine the GDP price index for 1984, using 2005 as the base year. What were the amounts of real GDP in 1984 and 2005?

GDP price index = 80 (16 / 20) * 100 = 80 By what percentage did the price level, as measured by this index, rise between 1984 and 2005? 25% ((100 - 80) / 80) * 100 = 25 Real GDP in 1984 = $240,000 12,000 * 20 = 240,000 Real GDP in 2005 = $520,000 26,000 * 20 = 520,000

Which factor made it imperative for all firms to lower their costs and prices and to innovate to remain competitive?

Global competition

exports are

Goods and services sold to international buyers.

Opportunity cost may be defined as the

Goods or services that are forgone in order to obtain something else.

A city's decision to limit smoking in public areas is an example of

Government intervention

According to the law of increasing opportunity costs,

Greater production of one good requires increasingly larger sacrifices of other goods.

The investment in human capital through education and training can result in

Greater productivity

The investment in human capital through education and training can result in

Greater productivity.

Economic efficiency is concerned with

Greatest production with the least costs

According to the World View titled "Income Share of the Rich," in which of the following would the top tenth of the population be most likely to receive the highest percentage of the country's income?

Haiti.

According to the World View titled "Income Share of the Rich," in which of the following would the top tenth of the population be most likely to receive the highest percentage of the country's income? Selected Answer: Correct Answers: Japan. The United States. Germany. Haiti.

Haiti.

A capital-intensive production process is one that

Has a high ratio of capital to labor

A capital-intensive production process is one that

Has a high ratio of capital to labor.

A labor-intensive production process is one that

Has a low ratio of capital to labor

A labor-intensive production process is one that

Has a low ratio of capital to labor.

A labor-intensive production process is one that: -Has a low ratio of labor to capital. -Has a low ratio of capital to labor. -Is used only in the United States. -All of the choices are correct

Has a low ratio of capital to labor.

Economic growth is concerned with

Having more tomorrow

Which 20th century businessman is typically associated with pioneering division of labor?

Henry Ford

Which of the following are considered to be possible reasons for the slowdown in productivity growth since the Great Recession?

High debt levels Overcapacity of capital goods New products do not generate revenue for firms

Ceteris paribus means

Holding everything constant except for the variables you are interested in examining.

Which economic institution owns the factors of production in a market economy?

Households.

Economics can be defined as the study of

How scarce resources are allocated.

True or False: Other things equal, an increase in productivity will shift the supply curve rightward.

True

Which of the following is NOT a key economic question? -how should these goods and services be produced -how should it be ensured that goods and services are paid for -what goods and services should be produced -who consumes these goods and services

How should it be ensured that goods and services are paid for?

In evaluating economic systems, it is most important to consider

How well the production questions are answered.

Differences in size of real GDP across countries are best explained by

Human Capital

Which of the following cannot properly be called a part of infrastructure?

Human capital

Human capital is defined as the

Human capital is defined as the

Differences in size of real GDP across countries are best explained by

Human capital.

Regarding increasing productivity, factor mobility is

Important in that it helps to reallocate resources in a dynamic economy

Regarding increasing productivity, factor mobility is

Important in that it helps to reallocate resources in a dynamic economy.

A country's total output includes all of the following except:

Imports.

The _______ problem describes a situation faced in command economies which producers have no reason to adjust production in response to shortages or surpluses in the economy

Incentive

According to your reading, is a major concern about a command economy

Incentive to work

Economic equity is concerned with

Income distribution

In terms of income distribution, if a person moves from the lowest fifth of households to the highest fifth over many years, this is known as:

Income mobility.

A country that increased its literacy rate and thereby its average human capital would probably

Increase GDP

A country that increased its literacy rate and thereby its average human capital would probably: -Decrease GDP. -Increase GDP. -Have not impact on GDP. -None of the choices are correct.

Increase GDP.

rich country that opened its borders to trade with a poor country would cause in the long run Selected Answer: Correct Answers: Increased GDP for the rich country but not the poor country. Increased GDP for the rich country and the poor country. Increased GDP for the poor country but not the rich country. None of the choices are correct.

Increased GDP for the rich country and the poor country.

The World View article titled "The Education Gap between Rich and Poor Nations" says that a greater percentage of people graduate from high school in rich nations than in poor nations. This investment in human capital can lead to Selected Answer: Incorrect Answers: Lower productivity. Increased output per worker. Lower labor quality. A bigger capital stock.

Increased output per worker.

Division of labor typically results in:

Increased productivity

Which of the following will contribute to accelerated growth for the U.S. economy?

Increased use of outsourcing for inputs and increased use of comparative advantage for trade in final goods and services.

Which of the following will contribute to accelerated growth for the U.S. economy?: -A decrease in factor mobility. -A decrease in government involvement in copyright laws. -Increased use of outsourcing for inputs and increased use of comparative advantage for trade in final goods and services. -A decrease in tax credits for research and development.

Increased use of outsourcing for inputs and increased use of comparative advantage for trade in final goods and services.

Outsourcing leads to

Increases in productivity and increases in total output.

Outsourcing leads to

Increases in total output, but with temporary job losses for some domestic workers

Per capita GDP will rise if GDP

Increases more rapidly than the population increases

Per capita GDP will rise if GDP

Increases more rapidly than the population increases.

per capita GDP will rise if GDP Selected Answer: Correct Answers: Increases more rapidly than the population increases. Increases at the same rate as the population increases. Decreases and the population increases. Increases more slowly than the population increases.

Increases more rapidly than the population increases.

As a nation's average education level increases, the nation's level of productivity

Increases, and the production possibilities curve shifts to the right.

If the United States decides to convert automobile factories to tank production, as it did during World War II, but finds that some auto manufacturing facilities are not well suited to tank production, then

Increasing opportunity costs will occur with greater tank production.

Price stability is concerned with

Increasing prices

Price Ceilings are intended to address the problem of

Inequity in the distribution of goods and services

Which of the following statements is true? Investment in public capital is a source of economic growth, but investment in private capital is not. Investment in both private and public capital is conducive to economic growth and higher productivity. Neither investment in private nor public capital has any effect on economic growth and productivity. Investment in private capital is a source of economic growth, but investment in public capital is not.

Investment in both private and public capital is conducive to economic growth and higher productivity.

The World View article titled "The Education Gap between Rich and Poor Nations" says that 85 percent of all Americans graduate from high school. This is an example of

Investment in human capital

Slavery is an example of:

Involuntary Exchange*

Economic growth

Is an increase in output or real GDP.

Economic growth: -Is an increase in output or real GDP. -Causes a contraction in the production possibilities curve. -Involves reduced capacity in the short run. -None of the choices are correct.

Is an increase in output or real GDP.

According to the law of demand, a demand curve:

Is downward sloping.

A new innovation in technology results in increased production. What do you predict will happen to the Production Possibility Curve?

It will move outward (to the right)*

Which economist argued that free markets unleashed the "animal spirits" of entrepreneurs, propelling innovation, technology, and growth?

John Maynard Keynes

Human capital is defined as the

Knowledge and skills workers possess.

Someone who works on a farm represents which factor of production?

Labor (L)

One basic difference between "labor" and "entrepreneur" is that: Selected Answer: Correct Answers: Labor is hired by a firm whereas the entrepreneur owns the firm An entrepreneurs has high-level skills whereas labor does not Labor performs manual work whereas an entrepreneur performs mental work Education is important for an entrepreneur but not for labor

Labor is hired by a firm whereas the entrepreneur owns the firm

Which of the following is NOT a reason why the United States is able to produce such high levels of GDP? -Abundant factors of production. -Labor-intensive production process. -High levels of investment in human capital. -High quality of capital.

Labor-intensive production process.

Wages are payment earned from:

Labor.

______ is the doctine that states that government generally should not intervene in the marketplace

Laissez-faire

Coal used to make steel represents which factor of production?

Land (T)

A factor market is any place or process where

Land, labor, or capital is bought and sold.

Rent is payment earned for:

Land.

The government establishes the rules of the game for economic transactions in order to

Legitimatize and enforce contracts.

Which of the following is NOT an investment in human capital?

Local company replaces its clerks' typewriters with PCs.

When we study the entire economy, we are primarily concerned with

Macroeconomics

The economic perspective focuses on _____, therefore the decision maker must compare incremental benefits and costs

Marginal analysis

When comparing the additional or incremental costs versus additional or incremental benefits of a decision, one is engaging in:

Marginal analysis

The law of diminishing marginal utility states:

Marginal utility declines where as the total utility increases *

Capitalism is an example of what type of economic system

Market

An economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets is called a

Market economy

When the invisible hand does not produce optimal outcomes for the economy, there is evidence of

Market failure

Which of the following statements about markets is not true?

Markets necessarily have a physical location.

For consumers, most market activity can be explained by the goal of:

Maximizing happiness.

A production possibilities curve indicates the

Maximum combinations of goods and services an economy can produce given its available resources and technology.

When we study individual markets or consumers, we are primarily concerned with

Microeconomics

A market-based economic system with limited government involvement is called a

Mixed economy

The economy of the United States represents a

Mixed economy

According to economists, which of the following is NOT a factor of production?: -Land -Labor -Money -Entrepreneurship

Money

Investment includes all of the following EXCEPT:

Money in a retirement fund.

According to economists, which of the following is NOT a factor of production?

Money.

Specialization typically results in people becoming:

More interdependent

Which of the following definitely means productivity has increased?

More output from fewer workers.

Which of the following definitely means productivity has increased? More output from fewer workers. Less output from fewer workers. More output from more workers. Less output from more workers.

More output from fewer workers.

Which of the following definitely means productivity has increased?: -More output from fewer workers. -Less output from fewer workers. -More output from more workers. -Less output from more workers.

More output from fewer workers.

According to the World View excerpt that compares GDP figures for several nations, Japan's real GDP is approximately

More than that of Germany

According to the World View excerpt that compares GDP figures for several nations, Russia's real GDP is approximately

More than that of Mexico

According to the World View excerpt that compares GDP figures for several nations, Russia's real GDP is approximately: -More than that of Germany. -More than that of China. -More than that of Mexico -None of the choices are correct.

More than that of Mexico.

Goods that have spillover costs affect our collective well-being and therefore can be overproduced because

Most businesses are more concerned about profits than how the environment is affected.

According to the World View titled "Income Share of the Rich," in which of the following would the top tenth of the population be most likely to receive the highest percentage of the country's income?

Namibia.

As the U.S. economy relies more and more heavily on the production of services rather than goods,

Nearly all future job growth will be in service-producing industries.

Government intervention to reduce the level of pollution is prompted by the existence of

Negative externalities.

Which of the following does not contribute to the high productivity of the U.S. economy?

Negative externalities.

Which of the following does not contribute to the high productivity of the U.S. economy? Selected Answer: Correct Answers: The capital stock. Factor mobility. Negative externalities. Technology.

Negative externalities.

The equation for net investment is written as:

Net Investment = Gross Investment - Depreciation

"There is no such thing as a free lunch." We have heard that many times. Think about opportunity costs in this example: Your friend wins a pair of tickets to a concert and invites you to go along with her. Is the concert truly free?

No

_____ is computed using current prices.

Nominal GDP

_________ economics considers the subjective desirability of certain aspects of the economy and underlies expressions of support for particular economic policies

Normative

When someone explains what should be, such as: "Prices are too high and should be lower", this is an example of

Normative Economics

If the market wage for fast-food restaurants is $11 and the government enforces a minimum wage of $7, the unemployment rate will

Not be affected by the minimum wage.

Which determinant of demand changes in the personal computer market as more individuals become interested in "surfing the Internet"?

Number of Buyers

Income inequality

Often greatest in the poorest countries.

Income inequality is

Often greatest in the poorest countries.

Which of the following is likely to be most capital-intensive?

Oil refining in the United States

Which of the following is likely to be most capital-intensive?

Oil refining in the United States.

Which of the following is likely to be most capital-intensive?: -Farming in developing countries. -Production of clothing in rural China. -Oil refining in the United States. -None of the choices are correct.

Oil refining in the United States.

A monopoly exists when

One firm produces all the output for a particular good or service.

A monopoly exists when

One firm produces the entire market of a good or service.

limits growth in poor nations

One of the consequences of a no-growth policy

Which component(s) of U.S. real GDP decreased in size relative to total U.S. real GDP from 1950 to 2000?

Only agriculture.

With respect to factors of production, which of the following statements is not true?

Only those resources that are privately owned are counted as factors of production.

The most desired goods or services that are given up when a choice is made are called the

Opportunity Cost

The Production Possibility Curve illustrates:

Opportunity costs

The Latin phrase ceteris paribus means

Other things remain equal.

Changes in real GDP serve as a better measure of the health of the economy than changes in nominal GDP because real GDP is affected by changes in:

Output only.

labor productivity

Output per hour of work is:

Productivity is a measure of

Output per unit of input

Productivity is a measure of

Output per unit of input.

Productivity measures:

Output per worker.

Expansion of capital goods, such as new factories, may have outpaced consumer demand for goods and services since the Great Recession. This possible explanation for productivity slowdown refers to:

Overcapacity

Those who are interested in assessing the relative standard of living of different countries over a given time period are most likely to look at

Per capita GDP

Average living standards are best measured using

Per capita GDP.

The best measure of how much output the average person would get if all output were divided evenly among the population would be

Per capita GDP.

Those who are interested in assessing the relative standard of living of different countries over a given time period are most likely to look at

Per capita GDP.

Which of the following is an indicator of how much output the average person would get if all output were divided up evenly among the population?

Per capita GDP.

Income inequalities are greatest in

Poor countries

________ economic analysis concerns what is, whereas ________ economic analysis represent subjective statements about what ought to be

Positive & Normative

When a statement of fact is made, such as: "The rate of unemployment is currently 5%," this is an example of

Positive Economics

Economic models are used by economists to

Predict economic behavior Explain economic behavior Develop economic policies

When unregulated monopolies exist,

Prices tend to be higher than with a competitive market

When unregulated monopolies exist,

Prices tend to be higher than with a competitive market.

When the government provides a legal framework,

Private market transactions benefit and government market transactions benefit.

Property owned by individuals or companies, not by the government or the people as a whole is called

Private property

Selling state-run firms to individuals is called

Privatization

When economists describe a production process as capital-intensive, they mean that the

Process uses a high ratio of machinery and other capital to labor

When economists describe a production process as capital-intensive, they mean that the

Process uses a high ratio of machinery and other capital to labor.

The economy of the United States is important because it:

Produces about 20 percent of total world output.

A market in which final goods and services are exchanged is a

Product Market

The market in which households purchase the goods and services that firms produce is called the

Product market

Business firms supply goods and services to _____ and purchase factors of production in ____.

Product markets; factor markets

In a market economy with no government intervention, the HOW to produce question is based on

Production Costs Alone

With a competitive market system, which variables are used as signals to firms in determining the goods that should be produced and that amount that should be produced?

Profits Prices

The elimination of import restrictions will Selected Answer: Answers: Alter the mix of output from export industries toward domestic industries. Redistribute income from import-competing industries to export industries. Alter the mix of output from export industries to import-competing industries. Redistribute income from domestic to foreign producers.

Redistribute income from import-competing industries to export industries.

Economic security is concerned with

Property rights

Producers of paper products are most likely to be in favor of Selected Answer: Correct Answers: Free trade in the paper product market and the lumber market. Protectionism in the paper product market and the lumber market. Free trade in the paper product market but protectionism in the lumber market. Protectionism in the paper product market but free trade in the lumber market.

Protectionism in the paper product market but free trade in the lumber market.

Although the necessary role of government in the economy is highly debated, many people agree that it should

Provide a legal framework, Protect the environment, Protect consumers and labor

The role of the government in establishing how private business can operate includes all of the following except Selected Answer: Correct Answers: Providing a legal framework. Providing raw materials to business. Protecting the environment. Protecting consumers from defective products.

Providing raw materials to business.

Ceteris paribus, according to the law of demand, if the price of a computer game increases from $25 to $30, the:

Quantity demanded of computer games will decrease.

Which of the following are arguments against rapid economic growth?

Rapid economic growth is unsustainable due to the earth's finite resources. Rapid economic growth results in pollution, global warming and other environmental problems. Rapid economic growth has not solved sociological problems like poverty and homelessness.

Economics assumes that human behavior reflects "_____ self-interest"

Rational

real gdp per capita

Real GDP divided by the size of the population is called:

Which of the following statements best summarizes the real economic growth per capita in the United States between 1950 and 2015?

Real GDP per capita rose more than threefold.

Which of the following statements best summarizes the growth in real GDP in the United States between 1950 and 2015?

Real GDP rose more than sixfold.

annual population growth exceeds that of real GDP

Real economic growth can be misleading when:

What are some possible reasons for the slow down in productivity growth rates starting in 2010?

Recent products like Internet apps have a very small effect on GDP. Increased productive capacity exceeded consumer demand. High debt levels that had accumulated.

Price signals direct the answers to the what, how, and for whom questions in a laissez-faire economy

TRUE

Specialization increases total world output

TRUE

Real GDP per capita is a

better measure of the physical environment than output

Which of the following has been a century-long trend in the United States?

Relative decline in manufacturing to the service sector.

Point E violates which assumption of the Production Possibility Curve?

Resources are fully employed*

According to the text, there is no such thing as a free lunch because

Resources used to produce the lunch could be used to produce other goods and services.

The World View article in the text titled "Income Share of the Rich" reports, "In poor, developing countries the richest tenth of the population typically gets 40 to 50 percent of all income." Which of the following is a form of government intervention designed to change this situation?

Rich nations opening up their domestic markets to exports from poor nations.

Productivity

Rises when the ratio of output to input increases

Productivity

Rises when the ratio of output to input increases.

An example of physical capital would be:

Robot used in a factory.

When resources are not freely or abundantly available, we say they are

Scarce

Factors of production are

Scarce in every society.

The production possibilities curve illustrates which two of the following essential principles?

Scarce resources and opportunity cost

The fact that there are too few resources to satisfy all our wants is attributed to

Scarcity

What kinds of goods are excluded from GDP because they do not contribute to current production?

Secondhand sales

Ones own personal gain is called

Self-interest

Which sector is expected to grow most rapidly for the United States in the future?

Services since Americans have high relative incomes.

The current U.S. economy is based primarily on the production of

Services.

How will a decrease in technology from a natural disaster such as a hurricane, ceteris paribus, affect an economy's production possibilities curve?

Shift the curve inward.

How will an increase in factor mobility, ceteris paribus, affect an economy's production possibilities curve?

Shift the curve outward

How will an increase in the level of human capital, ceteris paribus, affect an economy's production possibilities curve?

Shift the curve outward

How will an increase in factor mobility, ceteris paribus, affect an economy's production possibilities curve?

Shift the curve outward.

How will an increase in the level of human capital, ceteris paribus, affect an economy's production possibilities curve?

Shift the curve outward.

Which of the following is not a basic decision that all nations must confront?

Should we have economic growth?

The GDP of the united states includes production by foreign- owned firms that are located in the united states

TRUE

The demand schedule and demand curve remain unchanged only so long as the underlying determinants of demand remain constant

TRUE

Economics is a _______ science concerned with the allocation of _______ resources to meet the unlimited wants of the members of a given society

Social & Scarce

Identify purely financial transactions.

Social Security payments Cash gifts from parents Buying stocks

The result of government intervention in the market is that

Society could be better or worse off

The result of government intervention in the market is that: -Society is always better off. -The production possibilities curve always shifts outward. -Society could be made better or worse off. -Society is always worse off.

Society could be made better or worse off.

When the production of a good creates external costs

Society's collective well-being will be lower.

When the production of a good creates external costs,

Society's collective well-being will be lower.

In economics, scarcity means that

Society's desires exceed resources available.

In a command economy, decisions are made by

Some central authority

In a traditional economy, decisions are made by

Some designated leader

The opportunity cost of investing is:

Spending today

Which of the following allow the economy to achieve a higher rate of economic growth?

Stronger productivity growth and heightened global competition

In the type of capitalism practiced in the United States and most other countries, the government plays ______ role.

Substantial

In order to measure what a country produces, we:

Summarize the monetary value of output

the six determinants of economic growth are grouped into three categories one demand factor four_________ factors one efficiency Factor

Supply

T or F: A feature of the market system is the ability to reap monetary rewards from the innovation and creation of new products and processes

T

T or F: Freedom of choice allows workers to enter any line of work for which they are qualified. It also ensures that consumers are free to buy the goods and services that best satisfy their wants.

T

A decrease in the level of resource utilization would bring about an inward shift of a PPC

TRUE

All output combinations that lie outside a production-possibilities curve are unattainable with resources and technology

TRUE

An increase in the price of one good can cause the demand for another good to decrease if the goods are complements

TRUE

Education and training are an example of investment in human capital

TRUE

Goods are scarce because society's desire for them exceeds society's ability to produce them

TRUE

Government regulations, taxes, and subsides affect the mix of the output in the economy

TRUE

If every country specializes in what it produces best, more will be produced than if each country tries to produce everything for its own needs

TRUE

If the terms of trade are not between the opportunity costs for two countries, then the two countries will have no reason to trade

TRUE

Macroeconomics addresses the economy as a whole

TRUE

Which of the following contributes to the high productivity of American workers?: -The labor-intensive production process in the United States -The abundance of capital relative to labor -The low level of factor mobility -The decreasing investment in human capital

The abundance of capital relative to labor

Which of the following contributes to the high productivity of American workers? Selected Answer: Correct Answers: The labor-intensive production process in the United States. The abundance of capital relative to labor. The low level of factor mobility. The decreasing investment in human capital.

The abundance of capital relative to labor.

The opportunity cost of studying for an economics test is

The activity that is the best alternative use of your time

A buyer is said to have a demand for a good only when

The buyer is both willing and able to purchase the good

Which would be considered an investment, according to economists?

The construction of a new plant by Ford

The term externalities refers to

The costs or benefits of a market activity borne by a third party.

The WHAT question can best be answered using data about which of the following? Selected Answer: Correct Answers: The distribution of output among manufacturing, services, and agricultural sectors. Per capita GDP. Productivity. The distribution of GDP among different income quintiles.

The distribution of output among manufacturing, services, and agricultural sectors.

The 'WHAT goods and services does the US produce' question can best be answered using data about which of the following?

The distribution of output in markets, specifically among manufacturing, services, and agricultural sectors.

Per capita GDP is

The dollar value of GDP divided by total population.

Factor mobility refers to

The ease of reallocating resources

Factor mobility refers to

The ease of reallocating resources.

Which of the following statements is true concerning income inequality?

The free market produces an unequal distribution of income

Which of the following statements is true concerning income inequality?: -Income is equally distributed in poor countries. -Developed countries have greater income inequality than developing countries. -The government has no way to alter income inequality. -The free market produces an unequal distribution of income.

The free market produces an unequal distribution of income.

Suppose an economy's real GDP is $48,000 in year 1 and $50,200 in year 2. What is the growth rate of its real GDP? Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of real GDP per capita?

The growth rate of the economy's real GDP = 4.58% (50,200 - 48,000) / 48,000 * 100 = 4.58333 (repeating) = 4.58 The growth rate of the economy's real GDP per capita = 2.53% 48,000 / 100 = 480 50,200 / 102 = 492.16 ((492.16 - 480) / 480) * 100 = 2.5333 (repeating) = 2.53

FOR WHOM question

The income distribution of the United States is basically the nation's answer to the

Which of the following helps explain why the growth rate in the United States has been positive during the 1900s?

The increase in labor productivity.

In a market economy, decisions are made by

The interaction between buyers and sellers

Which of the following is a constraint that motivates economic interactions?

The limited resources that individuals have.

Which of the following statements about the way markets allocate resources is most accurate from society's perspective? Selected Answer: Correct Answers: The market always allocates resources in the best way. The market may allocate resources in a way that is not in society's best interest. Resource allocation by markets may not be perfect, but it is always better than government allocation of resources. Markets always fail to allocate resources properly, so we must rely on the government to determine the proper use of our resources.

The market may allocate resources in a way that is not in society's best interest.

The term opportunity cost refers to the

The most desired good or service given up when something is obtained

The term externalities refers to

The negative costs and positive benefits of a market activity borne by a third party.

An opportunity cost is defined as:

The next best alternative

rule of 70

The number of years for a variable to double equals 70 divided by its annual growth rate is called the:

True or False: If the terms of trade are not between the opportunity cost of two countries, then the two countries will have no reason to trade.

True

True or False: If there are unused resources an economy is operating inefficiently.

True

True or False: Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice.

True

Macroeconomics focuses on the behavior of

The overall economy

Macroeconomics focuses on the behavior of

The overall economy.

If population growth is less than output growth for a country,

The per capita living standard will increase

If population growth is less than output growth for a country,

The per capita living standard will increase.

Per capita GDP will definitely rise if

The population falls and GDP does not fall.

According to the law of demand, a change in _______ causes a movement along the demand curve.

The price of the good

Which of the following Is a determinant of supply?

The prices of the factors of production.

Capital intensive means:

The production process uses a high ratio of capital to labor inputs.

Per capita GDP will definitely fall if

The rate of economic growth is less than the rate of population growth.

American production is described as capital intensive, which means that:

The ratio of machinery to labor is high.

50%

The richest 20 percent of the families in the United States receive approximately ______ percent of total income.

true

The richest fifth of U.S. households get nearly half of all U.S. income.

The fundamental problem of economics is

The scarcity of resources relative to human wants

The level of economic prosperity is called

The standard of living

False

The standard of living rises when population growth exceeds economic growth.

It is important to invest today to improve ______________ tomorrow.

The standard of living.

Which of the following is an assumption under which the production possibilities curve is drawn?

The supply of resources is fixed

by raising the productivity of those inputs

The two ways that society can increase its real output and income are by increasing its inputs of resources and

The market mechanism may best be defined as

The use of market prices and sales to signal desired output.

Government income transfers are NOT included in the calculation of GDP because:

These payments do not reflect the production of goods and services.

When people consider their options, the make their choices based on belief that,

They believe they will be better off

On average, U.S. real GDP has grown roughly _____ percent per year.

Three

The government regulates food additives

To assess their safety.

Which is a primary use for national income accounting?

To measure changes in the value of goods and services produced in the economy.

Societies form economic systems because

To meet the wants and needs of its citizens.

The goal of the business firms in a market economy is to maximize

Total Profits

In an economy characterized by persistent inflation, nominal GDP will usually be greater than real GDP.

True

T or F: Communism all the characteristics of a command system

True

The U.S. federal income tax is an example of a progressive tax.

True

True or False: A "mixed economy" involves both private and public decision making on how, what, and for whom.

True

True or False: A change in quantity supplied of a commodity can only be caused by change in the price of the commodity.

True

True or False: A change in the demand for a commodity is caused by any factors other than the price of the commodity.

True

True or False: A theory or model is a simplification of reality, much in the same way that a road map shows only those features needed to get from one point to another.

True

True or False: Comparative advantage refers to the ability to product output with fewer resources than any other country.

True

True or False: Economics does not include the study of how to improve society.

True

True or False: Economists do not view money as capital.

True

True or False: Education and training are examples of investments in human-capital.

True

True or False: If every country specializes in what it produces best, more will be produced than if each country tries to produce everything to meet its need.

True

True or False: Rent, interest, wages, and profit are the payments to the four factors of production-land, capital, labor and entrepreneurship, respectively.

True

True or False: Specialization and international trade increases total world output.

True

True or False: The GDP of the United States includes production by foreign-owned firms that are located in the United States.

True

True or False: The existence of alternative uses for a resource implies it is scarce.

True

True or False: The term "ceteris paribus" means that a number of relevant variables are assumed to be constant.

True

True or false: GDP only counts final goods and services to avoid multiple counting of goods.

True

True or false: Growth enables society to improve nations infrastructure

True

True or false: Technological advance and investment are related because technological advance promotes investment in new machinery and equipment.

True

True or false: The competitive market system tends to drive the economy toward productive and allocative efficiency.

True

When calculating GDP, consumption makes up approximately

Two-thirds of total output.

When people make decisions, they take into consideration all available information. However, sometimes choices result in:

Unintended Consequences

Which of the following countries (or regions) produces the most output annually?: -Japan -United States -China -Germany

United States

Which of the following countries currently has the largest GDP?

United States

The following table shows the real GDP and population for the United States, Japan, Brazil, and Germany in 2010. Complete the table by calculating the real GDP per capita for each country United States $14,783,809 309 Japan 4,415,672 127 Brazil 1,797,588 201 Germany 3,111,392 82

United States - $47844 Japan - $34769 Brazil - $8943 Germany - $37944

According to the World View chart in the text, from highest to lowest real GDP per capita, which is correct?

United States, Canada, Germany, Japan, South Korea.

According to the World View chart in the text, from highest to lowest real GDP, which is correct?: -United States, Japan, China, Germany, Britain. -United States, China, Japan, Germany, Britain. -United States, China, Germany, Japan, Canada.

United States, China, Japan, Germany, Britain.

According to the World View chart in the text, from highest to lowest real GDP, which is correct?

United States, China, Japan, Germany, Russia.

Which of the following countries (or regions) produces the most output annually?

United States.

A mixed economy

Utilizes both market and non market signals to allocate goods and services

A mixed economy

Utilizes both market and nonmarket signals to allocate goods and services.

Nominal GDP measures the:

Value of output produced in current prices.

Who was the leader that introduced communism and central planning to the former Soviet Union?

Vladimir Lenin

When two people agree to make a trade based on the belief that each will be better off, this is called:

Voluntary Exchange*

Income transfers include all of the following EXCEPT:

Wages.

The fundamental economics problem is

We have more wants and needs than we have resources.

The annual output and prices of a 3-good economy are shown in the table below. Quarts of Ice Cream - (Year 1: $6, Quantity: 4), (Year 2: $6, Quantity: 6) Bottles of Shampoo - (Year 1: $4, Quantity: 2), (Year 2: $4, Quantity: 3) Jars of Peanut Butter - (Year 1: $3, Quantity: 4) (Year 2: $3, Quantity: 3)

What was nominal GDP in year 1? $44 - Multiply prices and quantities of the products and add them up for their respective year. (6 * 4) + (4 * 2) + (3 * 4) = $44 What was nominal GDP in year 2? $57 (6 * 6) + (4 * 3) + (3 * 3) = 57

productive

When an economy uses its resources in the least costly way to produce goods and services it is called _____ efficiency

Domestic market transactions benefit and foreign trade market transactions benefit

When the government provides a legal framework

Which of the following is NOT a question an economic system must answer?

When to produce?

Suppose the total market value of all the final goods and services produced in the country of Rushya was $8 billion in 2008 (measured in 2008 prices) and $9 billion in 2009 (measured in 2009 prices). Which of the following statements is definitely correct?

Whether real GDP increased cannot be determined with the information given.

an increase in real GDP occurring over some time period; an increase in real GDP per capita occurring over some time period

Which of the following are used by economists to define and measure economic growth?

The abundance of capital relative to labor

Which of the following contributes to the high productivity of American workers?

The fraction of the ___ - ___ population that is in the labor force is called the labor-force participation rate.

Working-age

The market mechanism

Works because prices serve as a means of communication between consumers and producers.

Why is the concert not completely free?

You will have to give up time to go to the concert, which represents your opportunity cost.

Which of the following countries experienced a decline in total output from 2000 to 2015?

Zimbabwe

a range with no clear divisions is called

a continuum

the "guns versus butter" dilemma that all nations confront is that

a increase in national defense implies more sacrifices of civilian goods and services

government programs that protext people experiencing unfavorable economic conditions is called

a safety net

economic growth allows a society to consume

a wider variety of goods higher quality Goods more goods and services

The largest economy in the world is a) U.S. b) China c) Japan d) India None of the above

a) US

A decrease in the average level of prices of goods and services is a) deflation. b) recession. c) depression. d) inflation.

a) deflation

In periods of rising prices, percentage increases in nominal GDP will, a) exceed percentage increases in real GDP b) equal percentage increases in real GDP c) be less than percentage increases in real GDP d) not change in relationship to real GDP

a) exceed percentage increases in real GDP

The resources used to produce goods and services are bought and sold in a) factor markets. b) product markets. c) capital markets. d) resource markets. e) None of the above.

a) factor markets.

The 'WHAT' goods and service does the US produce' question can best be answered using data about which of the following? a) the distribution of output in markets, specifically among manufacturing, services, and agricultural sectors b) per capita GDP c) productivity d) the distribution of GDP among different income quintiles

a) the distribution of output in markets, specifically among manufacturing, services, and agricultural sectors

Real GDP is the a) value of final output produced, adjusted for changing prices. b) value of final output produced, measured in current prices. c) income earned by current factors of production. d) GDP minus depreciation.

a) value of final output produced, adjusted for changing prices.

The table below shows the expenditure components for the United States in 2013 in billions of dollars. Durable goods $1,249.3 Nondurable goods 2,601.9 Services 7,633.2 Gross investment 2,648.0 Exports 2,262.2 Imports 2,770.4 Federal government 1,231.5 State and local government 1,912.4 a. Calculate consumption expenditures in 2013 b. Calculate the amount of net exports in 2013 c. Calculate nominal GDP in 2013

a. $11484.4 billion b. -$508.2 billion c. $16768.1 billion

The following table shows national income by type of income for the hypothetical economy of Highlands in billions of dollars. Rents 300 Wages 800 Interest 150 Profits and losses 400 Indirect business taxes 70 Depreciation 180 Net foreign interest income 50 a. What is the value of national income for Highlands? b. Using the income approach, what is the value of nominal GDP for Highlands?

a. $1650 billion b. $1950 billion

The following table shows prices and quantities in the hypothetical economy of Lowlands for two different items in two different years. Assume these are the only two items produced in this economy. Year 1 Year 2 Apples $1.25 500 $1.50 560 Shirts 12.00 100 14.00 120 a. What is the value of nominal GDP for Lowlands in year 1? b. What is the value of nominal GDP for Lowlands in year 2? c. Assume year 1 is used as the base year for this economy. What is the value of real GDP in year 2? d. In Lowlands, the value of output in year 2 would be ________ if nominal GDP were used instead of real GDP.

a. $1825 b. $2520 c. $2140 d. overstated

The table below shows GDP and real GDP for the hypothetical economy of Tinseltown. Year GDP $ Real GDP $ 1 500 500 2 530 515 3 567 527 4 550 522 5 594 543 6 633 559 a. Using the information in the table, compute the GDP price index for each year and complete the GDP price index column. b. Using the GDP price index, prices in Tinseltown ______ between year 2 and year 3.

a. 1 - 100 2 - 102.9 3 - 107.6 4 - 105.4 5 - 109.4 6 - 113.2 b. increased

Suppose a nation has a labor force of 45.5 million workers and an unemployment rate of 6.15%. a. How many workers in this nation are unemployed? b. How many workers in this nation are employed?

a. 2.8 million b. 42.7 million

Assume you have the following information about an economy: # of People (millions) Population over age 16 249.7 Labor force 157.2 Not in the labor force 92.5 Employed 148.2 Unemployed 9.0 a. What is the unemployment rate in this economy? b. What is the labor force participation rate? c. Suppose that 1 million currently unemployed workers decide to no longer actively look for work. What is the unemployment rate in this economy now? d. What is the new labor force participation rate?

a. 5.73% b. 62.96% c. 5.12% d. 62.56%

Assume you have the following information about an economy: # of People (millions) Population over age 16 248.2 Labor force 156.0 Not in the labor force 92.2 Employed 146.4 Unemployed 9.6 a. What is the unemployment rate in this economy? b. What is the labor force participation rate? c. Assume that 1 million discouraged workers decide to start looking for work again, thereby increasing the number of officially unemployed workers by 1 million. What is the unemployment rate now? d. What is the new labor force participation rate?

a. 6.15% b. 62.85% c. 6.75% d. 63.26%

The table below shows real GDP per capita for the United States between the years 1950 - 2013 Year Real GDP per Capita (dollars) 1950 13,819 1975 24,601 2000 43,935 2013 49,179 a. What is the growth rate in the standard of living from 1950 to 1975? b. What is the growth rate in the standard of living from 1975 to 2000?

a. 78% b. 78.6%

The table below shows the annual change in the average nominal wage and inflation rate since 2008. Annual Annual Yr Inflation Rate (%) Nom. Wage Growth (%) 2008 3.84 0.33 2009 -0.36 -1.20 2010 1.64 -0.74 2011 3.16 1.37 2012 2.07 2.68 2013 1.46 2.23 a. Compute the percentage change in real income for each year shown in the table. b. Of the years listed above, the paycheck of the average worker declined in _______ of the six years. c. Of the years listed above, the purchasing power of the average worker declined in _______ of the six years. d. The average real income of households can increase _______.

a. Annual Real Wage Growth (%) 2008 -3.51 2009 -0.84 2010 -2.38 2011 -1.79 2012 0.61 2013 0.77 b. 2 c. 4 d. whether nominal wage increases or decreases

Suppose an economy starts the year with $100 million in capital, and during the course of a year, it adds $20 million of gross investment. Economists estimate that the depreciation rate for this economy is 9% per year. a. Calculate depreciation and net investment for this economy. b. Now calculate the amount of next year's beginning capital stock for this economy.

a. Depreciation: $9 million Net investment: $11 million b. $111 million

The table below lists the prices from last year and the base year for a college related basket of goods. Goods Base Year ($) Last Year ($) Gasoline (per gallon) 1.90 2.50 Pizza (per pizza) 4.50 7.95 Beer (per 6-pack) 4.20 7.00 Textbook (per book) 100.00 233.00 a. What is the total cost for a basket of goods that includes 200 gallons of gas, 60 pizzas, 45 6-packs, and 3 textbooks? b. Using this basket of goods, compute the following CPI values: c. Assume that rather than buying textbooks for their courses last year, all students decided to buy online access cards at $100 per textbook. Compute the total cost for this basket of goods and the CPI.

a. In the base year: $1139 Last year: $1991 b. In the base year: 100 Last year: 174.8 c. Total cost of basket: $1592 CPI: 139.77

The table below lists the CPI values for the United States from different decades. Year CPI 1931 15.2 1932 13.7 1933 13.0 1946 19.5 1947 22.3 1948 24.1 1978 65.2 1979 72.6 1980 82.4 2001 177.1 2002 179.9 2003 184.0 a. Complete the table by computing the annual inflation rate. b. Using the table above, indicate the year the economy experienced: The highest annual inflation rate: The largest annual negative inflation (deflation) rate: The most stable price level (annual inflation rate closest to zero):

a. Inflation Rate (%) 1931 1932 -9.87 1933 -5.11 1946 1947 14.36 1948 8.07 1978 1979 11.35 1980 13.5 2001 2002 1.58 2003 2.28 b. The highest annual inflation rate: 1947 The largest annual negative inflation (deflation) rate: 1932 The most stable price level (annual inflation rate closest to zero): 2002

Determine whether each of the following examples would be included in Gross Domestic Product (GDP). a. When Judy went to the grocery store yesterday, she bought three pounds of potatoes. b. Ford Motor Company buys four tires to put on a new Ford Mustang. c. The U.S. Air Force purchases two new fighter jets from Boeing. d. When Joey had his birthday last week, his grandmother sent him a $100 bill that he could spend.

a. Judy's purchase of potatoes - would be included in GDP as a consumption expenditure b. The purchase of the tires - would not be included in GDP c. The purchase of the two fighter jets - would be included in GDP as a government purchase d. Joey's birthday gift of $100 - would not be included in GDP

Consider the following information about two nations: In nation A, the number of employed is 4,829,000 and the size of the labor force is 5,249,000. In nation B, the number of employed is 2,661,000 and the size of the labor force is 2,950,000. a. What is the unemployment rate in each nation? b. Nation A has ________ unemployed workers and ________ unemployment rate compared to nation B.

a. Nation A: 8% Nation B: 9.8% b. more; lower

Year CPI CPI(hundredths) 2011 224.94 2.249 2012 229.59 2.296 2013 232.96 2.330 2014 236.74 2.367 a. Using the information below, and assuming that you want to maintain your purchasing power from 2011, what nominal wage should you demand in each of the given years? b. Assume that your annual wage in 2014 was $85,000. This represents _______.

a. Nominal Wage ($) 2011 $80,080 2012 $81,753.53 2013 $82,964.16 2014 $84,281.62 b. This represents an increase in both nominal and real income ($85,000 is greater than $84,281.62, so is an increase in nominal income. $85,000/2.367 = $35,910.44; this is greater than $35,606.94, so the real income also increases)

The table below shows real GDP, population, and real GDP per capita for the hypothetical economy of Highlands. Yr R GDP Pop R GDP/Capita 1 $5,720 220 $26,000 2 6,496 224 29,000 3 7,392 231 32,000 a. Using the information in the table, calculate the growth rates in real GDP, population, and the standard of living (real GDP per capita) between year 1 and year 2. b. Now, using the information in the table, calculate the growth rates in real GDP, population, and the standard of living between year 2 and year 3. c. The standard of living in the economy of Highlands between year 1 and year 2 grew ________ the standard of living between year 2 and year 3.

a. Real GDP: 13.6% Population: 1.8% Standard of living: 11.5% b. Real GDP: 13.8% Population: 3.1% Standard of living: 10.3% c. faster than

The following table shows yearly real GDP data for France from 2006 to 2014, measured in billions of U.S. dollars. Year Real GDP (billions) 2006 2,136.6 2007 2,255.7 2008 2,582.4 2009 2,831.8 2010 2,619.7 2011 2,565.0 2012 2782.2 2013 2,611.2 2014 2,735.0 a. For each year, identify which stage of the business cycle the real GDP data represent for France. b. Using the table, what years represent a peak in France's business cycle? c. Using the table, what years represent a trough in France's business cycle?

a. Stage: 2006 2007 Expansion 2008 Expansion 2009 Expansion 2010 Recession 2011 Recession 2012 Expansion 2013 Recession 2014 Expansion b. 2009 and 2012 c. 2011 and 2013

For each of the following examples, indicate whether the transaction would be included in the gross investment component of GDP, and if so, indicate which category it would be included. a. When Leandro pays a general contractor to build a new house, it would b. The purchase of a new building by Whole Foods would c. When Sarah buys a new computer for her kids, it would

a. be included in gross investment as residential fixed investment b. be included in gross investment as business fixed investment c. not be included in gross investment

Identify the different stages of the business cycle. a. A time period when the economy is growing toward full employment is known as b. A time period characterized by full or near-full employment is known as c. A time period with two consecutive quarters of declining output is known as d. A time period when employment and real output are at their lowest levels is known as

a. expansion b. peak c. recession d. trough

In each of the following examples, identify whether the individual is experiencing cyclical unemployment, frictional unemployment, structural unemployment, or no unemployment. a. Eduardo has recently moved to a new city with his wife who was offered a great job there. He is trying to find a position in the same industry he worked in before relocating. b. Derek worked for a large telecommunications firm that went bankrupt last year due to a recent recession. He has since tried to find work with one of the firm's competitors, but good jobs are currently hard to come by. c. Drew lost his job at a car manufacturer last year. He spent 6 months applying for every job possible before giving up 2 months ago. He now spends his day playing Xbox. d. Paula has 20 years of experience in manufacturing. Her employer, and many other manufacturing firms, recently closed their U.S. plants. She would like to find a similar job but is unable to find anything that utilizes her skills. e. Katherine works part-time at a small retail store. She would like to work full-time, but her employer is currently unable to extend her hours. f. Tyrell just graduated from college with a business degree. His is currently looking for a job in banking in the major city he just moved to. g. Mike is a contractor who has been unable to find work, since most businesses are delaying or canceling their construction plans due to economic uncertainty in the coming year. h. Meg used to own and run her own bookstore. Her sales declined due to competition from online retailers. She has not been able to find any work related to her skills in the diminishing retail industry for books.

a. frictional unemployment b. cyclical unemployment c. not unemployed d. structural unemployment e. not unemployed f. frictional unemployment g. cyclical unemployment h. structural unemployment

a. Of the three types of unemployment described, which one usually involves the least amount of hardship to the unemployed and the lowest cost to the government and to society as a whole? b. For which of the three types of unemployment are job retraining programs and financial assistance for education most warranted?

a. frictional unemployment b. structural unemployment

In each of the following examples, identify whether the person is counted in the official labor force or not: a. Cynthia owns and operates her own retail store. b. Elder has recently moved to a retirement community in Florida where he enjoys his "golden years" as a retiree. c. Drew lost his job at a car manufacturer last year. He spent 6 months applying for every job possible before giving up 2 months ago. d. Katherine works part-time at a small retail store. She would like to work full-time, but her employer is unable to extend her hours. e. Latisha is an ambitious 15-year-old who spends her summer working as a lifeguard at a local pool. f. Ted Kaczynski is currently serving a prison sentence, but would like to use his skills in mathematics and chemistry again one day. g. Tyrell just graduated college with a business degree. He is currently looking for a job in banking in the major city he just moved to. h. John and his wife just had their second child. They decided that it was best for John to leave his job and care for their new child.

a. in the labour force b. not in the labour force c. not in the labour force d. in the labour force e. not in the labour force f. not in the labour force g. in the labour force h. not in the labour force

Suppose that inventories were $40 billion in 2012 and $50 billion in 2013. In 2013, national income accountants would

add $10 billion to other elements of investment in calculating total investment

pollution global warming and ozone depletion are _________externalities that result from economic growth.

adverse or negative

In macroeconomics, an ________ is a collection of specific economic units treated as if they were one unit

aggregate

Private property rights, coupled with the freedom to negotiate binding legal _________ enables individuals and businesses to obtain, use, and dispose of property resources as they see fit.

agreements

GDP is the market value of

all final goods and services produced in an economy in a given year

when an economy uses its resources to maximize people's well-being by producing a specific mix of goods and services it is called

allocative efficiency

the method used by a society to produce and distribute goods and services is called

an economic system

an expectation that ecourages people to behave in a certain ways is called

an incentive

Economist Define and measure economic growth as

an increase in Real GDP per capita over some period of time

When an economy increases the number of resources and increases the productivity of those resources, the economy will experience

an increase in output and income

Economists define and measure economic growth as:

an increase in real GDP per capita over some period of time

An important source of increasing labor productivity is:

an increase in the capital available for each worker

use of money

an obvious characteristic of any system is the extensive use of money. money performs several functions but first and foremost it is a medium of exchange. makes trade easier. Specialization requires exchange, which can occur through barter swapping goods for goods say wheat for oranges. But if there is no excess of wheat and oranges and the wants are not there, trade is stymied(prevented). suppose nebraska has no interest in floridas oranges but wants potatoes from idaho, and idaho wants floridas oranges but not nebraskas wheat, and suppose florida wants some of nebraskas wheat but none of idahos pataoes. -if there is a coincidence of wants. trade would be difficult. instead people in each state use money(convenient social invention to facilitate exchanges of goods and services). to serve as money, an item needs to pass only one test, it must be generally acceptalbe to sellers in exchange for their goods and services. money is socially defined, whatever society accepts as a medium of exchange is money -today most economies use pieces of paper as money, the use of paper dollars (currency) as a medium of exchange is what enables nebraska florida and idaho to overcome their trade stalemate. -on a global basis, specializations and exchange are complicated by the fact that different nations have different currencies. markets in which currencies are bought and sold make it possible without resorting to barter

statements that summarize help Burns can increase productivity using economies of scale

as firms expand their size and I'll put they are better able to recoup investments in new production methods and products as firms expand their size and output they can use more productive equipment as firms expand their size and output they can employ more productive methods of delivery

____ means requiring strict obedience to an authority, such as a dictator

authoritarian

If the CPI increases from 250 to 275 for one year, the rate of inflation for that year is a) 13 percent. b) 10 percent. c) 25 percent. d) 15 percent.

b) 10 percent.

An example of human capital would be a) a computer b) carpentry's skills c) a carpenter's saw d) all of the choices are correct

b) carpentry's skills

When the government provides a legal framework, a) domestic market transactions suffer and foreign trade market transactions suffer b) domestic market transactions benefit and foreign trade market transactions benefit c) domestic transactions benefit and foreign market transactions suffer d) none of the choices are correct

b) domestic market transactions benefit and foreign trade market transactions benefit

Full employment means everyone in the labor force has a job. a) true b) false

b) false

"Macroeconomics" includes the study of a) price and quantity adjustments in individual markets. economic growth. b) market structure such as competition, monopoly and oligopoly. c) rational decision making by individual consumers, d) workers and entrepreneurs. d) None of the above

b) market structure such as competition, monopoly, and oligopoly

When there is a mismatch between the skills required for a job and the skills of job seekers, the unemployment that results is an example of a) frictional unemployment. b) structural unemployment. c) cyclical unemployment. d) seasonal unemployment.

b) structural unemployment

National income is a measure of a) how well the economy is doing on a gross basis b) the income earned by the factors of production in producing GDP c) the income received by the factors of production plus depreciation d the country's future productive capacity

b) the income earned by the factors of production in producing GDP

Real GDP is the a) value of output produced, including the non market activities that are not counted in nominal GDP b) value of final output produced in a given period measured in constant prices c) value of final output produced in a given period measured in current prices d) intangible quality of goods and services produced in the economy

b) value of final output produced in a given period measured in constant prices

Economists develop theories of ________ of individuals (consumers,workers) and institutions (businesses,governments) engaged in the production, exchange, and consumption of goods and services

behavior

The recurrent ups and downs in the level of economic activity extending over several years are referred to as

business cycles

GDP includes goods and services produced

by foreign resources within a country. by domestic resources within a country.

the two ways that Society can increase its real output and income are by increasing its inputs of resources and_________

by raising the productivity of those inputs

The income distribution of the US is basically the nation's answer to the a) WHAT question b) HOW question c) FOR WHOM question d) WHAT, HOW, and FOR WHOM questions

c) FOR WHOM question

The base period used in computing a price index is a) the year in which prices were at their lowest level. b) the year in which prices were at their average level. c) a fixed reference year from which meaningful comparisons can be made. d) the earliest year for which data are available.

c) a fixed reference year from which meaningful comparisons can be made.

All of the following are considered to be human costs of increased unemployment except a) admissions to mental institutions. b) fatal heart attacks. c) decreased stress levels. d) none of the choices are correct.

c) decreased stress levels.

Price stability a) is defined as a 0 percent rate of inflation in the Full Employment and Balanced Growth Act of 1978. b) is targeted at a 3 percent rate of inflation by Alan Greenspan, the head of the Federal Reserve. c) has been officially set by Congress at 3 percent or less. d) has been achieved consistently in the 20th century in the United States.

c) has been officially set by Congress at 3 percent or less.

Studies have shown that unemployment causes a) increased expenditure on food. b) more spending on child care because more mothers go to work. c) increased health problems. d) little impact since most people receive unemployment benefits.

c) increased health problems

The sum of value added a) measures the intangible quality of goods and services produced in the economy b) equals the sum of the value of intermediate goods c) is one way to compute the GDP d) equals net domestic product

c) is one way to compute GDP

Which of the following results from unexpected increases in the rate of inflation? a) decreased uncertainty. b) increased windfall profits to creditors who have lent large amounts of money. c) redistributions of income and wealth between different groups. d) creditors are made better off.

c) redistributions of income and wealth between different groups.

Full employment in the U.S. economy means that a) frictional unemployment has been reduced to zero. b) the total unemployment rate has been reduced to zero. c) the economy has reached the lowest level of unemployment compatible with price stability. d) structural unemployment has reached its minimum as a result of increased spending, and the economy is moving toward the peak of the business cycle.

c) the economy has reached the lowest level of unemployment compatible with price stability.

the struggle among producers for the dollars of consumers is called

competition

a nation's real GDP depends on labor __________X _______labor

hours and productivity

Per capita GDP will definitely fall if a) the population falls b) the rate of economic growth falls c) the rate of economic growth is less than the rate of population growth d) there is a decrease in the size of the working population

c) the rate of economic growth is less than the rate of the population growth

Net exports are a) goods sold to foreigners b) not included in GDP c) the value of exports minus the value of imports d) exports that ultimately are imported back into the US

c) the value of exports minus the value of imports

production processes that use a high ratio of capital to labor inputs are referred to as

capital-intensive

An example of human capital would be

carpentry skills

In what kind of an economy does the government make all the decisions?

centrally planned

an economic system in which the central government makes all decisions on the production and consumption of goods and services is called

centrally planned economy

The study of economics is primarily concerned with:

choices people make*

The value of a good or service is determined by:

choices people make*

Freedom of Enterprise and Choice

closely related to private ownership of property is freedom of enterprise and choice. the market system requires that various economic units make certain choices, which are expressed and implemented in the economys markets: -freedom of enterprise: ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services and sell them in their chosen markets. -freedom of choice: enables owners to employees, dispose of their property and money as they see fit. Allows workers to enter any line of work for which they are qualified. Finally ensures consumers are free to buy the goods and services that best satisfy their wants that their budget allows -choices are free only within broad legal limitations. illegal choices such as selling human organs or buying illicit drugs are punished through fines and improsonment

a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government is called

communism

What is the struggle among varioud producers for the consumer's business called?

competition

when ________over many years and apparently minor difference in the rate of growth becomes highly significant

compounded

Gross Domestic Product (GDP) may be calculated as the sum of:

consumer spending, investment spending, government purchases of goods and services, and net exports.

GDP excludes expenditures by:

consumers on used automobiles.

GDP can be calculated by summing

consumption, investment, government purchases, and net exports

Real gross domestic product (GDP) is a measure of GDP that:

controls for price changes by using a base year to calculate the GDP for a year

The cost of a higher living standard in the future is giving up

current consumption

Assume nominal GDP is $10,000 trillion in period 1 and $15,000 trillion in period 2. If prices in period 2 are twice as high as in period 1, real GDP in period 2 is a) $10,000 trillion measured in period 1 prices b) $12,500 trillion measured in period 1 prices c) $15,000 trillion measured in period 1 prices d) $7,500 trillion measured in period 1 prices

d) $7,500 trillion measured in period 1 prices

Which of the following topics is a macroeconomic issue? a) The choices a student makes in selecting college courses. b) The decision by Apple to produce fewer Macintosh computers. c) The effect of a drought on the price of corn. d) The effect of an increase in federal spending on inflation. e) None of the above

d) The effect of an increase in federal spending on inflation.

The economic definition of investment includes all of the following except a) residential construction b) net changes in business inventory c) spending for plants and capital equipment d) a retirement portfolio of stocks and bonds

d) a retirement portfolio of stocks and bonds

The simple circular flow shows that a) GDP can be represented by flows of both goods/services and money. b) Total spending = total income = total production c) Dollar flows out of sectors must equal dollar flows into sectors d) All of the above e) None of the above

d) all of the above

Although the necessary told of government in the economy is highly debated, many people agree that it should a) provide a legal framework b) protect the environment c) protect consumers and labor d) all of the choices are correct

d) all of the choices are correct

Disposable income is equal to a) personal taxes + personal income b) personal taxes - personal income c) consumption - saving d) consumption + saving

d) consumption + saving

When compared to the average household in most low-income countries, poor people in the US receive a) about the same amount of goods and services b) somewhat fewer goods and services c) far fewer goods and services d) far more goods and services

d) far more goods and services

All of the following are macroeconomic effects of inflation except a) uncertainty. b) speculation. c) bracket creep. d) lower taxes.

d) lower taxes.

The redistributive mechanics of inflation include all of the following except a) price effects. b) income effects. c) wealth effects. d) output effects.

d) output effects

The current US economy is based primarily on the production of a) agricultural goods b) goods for federal government use c) manufacturing goods d) services

d) services

Suppose the total market value of all the final goods and services produced in the country of Rushya was $8 billion in 2008 (measured in 2008 prices) and $9 billion in 2009 (measured in 2009 prices). Which of the following statements is definitely correct? a) production increased in Rushya between 2008 and 2009. b) real GDP increased in Rushya between 2008 and 2009. c) average price levels increased in Rushya between 2008 and 2009. d) whether real GDP increased cannot be determined with the information given.

d) whether real GDP increased cannot be determined with the information given

As a person consumes more of something, marginal utility:

declines*

An ________ outcome is one where the additional value or benefits of an action slightly exceed or exactly equal the additional costs of that same action

efficient

the purchase of the economy's expanding goods and services by households businesses and government is known as the_________ factor

demand

A reason for some argue against economic growth is:

depletion of resources

The consumption of fixed capital in each year's production is called

depreciation

The principle that if the amount of labor and other inputs is held constant, then the greater the amount of capital in use, the less an additional unit of capital adds to production is called the principle of

diminishing returns to capital

In the expenditures approach of national income accounting, C, I, and G include expenditures for

domestically-produced, as well as imported, goods and services

self-interest

ea. firm, property owner, worker, and consumer believes is best for itself and seeks to obtain -is a motivating force of the various economic units as they express their free choices -ea. economic unit tries to achieve it own particular goal, which usually requires delivering something of value to others. Entrepreneurs try to max profit and min loss, property owners try to get the highest price for the sale or rent of their resources. workers try to max their utility by finding their jobs that offer the best combination of wages, hours, fringe benefits, and working conditions. consumers try to obtain products they want for lowest possible price -the motive of self-interest gives direction and consistency to what might otherwise be a chaotic economy

Which of the following is NOT characteristic of a centrally planned economy? -each collective or factory sets its own goals -the central government owns all land and captital -each person is assigned a job -the central government makes all economic decisions

each collective or factory sets its own goals

In order to match the higher production capacity created by the supply factors, the demand factor refers to:

economic agents purchasing the additional units produced.

frantic Paces on jobs worker burnout and alienated employees are all effects of

economic growth

reductions in per-unit production costs that result from increases in output levels are called

economies of scale

the two types of investment in human capital are on the job training and formal__________

education

one measure of a nation's quality of Labor is

educational attainment

other than a higher standard of living and more Innovations which of the following are true of the impacts of modern economic growth in industrialized nations a elimination of archaic social norms be increased in communistic economies C increased in democracies D increase in unemployment E increased Leisure Time in arts

elimination of archaic social norms increase in democracies increased Leisure Time and arts

In the expansion phase of a business cycle

employment and output increase

A trough in the business cycle occurs when

employment and output reach their lowest levels

In addition to lacking incentives, the command economies of the former Soviet Union, Eastern Europe, and China prior to market reforms also lacked___________

entrepreneurship

The value of corporate stocks and bonds traded in a given year is

excluded from the calculation of GDP because it is not a component of gross investment

efficiency factor is when an economy must achieve economic efficiency as well as_________ to reach its full production potential

full employment

true or false countries that experienced economic growth early then experienced declines have lower average incomes today

false

Consumption goods, capital goods and services purchased by their ultimate users are called ______ goods.

final

If the capital stock remains ______ while labor ______, labor productivity will probably ______ .

fixed; decreases; increase

Economic growth is made possible by the:

four supply factors that shift the production possibilities curve outward

an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market is called

free enterprise

opportunity cost may be defined as the

goods or services that are forgone in order to obtain something else

The method used to identify the contribution to economic growth from increased capital, labor, and technological progress is known as:

growth accounting

according to the World View titled "Income Share of the Rich," i which of the following would the top tenth of the population be most likely to receive the highest percentae of the Country's income

haiti

According to the law of demand, a demand curve

has a negative slope

an industry that requires a large capital investment and that produces items used in other industries is called

heavy industry

what are some possible reasons for the slowdown in productivity growth rate starting in 2010

high debt levels that have accumulated recent products like internet apps have a very small effect on GDP increase productive capacity exceeded consumer demand

the expansion of total output relative to population results in which of the following A)falling incomes B)higher standards of living C)lower standards of living D)rising incomes E)falling real wages F)reduced consumption G)Rising real wages

higher standards of living, Rising incomes, Rising real wages

The economic question of "______ to produce" is about decisions related to the mix of factor inputs (land, labor, capital...) used to produce goods and services

how

Growth accounting refers to the method used to:

identify the contribution of economic growth from increased capital, labor, and technological progress

What is an important advantage of a free market?

if offers a wide variety of goods and services

Foreign goods or ______ purchased by consumers, firms, or the government should be subtracted from GDP because the goods were not produced in the United States.

imports

Net exports is exports minus _____

imports

statements that describe the effect of liberalized international trade

improve allocation of resources expanded real output increased labor productivity

over time when workers move from low productivity to high productivity employment it is called

improved resource allocation

private property

in a (MS), private individuals and firms not the govt, own most of the property resources (land and capital). it is this extensive private ownership of capital that gives capitalism its name. -private property (coupled with the freedom to negotiate binding legal contracts): enables individuals and businesses to obtain, use, and dispose of property resources as they see fit. the right of property owners to designate who receives property when they die sustains the institution of private property -the most important cossequence of property rights is that they encourage people to cooperate to ensure mutually agreeable economic transactions take place -(PR) also encourage investment, innovation, exchange, maintenance of property, and economic growth. nobody would stock a store, build a factory, or clear land for farming if someone else or the govt itself could take the property for his/her benefit -property rights also extend to intellectual property, patents, copyrights, and trademarks. such long term protection encourages people to write books, music, and computer programs with the fear of having someone steal them and the rewards that follow -PR facilitate exchange. the title to automobile or the deed to a cattle ranch assures the buyer that the seller is the legitimate owner. property rights encourage owners to maintain or improve their property so as to preserve or increase its value. PR enables people to use their time and resources to produce more gods and services rather than protecting and retaining the property they have already produced or acquired.

Nominal GDP measures the value of all goods and services:

in current dollars

Technology and Capital Goods

in the market system, competition, freedom of choice, self-interest, and personal reward provide the opportunity and motivation for technological advances. the monetary reward for new products or production techniques accrue(result from) directly to the innovator. the market system therefore encourages extensive use and rapid development of complex capital goods -advanced technology and capital goods are important because the most direct methods of production are oftern the least efficient. the only way to avoid that inefficiency is to rely on capital goods. there are huge benefits to be derived from creating and using such capital equipment as plows, tractors, and storage bins. more efficient production means much more abundant output

"Net foreign factor income" in the national income accounts refers to the difference between the

income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.

A nation's economic growth from one year to the next depends on its:

increase in labor inputs and increase in labor productivity

The shift of labor out of agriculture to manufacturing in the United States has tended to:

increase labor productivity.

if a firm doubles the size of its plant equipment and labor force and finds that its total output has tripled they have experienced __________ returns

increased

An example of a positive externality is

increased factory use of private sector robotics that came from government research

Usually an abundance of natural resources ______ labor productivity

increases

The two supply-side elements of real GDP are:

increases in labor productivity increases in hours worked

a situation in which a given percentage increase in the amount of inputs a firm uses leads to an even larger percentage increase in the amount of output The Firm produces is called _________returns

increasing

Human capital refers to:

investment in education and training the skills and knowledge that enable a worker to be productive. the improvement in labor created by education and knowledge that is embodied in the work force

Economic Growth

is an increase in output or real GDP

The sum of value added

is one way to compute GDP

Active, but limited, government

is the final characteristic of market systems in modern advanced industrial economies. although a market system promotes a high degree of efficiency in the use of its resources, it has certain inherint(deeprooted) shortcomings called market failures. govt have their own set of short comings that can themselves cause substantial mis allocations of resources.

What is one of the most important advantages of a free market?

it encourages growth

What does the process of specialization do for an economy?

it makes it more efficient

In year 1, the Consumer Price Index was 120 and the average nominal income was $30,000. In year 2, the Consumer Price Index was 125 and the average nominal level of income was $32,000. What happened to real income from year 1 to year 2?

it rose by $600

Refer to the above graph. If the production possibilities curve for an economy is at CD, but the economy is operating at point x, the reasons are most likely to be because of:

lack of full employment and inefficient allocation of resources.

To an economist, the four factors of production are

land, labor, capital, entrepreneurship

Which of the following is a condition that most people would NOT expect the safety net of the government to provide for? -low income -natural disasters -joblessness -injuries

low income

High debt levels may have resulted in _____ productivity rates.

lower

In economics, an incremental or gradual change is also known as a ______ change

marginal

an arrangement that allows buyers and sellers to exchange things is called a

market

when the invisible hand does not produce optimal outcomes for the economy, there is evidence of

market failure

Adam Smith's invisible hand is now called

market mechanism

The U.S. produces and sells millions of different products. To aggregate them together into a single measure of domestic output, the quantity of each good produced is weighted by its

market price

a production possibilities curve indicates the

maximum combinations of goods and services an economy can produce given its available resources and technology

When gross investment is positive, net investment

may be either positive or negative

The presence of discouraged workers

may cause the official unemployment rate to understate the true amount of unemployment

Specialization

means using the resources of an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services. Market economies rely on specialization. those goods and services are then exchanged for a full range of desired products. the majority of consumers produce virtually none of the goods and services they consume, and they consume little or nothing of the items they produce. person working 9-5 installing windows in commercial aircraft may rarely fly. society learned long time ago that self-sufficiency breeds inefficiency. the jack-of-all-trades may be a very colorful indv. but is certainly not an efficient producer. DIVISION OF LABOR -division of labor means the separation of the work required to produce a product into a number of different tasks that are performed by different workers it contributes to society's output in several ways -Specialization makes use of differences in ability: enables indvs. to take advantage of existing differences in their abilities and skills. Lebron to play NBA and Beyonce to perform -specialization fosters learning by doing: even if the abilities of two people are identical, specialization may still be advantageous. by devoting time to a single task, a person is more likely to develop the skills required and to improve techniques, than by working at a number of different tasks. learn to be a good lawyer by practicing law -specialization saves time: by devoting time to a single task, a person avoids the loss of time incurred in shifting from one job to another. time is saved by not "fumbling around" with tasks that one is not trained to do -For all these reasons, specialization increases the total output society derives from limited resources GEOGRAPHIC SPECIALIZATION -specialization also works on a regional and international basis. oranges could grow in nebraska but the land is unsuitability of the land, rainfall, and temp. the cost would be high. wheat could be grown in florida but production could be costly for similar geographical reasons. So nebraska grows wheat florida grows oranges. by specializing, both economies produce more than is needed locally, Nebraska and florida swap some of their surpluses -simailar on an international scale, US specializes in producing commercial aircrafts and software, which sells abroad in exchange for mobile phones from china, bananas from honduras, and woven baskets from thailand. both human specialization and geographical specialization are needed to achieve efficiency in the use of limited resources

_____ is the discipline of economics concerned with individual units such as a person, household, firm or industry

microeconomics

How could the Chinese economy be characterized?

mixed, but on the side of centrally planned

How would the economy of Canada be likely to be characterized?

mixed, but on the side of free market

The factors of production include all of the following EXCEPT: Money. Land. Labor. Entrepreneurship.

money

a decline in the discrimination against women and minorities has resulted in

more women and minorities and higher productivity

In calculating gross private domestic investment, a _____ change in ______ must be subtracted from the total investment for that particular year.

negative; inventories

The difference between the amount of goods that are sold abroad and goods that are purchased from abroad is known as ______.

net exports

The major difference between nominal GDP and real GDP is:

nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices

Environmental pollution is accounted for in

none of these (not GDP, PI, or DI)

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result, the

official unemployment rate will remain unchanged

Due to scarce resources, every individual, whether rich or poor, is faced with an _____ cost when choosing to produce or consume more of one good than another

opportunity

Productivity is a measure of

output per unit of input

the passion that inspires a person to serve his or her country is called

patriotism

If an economy produces 100 pencils and 100 pens, and pencils sell for twice as much as pens,

pencils are weighted as twice as important in the economy compared to pens

To say that all transactions should be voluntary, this statement involves:

people exchange at their own free choice*

Real GDP per capita means GDP:

per person.

When a firm builds a new factory, this is an example of an investment in

physical capital

public investment in US infrastructure like roads and bridges promotes___________ investment in new factories and retail stores

private

when an economy uses its resources in the least costly way to produce goods and services it is called__________ efficiency

productive

when an economy uses its resources in the least costly way to produce goods and services it is called

productive efficiency

the financial gain made in a transaction is called

profit

households businesses and government must_________ the economy is expanding output of goods and services in order to achieve higher production potential created by Supply factors

purchase

In national income accounting, government purchases include

purchases by federal, state, and local governments

the following are arguments against rapid economic growth

rapid economic growth results and pollution global warming and other environmental problems rapid economic growth has not solved sociological problems like poverty and homelessness rapid economic growth is unsustainable due to the Earth's finite resources

Real GDP divided by the size of the population is called:

real GDP per capita

The best economic growth measurement to compare living standards is:

real GDP per capita

real GDP divided by the size of the population is called

real GDP per capita

the best economic growth measurement to compare living standard is

real GDP per capita

which of the following statements best summarizes the real economic growth per capita in the United States between 1950 and 2015 A) real GDP rose more than tenfold B) real GDP remains constant C) real GDP per capita Rose more than threefold D) real GDP per capita doubled.

real GDP per capita Rose more than three fold

labor productivity is

real output per hour of work

economic growth will __________the burden of scarcity

reduce

To increase future living standards by pursuing higher current rates of investment spending, an economy must

reduce current rates of consumption spending

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will

remain constant

Economic growth can best be portrayed as a

rightward shift of the production possibilities frontier

Select examples of infrastructure.

roads and bridges; water supply system

In economics, utility is the measure of:

satisfaction we gain from the consumption of some good or service*

Ideally, a nation acquires funds for investment spending on plant and equipment by ______ income.

saving

_______ is the notion that, in general, the quantity desired of economic goods exceeds the quantity available

scarcity

the fact that there are too few resources to satisfy all our wants is attributed to

scarcity

Henry and his girlfriend ate dinner at the new Thai restaurant that recently opened in his neighborhood. This expenditure would be included in:

services

which of the following is not a basic decision that all nations must confront

should we have economic growth? (how should we produced goods and services, for whom should goods and services be produced, what goods and services should we produce?)

a social and political philosophy based on the beleif that democratic means should be used to evenly distribute wealth throughout a society is called

socialism

in economics, scarcity means that

society's desires exceed resources available

the concentration of the productive efforts of individuals and firms on a limited number of activities is called

specialization

For the purposes of GDP accounting, government purchases include _____.

spending on highway construction the purchase of new military equipment

Private domestic investment expenditures consist of:

spending on new plant and equipment. newly produced housing. any increase in inventories.

identify the sources of increasing returns for firms

spreading of development cost Network a fax learning-by-doing simultaneous consumption more specialized inputs

A new firm focused on creating and introducing a particular new product or employing a new production or distribution method is called a _____ firm.

start-up

what allows the economy to achieve a higher rate of economic growth

stronger productivity growth in heightened Global competition

Ceteris paribus, for a farmer, corn and wheat are

substitutes in production

Consumption of fixed capital (depreciation) can be determined by

subtracting net investment from gross investment

the supply factors that are part of the determinants of economic growth include increasing the quality and quantity of natural and Human Resources increasing the stock of capital and improvements in___________

technology

The inflation rate measures the percentage growth rate of

the CPI from one year to the next

Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

the Consumer Price Index

Which measure of inflation would include consumer goods and capital goods?

the GDP Price Index

Historical data show that during the recession of 1990 − 1991, the natural rate of unemployment was about 5.9 percent while the actual rate of unemployment was 7.0 percent. A decade later, during the 2001 recession, the natural rate of unemployment had fallen to 4.8 percent while actual unemployment was 6.0 percent. Which of the following statements is correct regarding these two short recessions?

the actual unemployment rate was higher during the recession of 1990-1991, but cyclical unemployment was higher in 2001

The concept of marginal utility involves:

the additional utility we gain from each successive unit, declines*

A market shortage is

the amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand

Net foreign factor income is

the difference between the income people in a country receive from resources owned in foreign countries and the income people in foreign countries receive from resources owned domestically

competition

the effort and striving between two or more independent rivals to secure the business of one or more third parties by offering the best possible terms -competition requires: two or more buyers and two or more sellers acting independently in a particular product or resource market. Freedom of sellers and buyers to enter or leave markets, on the basis of their economic self-interest -competition among buyers and sellers diffuses economic power within the businesses and households that make up economy. when there are many buyers and sellers acting independently in a market, no single buyer or seller can dictate the price of the product or resource because others can undercut price. -(C) also implies that producers can enter or leave an industry; no insurmountable barriers prevent an industry's expanding or contracting. this freedom provides the economy with the flexibility needed to remain efficient over time. freedom of entry and exit enables economy to adjust to changes in consumer tastes, tech, and resource availablilty -the diffusion of economic power inherent in competition limits the potential abuse of that power. Producer that charges more than the competitive market price will lose sales to other producers. an employer who pays less thean the competitive market wage rate will lose workers to other employers. a firm that fails to exploit new tech will lose profits to firms that do. A firm that produces shoddy products will be punished with costumers switching to higher quality items made by rival firms. Competition is the basic regulatory force in the market system

Economic growth is made possible due to ______ that shift the production possibilities curve outward.

the factors of production

some Economist believe that the high productivity growth rates between 1995 and 2010 were a one-time anomaly caused by

the information technology Revolution

term economists use to describe the self- regulating nature of the marketplace is

the invisible hand

When economists talk about the "standard of living," they are generally referring to:

the level of overall well-being enjoyed by an economy

Which of the following is an example of an intermediate good?

the lumber produced by Boise Cascade and sold to a builder of old houses

What is the product market?

the market in which households purchase the goods and services that firms produce

A definition of the gross domestic product (GDP) is:

the market value of final goods and services produced by the economy in one year.

When the market mechanism is allowed to operate freely, prices will determine

the mix of output to be produced, the resources to be used in the production process, and for whom the output is produced

the rule of 70 states that

the number of years for a variable 2 mm equals 70 divided by its annual growth rate

macroeconomics focuses on the behavior of

the overall economy

Which of the following is not a component of gross investment?

the purchase of 100 shares of AT&T by a retired business executive (the purchase of a new drill press by the Ajax Manufacturing Company; construction of a suburban housing project; the piling up of inventories on a grocer's shelf - are all components of gross investment)

supply

the six determinants of economic growth are grouped into three categories: one demand factor, four ____ factors, and one efficiency factor

what has led to the reawakening of capitalism throughout the world

the success of the market systems the collapse of socialist economies

Nominal GDP is

the sum of all monetary transactions involving final goods and services that occur in the economy in a year

which of the following is an assumption under which the production possibilities curve is drawn

the supply of resources is fixed

Human capital is

the talents, training, and education of workers

Which of the following statements about economic growth is accurate?

the world's sustained economic growth has only been occurring over the last 300 to 400 years

how can follow our countries catch up to leader countries

they can utilize technologies that have already been created

What is the purpose of competition?

to act as a regulating force in the marketplace

An increase in the supply of gasoline, ceteris paribus, will cause equilibrium price

to fall and equilibrium quantity to rise

What is the function of an economic system?

to produce and distribute goods and services

Why does even a free market economy need some government intervention?

to provide for things that the marketplace does not address

determinants that directly affect the rate of economic growth

total spending on goods and services economic efficiency and full employment increases and the quantity and quality of natural and Human Resources increases in the supply of capital goods improvements in technology

GDP tends to overstate economic well-being because it takes into account

total spending to deal with the adverse health effects of some products

an economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and serives is called a

traditional economy

If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by

two percentage points

When households, businesses, and the government purchase the economy's expanding output, resources remain fully employed and there are no:

unplanned increases in inventory

a mixed economy

utilizes both market nonmarket signals to allocate goods and services

in the anti-growth view economic growth has not saw sociological problems such as poverty and homelessness and discrimination because

we need to redistribute wealth and income

The economic question of "_______ to produce" is about decisions related to the mix (quantity and type) of goods and services to make available in a given economy

what

which of the following is not one of the three core economic issues that must be resolved

what to produce with unlimited resources. (how to produce the goods and service we select, who should get the goods and services we produce, what to produce with limited resources)

Workers today are more productive than workers in the past because:

workers now have more physical capital embodying better technology with which to work

The "rule of 72" is a formula for determining the approximate number of

years that it would take for a value (like real GDP) to double

When gross investment and depreciation are equal, the value of net investment is

zero

which of the following countries experienced a decline in total output from 2000 to 2015

zimbabwe