Econ 104

40. Services make up about what percentage of the U.S. economy?

85%

38. Flu vaccinations of school children have the unintended effect of protecting the vulnerable elderly from contracting the virus. This is an example of a:

Positive externality

48. The risk that all loans will default at the same time is called:

Systemic risk

22. U.S. output represents about what percentage of total world output?

15

42. If the reserve ratio is 0.25, the money multiplier is:

4 (1/0.25)

Money multiplier.

46. The amount of money ultimately created per dollar deposited when people hold no cash is found using the:

45. What is exchanged in the financial sector?

All financial assets

4. The price mechanism is:

Also known as the invisible hand.

21. Which of the following is an example of the law of one price?

Because their countries have similar institutions, computer programmers in Germany and the United States either are or will be paid about the same.

Economics is an art because it:

Blends objective and subjective analyses

33. A commercial bank is a financial institution that:

Borrows from and lends to individuals and businesses.

23. Which of the following occur in the real world?

Both market failures and government failures

29. Bank reserves are:

Cash and deposits a bank keeps on hand or at the central bank.

15. Trade based on comparative advantage benefits:

Consumers in all countries.

39. Socialism in theory is based on the principle that individuals should:

Cooperate with one another to meet their needs.

28. A company such as Microsoft or Pepsi Co. is a legal hassle to organize, difficult to monitor, and possibly could double tax income. It is an example of a:

Corporation.

5. Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40 to you. Following economic reasoning, you should

Date Perry.

27. When a government bans prostitutions, it may do so because it considers prostitution to be a:

Demerit good.

26. Some nutritionists consider junk food or eating junk food an example of:

Demerit goods or activities.

47. Banks hold people's cash for free, and sometimes even pay for the privilege of holding it, because:

Deposits allow banks to make profitable loans.

11. If there is an inverse relationship between two variables, the graph relating the two variables will be:

Downward-sloping.

16. Because you can get more of one good only by giving up some of another good, the shape of a production possibility curve is:

Downward-sloping.

34. The value and functionality of money are determined by the:

General acceptability to other people.

socialism

Government planning, rather than the market, is relied upon to coordinate economic activity.

14. The slope of a line is zero when it is:

Horizontal

20. Mexico has a comparative advantage in producing corn:

If its opportunity cost of producing corn is lower than the opportunity cost in other countries.

17. Adam Smith argued that greater specialization and division of labor are likely to:

Improve standards of living.

44. Checking account balances are:

Included in M₁ and serve as a medium of exchange.

6. The price mechanism that guides people's actions is called the:

Invisible hand.

2. Brooke and Sandy both attend the same college and have the same expenses for tuition, books, and supplies. However, Brooke is a famous actress who could earn $2 million per year if she were not attending college whereas Sandy could earn $10,000 a year serving hamburgers if he were not attending college. It follows that the opportunity cost of attending college:

Is greater for Brooke than for Sandy

24. A business is likely a sole proprietorship if:

It has only one owner who has unlimited liability.

25. Governments can make trading easier and more beneficial by:

Limiting private restrictions on trade.

7. The fact that the price of a gallon of milk is likely to be more expensive at a convenience store than at a supermarket is an example of:

Market forces.

43. When a clerk gives you a pair of jeans for your $20 bill, money is serving which function?

Medium of exchange

35. Real assets are created by:

Real economic activity, such as the construction of a house.

30. Flows that do not enter the spending stream enter the financial sector in the form of:

Saving

31. In POW camps during World War II, everything was traded for cigarettes. For example, one bar of soap cost two cigarettes, two candy bars cost four cigarettes. During the time of the POW camps, cigarettes:

Served as money because they served as a unit of account, medium of exchange, and store of wealth.

41. State and local governments do not receive income directly from which source?

Social security taxes

8. Which of the following topics is most appropriately studied in a microeconomics course?

The decision by a nurse to change professions

19. The text attributes the growth of economies over the last 200 years largely to:

The development of markets

13. Countries gain from trade by producing:

The goods they can produce at the lowest opportunity cost.

9. Which of the following is a normative statement?

The governments should spend more to aid the poor.

12. If there is a direct relationship between two variables, the graph relating those two variables will be:

Upward-sloping.

3. The opportunity cost of attending college for one year is best measured by the:

Value of the next-best activity forgone by attending college

18. Which of the following is an example of the law of one price in action?

Wages in India are lower than wages in the United States, and so firms move their call centers to India. This tends to raise wages in India and depress wages in the United States.

Profit

What is left over from total revenue after all of the appropriate costs have been subtracted?

32. The financial liability that makes the real economy function smoothly for its liquidity and its acceptability is called:

money

49. Socialism, in principle, is an economic system based on individuals' goodwill towards others.

true

50. In a capitalist system, ownership of the means of production traditionally resides with a small group of individuals.

true

10. Which of the following is not one of the three central coordination problems of the economy given in the book?

whether