Econ 131
Structural unemployment is related to the movement of workers from low-paying to high-paying jobs.
False
The concept of self interest assumes that individuals can only further their goals at the expense of other individuals.
False
Which of the following will generate an increase in aggregate demand?
Government spending for the onset of a war.
Whenever inflation rates are overestimated for the life of a loan, creditors lose and debtors gain. If you invest $1,000 in a savings account that pays 2 percent annually, your $1,000 investment will have gained the most purchasing power in one year if the inflation rate is...
False 1 percent.
As nations become richer, average family size increases. The world's population is growing at a rate of about...
False 2 people per second.
In the base year, the price index will always have a value of zero. The ________ is a price index measuring the changes in prices of all new goods and services produced in the economy.
False GDP deflator
Unemployment due to the fact that workers must search for appropriate job offers is called frictional unemployment.
True
When nations specialize in an area of comparative advantage and then trade with the rest of the world, the average standard of living in the world rises.
True
The three fundamental economic questions that a nation addresses in order to allocate society's scarce resources include all of the following except:
Why will the items be produced?
A country that saves a larger percentage of GDP than another country will, ceteris paribus...
experience higher rates of economic growth since there will be more investment.
According to the new growth theory...
knowledge about how to produce goods and services is an important source of economic growth.
The primary difference between the aggregate demand curve and an individual demand curve is that...
the aggregate demand curve represents total planned expenditures on all goods and services while an individual demand curve represents a single good or service.
In economics, resources are _____. Wants are _______.
things used to produce items of value. what people would buy if their incomes were unlimited.
Bill lends Joann $1,000 for a year at a nominal interest rate of 7%. If both Bill and Joann expect the inflation rate to be 3% next year, then the real rate of interest is...
4%.
Which of the following statements is false?
A society that wants more in the future should consume more of its capital today.
Which of the following is the definition of the Consumer Price Index (CPI)?
A weighted average of prices of a market basket of goods and services purchased by typical urban consumers.
Suppose real GDP for a country is $1,000 billion. The GDP price index is 114.5. There are 26 million workers who work 3030 hours per week, and the real wage averages $ 18 per hour. What is labor productivity for this country?
A. $1,667 B. $17,308 C. $38,462 Your answer is correct. C D. $8,734
Gross Domestic Product
All of the above.
Price ceilings, such as rent controls...
All of the above.
The long-run aggregate supply curve can shift to the right due to...
All of the above.
Total income can be viewed as the sum of...
All of the above.
Which of the following factors are highly related to the pace of economic development?
All of the above.
Economic models relate to the way people think rather than to the way people act.
False
Which of the following transactions would not be included in GDP?
Ginie receives a Social Security payment from the government.
According to the circular flow of income and output, which of the following is not true?
Goods, services and money all flow in one direction since money pays for the goods and services.
A model is considered "good" if it yields usable predictions that are supported by real-world observations.
True
Cyclical unemployment results from business recessions.
True
Rationing by the price system leads to the most efficient use of available resources.
True
Which of the following describes an inferior good?
When consumer income increases, the demand for eggs decreases.
Suppose you are fired from your formal full-time position and earn a minimal amount of income by engaging in informal work. According to government statisticians, you would be classified as...
Your classification depends on whether you decide to search for formal work or halt your work search.
The development of modern rich nations can be characterized by three stages:
agricultural stage, followed by manufacturing stage, and lastly the tertiary stage.
The division of labor increases the output of society by...
allowing resources to specialize in the tasks for which they have a comparative advantage.
A price ceiling is...
a government-imposed maximum price that may be charged for a good or service, which can lead to shortages.
Economic models...
can be used to explain or predict economic phenomena.
Each country has a unique economic system to allocate its scarce resources. However, the economic system of most of the world's nations are a combination of the _____ system and the ______ system.
central planning; price
We draw the long-run aggregate supply curve as a vertical line to reflect the fact that...
changes in the price level do not alter the level of potential real output.
Real GDP is computed by adjusting nominal GDP for...
changes in the price level.
The productivity gains achieved by specialization are due to...
comparative advantage.
One of the most important factors for economic growth to take place is that a society must...
consume less than they produce.
Total expenditures for domestically produced goods and services consist of...
consumer spending, business spending, government spending, and net foreign spending.
To derive GDP using the expenditure approach, which of the following components are added together?
consumption expenditures, gross private domestic investment, government expenditures, and net exports
Consider an economy where the natural rate of unemployment is equal to 4%. If the actual unemployment rate is equal to 8%, then...
cyclical unemployment rate is 4% .
The type of unemployment that rises as the economy goes into a recession is called...
cyclical.
Microeconomics focuses on...
decisions made by individual households and firms.
When the _____ curve shifts outward or inward with an unchanged _____ curve, equilibrium price and quantity increase or decrease, respectively. When the _____ curve shifts outward or inward given an unchanged _____ curve, equilibrium price moves in the direction opposite to equilibrium quantity. When there is a shift in demand or supply, the new equilibrium price is not obtained _____. Adjustment _____.
demand; supply; supply; demand immediately; takes time
According to the text, firms encounter rising costs when they attempt to produce more in the same time period. As a consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is....
direct (or positive) and is called the law of supply.
Government-enforced prices such as price ceilings...
disrupt the rationing function performed by prices in a market system.
Labor productivity is normally measured by...
dividing total real domestic output by the number of workers or by the number of labor hours.
Population growth generally...
encourages technological progress that increases economic growth.
Developing countries should...
focus on production based on comparative advantage.
Marisa has just graduated from college and is seeking a job, but hasn't found one yet. Which type of unemployment is this?
frictional unemployment
In the circular flow of income...
households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms.
Economics is best defined as the study of...
how people allocate limited resources to satisfy unlimited wants.
Economic growth is positively related to all of the following except...
import tariffs.
In the long run, persistent deflation in a growing economy can occur if...
increases in the LRAS are proportionately larger than the increases in AD.
Opponents of minimum wage legislation argue that higher minimum wages serve to...
increase unemployment, particularly among unskilled minority teenagers.
The rationality assumption implies that...
individuals will not intentionally make decisions that leave them worse off.
According to the law of demand, the quantity demanded of any commodity is ________ related to its price, other things being equal.
inversely
Based on the recommendation of a friend, you buy a ticket and attend a movie with high expectations. After seeing the movie, you think that it is the worst film ever made and that it was a complete waste of money. This situation...
is consistent with rational behavior because you had thought that you were going to like the movie.
The model of long-run equilibrium...
is the same as the Classical Model.
To encourage economic development a country should do all of the following except...
limit the amount of imports allowed in to the country.
The impact of the national debt on the economy's unemployment is an example of...
macroeconomics analysis.
Voluntary exchange
makes both parties to a trade better off.
Which of the following is not a factor of production...
money.
The problem with using foreign exchange rates to convert one country's GDP into dollars is that...
not all goods and services are sold on world markets.
The ceteris paribus assumption means...
other things equal.
All of the following transactions are excluded from the measure of GDP except...
paying your dentist to have your teeth cleaned.
The assumption of bounded rationality suggests that people might use rules of thumb to guide their decision making because...
people can not examine every possible choice available to them.
The largest component of GDP by far is... If a household purchases a new car and a new refrigerator, this would be classified as spending on...
personal consumption expenditures. consumer durables.
Black markets usually arise when there are...
price ceilings.
All of the following would cause the aggregate demand curve to shift except....
price level changes.
A key feature of the _____ system is _____ exchange, which involves trades between individuals that they both perceive to raise their well-being. _____, also known as intermediaries, specialize in linking ultimate sellers and buyers and lowering these parties' _____ costs.
price; voluntary Middlemen; transaction
Any activity that results in the conversion of resources into products that can be used in consumption is called...
production.
The economic development of a country is dependent on all of the following except...
promoting protectionist barriers.
The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is called...
purchasing power parity.
At the market equilibrium price,...
quantity demanded equals quantity supplied.
An economy's rate of economic growth equals...
rate of growth of capital plus rate of growth of labor plus rate of growth in the productivity of capital and labor.
When GDP is corrected to reflect constant dollars, this price-corrected GDP is called...
real GDP.
Per capita real GDP equals... The country with the highest per capita GDP based on purchasing power parity (U.S. dollars) is...
real GDP/population. the United States.
People often complain about price gouging after a natural disaster. Suppose the government imposed limitations on price increases in the aftermath of a disaster. One would expect...
reconstruction to take longer because the quantity supplied of new materials would increase more slowly.
Each individual must make choices because...
resources are limited and therefore cannot satisfy one's many competing wants.
A point inside the PPC means that...
resources are not being fully utilized due to unemployment or inefficiency.
Scarcity
results from unlimited wants coupled with limited resources.
For economic growth to take place, a country must save. But, for saving to actually generate economic growth,...
saving must be channeled into investment.
A persistent decline in the price level due to economic growth with stable aggregate demand is...
secular deflation.
An economic model...
should capture only the essential relationships that are sufficient to analyze a particular problem or answer a particular question.
The aggregate demand curve...
shows planned purchase rates of goods and services at various price levels.
CH4 In a price system, changes in prices...
signal to consumers that some goods are relatively more or less scarce.
One result of the agriculture price supports cited in the text is that...
sometimes surplus food is given away.
Total income equals the dollar value of total output because...
spending by one group represents income to the other group.
If a decrease in the price of soft drinks leads to a decrease in demand for bottled water, the two goods must be...
substitutes.
All of the following are assumptions underlying the production possibilities curve except...
technology is assumed to be continuously improving.
The new growth theory argues that...
technology must be considered a separate factor of production that is sensitive to economic incentives.
One reason that economists use microeconomics as the basis of macroeconomic analysis is...
that all choices are made by individuals and firms.
The existence of scarcity requires...
that people must make choices and face trade-offs in using their resources.
Suppose the market price of corn is $5 a bushel but the government sets a price of $7. As a result,...
the government must purchase the surplus to maintain the price.
Some people claim that the "economic way of thinking" does not apply to issues such as health care. All of the following choices clearly demonstrate how economics applies to this issue, except when...
the individual decides against health care, as not having it may make him better off.
According to new growth theorists, increased population growth rates can lead to faster economic growth because...
the larger the market the more incentive there is to innovate.
The more flexible prices are,...
the more quickly a shock to the economy can be absorbed.
Opportunity cost is best defined as ______ alternative(s) that must be sacrificed to obtain something or to satisfy a want. Which of the following would least likely be, for the typical student, the opportunity cost of attending a class at 11:00 a.m.? The opportunity cost of attending a class at 11:00 a.m. will likely differ from the opportunity cost of attending a class at 8:00 a.m. because...
the next best Partying with a close circle of friends. both A and C are correct.
If real GDP increases in any year, we know that...
the output of goods and services produced this year has increased.
The position of the long-run aggregate supply curve is determined by...
the production possibilities curve.
The rate of growth in the productivity of capital is 1 percent, the rate of growth of capital is 2 percent, the rate of growth of labor is 1 percent, and the rate of growth in the productivity of labor is 3 percent. From this we know that...
the rate of economic growth is 7 percent.
The natural rate of unemployment is best defined as...
the rate of unemployment after all workers and employers have fully adjusted to all changes in the economy.
The simple circular flow model shows that...
total income received by households must be equal to the dollar value of all goods and services produced.
New growth theory differs from traditional growth theory in that...
traditional theory did not explain what causes improvements in technology, but new growth theory does.
All of the following are benefits of economic growth except...
urban congestion.
CH3 A demand schedule shows...
various quantities of a good or service demanded at various prices.
The long-run aggregate supply curve, LRAS, is a _____ line determined by amounts of available resources such as labor and capital and by technology and resource productivity. The position of the LRAS gives the full-information and full-adjustment level of real GDP per year. The ____ rate of unemployment occurs at the long-run level of real GDP per year given by the position of the LRAS. If labor or capital increases from year to year or if the productivity of either of these resources rises from one year to the next, the LRAS shifts ______. In a growing economy, therefore, real GDP per year gradually ______ over time.
vertical natural rightward; increases
Economics is a social science that involves the study of how individuals choose among alternatives to satisfy their _____, which are what people would buy if their incomes were ______. ________, the study of the decision-making processes of individuals (or households) and firms, and _______, the study of the performance of the economy as a whole, are the two main branches into which the study of economics is divided.
wants; unlimited Microeconomics; macroeconomics
Economic growth implies...
you can now have more of all goods.
Typically, countries in which there are few property rights have ____ entrepreneurship, which leads to ____ investment, which leads to _____ economic growth.
less, less, less
Saving is important for economic growth because...
without saving, there cannot be investment, and without investment, there will be less economic growth.
An increase in the U.S. price level can be caused by all of the following except...
worsening economic conditions in Asia.
A nation's capital goods wear out over time, so a portion of its capital goods become unusable every year. Last year, its residents decided to produce no capital goods. It has experienced no growth in its population or in the amounts of other productive resources during the past year. In addition, the nation's technology and resource productivity have remained unchanged during the past year. Now, suppose that educational improvements during the past year enable the people of this nation to repair all capital goods so that they continue to function as well as new. All other factors are unchanged, however. In light of this single change to the conditions faced in this nation, this nation's economic growth rate for the current year will be ____.
zero.
A price index is computed as...
(cost of market basket today÷cost of market basket in base year)×100.
To which of the following household-type(s) does the phrase "unlimited wants and limited resources" apply? I. A low-income household II. A middle-income household III. A high-income household
I, II, and III.
Identify which of the following would generate a decrease in the market demand for e-book readers, which are a normal good. I. An increase in the price of downloadable apps utilized to enhance the e-book reading experience, which are complements. II. An increase in the number of consumers in the market for e-book readers. III. A decrease in the price of tablet devices, which are substitutes. IV. A reduction in the income of consumers of e-book readers.
I, III and IV.
Ch2 Does the richest person in the world face the problem of scarcity?
Yes, because even if you have money you will never be able to satisfy all of your wants and must therefore make choices.
Can real standards of living go up without any positive economic growth?
Yes, if individuals are, on average, enjoying more leisure by working fewer hours but producing as much as they did before.
One of your classmates, Sally, is a hardworking student, serious about her classes, and conscientious about her grades. Sally is also involved, however, in volunteer activities and an extracurricular sport. Is Sally displaying rational behavior?
Yes, she is using her time allocated among school, studying, sports and volunteer work in a manner she deems best.
Consider this statement: "Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the long-run aggregate supply curve." This statement is describing...
demand-side inflation.
The aggregate demand curve slopes downward because of the...
real-balance, interest rate and open economy effects.
Economists assume that an individual acts as if motivated by...
self-interest.
The nominal value of anything is its price expressed in ________, and the real value of anything is its value expressed in ________.
today's dollars; purchasing power
People have ________ wants and ________ resources to deal with those wants.
unlimited; limited
Evidence indicates that a system of rent controls primarily benefits...
upper-income professionals.
You can wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. Your roommate can wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour. The absolute advantage in laundry is held by ____ and in meal preparation by ____ The comparative advantage in laundry is held by ____ and in meal preparation by ____.
you; neither. you; your roommate.
Demand curves are drawn with determinants other than the price of the good held constant. These other determinants, called ceteris paribus conditions, are (1) ______, (2) ______, (3) ______, (4) ______, and (5) ______ at any given price. If any one of these determinants changes, the demand curve will shift to the right or to the left. A change in demand comes about only because of a change in the ______ conditions of demand. This change in demand is a shift in the demand curve to the left or to the right. A change in the quantity demanded comes about when there is a change in the price of the good (other things held constant). Such a change in quantity demanded involves a ______ a given demand curve.
(1) income, (2) tastes and preferences, (3) prices of related goods, (4) expectations about future prices and incomes, (5) the number of potential buyers in the market ceteris paribus movement along
Suppose that the price of a jar of peanut butter is $10 and the price of a T−shirt is $6. What is the relative price of a jar of peanut butter? What is the relative price of a T−shirt?
1.667 0.600
Suppose that the price of a pair of shoes is $5 and the price of a box of tea is $3. What is the relative price of a pair of shoespair of shoes? What is the relative price of a box of teabox of tea?
1.667 0.600
If last year a pineapple cost $2, and this year it costs $4, there has been a ________ percent rise in the price of the pineapple over a one-year period.
100
If the average annual rate of economic growth is 4 percent, approximately how long will it take for the nation's per capita real GDP to double?
17.5 years
Which of the following is most likely to gain from unanticipated inflation?
A consumer with a five year auto loan.
Personal income is the income received by households after personal income taxes are paid.
False
Which of the following is not true about economic models?
A good model must be realistic.
Which of the following is a true statement about self-interest as used in the study of economics?
Any action can be based on self-interest if the person has some reason for the action.
What is the difference between absolute advantage and comparative advantage?
Absolute advantage is when someone can produce more of a good using a given quantity of inputs while comparative advantage is when someone can produce a good at a lower opportunity cost.
Which of the following equations is correct?
All of the above equations are correct.
According to the interest rate effect, an increase in the price level...
All of the above.
Economic growth as it is currently measured...
All of the above.
Given the existence of relative scarcity, resources can be rationed by...
All of the above.
Government enforced property rights are crucial to economic growth because they...
All of the above.
What is the economic effect of price ceilings?
An effective price ceiling will lead to a shortage.
Which of the following would cause an increase in the demand for pork?
An increase in the price of sausages, a substitute for pork.
Real standards of living can only go up with positive economic growth.
False
Scarcity is the same as a shortage.
False
Identify which of the following would generate an increase in the market demand for tablet devices, which are a normal good. I. A decrease in the incomes of consumers of tablet devices. II. An increase in the price of ultrathin computers, which are substitutes. III. An increase in the price of online apps, which are complements. IV. An increase in the number of consumers in the market for tablet devices.
Both II and IV.
Disposable personal income refers to the income used by households for all purchases of nondurable goods during a year.
False
It is relatively easy for an author to keep all normative statements out of a textbook.
False
Markets which are temporarily out of equilibrium will always return to equilibrium immediately.
False
On a coordinate number system, the vertical number line is known as the x axis and the horizontal number line is known as the y axis.
False
What is economic growth?
Economic growth is increases in per capita real GDP measured by its rate of change per year.
Which of the following statements is true?
Economics is a science since the study of economics uses models and theories that are subject to empirical testing.
Which of the following is not a true statement about the impact of immigration on economic growth?
Economists agree that population growth through immigration is a drain on the economy because it lowers per capita GDP.
Which of the following statements is true?
Everyone can benefit when people specialize where they have a comparative advantage and then trade with each other.
An increase in the price level shifts the aggregate demand curve (AD) to the left.
False
An increase in long-run aggregate supply cuases the price level to increase, and is therefore inflationary.
False
An innovation is the same thing as an invention. According to economist Paul Romer, ideas are what drive economic growth. The knowledge and skills that people in the workforce acquire through education, on-the-job training, and self-teaching is referred to as...
False True human capital.
When the economy is at full employment, the unemployment rate is zero. The natural rate of unemployment includes...
False frictional and structural unemployment.
Individuals who have stopped looking for a job because they are convinced they will not find a suitable one are classified as unemployed. According to the Bureau of Labor Statistics, an unemployed individual whose employment was involuntarily terminated is classified as a...
False job loser.
A change in the price level has no effect on the real value of cash balances. The idea that higher price levels in the United States result in foreign residents desiring to buy fewer U.S.-made goods and U.S. residents desiring to buy more foreign-made goods is referred to as the...
False open economy effect.
Whenever we use productive resources to make capital goods, we are automatically increasing current consumption. The greater the amount of productive resources we use to produce capital goods today,...
False the more growth we will experience in the future.
Most of the benefits from agricultural price supports have gone to small, family-owned farms. As long as a price floor is ________ the market clearing price, imposing a price floor creates a ________.
False above; surplus
Shortages and scarcity are the same thing. A shortage occurs when quantity demanded is ________ than quantity supplied at a price ________ the market clearing price.
False greater; below
Rent control is a type of price floor. Evidence indicates that the group which benefits most from rent ceilings is...
False upper-income professionals.
Prices in a market economy perform a rationing function because they reflect relative scarcity, allowing the market to clear. Other ways to ration goods in an economy include _____, _____, _____, _____, and _____. Even when businesspeople can change prices, some rationing by waiting may occur. Such _____ arises when there are large changes in demand coupled with high costs of satisfying those changes immediately.
First come, first served; political power; physical force; random assignment; coupons queuing
_____ unemployment occurs because of transaction costs in the labor market. For example, workers do not have full information about vacancies and must search for jobs. _____ unemployment occurs when there is a poor match of workers' skills and abilities with available jobs, perhaps because workers lack appropriate training or government labor rules reduce firms' willingness to hire. The levels of frictional and structural unemployment are used in part to determine our (somewhat arbitrary) measurement of the _____ rate of unemployment.
Frictional Structural natural
Which of the following statements is correct?
GDP excludes nonmarket production and is not a measure of a nation's overall welfare.
Which of the following statements is not true about the use of GDP as a measure of national welfare?
GDP is a useful measure of national welfare since it excludes nonmarket transactions.
Which of the following factors could cause the economy to experience supply-side inflation?
Government laws which say that the average work week must be reduced by one hour every year.
____ is the total market value of final goods and services produced in an economy during a one-year period by factors of production within the nation's borders. It represents the dollar value of the flow of final production over a one-year period. To avoid double counting, we look only at final goods and services produced or, equivalently, at ____. In measuring GDP, we must ____ (1) purely financial transactions, such as the buying and selling of securities; (2) government transfer payments and private transfer payments; and (3) the transfer of secondhand goods. Many other transactions are excluded from measured ____, among them household services rendered by homemakers, underground economy transactions, and illegal economic activities, even though many of these result in the production of final goods and services. GDP is a useful measure for tracking changes in the ____ of overall economic activity over time, but it is not a measure of the well-being of a nation's residents because it fails to account for nonmarket transactions, the amount and quality of leisure time, environmental or safety issues, labor market discrimination, and other factors that influence general welfare.
Gross domestic product value added. exclude GDP market value
Which of the following statements best demonstrates the concept of bounded rationality?
Individuals make short-run choices that are not consistent with their long-term goals.
All of the following are key price indexes except the...
KLB.
Which of the following will increase labor productivity?
Labor has more physical capital to work with.
Until 2008, the people of the fictitious nation of Dor relied mainly on private car companies to determine how many automobiles to produce. After 2008, the people of Dor have been relying on the Dor government to determine how many automobiles to produce. This represents a shift in the economic system of Dor from...
Market System to Central Planning.
What is the difference between microeconomics and macroeconomics?
Microeconomics is the study of decision making undertaken by individuals while macroeconomics looks at the behavior of the economy as a whole.
Which of the following measures will lower the natural rate of unemployment?
More high school graduates enter college without looking for employment right away.
What is the difference between nominal GDP and real GDP?
Nominal GDP is measured in current market prices while real GDP corrects for changes in the overall level of prices from year to year.
Which of the following is an implication of the law of supply? The law of supply then implies that a ____ the supply curve occurs due to a change in market price.
Producers will offer more units at a higher price and fewer units at a lower price. movement along
Which of the following statements is not true?
Property rights encourage people to take fewer risks, making the economy more secure.
Which of the following is correct?
Real rate of interest = (Nominal rate of interest−Anticipated rate of inflation)
What is the relationship between wants and resources?
Resources are used to produce things that satisfy people's wants.
Suppose that you are investigating the market for wheat. The price of corn, a substitute good, has decreased. Which of the following would best describe the market reaction to this event?
The demand for wheat decreases, which creates a surplus of wheat, causing the price of wheat to decrease.
_____ is the situation in which human wants always exceed what can be produced with the limited resources and time that nature makes available. We use scarce resources, such as__________, __________, __________ and __________ capital, and __________, to produce economic goodslong dash—goods that are desired but are not directly obtainable from nature to the extent demanded or desired at a zero price. _____ are unlimited. They include all material desires and all nonmaterial desires, such as love, affection, power, and prestige. The concept of ____ is difficult to define objectively for every person. Consequently, we simply consider every person's wants to be unlimited. In a world of scarcity, satisfaction of one want necessarily means nonsatisfaction of one or more other wants.
Scarcity land; labor; physical; human; entrepreneurship Wants need
Which of the following statements is true?
Since World War II, the consumer price index has continued to rise.
Why are politicians and economists concerned about the economic growth rate in the U.S.?
Small differences in the rate of economic growth can make large differences in the standard of living over time.
What is the economic effect of price floors?
Surpluses.
Which of the following statements is true?
The U.S. unemployment rate exceeded 25 percent during the Great Depression.
Which of the following is the definition of personal income (PI)?
The amount of income that households receive before paying taxes.
Mariko is buying a soft drink. She can choose between iced tea, cola, and diet cola. She doesn't like diet cola, and after some thought, she chooses iced tea. What is the opportunity cost of this choice?
The cola
Which of the following is not an example of a transaction cost?
The enjoyment of using the good.
The price of milk increases. Which of the following is not part of the likely chain of events that follows from this price change?
The manufacturers of milking machines lay off some workers.
Suppose that at first the price of a pair of shoes is $15 and the price of a t−shirt is $9. Then, the price of a pair of shoes changes to $30 and the price of a t−shirt changes to $21. What has happened the money prices and relative prices of these two goods?
The money price of a pair of shoespair of shoes and a t−shirt have risen and the relative price of a pair of shoes has fallen while relative price of a t−shirt has risen.
A professor with a Ph.D. in Economics can write a short essay in economics in 2 hours and can mow the lawn in 4 hours. A student in economics can write a short essay in economics in 4 hours and can mow the lawn in 4.5 hours. Which of the following statements is true?
The professor should write the essay since he has the comparative advantage in writing.
Why do economists avoid making the distinction between wants and needs?
The term need is subjective making it difficult to distinguish between something someone wants and something they need.
At equilibrium, there is neither excess quantity supplied nor excess quantity demanded.
True
In an open economy, the total value of GDP is based on the spending decisions of individuals, firms, governments, and foreign residents.
True
In general, the more securely private property rights are assigned, the more capital accumulation there will be.
True
Middlemen specialize in lowering transaction costs.
True
National income is income earned by all U.S. factors of production.
True
Population growth can have both a positive and a negative impact on economic growth.
True
The difference between real GDP and nominal GDP for the same year reflects the amount of inflation that occurred during that year.
True
The dollar value of total output is always equal to total income.
True
The labor force is equal to the number of employed plus the number of unemployed.
True
The lower the price level, the greater the total planned spending on goods and services.
True
The price at which quantity demanded equals quantity supplied and at which the demand curve intersects the supply curve is called the market clearing price.
True
The relationship between two variables is inverse when a decrease in one variable is associated with an increase in the other variable.
True
To go from personal income to disposable personal income, personal income taxes must be subtracted.
True
There are predictions that computers may become as powerful as the human brain by 2030. According to new growth theory, more technological advances will occur when the rewards are greater. In the United States, a patent gives the inventor of a product the exclusive right to make, use, or sell the product for 50 years. For every 1 percent increase in the stock of research and development in the United States, productivity in the rest of the world...
True True False increases by about 0.25 percent.
The components of GDP as calculated using the expenditure approach are identical to the components of aggregate demand. The shape of the aggregate demand curve (AD) is...
True downward sloping.
Entrepreneurship is the component of human resources that performs the functions of organizing, managing, and assembling the other factors of production to create and operate business ventures. The factor of production that consists of factories and equipment used in production, as well as improvements to natural resources, is called...
True physical capital.
Gross domestic income (GDI) is identical to gross domestic product (GDP). Which of the following equations is used to calculate gross domestic income (GDI)?
True wages + interest + rent + profit + taxes unrelated to incomes net of subsidies + depreciation = GDI
An economy is productively efficient whenever it is producing the maximum output with given technology and resources. An economy's production is efficient...
True whenever it is operating on its production possibilities curve.
A market demand curve is derived by summing (at each price) the individual quantites demanded by all buyers in the market. A demand schedule gives a schedule of ________ quantities demanded per time dimension at ________.
True alternative; different possible prices
A market supply curve is derived by summing the individual producers' supply curves. A supply schedule gives a schedule of ________ quantities supplied per time dimension at ________.
True alternative; different possible prices
______ persons are adults who are willing and able to work and are actively looking for a job but have not found one. The unemployment rate is computed by dividing the number of unemployed by the total ______, which is equal to those who are employed plus those who are unemployed. The unemployed are classified as ______, ______, ______, and ______ to the labor force. The flow of people departing jobs and people acquiring jobs determines the stock of the unemployed as well as the stock of the employed. The duration of unemployment affects the unemployment rate. If the duration of unemployment ______, the measured unemployment rate will increase, even though the number of unemployed workers may remain the same. Whereas overall labor force participation on net has risen only modestly since World War II, there has been a major increase in ______ labor force participation.
Unemployed; labor force job losers; reentrants; job leavers; new entrants increases female
Which of the following statements is true concerning the consequences of rent controls?
Upper income earners are big winners due to the fact that they can better exploit nonprice rationing devices.
Suppose that the U.S. federal government has borrowed $500 billion to expand its total spending on goods and services across the entire economy in an effort to boost by $500 billion the aggregate production by the nation's firms. Would we apply microeconomic or macroeconomic analysis to analyze this policy action?
We would apply macroeconomic analysis because this policy action would affect the behavior of the economy as a whole.
Suppose that the government has raised by $10 a per-carat tax rate it imposes on diamonds in an effort to influence production of this particular good by each of the firms that produce it and purchases by individual consumers. Would we apply microeconomic or macroeconomic analysis to analyze this policy action?
We would apply microeconomic analysis because this policy action would affect decision making undertaken by individuals (or households) and by firms.
The aggregate demand curve would shift to the right as a result of...
a drop in the foreign exchange value of the dollar.
The minimum wage is an example of...
a price floor.
Opportunity cost...
is the value of the next best alternative as a result of choosing some given alternative.
The consequences of decriminalizing illegal drugs have long been debated. Some claim that legalization will lower the price of these drugs and reduce related crime. Others claim that more people will use these drugs. Suppose that some of these drugs are legalized so that anyone may sell them and use them. Based on positive economic analysis, such decriminalization will lead to...
a reduction in price of these drugs and an increase in quantity demanded.
Entrepreneurship functions better when...
a system of private property rights permits entrepreneurs to capture the rewards from their entrepreneurial activities.
All of the following will decrease the supply of train trips except...
a technological change that makes trains safer and more fuel-efficient.
Scarcity implies that...
a way of rationing supplies of goods must be found.
In the market for wireless earbuds (a normal good), indicate whether the following events would cause an "increase or a decrease in demand" or an "increase or a decrease in the quantity demanded." a. There is an increase in the price of carry cases for wireless earbuds. Equilibrium quantity would _____. Equilibrium price would _____. b. There is a decrease in the price of devices used to charge wireless earbuds. Equilibrium quantity would _____. Equilibrium price would _____. c. There is an increase in the number of consumers of wireless earbuds. Equilibrium quantity would _____. Equilibrium price would _____. d. A booming economy increases the income of the typical buyer of wireless earbuds (this is a normal good). Equilibrium quantity would _____. Equilibrium price would _____. e. Consumers of wireless earbuds anticipate that the price of this good will decline in the future. Equilibrium quantity would _____. Equilibrium price would _____.
a. decrease in demand. decrease; decrease b. increase in demand. increase; increase c. increase in demand. increase; increase d. increase in demand. increase; increase e. decrease in demand. decrease; decrease
CH7 In a country with a labor force of 200, a different group of 13 people becomes unemployed each month, but becomes employed once again a month later. No others outside these groups are unemployed. a. Calculate this country's unemployment rate. _____ (Enter your response as a percentage rounded to two decimal places.) b. The average duration of unemployment in this country is _____. c. Suppose the establishment of a system of unemployment compensation increases to two months the interval that it takes each group of job losers to become employed each month. Nevertheless, a different group of 13 people still becomes unemployed each month. Now the average duration of unemployment is _____. d. Following the establishment of a system of unemployment compensation, calculate the country's unemployment rate. _____(Enter your response as a percentage rounded to two decimal places.)
a. 6.5% b. one month. c. two months. d. 13.00%
Which of the following predictions appears to follow from a model based on the assumption that rational, self-interested individuals respond to incentives? a. For every 10 exam points Myrna must earn in order to pass her economics course and meet her graduation requirements, she will study one additional hour for her economics test next week. b. A coin toss will best predict Leonardo's decision about whether to purchase an expensive business suit or an inexpensive casual outfit to wear next week when he interviews for a high-paying job he is seeking. c. Celeste, who uses earnings from her regularly scheduled hours of part-time work to pay for her room and board at college, will decide to buy a newly released DVD this week only if she is able to work two additional hours.
a. Based on the rationality assumption. b. Not based on the rationality assumption. c. Based on the rationality assumption.
Assume that the cost of aluminum used by soft-drink companies increases. Indicate which of the following statements describing the resulting effects in the market for soft drinks distributed in aluminum cans are true (T) or false (F). a. The demand for soft drinks decreases. b. The quantity of soft drinks demanded decreases. c. The supply of soft drinks decreases. d.The quantity of soft drinks supplied decreases.
a. F b. T c. T d. F
Categorize each of the following issues as either a microeconomic issue or a macroeconomic issue. a. The national unemployment rate. b. The decision of a worker to work overtime or not. c.A family's choice of having a baby. d. The rate of growth of the money supply. e. The national government's budget deficit. f. A student's allocation of study time across two subjects.
a. Macroeconomics b. Microeconomics c. Microeconomics d. Macroeconomics e. Macroeconomics f. Microeconomics
Categorize each of the following conclusions as being the result of positive analysis or normative analysis. a. A higher minimum wage will reduce employment opportunities for minimum wage workers. b. Increasing the earnings of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this. c. Everyone should enjoy open access to healthcare. d. Heathcare subsidies will increase the consumption of health care.
a. Positive economics b. Normative economics c. Normative economics d. Positive economics
Indicate whether the following events would cause an "increase or a decrease in demand" or an "increase or a decrease in the quantity demanded" for cable-based Internet access service, which is a normal good. a. Firms providing wireless (an alternative to cable) Internet access services reduce their prices. This will cause a(n) b. Firms providing cable-based Internet access services reduce their prices. This will cause a(n) c. There is a decrease in the incomes earned by consumers of cable-based Internet access services. This will cause a(n) d. Consumers' tastes shift away from using wireless Internet access in favor of cable-based Internet access services.
a. decrease in demand. b. increase in quantity demanded. c. decrease in demand. d. increase in demand.
Consider the market for economics textbooks. Explain whether the following events would cause an increase or a decrease in supply or an increase or a decrease in the quantity supplied. a. The market price of editorial services increases. This will cause a(n) b. The market price of economics textbooks increases. This will cause a(n) c. The number of publishers of economics textbooks increases. This will cause a(n) d. Publishers expect that the market price of economics textbooks will increase next month. This will cause a(n)
a. decrease in supply. b. increase in quantity supplied. c. increase in supply. d. decrease in supply.
Explain what happens to contributions to GDP in each of the following situations. a. A woman who makes a living charging for investment advice on her Internet Web site marries one of her clients, to whom she now provides advice at no charge. As a result of this, ____. b. A tennis player wins two top professional tournaments as an unpaid amateur, meaning the tournament sponsor does not have to pay out his share of prize money. As a result of this, GDP ____. c. A company that had been selling used firearms illegally finally gets around to obtaining an operating license and performing background checks as specified by law prior to each gun sale. As a result of this, GDP ____.
a. decreases. b. remains unchanged. c. remains unchanged.
For each of the following items, state whether a direct or an inverse relationship is likely to exist. a. The number of hours you study for an exam and your exam score is a ______ relationship. b. The price of pizza and the quantity purchased is an _____ relationship. c. The number of games the university basketball team won last year and the number of season tickets sold this year is a ____ relationship.
a. direct b. inverse c. direct
Which of the following are production activities that are included in GDP? Which are not? a. Mr. King performs the service of painting his own house instead of paying someone else to do it. This activity is ____ in GDP. b. Mr. King paints houses for a living. This activity is ____ in GDP. c. Mrs. King earns income from parents by taking baby photos in her home photography studio. This activity is ____ in GDP. d. Mrs. King takes photos of planets and stars as part of her astronomy hobby. This activity is ____ in GDP. e. E*Trade charges fees to process Internet orders for stock trades. This activity is ____ in GDP. f. Mr. Ho spends $10,000 on shares of stock via an Internet trade order. This activity is ____ in GDP. Mr. Ho pays a $10 brokerage fee. This activity is ____ in GDP. g. Mrs. Ho receives a Social Security payment. This activity is ____ in GDP. h. Ms. Chavez makes a $300 payment for an Internet-based course on stock trading. This activity is ____ in GDP. i. Mr. Langham sells a used laptop computer to his neighbor. This activity is ____ in GDP.
a. excluded b. included c. included d. excluded e. included f. excluded; included g. excluded h. included i. excluded
Consider the market for smartphones. Explain whether the following events would cause an increase or a decrease in supply or an increase or a decrease in the quantity supplied. a. The price of touch screens used in smartphones declines. This will cause a(n) Equilibrium quantity would ______. Equilibrium price would _____. b. The price of machinery used to produce smartphones increases. This will cause a(n) Equilibrium quantity would ______. Equilibrium price would _____. c. The number of manufacturers of smartphones increases. This will cause a(n) Equilibrium quantity would ______. Equilibrium price would _____. d. There is a decrease in the market demand for smartphones. This will cause a(n) Equilibrium quantity would ______. Equilibrium price would _____.
a. increase in supply. increase; decrease b. decrease in supply. decrease;increase c. increase in supply. increase; decrease d. decrease in quantity supplied. decrease; decrease
Explain what happens to the official measure of GDP in each of the following situations. a. Air quality improves significantly throughout the United States, but there are no effects on aggregate production or on market prices of final goods and services. As a result of this, GDP ____. b. The U.S. government spends considerably less on antipollution efforts this year than it did in recent years. As a result of this, GDP ____. c. The quality of cancer treatments increases, so patients undergo fewer treatments, which hospitals continue to provide at the same price per treatment as before. As a result of this GDP ____.
a. remains the same. b. decreases. c. decreases.
Consider the following cases. a. If the price of bacon rises, and as a result the demand for sausage increases, this implies that these two goods are ____. b. If the price of tennis racquets falls, and as a result the demand for tennis balls ____, this implies that these two goods are complements. c. If the price of coffee rises, and as a result the demand for sugar falls, this implies that these two goods are ____. d. If the price of automobiles _____, and as a result the demand for motorbikes falls, this implies that these two goods are substitutes.
a. substitutes b. increases c. complements d. falls
Consider the following situations. a. A rational, self-interested student decides whether to purchase a textbook required for a particular class based on all of the following, except b. Rational, self-interested government officials seeking more funding for mass transit through higher taxes should consider c. A municipality taxing hotel guests to obtain funding for a new sports stadium should consider all of the following, except
a. whether the textbook has an attractive dust jacket. b. the fact that raising taxes is generally unpopular and may result in a potential loss in a future election. c. the winning potential of the sports team using the stadium.
Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium...
after an adjustment period that varies.
In the United States, government-imposed price supports are most often associated with...
agricultural products.
Typically, modern developed countries have gone through three stages. Initially countries have most of the population involved in _____. Secondly, much of the population moves to _____. Finally, there is a shift toward _____.
agriculture.; industry.; services.
A production possibilities curve represents...
all possible combinations of output that could be produced assuming fixed productive resources and their efficient use.
Prices perform a rationing function by...
allocating goods to the buyers who are willing and able to pay the highest price.
The economic way of thinking is best described as....
an analytical framework enabling one to reach informed conclusions.
If government statisticians were to count informally employed people as in the labor force and employed, the result would be...
an increase in the labor force participation rate and a lower unemployment rate.
The relative price of any commodity is its price in terms of...
another commodity.
If nominal GDP increases, it is possible that...
any of the above might have happened.
Positive economic statements ________, and normative economic statements ________.
are concerned with "what is"; are concerned with "what ought to be"
The law of demand states that...
as price increases, quantity demanded decreases, all other things equal.
Economics...
assumes individuals are rational and respond to different incentives.
Once we pick a market basket of goods, we can construct a price index that compares the cost of that market basket today with the cost of the same market basket in a _____ year. The _____ is the most often used price index in the United States. The _____ measures what is happening to the average price level of all new, domestically produced final goods and services in our economy. The _____ Index uses annually updated weights from consumer spending surveys to measure average prices faced by consumers.
base Consumer Price Index GDP deflator Personal Consumption Expenditure
Limiting the immigration of highly educated professionals hurts U.S. economic growth because...
both A and B.
Sebastian is a financial analyst who is convinced that his clients do not always make choices that are consistent with their long-term objectives. He has also determined that his clients do not consider every relevant choice and often fail to act in their own self-interest. Does Sebastian perceive that his clients' behavior accords with the rationality assumption or the assumption of bounded rationality? Sebastian perceives that his clients' behavior accords with the assumption of...
bounded rationality because they cannot examine and think through every possible choice they confront without help.
Supply-side inflation can be caused by a continual...
decrease in aggregate supply while aggregate demand remains unchanged.
Inflation can be caused by...
decreases in the long-run aggregate supply curve or increases in the aggregate demand curve.
While some economists argue that population growth reduces _____ growth, others contend that the opposite is true. The latter economists consequently believe that immigration should be encouraged rather than discouraged. Well-defined and protected _____ rights are important for fostering entrepreneurship. In the absence of well-defined _____ rights, individuals have less incentive to take risks, and economic growth rates suffer.
economic; property; property
If the demand and supply curves increase (shift outward) by identical proportions then... What if the increase in demand were larger than the increase in supply? What if the increase in demand were smaller than the increase in supply?
equilibrium price stays the same and quantity rises. The equilibrium price and quantity increase. Equilibrium price falls and quantity rises.
The ____ approach to measuring GDP requires that we add up consumption expenditures, gross private investment, government purchases, and net exports. Consumption expenditures include consumer ____, consumer ____, and ____. To derive GDP using the income approach, we add up all factor payments, including ____, ____, ____, and ____. To get an accurate measure of GDP using the income approach, we must also add ____ and ____ to those total factor payments.
expenditure; durables; nondurables; services wages; profit; interest; rent nonincome related taxes net of subsidies; depreciation
By providing information and reducing the costs of job search, the Internet's impact on the job market is to reduce...
frictional unemployment.
Buyers and sellers receive information about what should be bought and what should be produced...
from prices in a market system.
Economic goods are...
goods that are scarce.
Whenever inflation is ____ than anticipated, creditors lose and debtors gain. Whenever the rate of inflation is ____ than anticipated, creditors gain and debtors lose. Holders of cash lose during periods of inflation because the ____ of their cash depreciates at the rate of inflation. The ____ interest rate is the market rate of interest observed in contracts expressed in today's dollars, whereas the ____ interest rate equals the ____ interest rate minus the ____ rate of inflation.
greater; less purchasing power nominal; real; nominal; anticipated
With a given set of resources, specialization results in ____ output. In other words, there are gains to specialization in terms of greater material well-being. Individuals and nations specialize in their areas of ____ advantage in order to reap the gains of specialization. Comparative advantages are found by determining which activities have the _____ opportunity costs long dash—that is, which activities yield the highest return for the time and resources used. A _____ of labor occurs when different workers are assigned different tasks. Together, the workers produce a desired product.
higher comparative lowest division
Many economists view the natural rate of unemployment as the level observed when real GDP is given by the position of the long-run aggregate supply curve. There can be positive unemployment in this situation because...
information is costly and rigidities always exist causing some types of unemployment (frictional and structural) to occur even in the long run after everyone in the economy has fully adjusted to any changes.
Improvements in _____ productivity, all other things being equal, lead to _____ economic growth and higher living standards. One fundamental determinant of the rate of growth is the rate of _____. To have more consumption in the future, we have to _____ rather than consume. In general, countries that have had higher rates of _____ have had higher rates of growth in per capita real GDP. _____ theory argues that the greater the rewards, the more rapid the pace of technology. And greater rewards spur research and development. The openness of a nation's economy to international _____ seems to correlate with its rate of economic growth. Invention and innovation are not the same thing. _____ are useless until _____ transforms them into goods and services that people find valuable. According to _____ theory, economic growth can continue as long as we keep coming up with new ideas. Increases in _____ capital can lead to greater rates of economic growth. These come about by increased education, on-the-job training, and self-teaching.
labor; greater saving; save; saving New growth trade Inventions; innovation new growth human
Factors of production include...
land, labor, physical capital, human capital and entrepreneurship.
A ____ uses assumptions and is by nature a simplification of the real world. Its usefulness can be evaluated by bringing empirical evidence to bear on its predictions. Most models use the ______ assumption that all other things are held constant, or equal. ______ economics emphasizes psychological constraints and complexities that potentially interfere with rational decision making. This approach utilizes the ______ hypothesis that people are not quite rational, because they cannot study every possible alternative but instead use simple rules of thumb to decide among choices.
model ceteris paribus Behavioral; bounded rationality
To obtain ____, we add net U.S. income earned abroad (and adjust for statistical discrepancies) to net domestic product. To obtain ____, we must add government transfer payments, such as Social Security benefits and food stamps. We must subtract income earned but not received by factor owners, such as corporate retained earnings, Social Security contributions, and corporate income taxes. To obtain disposable personal income, we subtract all personal ____ from personal income. Disposable personal income is income that individuals actually have for consumption or saving.
national income personal income income taxes
CH9 A nation's capital goods wear out over time, so a portion of its capital goods become unusable every year. Last year, its residents decided to produce no capital goods. It has experienced no growth in its population or in the amounts of other productive resources during the past year. In addition, the nation's technology and resource productivity have remained unchanged during the past year. The nation's economic growth rate for the current year will be ____.
negative.
Scarcity requires us to choose. Whenever we choose, we lose the _____-valued alternative. Cost is always a forgone _____. Another way to look at opportunity cost is the trade-off that occurs when one activity is undertaken rather than the _______ alternative activity. A _______ curve graphically shows the trade-off that occurs when more of one output is obtained at the sacrifice of another. This curve is a graphical representation of, among other things, opportunity cost.
next-highest opportunity. next-best production possibilities
Economic growth can be defined as the increase in ____ real GDP, measured by its rate of change per year. The ____ of economic growth are reductions in illiteracy, poverty, and illness and increases in life spans and political stability. The ____ of economic growth may include environmental pollution, alienation, and urban congestion. Small percentage-point differences in growth rates lead to ____ differences in per capita real GDP over time.
per capita benefits; costs large
The income households actually receive before they pay personal income taxes is:
personal income.
Total capital is the sum of...
physical capital and human capital.
Although many people believe that population growth hinders economic development, there is little evidence to support that notion. What is clear is that economic development tends to lead to a reduction in the rate of _____ growth. Historically, there are three stages of economic development: the _____ stage, the _____ stage, and the _____ stage, when a large part of the workforce is employed in providing services. Although one theory of economic development holds that a sizable natural resource base is the key to a nation's development, this fails to account for the importance of the human element: The _____ must be capable of using a country's natural resources. Fundamental factors contributing to the pace of economic development are a well-defined system of _____, training and _____ , allowing new generations of companies and industries to _____ older generations, and promoting an open economy by allowing _____ .
population agricultural; manufacturing; service-sector working population property rigths; education; replace; international trade
According to the real-balance effect, an increase in the price level...
reduces an individual's expenditures due to a decrease in the real value of cash balances.
An economic model is developed from a set of assumptions about consumer behavior and predicts that people will buy less of a good the higher the price of the good. Empirical testing of this model would involve...
the collection of data to evaluate the usefulness of the model.
The notion that people do not intentionally make decisions that would leave them worse off is known as _____. The hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them is known as _____.
the rationality assumption. bounded rationality.
People anticipate the inflation rate to be 8%. Banks are making loans at a 12% interest rate. Therefore,...
the real rate of interest is 4% and the nominal rate is 12%
Economics is...
the study of how limited resources are allocated to satisfy unlimited wants.
Gross domestic product is defined as...
the total market value of all final goods and services produced in an economy during a year.
Full employment means
there is a level of unemployment consistent with "normal" frictions in the labor market.
The long-run aggregate supply curve shifts outward when...
there is economic growth.
The economy of Finlandia is at full employment when...
there is some unemployment due to friction in the labor market, but there is no cyclical unemployment.
When an individual proclaims the need for a new car, the person typically means...
they want something they currently do not have.
The long-run aggregate supply curve is determined by...
the full-employment level of real output.
When the production possibilities curve shifts outward,...
the long-run aggregate supply curve shifts to the right.
If there is persistent inflation in a growing economy,...
the long-run aggregate supply is shifting to the right at a slower rate than aggregate demand.
If economic growth causes the long-run aggregate supply curve to shift rightward over time, but the aggregate demand curve does not change, we expect...
the long-run equilibrium price to decline, and there will be secular deflation.
The ultimate purpose of economics is...
to study how individuals make choices.
After the concert is over and you and your friend are traveling home, you discuss how each of you might otherwise have used the four hours devoted to attending the concert. The four hours could have been used to study, to watch a sporting event on TV, or to get some extra sleep. Your friend decides that if she had not spent four hours attending the concert, she would have chosen to study, and you reply that you otherwise would have watched the televised sporting event. The relevant opportunity costs for you and your friend for allocating four hours to attending the concert are...
watching a sporting event on TV for you and studying for your friend.
Centralized command and control prevails throughout a certain nation's economy. What three key economic questions have been addressed in this nation, and what has been the common element of the nation's answers to those questions? The three key economic questions that have been addressed in this nation are: The common element of the nation's answers to those key economic questions has been:
what and how many items to produce, how scarce resources are used in producing the items, and who can obtain the items produced. a centralized authority assuming responsibility for addressing them.
The long-run equilibrium of an economy occurs...
where the long-run aggregate supply curve meets the aggregate demand curve.
