Macroeconomics Chapter 1

Which of the following are issues most explored in micro economics?

-The expenditures of a government entity -Measuring the price of specific goods -Measuring total revenues of a firm

Income Changes

-The location of the budget line varies with money income -An increase in money income shifts the budget line to the right; a decrease in money income shifts it to the left

Which statements best describe the combinations of goods, that lie on the production possibilities curve?

-They are attainable -They utilize all of an economy's available resources.

Which of the following are ways of expressing the meaning of ceteris paribus?

-assuming factors other than those being considered in a particular analysis do not change. -assuming other things remain the same

Which of the following combinations are attainable given a consumer's budget line?

-combinations that fall inside the budget line -combinations that fall on the budget line

Purposeful Behavior

Economics assumes that human behavior "rational self-interest." Individuals and institutions look for and pursue opportunities to increase their utility-the pleasure, happiness, or satisfaction obtained from consuming a good or service.

When a country engages in international specialization, it focuses on producing which of the following?

Goods with the lowest opportunity costs.

Resource-Land

In addition to the part of the earth's surface not covered by water, this term refers to any and all natural resources ("free gifts of nature") that are used to produce goods and services Thus, it includes the oceans, sunshine, coal deposits, forests, the electromagnetic spectrum, and fisheries. Note that land is one of the four economic resources.

normative economics

The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.

Scientific Method

The procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws.

Which statement best describes combinations of goods that are beyond the production possibilities curve?

They are unattainable

A consumer's _________ line or constraint shows various combinations of two products that can be purchased with a specific amount of income.

budget

Factories, storage, transportation and machinery are all examples of ____________ goods.

capital

A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as a(n)_______________________________

economic principle

The work-related activities of a teacher and doctor fall under the resource category of

labor

What do economists call the physical actions and mental activities that people contribute to the production of goods and services?

labor

From an economic standpoint, _____________ includes all natural resources used in the production process.

land

Which discipline studies the economy as a whole or its basic subdivisions or aggregates?

macroeconomics

A production possibilities curve (PPC) illustrates the attainable combination __________.

of two goods that can be produced given a specific set of resources.

positive economics

the analysis of facts or data to establish scientific generalizations about economic behavior

other-things-equal assumption

the assumption that factors other than those being considered are held constant. Also known as the ceteris paribus assumption

Your next-door neighbors want to go on a European vacation but cannot afford it, so they decide to visit a local amusement park instead. This is an example of___________.

the economizing problem

Two goods

the economy is producing only two goods: (1) a product that symbolize consumer goods (2) a product that symbolize capital goods

The outward bowing shape of the production possibilities curve is due to __________________.

the law of increasing opportunity costs

The optimal allocation of resources occurs when _________

the marginal benefits of the good equals the marginal cost.

fixed resources

the quantity and quality of the factors of production are fixed

fixed technology

the state of technology (the methods used to produce output) is constant

Specializing and participating in international trade allows an economy to do which of the following?

-Increase the quantities of capital and consumer goods available to society -Circumvent the output limits imposed by its own production possibilities curve

Which of the following describes a budget line?

A curve showing various combinations of two products a consumer can purchase with a specific amount of income.

A point that lies inside the production possibilities curve reflects which of the following?

A failure to achieve full employment

economic perspective

A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions.

Resource-Labor

Any mental or physical exertion on the part of a human being that is used in the production of a good or service. Note that labor is one of the four economic resources.

Normative economics is _______________.

Based on value judgments

Taken together, the four general categories of economic resources (land, labor, capital, and entrepreneurial ability) are referred to as which of the following?

Factors of production

True of false: Everyone except for the super wealthy has a finite, or limited, amount of income

False

True or false: Positive economics encourages value judgments.

False- positive economics avoids value judgments, instead seeking to empirically describe the facts of the case.

True or false: Economists use the terms "capital" and "money" interchangeably.

False-The term "capital" as used by economists does not refer to money.

_______ comes in the form of wages, interest, rent, profit and even from government programs.

Income

_____________________ is the discipline that exams the performance and behavior of an economy as a whole.

Macroeconomics

unlimited wants

Most people have virtually unlimited wants. Our wants extend over a wide range of products, from necessities, food shelter, clothing, to luxuries, perfumes, yachts, sports cars.

______ economics considers the desirability of certain aspects of the economy and underlies expressions of support for particular economic polices.

Normative

Positive economics _____________ value judgments, tries to establish ___________ statements about economic behavior, and deals with _______ economic events.

Positive economics avoids value judgments, tries to establish scientific statements about economic behavior, and deals with actual economic events.

factors of production

The four economic resources: land, labor, capital (goods) and entrepreneurial ability.

utility

The wet-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from the consumption of. collection of goods and services).

True or false: A decrees in income will shift the budget line to the left

True

True or false: If economic resources were perfectly adaptable to alternatives uses, then there would be constant opportunity costs along the production possibilities curve

True

True or false: In graphing a relationship between two variables, economists always follow the mathematical convention. Thus, if price is the independent variable then it is measured on the horizontal axis.

True

limited income

We all have a finite amount of income

aggregate

a collection of specific economic units treated as if they were one unit

economic principle

a widely accepted generalization about the economic behavior of individuals or institutions

Attainable combinations

all combinations on or inside the budget line

Normative economics is_______________

based on value judgments.

For economists, ______________ goods include all manufactured aids used in producing consumer goods and services

capital

Assume that a consumer spends a given budget on only two goods and that the prices of the two goods are constant. The budget line in this case would

definitely be a straight downward-sloping line.

All natural resources, Human Resources, and manufactured goods that go into the production of goods and services are considered as society's scarce _________ resources.

economic

The _________ problem refers to the need to make choices because economic wants exceed economic means.

economizing

Which of the following is a result of having scarce economic resources for the production of goods and services?

fewer options that require choices

One major part of the opportunity costs of one's decision to go to college after high school graduation is the

full-time job that one could have gotten instead of going to college.

What is the simplified term economists use to refer to "factors of production"?

inputs

Resource-Capital (goods)

man-made physical objects (factories, roads) and intangible ideas (the recipe for cement) that do not directly satisfy human wants but which help to produce goods and services that do satisfy human wants; also called capital goods. Note that capital goods is one of the four economic resources.

Optimal Allocation

marginal benefit (MB) = marginal cost (MC). Any economic activity should be expanded as long as marginal benefit exceeds marginal cost.

Which discipline studies the decision-making process of customers, workers, households, and business firms on an individual basis rather than as aggregates?

microeconomics

Economists do not include money as an economic resource because_________ .

money produces nothing-Money only facilitates the purchase of economic resources.

Improvements in the methods of production allows for the creation of _______

more goods with available resources

Points lying _____ the production possibilities curve represent greater, but unachievable levels of output with current inputs, than that at any point on the curve.

outside

unemployment in the economy is graphically represented by ______ the production possibilities curve.

points inside

Which of the following illustrates the following illustrates the attainable combination of two goods that can be produced given a specific set of resources?

production possibilites curve

This ______ table lists the different combinations of pizza and robots that can be produced with a specific set of resources.

production possibilities

A ____________ lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment.

production possibilities table

consumer goods

products and services that satisfy human wants directly

In developing economic theories, principles, or models, economist_______________.

remove clutter and simplify

When an economy produces a good such that the marginal benefit equals the marginal cost, this indicates that _________.

resources are being allocated efficiently.

Land and mineral resources, transportation and communication facilities, factories and farm buildings, equipment, tools and machinery are all examples of:

scarce economic resources

An increase in income will____________.

shift the budget line to the right.

The ration of the price of two goods on a graphed budget line is measured by its ________

slope

full employment

the economy is employing all of its available resources

People desire goods and services that provide maximum utility. In fact, our desires or wants are

unlimited-Our desires or wants are unlimited and insatiable, Maning we want more than we can have due to our limited incomes. This is the basis of economizing or picking and choosing goods and services that maximize our satisfaction given the limitations we face.

The pleasure, satisfaction, or happiness obtained from consuming a good or service is known as________________________

utilities or Utils

For better or worse, people have________

virtually unlimited wants

Because consumers behave in a rationally self-interested manner, the consumer will purchase a good or service________________________

when the marginal benefit is greater than the marginal cost

Which of the following resources would be considered to be land by an economist?

-oil and mineral deposits -forests -water -arable land

Suppose you are given a $100 gift card and you choose to spend it on a number of goods. You will select a combination of goods that is best for you and that maximizes your satisfaction. Your choices will involve which of the following?

A comparison of marginal benefits and marginal costs for each good considered.

production possibilities curve

A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed.

budget line

A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices.

Which of the following enables society to produce more goods with current resources?

Advances in technology

What does every point on a budget line graph represent?

All combinations of goods that can be purchased with a given income.

If economists examine the relationship between the price of a good and sales of that good while ignoring other relate factors, or assuming those other factors are equal, they are using which of the following?

Centeris paribus

If economists examine the relationship between the price of a good and sales of that good while ignoring other related factors, or assuming those other factors are equal, they are using which of the following?

Ceteris paribus

Which of the following combinations are unattainable given a consumer's budget line?

Combinations that fall beyond the budget line.

In this figure, obtaining more books by giving up some movies is called a(n)_________________; whereas losing two books in order to gain 1 movie is referred to as ___________ cost.

In this figure, obtaining more books by giving up some movies is called a(n) trade-off; whereas losing two books in order to gain 1 movie is referred to as production cost.

entrepreneurs

Individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly.

Which of the following can be stated as potentially true about any economy?

Its current choice of position on its production possibilities curve helps determine the curve's future location.

Suppose an economy produces consumer goods and capital goods. Which of the following can be inferred from this current choice on its production possibilities curve?

That its present choice in production may result in higher future prospects for economic growth.

opportunity cost

The amount of other products that must be forgone or sacrificed to produce a unit of a product.

economizing problem

The choices necessitated because society's economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce).

marginal analysis

The comparison of marginal ("extra" or "additional") benefits and marginal costs, usually for decision making.

entrepreneurial ability

The human resource that combines the other economic resources of land, labor, and capital (goods) to produce new products or makes innovations in the production of existing products; provided by entrepreneurs.

Economic Resources

The land, labor, capital, and entrepreneurial ability that are used to produce goods and services. Also known as the factors of production

A production possibilities curve with an increasing slope is the result of which of the following?

The law of increasing opportunity costs

Shape of Curve

The law of increasing opportunity costs is reflected in the shape of the production possibilities curve: The curve is bowed out from the origin of the graph.

Scarcity

The limits placed on the amounts and types of goods and services available for consumption as the results of there being only limited economic resources from which to produce output; the fundamental economic constraint that creates opportunity costs and that necessitates the use of marginal analysis (cost-benefit analysis) to make optimal choices.

Microeconomics

The part of economics conceded with (1) decision making by individual units such as a household, a firm, or an industry and (2) individual markets, specific goods and services, and product and resource prices.

Macroeconomics

The part of economics concerned with the performance and behavior of the economy as a whole. Focuses on economic growth, the business cycle, interest rates, inflation, and the behavior of major economic aggregates such as the household, business, and government sectors.

True or false: A trade-off occurs when some quantity of production of a good is given up in order to produce another good.

True

Points _______ the production possibilities curve represent a maximum output of two products as long as the economy is fully employed.

along