Macroeconomics Test 1

Industry

Def-A group of firms that specialize in the production of similar goods and services. a. THE NUMBER OF FIRMS serving the market b. TYPES OF PRODUCTS manufactured or services rendered c. DEGREE OF FIRM DOMINANCE in a marketplace. Firm's ability to set price, restrained by people's willingness and ability to pay, and in some cases by firm rivalry d. degree to which __________ SIZE can expand or contract over time

D

37. An assumption of laissez-faire capitalism is that the wealth of a nation will be increased: A) by maintaining minimal government involvement in its economy. B) by relying on free and open markets to optimize resource use, production and consumption. C) if individuals are free to pursue their self-interests. D) all of the above.

C

38. Markets are important in those economies where decisions are made: A) collectively. B) by central planners. C) by individuals. D) by the government.

A

39. A socialist system favors collective ownership of society's factors of production. A) True B) False C) Inconclusively True or False

B

4. A recurring theme in economics is: A) our country is rich; we just don't realize it. B) people have unlimited wants in the face of limited resources. C) there are unlimited resources. D) people have limited wants in the face of limited resources.

A

40. A mixed economy involves a significant degree of government oversight over markets to improve a nation's economic outcomes. A) True B) False C) Inconclusively True or False

C

5. The basic economic problem is the combined existence of: A) growing populations and the depletion of natural resources. B) economic freedom and income equality. C) scarce economic resources and unlimited material wants. D) inflation and unemployment.

B

6. Which is considered a factor of production? A) money in a checking account B) an auto plant C) U.S. savings bonds D) a firm's common stock

D

7. The role of the entrepreneur in society is to: A) control the land upon which all production takes place to get the most rent. B) work with other elected officials to determine what goods are produced. C) provide capital to the firm which the management combines with labor. D) bring the factors of production together and assume risks taking.

B

8. In a market economy, government officials make most production decisions in a centralized manner. A) True B) False C) Inconclusively True or False

A

9. Consumer sovereignty means that consumers vote with their dollars in a market economy, which helps determine what is produced. A) True B) False C) Inconclusively True or False

Rational

Also referred to as Economic Decision Making. a) Individuals and organizations make decisions by responding to incentives in a ________ way!(motivated by self interest, and consider all benefits and costs associated with the decision) b) Most _________ decisions are incremental or marginal

Subsidy

Governments investment in the private sector

Real Flows

Movement of goods or resources, and services flows

Monetary Flows

Movement of money- Product Market=Expenditures to Firm Revenue Resource Market=Production Cost to Income Financial Market=Savings to Lending

Goals

National Economic "Performance" ________ Def-Best characterized in terms of EFFICIENCY, STABILITY, EQUITY/FAIRNESS, SUSTAINABILITY, and IMPROVED LIVING STANDARDS as the world changes. a)full employment of resources b)stability in costs of living relative to income c)moderate economic growth and development-sufficient savings, economic freedom/stability d) sustain a trade balance e)promotion of peace and social justice

Economics

The study of production, distribution, and consumption of material goods and services in a world of resource scarcity

Pure (social)

________ public goods and services-provided mostly but not exclusively by government and non-profit organizations, and jointly used by many people in society. NON-RIVALRY. Example-fireworks, mass media, national defense

Private (Personal) goods and services

_________ _______ _____ __________ are goods provided "primarily but not exclusively" by for profit businesses, and beneficial for personal use (market goods)

Laissez faire

_________ ________ essentially implies "hands off." In pure "__________ _______" capitalist economy, the government's role is limited to protecting private property and establishing the legal framework for free enterprise and free markets to function. The optimal allocation of resources, production and consumptions should be realized on the basis of incentives (i.e. product prices, resource costs, profits, etc.).

Highest

_________ use: Resource use that is most beneficial (of greater value) to society, and supports a higher living standard(also, most profitable use) ALLOCATIVE EFFICIENCY a. The optimal resource assignments, where total VALUE ADDED IS MAXIMIZED and ALL PRIORITIZED CONSUMPTIONS ARE FUFILLED b. All production and consumption plans (priorities) are balanced or perfectly aligned, where nothing is under or over produced or consumed

Public

__________ bads and disservices- environmental pollution, public policies having adverse unintentional consequences. Ex) Terrorism, Porn

Allocation

__________ of Resources Resource assignments between the public and private sector-resource distribution among firms, industries, and public sector institutions (optimal resource use)

Impure

__________ public goods and services 2 types 1. Community goods -rivalry "competitive" in consumption or use/non-exclusive ownership or open access. Ex) Library/public places 2. Club goods-non rivalry in consumption or use/exclusive ownership rights or closed access. Ex) memberships/subscriptions

Rational

__________ self-interest simply means that people strive to achieve personal satisfaction. This personal satisfaction can be achieved in many ways, from both selfish and unselfish acts.

Business

__________ subsector-Firms that specialize "mostly" in private goods and services provision, or some form of public good or service provision

Private (personal)

___________ goods and services-goods provided "primarily but not exclusively" by/for PROFIT BUSINESSES and beneficial for personal use. Exclusive ownership and property rights where the benefits of the good or service can be denied to a third party. Example-retail goods and personal services

wealth

(1 word)CREATED VALUE is called _______. Capital is often referred to as _____ that creates _______

Allocation

(1/3 economic roles of Government) 1.Government provides essential public goods and services and private goods in some cases, which are supported mostly by our tax dollars 2. Government can improve market outcomes by enacting public policies, laws and regulations that support the common good a) Consumer Protections-Product safety/antitrust laws against collusion and price regulations b) Social and Physical Environmental Protections-cleaner water/air, energy conservation, national/public safety c)Protection of worker rights-safety concerns, employee relations, anti-discrimination laws, minimum wage laws

Product

(1st market type) __________ (output) Markets Buying and selling private goods and services at mutually agreeable prices, HOUSEHOLD CONSUMERS are PRIMARY BUYERS (including government and international buyers) and FIRMS are PRIVATE SELLERS

Consumer Producer

(2 words) Markets are created and sustained by ___________ desires, not ___________ wishes! Since household consumers are sovereign in free societies, they assume a major role in defining social priorities

Moral Ethical

(2 words) ________ or __________ incentives (Moral Persuasion) Decisions (choices) made because it is the "Right Thing to Do". A BENEFIT is feeling good for doing something well, a COST is some sacrifice endured. Examples) Helping someone in need without pay, or giving to charitable organizations

Market Material

(2 words) __________ or ____________ incentives (Value: Profit, Satisfaction) (Price: Cost, Risk Exposure) People's decision to purchase or not purchase a good based on perceived/actual benefits and costs. $$$******PEOPLE'S Response to MATERIAL incentives brings about effective rationing and social accountability in lieu of scarcity

Coercion Compulsion

(2 words) ____________ or ___________ (Laws, Regulations) People act against the violation of laws to avoid fines, penalties and retribution. Avoidance of a monetary penalty is a reward.

Distribution

(2/3 economic roles of society) ___________(Income Redistribution)-Establishment of public or entitlement programs such as -social security and Medicare -Welfare, food stamps, Medicaid -Federal Disability -Unemployment Insurance

Resource

(2nd Market type) _________ (factor or input) Markets The provision and the use of productive assets at mutually agreeable costs, FIRMS are PRIMARY USERS "buyers"(including Government organizations) and HOUSEHOLDS are PRIMARY PROVIDERS "sellers". Examples-Labor markets, Land markets

Stabilization

(3/3 economic roles of society) ____________ FISCAL POLICY- Creation of federal budge deficits or surpluses to smooth out fluctuations in domestic production, while reducing the possibility of unsustainable high cost of living or massive unemployment. These policies. if effective, can result in greater economic growth potential and prosperity

Financial Capital

(3rd Market Type) ____________ _________ (money) Markets Mutually beneficial exchanges that entail provisions and uses of loanable funds -the providers of funds are savers -the users of funds are borrowers -Market intermediaries such as commercial banks, credit unions, investment bankers, federal reserve Examples) stock and bond markets, Mutual funds

Household

(Private Sector)_______________ subsector-"comprised of people" as major consumers of goods and services, and primary owners and providers of essential resources(upper/middle/lower income)

Government

(Public Sector) ______________ assumes three economic roles in our society: 1. Allocation 2. Distribution 3. Stabilization

Economic System

-A nation wide organization initiative (collection of enterprises) that confronts and alleviates (lessens) the impact or relevance of scarcity -A set of institutional arrangements and a coordinating mechanism for prioritizing consumption, organizing production, and allocating limited resources to higher and better uses

C

1. Microeconomics focuses on: A) issues such as unemployment and inflation. B) total production and the general price level. C) the individual institutions that make up the entire economy. D) the entire economy as a whole

D

10. Which of the following is not a question that scarcity forces all societies to answer? A) Which goods and services are to be produced? B) How are goods and services to be produced? C) Who will get the goods and services produced? D) How can scarcity be eliminated?

B

11. A system of economic organization in which the ownership and control of productive capital assets rests with the state and resources are allocated through central planning and political decision making is called: A) a market economy. B) a command economy. C) a corporate economy. D) capitalism. E) a unified economy.

A

12. The circular flow diagram presented in class shows the: A) flow of goods, services, and payments between households and firms. B) influence of government on business behavior. C) role of unions and government in the economy. D) interaction among taxes, prices, and profits. E) only the economy's banking system.

D

13. Every country in the world, regardless of its political or economic system, must determine: A) how goods and services will be produced. B) what goods and services will be produced. C) who will receive the goods and services that are produced. D) all of the above.

B

14. The way a society is organized to make the basic economic decisions is referred to as its: A) output strategy. B) economic system. C) production network. D) social-economic structure.

B

15. A society's economic system is defined by: A) the degree of scarcity it faces. B) the way in which basic economic decisions are made. C) the forms into which its businesses are legally organized. D) its type of government; that is, whether it has a dictatorship or a democracy.

D

16. In a market economy, the willingness and ability of buyers to purchase goods and services helps to: A) set the prices of those goods and services. B) determine who gets the goods and services. C) determine what goods and services will be produced and in what quantities. D) all of the above.

D

17. For a pure market economy to work: A) buyers and sellers must be able to communicate through prices. B) business owners must be free to make their own decisions and operate with a profit motive. C) individuals must have private property rights to own and dispose of goods, services, and resources. D) all of the above.

D

18. Private property rights: A) are one of the defining elements of capitalism. B) are essential to the operation of a market economy. C) allow individuals to own and use resources, goods, and services as they choose. D) all of the above.

A

19. Microeconomics, unlike macroeconomics, focuses on: A) individual households and businesses, and how they make decisions. B) households and businesses as groups, and their relationship to other households and businesses. C) individual households and businesses, and how their behavior affects overall economic activity. D) households and businesses as groups, and how their behavior affects overall economic activity.

C

2. Macroeconomics focuses on: A) how a business determines how much of a product to produce. B) the individual institutions that make up the whole of the economy. C) total domestic production and the general level of prices in the economy. D) studies of how individual markets and industries are organized.

C

21. The majority of household income is used for: A) taxes. B) saving. C) spending. D) entertainment.

B

22. If a concert ticket costs ten times as much as a movie ticket, the decision to attend the concert will require the additional benefits from the concert be: A) at least as much as the additional benefits from attending the movie. B) at least ten times as much as the additional benefits from attending the movie. C) no more than ten times as much as the additional benefits from attending the movie. D) none of the above.

D

23. Which of the following is an example of an individual responding to an incentive. A) Purchasing a product at the lowest possible price. B) Purchasing a product that is most beneficial, useful or valuable. C) Accepting the highest paying job offer. D) All of the above

B

3. Which is the correct match of an economic resource and payment for that resource? A) land and profit B) capital and interest income C) entrepreneurial ability and wages D) labor and rental income

C

36. Laissez-faire capitalism: A) is concerned with placing the interests of the state above the interests of individuals. B) holds that, for the sake of fairness, the state should decide how much income people will receive. C) holds that individual decision making with minimal government intervention will maximize the interests of society. D) all of the above.

Incentive

Also called Coordinating Mechanisms. Def-A COST(price) and/or PERCIEVED BENEFIT (value) that motivates a choice or action on behalf of consumers, producers, and other decision makers Costs and benefits can be a. direct or indirect b. explicit or implicit c. strictly private d. social

factors of production

All _______ __ ___________(3 words) have in common- 1. More productive resources are higher valued 2. All relative resources are scarce or limited 3. Many resources have competitive or alternative uses. Due to limitations, all productive resources must be rationed through prices. 4. The inherent value and income potential of resources often prescribes the highest and best use 5. Resource assignments entail the consideration of social benefits

Production

The engagement of resources in a manufacturing process or service establishment to create value is called ____________

Poverty

Annual household "discretionary" income is insufficient to support material needs, much less material wants

Social

Economics is a ________ science

Cooperative

Enterprises that are operated and controlled by a group of owners, where each owner has a vested interest in that company. Agricultural _____________ are very popular!

Social Norms

Factors that influence the existence, evolution and sustainability of markets -Transportation and communication infrastructure -_________ _________ a. Religious and Ethical systems b. Customs and Traditions c. Mass Media d. Education

labor

Households act as suppliers when they provide ______ services to firms and governments

buyers sellers

In a circular flow model, households are product ________ while firms are product ________ in PRODUCT MARKETS

Consumer Sovereignty

In market economies, consumption PLANS(priorities) are revealed by household BUDGETS (spending), shaped by MATERIAL INCENTIVES, and acted upon by profit seeking firms

Facets

Market _________ a)Delineated by product and service lines, on a GEOGRAPHICAL or CONSUMER GROUP basis b)Considered the most ideal means of organizing economic activity. Fait market environments usually reward GOOD DECISIONS and while penalizing BAD DECISONS

Output Income

Measures of production- 1. ________: physical units manufactured, which is limited by the available resources or productive capacity. 2. ________ (Value Added) measured in monetary terms.

factors of production

PRODUCTIVE RESOURCES are also referred to as _________ ___ _____________. These are land labor, capital, and entrepreneurial ability

market

Prices and social value of goods and services are _______ determined

Command

Pure _________ Economy -all resources are owned and managed by the STATE. STATE ENTERPRISE SYSTEM(no private ownership of property) -All enterprises are NON-COMPETITIVE -TOTALITARIAN STATE(open elections and free enterprise DO NOT EXIST) -COLLECTIVISM/WELFARE STATE-Buying and selling activities do occur, but with keen STATE "GOVERNMENT" OVERSIGHT -NATIONAL SOVERIEGNTY-central planners, political party, or a national leader will decide the what, how, how much, where to produce

Objectives

Resource Market ___________- 1. GREATEST REWARD-maximizing household income 2. Firms are rewarded for using the most productive and higher quality assets-profitability, improved reputation, improved market share 3. Use of resources in the most COST EFFECTIVE WAY-minimizing waste and minimizing costs

Relative worth

The __________ _______of any resource is prescribed by its UNIQUENESS and PRODUCTIVITY (time, effort, energy, and synergy to create value), which is rewarded to some degree.

Command

The _____________ economy is the opposite extreme alternative to pure capitalism. It is a system characterized by government ownership of all or nearly all property resources and centrally planned and administered production.

Consumption

The acquisition and use of a good or service to fulfill a need or want.

Politics

The attempt to invoke or induce economic and social change at the pleasure of certain constituencies.

wage

The largest source of income for a U.S. Household is ______ income

Services (Intangibles)

The performance of activities (productivity) that improves people's quality and standard of living are called ________

Economic Systems

The philosophical and institutional basis(rules, laws, guidelines) through which nations CONFRONT AND COPE WITH SCARCITY, as characterized by interactions among economic, political, legal and cultural aspects of social order!

False

True or False? Profit is the payment received by the owners of real capital.

True

True or False? Economics can be defined as the study of how societies make choices with regard to WHAT TO produce, HOW MUCH to produce, HOW TO produce, and FOR WHOM to produce.

competencies

Uniqueness of skill sets is called ______________

Goods are Rationed

________ ____ __________ through -first come, first serve(black Friday) -pricing (willingness/ability to pay) -random selection(lottery) -eligibility to purchase(alcohol)

Goods and Services

_____ ___ ________ are tangibles(products) and intangibles(activities) having the virtues of being useful and beneficial(valuable), and enhance our living standards

Bads and Disservices

______ _____ ___________ are tangibles (products) and intangibles (activities) that are destructive and tend to lower living standards. Goods and Services can be these if overused, misused, or abused.

Free Market

______ _______ Economy (Laissez-Faire) -Private and free enterprise system-resources are privately owned by individuals -Individualism/Democratic State-open elections/political and economic freedoms -consumer Sovereignty -Allocative Efficiency

Best

_______ use: Uses that are most productive, efficient, especially resources having specialized skills or unique attributes TECHNICAL/PRODUCTIVE EFFICIENCY a. Maximize production relative to resource limitations b. Output attainment with the least amount of resources

Economics

___________ is the social science concerned with the efficient use of scarce resources to achieve relatively high living standards. Our wants are many and diverse, and society strives to use productive resources to produce highly valued goods and render services that fulfill as many of these wants as possible. Since our wants exceeds the productive capacity of the economy, a system of incentives is established to optimize the use of scarce resources.

National Sovereignty

____________ "Government" _____________ In welfare economies, CONSUMPTION PLANS are synchronized with NATIONAL PRODUCTION PRIORITIES, as prescribed by social needs and what is in society's best interest (common good)

Distribution

____________ (Physical vs. Functional) Physical-Facilitated through transportation and communication networks/Supply chains-movement of goods from manufacturers to wholesalers to retailers, and ultimately to end users Functional-Income generating capacity (resource ownership/The distribution of wealth that segments the population into income groups (haves vs. have nots)

Institutional

_______________ Arrangements (Social Order) that create a decision making environment- Institutions of 1. Economic-collection of buyers and sellers 2. Political- Government/Politics 3. Legal-Constitution/Bill of Rights 4. Cultural-Marriage/family/churches/sports

Microeconomic

____________________ perspective: The study of smaller economic units -A detailed analysis and investigation of economic behavior with regard to consumers, producers, governmental entities, and how economic activities are organized through markets

Macroeconomic

______________________ perspective: Study of the national economy -An abstract (simplified) analysis and synthesis of the free enterprise system as a whole, including the flow of goods and services and resources throughout the entire economic "market" system

Created value

how well society values productivity is derived from those skill sets in relative terms is called ___________ __________

Scarcity

insufficient resources to satisfy unlimited wants.