UNIT 1 EXAM STUDY GUIDE

CH2 Which of the following sayings best reflects the concept of opportunity cost?

"Time is money"

CH2 Alyssa needs a new bathroom. She finds Albert, a contractor, through an ad he posted in the local newspaper. Albert paid $50 to post the ad in the newspaper. After Alyssa and Albert agree on the price for the new bathroom, they sign a contract, which Alyssa has a law firm write up for $75, stating that Albert will install Alyssa's new bathroom for $2,000. The transaction costs associated with this exchange are (*blank*)

$125

CH3 Jeff buys a new shirt for $50. if his willingness to pay is (*blank*), he received consumer surplus of $15 on his purchase - $15 - $35 - $50 - $65

$65

CH1 Which of the following policy changes is most likely to lead to a rise in the birthrate in a country? - An increase in taxes imposed on those who have children - A decrease in the child tax credit - A reduction in the taxes imposed on those who have children - An increase in income taxes in the country

- A reduction in the taxes imposed on those who have children

CH1 Which of the following is part of the economic way of thinking? - opportunity costs will always be incurred when scarce resources are used to produce a good. - when the cost of an option increases, individuals will be less likely to choose it. - in addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. - All of the above are part of the economic way of thinking.

- All of the above are part of the economic way of thinking.

CH1 Consider the following scenario: "Crystal is training for a triathlon, a timed race that combines swimming, biking, and running. While Crystal usually practices swimming for two hours per day, she decides to continue for an additional hour because the pool is less crowded than usual today allowing her practice time to be more productive." Which basic principle of individual choice does Crystal's plan illustrate? - Decisions are made at the margin. - People usually exploit opportunities to make themselves better off. - All decisions involve opportunity costs. - Resources are scarce.

- Decisions are made at the margin.

CH2 Chick-fil-A's "Eat Mor Chikin" advertising campaign features three cows holding signs that say things like "Save the cows, eat more chicken." If consumers began eating more chicken and less beef, would the cattle population increase or decrease? - Decrease. Because cattle are privately owned, when the market demand for beef declines, suppliers will reduce their herds of cattle. - Increase. Because cattle are privately owned, the market demand for beef creates an incentive for suppliers to maintain herds of cattle and protect them under a system of private ownership.

- Decrease. Because cattle are privately owned, when the market demand for beef declines, suppliers will reduce their herds of cattle.

CH1 Suppose that Charles, who is a policymaker in the state of Cargomix, believes that air and water pollution should be reduced to zero. What secondary effects might such policies have? - Firms that face increased costs of pollution reduction may end up hiring fewer workers as they cannot afford to produce as much as they did before. - If firms are required to reduce pollution levels to zero, the prices of goods and services produced will fall significantly. - If firms are required to reduce pollution levels to zero, the employment rates in the economy will rise. - Zero pollution in an economy will lead to an abundance of resources for the entire economy.

- Firms that face increased costs of pollution reduction may end up hiring fewer workers as they cannot afford to produce as much as they did before.

CH2 Which of the following accurately defines the law of comparative advantage? - Individuals, firms, regions, or nations can gain by specializing in the production of goods that they produce at a low opportunity cost and exchanging them for goods they produce at a high opportunity cost. - Individuals, firms, regions, or nations can gain by replacing old products and production methods with innovative new ones that consumers judge to be superior. - Individuals, firms, regions, or nations can gain by specializing in the production of goods that they produce at a high opportunity cost and exchanging them for goods they produce at a low opportunity cost. - Individuals, firms, regions, or nations can gain by adopting a new product or process.

- Individuals, firms, regions, or nations can gain by specializing in the production of goods that they produce at a low opportunity cost and exchanging them for goods they produce at a high opportunity cost.

CH2 If you have private-ownership rights to something, what does this mean? - It means that you can transfer, sell, or mortgage the good. - It means that you have the right to do anything you want with the good. - It means that you paid for the good. - It means that you have the right to infringe on the rights of others.

- It means that you can transfer, sell, or mortgage the good.

CH7 Why is real GDP a more accurate measure of an economy's production than nominal GDP? - Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not. - Real GDP includes the value of exports, but nominal GDP does not. - Real GDP is not influenced by price changes, but nominal GDP is.

- Real GDP is not influenced by price changes, but nominal GDP is.

CH1 Which of the following is true about a market economy? - Resources are rationed through government permits and quotas. - Resources are rationed through government incentives. - Resources are rationed through the price mechanism. - The economy can freely satisfy all its needs and wants.

- Resources are rationed through the price mechanism.

CH1 How would a change in the meeting time of the introductory economics course, from 11:00 AM to 7:30 AM, affect a student's decision to attend the lectures? - The change in the meeting time would have no effect on a student's decision to attend the class. - The change in the meeting time would reduce the incentive of a student to attend the class. - The change in the meeting time would make it more likely that a student would attend the early class. - The change in the meeting time would encourage students to attend the early class.

- The change in the meeting time would reduce the incentive of a student to attend the class.

CH1 Suppose that the government raises the permissible minimum wage to $15 per hour. Which of the following describes a secondary effect that will likely result from this action? - The rise in the minimum wage will lead to an increase in the on-the-job training opportunities available to low-skill workers. - The rise in the minimum wage may lead to an increase in the level of poverty in the country as fewer workers are hired by businesses that cannot afford the higher wages. - The rise in the minimum wage will lead to a drastic fall in the poverty rate in the country. - The rise in the minimum wage will lead to a reduction in the unemployment rate of low-skill workers.

- The rise in the minimum wage may lead to an increase in the level of poverty in the country as fewer workers are hired by businesses that cannot afford the higher wages.

CH1 Consider the following statement: "Local government bans on plastic grocery bags due to environmental concerns have led to increased emergency room visits and deaths related to harmful bacteria such as E. coli, as many people do not wash their bags after each use." Which of the following best characterizes the statement? - The statement demonstrates that even when government policies are enacted with good intentions, they do not always guarantee good outcomes due to unintended consequences and secondary effects. - The statement shows that all environmental regulations have benefits that exceed the costs. - The statement demonstrates that normative economics is often confused with positive economics. - The statement is an example of the fallacy of composition because all foods do not contain harmful bacteria.

- The statement demonstrates that even when government policies are enacted with good intentions, they do not always guarantee good outcomes due to unintended consequences and secondary effects.

CH1 Suppose that Kate makes the following statement: "Our agricultural policy should not involve the subsidization of farmers. That money should be spent on other projects." Is this a positive statement or a normative statement?

- This is a normative statement.

CH1 The government enacts a policy to protect red-cockaded woodpecker habitats—if the woodpeckers are found on or near a property, the use of that property would be restricted by the government. As a result, property owners cut down trees in order to prevent woodpeckers from building nests on or near their properties. This leads to a reduction in the habitat available for these birds. Which of the following statements is most applicable to this scenario? - This is an example of careful economic reasoning being utilized by the government. - This is an example of sound economic policy. - This is an example of unsound policy even though the intentions were good. - This is an example of the typical outcome of policies.

- This is an example of unsound policy even though the intentions were good.

CH1 Consider the following statement: "I examined the statistics for our basketball team's wins last year and found that, when the third team played more, the winning margin increased. If the coach played the third team more, we would win by a bigger margin." Which of the following applies to this statement? - This statement is correct because third teams always win by larger margins in basketball games. - The statement is logical and exhibits no fallacy. - This statement exemplifies the post hoc ergo propter hoc ("after this, therefore because of this") fallacy, whereby association is confused with causation. - This statement is correct. If the coach had played the third team more often, the winning margin would have increased.

- This statement exemplifies the post hoc ergo propter hoc ("after this, therefore because of this") fallacy, whereby association is confused with causation.

CH2 What is the major function of the middleman? - To lobby the government when it ignores the wishes of the people. - To enforce private-property rights - To reduce transaction costs - To increase transaction costs

- To reduce transaction costs.

CH2 Alyssa, the president of a company that makes electronic devices, borrows a large sum of money from the local bank to purchase machinery to make its latest line of smartphones. Smartphone technology is expected to ultimately make cell phones without PC-like functionality obsolete. As depicted in the above scenario, which of the following is an example of creative destruction? - Traditional cell phones exiting the market because of the introduction of smartphones - The new machinery used to make smartphones - The purchase of machinery used to make smartphones

- Traditional cell phones exiting the market because of the introduction of smartphones

CH2 In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is - an exchange broker - a middleman - a transactions specialist - an opportunity finder

- a middleman

CH1 Which of the following is a positive economic statement? - reducing unemployment should be the highest priority of the federal government. - an increase in unemployment benefits will increase the unemployment rate. - corporations should be prohibited from laying off workers during a recession. - congress should increase unemployment benefits during a recession.

- an increase in unemployment benefits will increase the unemployment rate.

CH3 In economics, the demand for a good refers to the amount of the good people - would like to have if the good were free - are willing to buy at various prices - need to achieve a minimum standard of living - will buy at alternative income levels

- are willing to buy at various prices

Consumer surplus is the area on the graph - above the supply curve and below the demand curve - below the demand curve and above the market price - that represents the gains that producers receive when they sell a product - that reflect the opportunity cost of producing the a good

- below the demand curve and above the market price

CH1 In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and services are referred to as - consumer goods - capital - marginal goods - infrastructures

- capital

CH3 If salsa and nacho chips are complements, an increase in the price of nacho chips would - increase the price of salsa - decrease the demand for salsa - increase the demand for salsa - have no effect on the demand for salsa

- decrease the demand for salsa

CH2 Richer economies often have more middlemen. Economic thinking indicates that such economies - suffer losses from these activities - gain since the opportunity costs of arranging trades would be higher without middlemen. - become progressively more wasteful, and middlemen are one sign of the waste - are unable to employ middlemen in any other way

- gain since the opportunity costs of arranging trades would be higher without middlemen.

CH1 The fallacy of composition is the incorrect view that - everything else is always held constant when a change occurs. - a small change in an economics variable will have unrecognizable but significant consequences on the economy. - when two events are associated, the one observed first must have caused the second. - if something is true for an individual, then it must also be true for the group

- if something is true for an individual, then it must also be true for the group

CH1 Which of the following is often referred to as the basic postulate of economics? - individuals act only out of selfish motives. - incentives matter --individuals respond in predictable ways to changes in personal costs and benefits - the accuracy of the assumptions is the best test of an economic theory - the value of a good is objective; it is equal to the cost of producing the good.

- incentives matter --individuals respond in predictable ways to changes in personal costs and benefits

A movement along a demand curve - is called a change in demand - is the result of a change in the price of the good - can be caused by many things - means the product is inelastic

- is the result of a change in the price of the good

CH3 Which of the following best explains the source of consumer surplus for good A? - many consumers pay prices that are greater than the equilibrium price of good A - many consumers would be willing to pay more than the market price for good A - many customers think the market price of good A is greater than its cost - many consumers think the demand for good A is elastic

- many consumers would be willing to pay more than the market price for good A

CH2 When the production possibilities curve is bowed out, resources are - equally well-suited to production of both goods - not being used efficiently - not equally suited to the production of both goods - available in larger and larger quantities as more of one good is produced.

- not equally suited to the production of both goods

CH3 The total economic cost of producing a good or service is called the - comparative value of construction - social consequence of resources - marginal valuation of output - opportunity cost of production

- opportunity cost of production

CH1 When an individual weighs her options and makes a choice that maximizes her benefit at the minimum cost, economists refer to this as a process of - rational decision making. - objective decision making because the value of goods is determined objectively. - marginal management analysis. - random decision making.

- rational decision making.

According to the law of supply, as the price of a good decreases - buyers will buy more of the good - sellers will produce more of the good - buyers will buy less of the good - sellers will produce less of the good

- sellers will produce less of the good

If the price of coffee decreases, the demand curve for tea (a substitute good) will - remain unchanged - shift to the right - shift to the left - do none of the above

- shift to the left

CH3 When economists say the supply of a product has increased, they mean the - supply curve has shifted to the right - price of the product has risen, and consequently, suppliers are producing more of it - supply curve has shifted to the left - amount of the product that consumers are willing to purchase at various prices has increased

- supply curve has shifted to the right

Which of the following would most likely increase the price of automobiles? - a decrease in the price of steel used to produce automobiles - an increase in the price of gasoline - a decrease in consumer income - the United Auto Workers union obtaining a substantial wage increase for auto workers

- the United Auto Workers union obtaining a substantial wage increase for auto workers

If coffee and cream are complements, a decrease in the price of coffee will cause - the demand for cream to decrease - the demand for cream to increase - the demand for coffee to increase - no change in the demand for cream; only quantity demanded would be affected

- the demand for cream to increase

CH1 If you win the lottery this would be great for you, but if everyone simultaneously won the lottery this wouldn't be nearly as good, why? - association is not causation - it is a violation of ceteris paribus - the fallacy of composition - what appear to be positive outcomes in society are actually normative

- the fallacy of composition

CH1 The opportunity cost of going to college is - the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. - the value of the best opportunity a student gives up to attend college. - zero for students who are fortunate enough to have all their college expenses paid by someone else. - zero, since a college education will allow a student to earn a larger income after graduation.

- the value of the best opportunity a student gives up to attend college.

CH2 Which of the following is true regarding value and exchange? - middlemen fail to create value since they do not expand the supply of physical goods - a good or service has a given value regardless of who uses it or how it is used. - if it were not for middlemen, transaction costs would be zero - voluntary exchange creates value by channeling goods into the hands of people who value them most.

- voluntary exchange creates value by channeling goods into the hands of people who value them most.

CH2 Compared to a situation where transaction costs are zero, the existence of transaction costs - will reduce the volume of trade - will reduce the gains from trade - may lead some buyers and sellers to employ middlemen -all of the above are correct

-all of the above are correct

CH3 Complete the following table by selecting the term that matches each definition. 1. A table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices 2. The amount of a good that buyers are willing and able to purchase at a given price 3. The claim that, with other things being equal, the quantity demanded of a good falls when the price of that good rises 4. A graphical object showing the relationship between the price of a good and the amount of the good that buyers are willing and able to purchase at various prices

1. Demand Schedule 2. Quantity Demanded 3. Law of Demand 4. Demand Curve

CH7 Based on this definition of GDP, indicate which of the following transactions will be included in (that is, directly increase) the GDP of the United States in 2020. 1. Roadway Motors, a U.S. automobile company, produces a convertible at a plant in Germany on March 15, 2020. Roadway Motors imports the convertible into the United States on May 3, 2020. 2. Chocolate Express, a Swiss chocolate company, produces a chocolate bar at a plant in Illinois on December 12, 2020. An elementary school student buys the chocolate bar on December 24. 3. You chop down a cherry tree on your property in California and make a dining room table in 2020. A similar table sells for $800 in a local furniture store. 4. Awake Cafe, a U.S. coffee company, produces a latte at its location in Minneapolis on January 8, 2020. It sells the latte to a customer immediately. 5. Treetopplers, a U.S. lumber company, produces wood at a plant in Oregon on September 19, 2020. It sells the wood to Buildit and Partners, a developer, for use in the production of a new house that will be built in the United States in 2020. (Note: Focus exclusively on whether production of the wood increases GDP directly, and ignore the effect of production of the new house on GDP.)

1. Excluded 2. Included 3. Excluded 4. Included 5. Excluded

CH7 Nick and Rosa Zhou live in Swarthmore, PA. Rosa's father, Tim, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. 1. Rosa's father in Sweden orders a bottle of Vermont maple syrup from the producer's website. 2. Rosa buys a new BMW, which was assembled in Germany. 3. The Federal Aviation Administration expands the runways at Philadelphia International Airport, which is just a few miles from Nick and Rosa's house. 4. Rosa gets a new video camera made in the United States. 5. Nick's employer upgrades all of its computer systems using U.S.-made parts.

1. Exports (X) 2. Consumption (C) and Imports (M) 3. Government Purchases (G) 4. Consumption (C) 5. Investment (I)

CH1 Determine whether each of the following topics would more likely to be studied in microeconomics or macroeconomics. 1. The effect of a large government budget deficit on economic growth 2. How a change in interest rates by the Federal Reserve impacts unemployment 3. The effect of government regulation on a business firm's costs and prices

1. Macroeconomics 2. Macroeconomics 3. Microeconomics

CH1 Determine whether each of the following topics would more likely to be studied in microeconomics or macroeconomics. 1. The effect of a cigarette tax on the quantity of cigarettes sold 2. The effects of the internet on the pricing of used cars 3. The effects of government tax policy on long-term economic growth

1. Microeconomics 2. Microeconomics 3. Macroeconomics

CH1 Categorize each of these statements as either positive or normative. 1. In the past decade, U.S. companies have outsourced millions of jobs overseas. 2. Companies that outsource jobs are acting immorally. 3. If the U.S. government were to institute higher tariffs on imports, companies would stop outsourcing jobs. 4. The U.S. government should institute higher tariffs on imports.

1. Positive 2. Normative 3. Positive 4. Normative

CH1 Categorize each of these statements as either positive or normative. 1. In the past decade, U.S. companies have outsourced millions of jobs overseas. 2. Companies that outsource jobs are acting immorally. 3. If the U.S. government were to institute higher tariffs on imports, companies would stop outsourcing jobs. 4. The U.S. government should institute higher tariffs on imports.

1. Positive 2. Normative 3. Positive 4. Normative

CH3 Consider the market demand for cereal. Complete the following table by indicating whether an event will cause a movement along the demand curve for cereal or a shift of the demand curve for cereal, holding all else constant. 1. A change in the expectations of consumers about their future income 2. A decrease in the price of cereal 3. A change in tastes of consumers that makes them desire more cereal

1. Shift 2. Movement Along 3. Shift

CH3 Complete the following table by selecting the term that matches each definition. 1. A graphical object showing the relationship between the price of a good and the amount that sellers are willing and able to supply at various prices 2. A table showing the relationship between the price of a good and the amount of it that sellers are willing and able to supply at various prices 3. The claim that, other things being equal, the quantity supplied of a good increases when the price of that good rises 4. The amount of a good that sellers are willing and able to supply at a given price

1. Supply Curve 2. Supply Schedule 3. Law of Supply 4. Quantity Supplied

CH3 Apply your understanding of the previous key terms by completing the following scenario with the appropriate terminology. Your coworker Bob is really concerned about a project that he has just been assigned. He is in charge of analyzing and determining conditions in the market for televisions from an extensive sales report. If Bob's boss is interested in a graphical presentation of the relationship between the price and quantity of televisions supplied, you would advise your coworker to construct (*blank*) using the data provided. However, if Bob's boss is more interested in the detailed numbers used to construct this visual representation, you would instead advise your coworker that a (*blank*) would be more appropriate.

A Supply Curve; Supply Schedule

CH3 Surplus

A condition that exists when the quantity supplied is greater than the quantity demanded.

CH1 Which of the following are normative (rather than positive) statements? Check all that apply. - There are two policies designed to reduce alcohol consumption. You should support policy A. - People should drink less beer. - There are two policies designed to reduce alcohol consumption. Policy A leads to a larger reduction in the consumption of alcohol than policy B. - An increase in the price of beer will lead to people drinking less beer.

All of the above.

CH2 Capitalism

An economic system based on private ownership of productive resources and the allocation of goods based upon market prices.

CH7 Consumer Price Index (CPI)

An indicator of the general level of prices that attempts to determine changes in the cost of purchasing a market basket of goods bought by a typical consumer during a specific period.

CH1 Resource

An input such as land, labor, or capital that can be used to produce an economics good.

PERSONAL CONSUMPTION FORMULA (Expenditure Approach)

Personal Consumption = Durable Goods + Nondurable Goods + Services

CH3 Complements

Related products that are jointly consumed such that an increase in the price of one will causes a decrease in the demand for the other.

CH3 Substitutes

Related products that serve similar purposes such that an increase in the price of one will cause an increase in the demand for the other.

CH1 Macroeconomics

The branch of economics that focusees on how human behavior affects outcomes in highly aggregated markets.

CH1 Microeconomics

The branch of economics that focuses on how human behavior affects the conduct of affairs within narrowly defined units.

CH7 Depreciation

The estimated amount of physical capital that is worn out or used up producing goods during a time period.

CH1 Scarcity

The fundamental concept of economics that indicates there is less of a good freely available than people would like.

CH1 Opportunity Cost

The highest valued alternative that must be sacrificed as the result of a decision that is made.

CH3 Demographics

The statistical study of people groups within human populations.

CH2 Transaction Costs

The time, effort, or expense needed to search out, negotiate, and consummate an exchange.

CH7 Gross Domestic Product (GDP)

The total market value of all final goods and services produced domestically during a specific period, usually a year.

The term market always refers to

a group of buyers and sellers of a particular good or service

CH2 A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called - national socialism - the welfare state - a corporate economy - capitalism

capitalism

CH2 The discovery of a product or process is called (*blank*)

invention

CH1 Suppose that in the hypothetical country of Trashland, garbage cans are distributed on a first-come, first-served basis. This distribution rule gives the residents of Trashland an incentive to spend time (*blank*)

maintaining their place in line.

CH2 Complete the following statement on how international trade has influenced people's production levels and living standards. Trade channels goods to those who value them (*blank*) . Trade (*blank*) specialization, the division of labor, and mass production and over the years trade has (*blank*) living standards.

most; encourages; improved

CH2 The owners of private property will

use their property in ways that others value because the market will generally reward them with profits (or a higher selling price) if they do so

CH2 Before you started applying for college, a job recruiter offered you a full-time cashier position at a doctor's office, earning an after-tax salary of $21,000 per year. However, you turn down this offer and attend your first year of college. The additional monetary cost of college to you, including tuition, supplies, and additional housing expenses, is $32,000. You decide to go to college, probably because (*blank*)

you value a year of college at more than $53,000.

CH3 if the supply of a good is relatively inelastic, this means that the quantity supplied of the good is - not very sensitive to the price of the good - highly sensitive to the price of the good - unrelated to the price of the good - none of the above

- unrelated to the price of the good

CH1 Which one of the following states a central element of the economic way of thinking? - scarce goods are priceless - incentives matter --human choice is influenced in predictable ways by changes in personal costs and benefits. - the realism of the assumptions is the best test of an economic theory - when deciding how to allocate time, the concept of opportunity cost is meaningless

- incentives matter --human choice is influenced in predictable ways by changes in personal costs and benefits.

CH3 Shortage

A condition that exists when the quantity demanded is greater than the quantity supplied.

CH3 Equilibrium

A state of balance between conflicting forces, such as supply and demand.

CH2 Socalism

A system of economic organization in which the basic means of production rests with the state, and resource allocation is determined by centralized planning.

CH1 Marginal

A term used to describe the effects of a change in the situation.

CH3 Short Run

A time period of insufficient length to permit decision makers to adjust fully to a change in market conditions.

CH3 Long Run

A time period of sufficient length to enable decision makers to adjust fully to a change in the market.

CH2 Consider the following transaction. "Jones trades a used car to Smith for $5,000." Complete the following statement: This transaction (*blank*) improve the welfare of people.

Can

CH1 In order to pay for services such as health care, education, and highways, governments (*blank*) .

Collect taxes

CH1 True or False: Economizing behavior involves spending as little money as possible, even if it means that wants and needs are not fulfilled.

False

CH1 True or False: Marginal analysis involves comparing the average benefit derived from consuming several units of a product or service to the average cost of consuming those units of the product or service.

False

CH2 During the last four decades, entrepreneurs like Steve Jobs, Sam Walton, and Elon Musk have earned billions of dollars. Evaluate the following statement. True or False: The average American is worse off as the result of the economic activities of these individuals because they donate too much money, thus discouraging the less-privileged part of the population.

False

GDP FORMULA (Expenditure Approach)

GDP = Consumption (C) + Investments (I) + Government Purchases (G) + (Exports (X) - Imports (M))

CH7 Imports

Goods and services produced by foreigners but purchased by domestic consumers, investors, and governments.

CH7 Exports

Goods and services produced domestically but sold to foreigners.

CH7 Intermediate Goods

Goods purchased for resale, or used by firms to produce another good or service.

GROSS PRIVATE INVESTMENT FORMULA (Expenditure Approach)

Gross Private Investment = Fixed Investment + Inventories

INFLATION RATE FORMULA

Inflation Rate = 100 *multiply* ( Current Dated GDP Deflator - Past Dated GDP Deflator) / (Past Dated GDP Deflator)

REAL GDP FORMULA

Real GDP = Nominal GDP *multiply* (GDP Deflator in Base Year) / (GDP Deflator in Current Year)

REAL GDP PER CAPITA FORMULA

Real GDP Per Capita = (Real GDP) / (Population)

CH1 Each resource described in the table is an element of human resources, capital, or natural resources. In the following table, chose the correct type of resource illustrated by each example. Resource: 1. A truck used by a delivery service company 2. A field used for crops such as corn or wheat 3. The physical strength one develops through weight training

Resource type: 1. Capital 2. Natural Resource 3. Human Resource

CH1 True or False: Suppose that the hypothetical country of Andesland has a chronic scarcity of quinoa, its staple grain. This implies that the residents of Andesland need to ration quinoa.

True

CH1 True or False: We all face scarcity.

True

CH2 True or False: People have a much stronger incentive to conserve privately owned property than they do commonly owned property.

True

CH2 Economic thinking suggests that a nation in which middlemen are considered to be unproductive seekers of profit and where their activities are heavily restricted by law, will

lose the potential gains from trade that would result from lower transaction costs emanating from middleman activities

CH3 Which of the following would most likely increase the supply of beef?

lower prices of grains used to feed cattle

CH7 The gross domestic product (GDO) of the United States is defined as the (*blank*) all (*blank*) (*blank*) in a given period of time.

market value of; final goods and services produced; within the United States

CH2 Complete the following statement. People in business get ahead by (*blank*) the needs of their consumers. As a result, : - The gains of business are at the expense of suffering imposed on their customers. - Both businesses and customers benefit.

meeting; - both businesses and customers benefit.

CH1 The highest valued alternative that must be given up in order to choose an option is called - opportunity cost - utility - scarcity - disutility

opportunity cost

Adam Smith's invisible hand principle stresses

the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society.

NET EXPORTS FORMULA

NET EXPORTS = TOTAL EXPORTS - TOTAL IMPORTS

CH2 Property Rights

The rights to use, control or obtain benefits from a resource or good.