Macroeconomics - Chapter Review

Household income is made up of: 1. wages 2. interest 3. rent 4. profit

1, 2, 3, 4

three forms of economic systems

1. Traditional 2. Command 3. Market

A (an) __________________________ is an organizational structure for addressing, what, how and for whom to produce. a. economic system b. incentive c. basic economic question d. society's economic goal

A

Entrepreneurs who risk their own money and time to build a business receive: a. a profit. b. interest. c. rent. d. a wage.

A

Expenditures for which the government receives no good, service, or resource in return, are called a. a transfer payment. b. a factor payment. c. property right. d. a public good.

A

In recent years, e-book readers and downloadable ebooks have experienced great economic growth. What is one likely tradeoff of this etechnological change? a. Owners of traditional bookstores experience less economic security. b. The standard of living for people working in other entertainment fields declines. c. Sustainability is challenged as people throw old paper books away. d. Equity decreased among authors of different types of books

A

Resources are exchanged for money in: a. factor markets. b. product markets. c. international markets. d. the market for public goods

A

The United States has a: a. mixed economy. b. command economy. c. traditional economy. d. socialist economy.

A

What is the primary incentive for business owners in a market economy? a. earning profits b. meeting production quotas c. managing rationing d. achieving economic security

A

Which of the following is NOT one of the ways that the government can improve market performance? a. eliminating all regulations b. enforcing contracts c. enacting regulations d. enforcing property rights

A

Which of the following is a way that government activity reaches into the circular flow? a. acts as a buyer of resources b. acts as a receiver of transfer payments c. acts as a seller of resources d. acts as a payer of taxes

A

Which of the following is an economic goal that market economies do well in achieving? a. efficiency b. sustainability c. equity d. economic security

A

Which of the following is an example of a public good? a. removing snow from roadways b. buying a new computer c. buying a new car d. mowing the grass in your yard

A

Which of the following would most contribute to economic security within a society? a. Companies produce a great deal of well-paying jobs. b. Many households lack enough income to pay their bills on time. c. A large number of people apply for a limited number of job openings. d. The government decides to eliminate of the social safety net.

A

Need

A basic requirement for survival. Food, water, shelter.

An example of a microeconomic decision is a situation in which...

A firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits.

Scarcity

A fundamental economic problem facing all societies. A condition that results from having scarce resources and unlimited wants of people.

Production Possibilities Curve (PPC)

A graphic representation of the production relationship between two goods

Which of the following transactions would take place in the factor market?

A households that lends money to firms to buy capital

Utility

A measure of satisfaction. Variable

Productivity

A measure of the amount of output produced by a given amount of inputs in a specific period of time.

Economic Growth

A nation's total output of goods and services increases over time. The circular flow gets larger

Market

A place where buyers and sellers make exchanges

Circular Flow Model

A simplified model that shows how business firms, individuals, money, resources, goods, and services flow through our economy.

Economics

A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants.

Capitalism-Free Enterprise

A system where private citizens own the factors of production

Voluntary exchange

A trade made in which both parties benefit

The economic system in which the primary incentive is private gains and losses from voluntary exchange is: a. a traditional economy: b. a command economy c. a market economy d. all of the above

C

When an economy decides to distribute goods and service to its citizens based on their contribution to the society they are dealing with the economic question of: a. how to produce. b. when to produce. c. for whom to produce. d. what to produce.

C

When an economy decides to distribute goods and service to its citizens based on their contribution to the society they are dealing with the economic question of: a. how to produce. b. when to produce. c. for whom to produce d. what to produce.

C

Which economic goal did the economic system supported by the philosopher Karl Marx most strive to achieve? a. economic growth b. sustainability c. equity d. economic freedom

C

Which statement best summarizes the idea of equality of opportunity? a. Employers should be required to exercise fair hiring practices. b. All people should have the chance to purchase the same goods and services. c. Members of a society should have the freedom to choose among equal chances in life. d. Government leaders should ensure that all citizens have access to a social safety net.

C

________________ is the ability to keep things as they are indefinitely. a. Equity b. Economic growth: c. Sustainability d. Financial security

C

Which of the following would be a question about economic freedom?

Can the people in an economy make economic decisions for themselves?

Most resources are privately owned

Capitalist system

Models the interaction between key players in the economy

Circular flow diagram

Central planners make the important decisions about what, how, and for whom to produce

Command Economy

Advantages of command economies

Command economies can provide economic security. The central planners guarantee employment by assigning every person to a job that is part of the plan. No safety net is needed, because everyone works for, and is paid by, the government, and many basic needs such as housing, education, and medical care are provided by the government without charge. As long as the country has reached a level of production high enough to provide basic goods and services for everyone, a command economy can make great strides in eliminating hunger, homelessness, illiteracy, and extreme poverty. The Soviet Union and many other command economies eventually managed to satisfy the most basic needs of their citizens during the first half of the twentieth century. Command economies also have the ability to adjust rapidly to changing circumstances. If the government decides that more computers, more bridges, or more missiles are needed, it can quickly shift resources away from other types of production into these industries. This flexibility enabled many command economies to grow rapidly in the first half of the twentieth century, when resources were shifted away from consumer goods like food and clothing toward the production of physical capital, such as farm machinery, factories, highways, and harbors. At first, living standards fell dramatically because of shortages of consumer goods. Living standards rose again as the capital stock grew and production increased

An authoritarian government is most closely associated with which economic system?

Command economy

Guns v. Butter

Common production possibilities for wartime

Legislators from a single party, the Communist party, establish wages, oversee production, and allocate goods according to the needs of the citizens.

Communism

Which of the following would most contribute to economic security within a society?

Companies produce a great deal of well-paying jobs

A (an) ___________________ is the prospect of a reward or punishment that influences a decision or motivates action . a. social safety net b. tradeoff c. economy d. incentive

D

A ____________________ can be any form of government assistance for those with financial needs. a. opportunity cost b. tradeoff c. scarce resource: d. social safety net

D

All modern market economies: a. are command economies. b. contain a mixture of traditional and command economies. c. are traditional economies. d. are mixed economies.

D

Citizens with ________________________ have confidence in their ability to support themselves and their families. a. sustainability b. economic growth c. equity d. economic security

D

In a _____________ economy, most important decisions about resources are made by business owners and consumers. a. traditional b. mixed c. command d. market

D

In countries where social safety nets are very low we would expect to find: a. people working less. b. people saving less of their income. c. people paying higher taxes. d. people saving more of their income.

D

Incentives help individuals make economic decisions by: a. telling them the total cost of a certain good or service. b. always offering a monetary reward. c. determining what type of economic system a person lives under. d. providing a reason to accept the opportunity cost of a choice.

D

Which of the following is an economic goal that command economies do NOT do well in achieving? a. equity b. economic security c. economic growth d. economic freedom

D

Which of the following statements most closely relate to the economic question of what to produce? a. People do not necessarily have equal access to goods and services because of scarce money. b. An automobile manufacturing company may use many workers and few machines or many machines and few workers. c. Electricity can be generated using flowing water, wind, or sunlight. d. If more land is used to grow wheat, less land is available to grow oats.

D

Which of the following transactions would take place in the product market? a. firms paying taxes to government b. firms buying labor from households c. firms buying land from households d. firms selling goods to households

D

Which statement best explains why must government provide some public goods? a. Citizens are unwilling to pay taxes to governments that do not offer public goods and services. b. Voters expect government to be involved in the planning and management of the economy. c. Some goods are too important to be managed solely by buyers and sellers in a market. d. Market economies offer little incentive for producer to make certain shared goods and services.

D

Which statement best summarizes the idea of equality of outcome? a. Employers should be required to pay everyone an equal wage. b. Everyone should have a chance to get a good education. c. Producers should make equal amounts of goods and services. d. All people should have the same share of goods and services.

D

__________________ refers to the placement of limits on the amount of goods each person can purchase. a. Tradeoffs b. Sustainability c. Equity d. Rationing

D

Which of the following would be a question about equity?

Do a lot of people receive the goods and services, or do a small number of people reap the benefits of the country productivity?

Which of the following would be a question about a country's standard of living?

Do people enjoy plenty of goods and services, including things such as secure homes and reliable cars that make life more enjoyable?

Which of the following would be a good question about economic security?

Do the citizens have a high degree of confidence in their ability to support themselves and their families?

As for disadvantages, traditional economies rarely achieve the goals of:

Economic Freedom, growth, and high standard of living.

Which of the Following economic goals does a traditional economy do well at achieving?

Economic Security, Sustainability

Advantages of a traditional economy include:

Economic Security, Sustainability, and equitable distribution of goods and services.

With __________, people can make economic decisions for themselves.

Economic freedom

______________________ is sacrificed to ensure that every part of the central plan is obeyed.

Economic freedom

Countries with higher safety nets usually rank lower in:

Economic growth

________ is an increase in the amount of goods and services an economy can produce overtime.

Economic growth

Which of the following statements concerning economic models is FALSE?

Economic models are based on pure fact and no assumptions

An organizational structure for addressing what, how, and for whom to produce.

Economic system

Aggregate output

Economy's total production of goods and services for a given time period

The government also assists markets by ___________

Enforcing contracts

Labor force

Equal to the sum of employment and unemployment

In spite of the promises of their governments, most countries with command economies have failed to achieve acceptable levels of _____________.

Equity

Which of the following economic goals does a market economy struggle to achieve or fails at achieving altogether?

Equity

Which of the following is an economic goal that traditional economics do well in achieving?

Equity

__________ is the quality of being just and fair

Equity

Over time, governments in market economies have expanded their roles in the pursuit of:

Equity, Economic security, Sustainability

T or F; command economies achieve economic freedom well

FALSE

Rent paid for the use of land

Factor

Interest paid for the use of capital

Factor market

Profit paid to an entrepreneur

Factor market

Workers paid in California to make Levi's jeans

Factor market

A payment for the use of a resoruce

Factor payment

Deflation

Falling overall price level

A Mixed economic system describes the role of the national government in preserving marketplace competition.

False

A catalyst is an economic system with varied combinations of command, traditional, and market economies

False

American economic and social goals have stayed the same over time.

False

Between 2008 and 2010, the American economy went through a difficult economic period commonly known as the Great Depression.

False

Both goods and services are both counted as wealth

False

Capital-Intensive is a term that describes the number of people per square mile of land area.

False

Computers used to produce magazine articles are an example of Land.

False

Consumers and Producers do not have a relationship in a modern economy.

False

Countries like North Korea and/or Cuba are examples of mixed economies.

False

Economic growth can usually be achieved without investing in new resources.

False

Economic growth leads the Production Possibilities Frontier to contract.

False

In a Traditional Economy, questions of what, how, and for whom to produce, are answered by the buying and selling activities of individuals.

False

In general, people do not want their economic systems to create as many jobs as possible.

False

Japan employs more people than machines to produce goods.

False

Mixed economies work to the degree that they embrace democracy.

False

People's needs are unlimited.

False

People's skills, abilities, health, knowledge, and motivation all add up to entreprenuership.

False

Population Density is a term that denotes a particular method of production requires large amounts of investment in relation to labour.

False

Safety nets (Social security, welfare, etc.) are needed in command economies more so than in traditional or market economies.(T/F)

False

Scarcity is an economic problem with which only poor societies are faced.

False

Separation of tasks to be performed by different workers is known as Capital Investment

False

Socialist economies include aspects of both Command and Free-enterprise systems.

False

Someone who organizes and manages land, labour, and capital to earn a profit is known as a Consumer.

False

The driving force that encourages people to improve their material wel being and standard of living is known as Inflation.

False

The economic system that has some combination of traditional, command, and market economies is known as Popular Density.

False

The federal program that pays retirement benefits to most American seniors is known as Medicaid.

False

The government decides what to produce in all modern societies.

False

The independent Polish labour union founded in 1980 by Lech Walesa was called Keiretsu.

False

The measurement of a country's output and economic health is the Production Possibilities Frontier.

False

The model which represents the range of production possibilities is known as Gross Domestic Product.

False

The place where all the Factors of Production are bought and sold is known as the Product Market.

False

Today, almost all the former communist countries still maintain public ownership and central planning. (T/F)

False

Someone who organizes and manages land, labour, and capital to earn a profit is known as a Consumer.

False; Entrepreneurs

Adam Smith

Famous economist believed in the invisible hand guiding the economy to help nations become wealthy. Also laissez faire, division of labor, and specialization

A privately owned organization that produces goods and services and sells them to others

Firm

When an economy decides to distribute goods and services and services to its citizens based on their contribution to the society they are dealing with the economic question of:

For whom to produce

Exchanges of resources or goods for money take place voluntarily between parties.

Free-enterprise system

Capital goods

Goods that are used in the production process

Consumer goods

Goods used by people in their day to day lives

Which of the following economic goals does a traditional economy struggle achieve or fails at achieving altogether?

Growth, Equity, Freedom, Efficiency

Competition

Helps create better quality products and lower prices. Fundamental for free enterprise

The issues that an economic system attempts to solve include:

How to produce items, what to produce, for whom items are produced.

Which of the following statements most closely relate to the economic question of what to produce?

If more lan is used to grow wheat, less land is available to grow oats

The prospect of a reward or punishment that influences a decision or encourages greater effort.

Incentive

If economic research shows one thing, it is that ____________ shape(s) human behavior:

Incentives

Why is some government intervention most likely to be helpful in a market economy?

Incentives sometimes encourage producers to act in ways that are not beneficial to consumers.

Microeconomics focuses on...

Individual decision makers within the economy.

_____________________ Can disrupt the production of many other goods and cause the entire (command) plan to fail.

Insufficient production of one good.

Which of the following would be a question about economic growth?

Is the economy experiencing an increase or a decrease in the amount of goods and services it can produce over time?

Unemployment rate

Is the percentage of the labor force that is unemployed

Factors of Production

Land or natural resources, labor or human resources, capital resources are the machines used for the production, and entrepreneurship will bring the factors together. All four parts are necessary.

Factors of production/resources

Land, labor, capital & entreprenurial ability

The standard of living in command economies is:

Low despite the abundance of jobs

Which of the following is a statement with positive economic analysis?

Lower wages increase employment and reduce the unemployment rate, a reduction in the size of the budget deficit will reduce interest rates, and slower money growth reduces inflation.

Profit Motive

Making money is the driving force behind the creation and continued development of products in the market place. Fundamental for free enterprise

Most key decisions are made by business owners and consumers.

Market Economy

Which statement best explains why must government provide some public goods?

Market economies offer little incentive for producer to make certain shared goods and services.

The label _____________ applies whenever private ownership and voluntary exchange play a major role.

Market economy

Which of the following is a normative economic statement?

Men and women should earn the same salary if they perform the same job.

Combines a market economy with government involvement.

Mixed Economy

Private Property Rights

The ability to own property allows people to use it for their own benefit. Fundamental for free enterprise

Which of the following is a microeconomic topic?

The advertising strategy of a particular company

Economics is the study of

The allocation of scarce resources to satisfy unlimited wants.

Opportunity Cost

The cost of the next best alternative when making a choice. 99% of students that came to school today say that their next best alternative was to be sleeping.

Consumer sovereignty

The customer is always right. Products will only be successful if they are wanted in the market place.

Gross Domestic Product (GDP)

The dollar value of all production within a country's borders.

The incentives in a command economy come from __________________.

The government

Which of the following is a normative economic statement?

The government should increase spending during times of economic recession.

In each typeof command economy, key resources and businesses are owned by:

The government, group of workers

Incentives in a Command Economy

The incentives in a command economy come from the government. To ensure fulfillment of the plan, rewards and punishments are given to the managers of factories, transportation systems, schools, and other key enterprises. Those who meet their production quotas might be rewarded with better jobs, nicer apartments, or access to luxury goods such as cars or vacation homes. Those who fall short may be demoted or transferred to less desirable locations. Anyone caught using government-owned resources for personal gain is likely to receive a stiff prison sentence. These incentives are designed to ensure that production goes as planned in each industry and to avoid glitches and delays that can have a domino effect across industries and cause the central plan to fail

Incentives in a traditional economy

The incentives include social approval for performing well at a traditional role and disapproval for rebelling against traditions of performing poorly.

Invisible hand

The market acts to help people make wise decisions. Businesses have to make and sell products that are needed or wanted to be able to be successful and allow for a healthy growing economy.

Which are the two markets represented in the simplest circular flow diagram?

The market for goods and services and the market for factors/resources

Opportunity cost

The next best alternative when making a choice

Unemployment

The number of people who are actively looking for work but aren't currently employed

Which of the following is a positive economic statement?

The rate of unemployment of young African-Americans exceeds that of white Americans

Inflation

The rising of prices

Macroeconomics

The study of aggregate economic variables such as national income, employment, interest rates, exchange rates, and prices. Often because of aggregation, index numbers are used to represent macroeconomic variables. Examples are the unemployment rate, the trade-weighted exchange rate, and the consumer price index

According to economic theory, how do people make decisions?

They make decisions based on their own self-interest.

Consider the case of a teacher who tells students that those who miss more than three classes for any reason will automatically receive a lower grade.

This is an example of a negative incentive for students to attend class.

An economy in which the incentives are primarily based on a system of social approval for performing well and disapproval for rebelling or performing poorly is a:

Traditional economy

Decisions about resources are made by habit, custom, superstition, or religious tradition.

Traditional economy

An expenditure for which the government receives no good, service, or resource in return

Transfer payment

A developer of any new smartphone app is known as Entrepreneurship.

True

A fourth-grade teacher is an example of Labor.

True

A market economic system where people freely engage in economic activity, but are still subject to governmental regulations is known as Free-Enterprise Economic System.

True

A voucher is a certificate used to purchase government-owned property during privitization.

True

Collectivization is the process of forced common ownership of a nation's factors of production.

True

Command economies have the ability to adjust rapidly to changing circumstances.(T/F)

True

Economic action done or brought about by free choice is known as Voluntary exchange.

True

Economic growth is an increase in a nation's output of goods and services over time.

True

Economic growth is necessary as a nation's population increases for the Standard of Living to stay the same.

True

Food is an example of a Non-durable Good.

True

Manufactored goods which are used in the production of other goods or services are known as Capital Goods.

True

Market economies may provide too few incentives to conserve resources and adopt renewable alternatives. (T/F)

True

Mixed economies can evolve when societies with different kinds of economies interact.

True

Reliance on others to produce goods and services we need is known as Economic Interdependence.

True

Social Security is one example of how Americans have modified their Free-enterprise economic system.

True

Socialism can be described as a more liberal version of a Command Economy.

True

The consumer is the ruler of the market in determining goods and services produced.

True

The fundamental economic problem faced by all societies is known as Scarcity.

True

The fundamental restructuring of the Soviet economy, introduced by President Mikhail Gorbachev, was called Perestroika.

True

The independently owned group of Japanese business firms united to regulate competition is known as the Keiretsu.

True

The mechanism through which buyers and sellers of an economic product or service come together is known as the Marketplace.

True

The minimum wage was established at federal and state levels as the lowest legal wages that employers can pay the majority of their workers.

True

The profit motive is what drives people and organizations to improve their material well being and standards of living.

True

The quality of life in a specific country is measured by the Standard of Living.

True

The rainy season for the Southern American States is an example of Land.

True

There is always some degree of government involvement in a mixed economy.

True

Depression

Very deep and prolonged downturn

The incentive problem in command economies generally leads to_________________.

Weak economic growth.

The economic concept of tradeoffs is most closely associated with the basic question of:

What to produce

Basic Economic Questions

What, How, Who. Each society has to decide what to produce with their scarce resources, and how they are going to produce it. Finally, they need to decide who gets what is produced.

Price stability

When the aggregate price level changes only slowly

Illegal "Underground" markets flourish:

When the goods consumers want aren't available in adequate quantities.

Price floor

When the government sets a price above equilibrium and establishes this as the minimum price that may be charged for that good or service.

Price ceiling

When the government sets a price below equilibrium and establishes this as the maximum price that may be charged for that good or service

Scarcity

When there are not enough resources to satisfy our unlimited wants and needs

Product Market

Where goods and services are exchanged in the circular flow model

Factor Market

Where the factors of production are exchanged in the circular flow model

Services

Work done for you. You don't usually receive a good. Ex. Auto repair

Value

Worth of a good or service as determined by the market

Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters. From the economist's perspective, was Sara behaving rationally when she bought those shoes?

Yes, as long as Sara didn't intentionally purchase blister-causing shoes.

Based on your understanding of your roommate's preferences, you predict that he will select spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?

You constructed a model that made a prediction, and the prediction was refuted.

Country X has a socialist economy. Which person or group most likely controls energy resources in Country X?

a government agency

The economic system in which the primary incentive is private gains and losses from voluntary exchange is:

a market economy

"All Americans should have access to health care" is an example of

a normative statement

"No individual should have less than $20,000 income in the United States in2010" is an example of

a normative statement

The difference between positive statements and normative statements is that

a positive statement is a statement of fact and a normative statement involves value judgments.

Economic models are

a simplified representation of the real world

Consumers can influence the production and sale of goods by doing which of the following?

a. 'Voting' with their dollars

Which of the following statements best describes the Communist Ideal ?

a. A classless society in which everyone works for the common good.

A nation's wealth is determined by which of the following?

a. Accumulation of all tangible and intangible resources.

Which of the following is a feature of a Command economy that distinguishes it from a Socialist economy?

a. All production is managed by the government.

Which of the following characteristics describes the PPF Curve?

a. Bowed Outward

Which of the following can be concluded about Capitalism from the economic growth of South Korea in the late 20th Century?

a. Capitalism can restore a damaged economy.

Which of the following is something that stimulates activity among forces or people ?

a. Catalyst

The struggle among sellers to attract consumers is known as which of the following?

a. Competition

A car is an example of which of the following?

a. Durable Good

What economic phenomenon is occurring when a nation's total output increases over time?

a. Economic growth

in its role as protector of the American free enterprise system, which of the following is one of the issues with which the government must face?

a. Environmental Hazards

Which of the following is the vocabulary term for Gross Domestic Product on a per person basis ?

a. GDP per Capita

Which of the following was the central planning authority in the former Soviet Union?

a. Gosplan

The dollar value of all final goods, services, and structures produced in a country in one year is known was which of the following?

a. Gross Domestic Product

The most comprehensive measure of a nation's wealth is provided by which measurement?

a. Gross Domestic Product

Which of the following is NOT an economic question faced by all societies?

a. How much does this cost?

Scarcity in economics exists:

a. If we desire more of something than we can have

Which of the following is a disadvantage of a market economy?

a. It sustains a high degree of uncertainty.

Why did Sweden move from socialist economic policies in the 1970s to mixed economic policies in the 1980s?

a. Its citizens objected to the nation's high rate of taxation.

Which of the following describes an economic system with a combination of command, traditional, and market economic systems? (There are two answers).

a. Mixed Economic System b. Hybrid Economic System

Which of these helps explain why mixed economies develop?

a. People become unhappy with aspects of their current economic system.

Which statement describes why the people in a nation with a Command Economy might resist a shift to a Free-market Economy?

a. People who hold political power are threatened by systemic changes.

The amount of output in a specific amount of time with a given amount of resources is referred to as which of the following?

a. Productivity

The efficient use of scarce resources is called which of the following?

a. Productivity

Which of the following allows people to own and control their possessions as they see fit (provided it does not interfere with the same rights of others)?

a. Property Rights

Which of the following is a system in which government owns and controls some factors of production?

a. Socialism

Which statement best explains the underlying cause of the law of increasing opportunity cost?

a. Some resources are better suited for one type of production than another.

Which of these is an accurate statement about mixed economic systems today?

a. There are more mixed economic systems in the world today than any other type of economic system.

When deciding how to use resources, you need to evaluate the costs and benefits of each choice to decide which meets your criteria. These are called which of the following?

a. Trade-offs

The way in which the 19th Century Inuit divided the 'spoils of the hunt' demonstrates the functioning of which of the following?

a. Traditional Economy

Inflation causes people to do which of the following?

a. Work more to pay for basic necessities

Which of the following is a way that government activity reaches into the circular flow

acts as a buyer of resources

These restrictions on trade ______ for trades to take place

actually make it easier

All modern market economies:

are mixed economies

The economic concept of tradeoffs is most closely associated with the basic question of: a. how to produce. b. what to produce. c. for whom to produce. d. how much to produce

b

A nation's wealth is made up of which of the following?

b. All Goods and Services

Asha went into business for herself as a hair stylist. Which of the following gives the best example of how Asha uses the scarce resource physical capital?

b. Asha bought scissors and a hair dryer to style hair

What kind of economy offers uniformity in wages regardless of occupation or individual productivity?

b. Command and Socialist Economies

The role of the consumer as the ruler of the marketplace is known as which of the following?

b. Consumer sovereignty

The movement which promotes the rights of buyers and consumers is which of the following?

b. Consumerism

An economy is based upon which of the following when it is capitalistic and has free and open markets?

b. Free Enterprise

Paradox of Value is the economic phenomena where which of the following occurs?

b. High valuation of a non-essential item and a low valuation of an essential item.

Which of the following motivates people to work, save, and invest their incomes?

b. Incentives

A general rise in the aggregate price level is known as which of the following?

b. Inflation

In the country of Argentina, an entreprenuer has introduced a new technology that makes manufactoring twice as efficient as before. How is this likely to affect the production possibilities frontier?

b. It would expand the frontier.

Suppose that the US economy produces 100 units of dog collars and 50 units of cat collars. If consumers became much more interested in buying cat collars, what opportunity cost would most likely result?

b. Many fewer dog collars would be produced.

What is the name of the federal health insurance program for senior citizens?

b. Medicare

The economic system of these United States is considered to be which of the following?

b. Mixed

Which of the following is largely responsible for the large economic growth in a free enterprise economic system?

b. Profit Motive

An increase in the number of workers in an economy and an increase in the amount of capital will cause which of the following?

b. Shift the PPF Curve to the right

Which country is an example of a successful nation trasitioning to Capitalism?

b. Singapore

The tendency for the opportunity cost of a good to rise as more of the good is produced is called which of the following?

b. The Law of Increasing Opportunity Costs

In the context of the production possibilities frontier, opportunity cost refers to which of the following?

b. The value of the next best alternative.

What have some states done to protect workers from adverse economic events such as layoffs and illnesses?

b. They set up unemployment compensation programs.

Societies are faced with which thee basic questions about production of goods?

b. What to Produce, How to Produce, & For Whom to Produce

Societies embarce various economic systems to deal with the fundamental problem of ___________________.

b. scarcity

Which of the following the successor to the European Coal and Steel Community, established in 1993?

b. the European Union

Which of the following describes the worst period of economic decline in American history.

b. the Great Depression

Who ultimately determines the success of a product?

b. the consumer

The government is a _______ in the Product market

buyer

The government is a ________ in the Factor market

buyer

In a market system, the what, how and for whom questions in economics are determined by

buyers and sellers together

The economic concept which involves deciding who gets the goods and services produced is most closely associated with the basic question of: a. when to produce. b. how to produce. c. for whom to produce. d. what to produce

c

In which of these systems is the government most likely to provide people with goods and services they could not otherwise afford?

c. A Socialist economy

Which of the following economic systems decribes where economic and political forces own and direct all hte factors of production?

c. Command Economy

Which of the following have the least in common?

c. Command economy and Capitalism

The phrase the customer is always right is most closely associated with which of the following?

c. Consumer Sovereignty

Markets in the free enterprise system are regulated by which of the following?

c. Consumers

When a business needs to decide whether a certain action is worth the cost, the most helpful analysis would be which of the following?

c. Cost-Benefit Analysis

When the PPF Curve shifts to the right, this means which of the following?

c. Economic Growth

Eugene opened a bike store. Which of the following gives the best example of how Eugene uses the scarce resource labor?

c. Eugene hired an employee to do bike repairs

Which of the following states an advantage of a traditional economy?

c. Everyone knows exactly what their function is in the society.

Division of Labor is practiced because of which of the following?

c. It increases efficiency by ensuring that workers become good at specific tasks.

Which of the following statements apply to present-day Sweden?

c. Its unemployment rate and GDP per capita are relatively high.

Which of the following is a key characteristic of the American economy and the role of the American government?

c. Limited

Which of the following is a governmental regulation that sets the lowest legal price for labour?

c. Minimum Wage Laws

A can of soup is an example of which of the following?

c. Nondurable Good

Why would privitization tend to raise a nation's overall Standard of Living for societies in an economic transition?

c. People are more likely to be productive when it benefits them personally.

Which of the following is a cause of struggle in the process of privitization?

c. People must adjust to the costs and risks that are a part of Capitalism.

Which of the following protect consumers against harm from products on the market? (There are two answers to this question).

c. Profit Motives d. Government Regulations

Which of the following helps determine something's value?

c. Scarcity

Activities produced in an economy are known as:

c. Services

Which of the following descriptions best explains the meaning of Opportunity Cost?

c. The cost of choosing one alternative over another.

Which of the following is a characteristic of a capitalist free-enterprise economic system?

c. Voluntary Exchange

Which group of people did Karl Marx believe would be the main beneficiaries of Socialism?

c. Working Class Members

Economic equity means it is illegal to unjustly discriminate on the basis of age, gender, ethnicity, religion, or ____________.

c. disability

The three synonymous terms to describe the US economic system are free enterprise, capitalism, and _________________.

c. free market

Which of these is the most striking example of the costs and risks of pure Capitalism?

c. the Great Depression

Consumers in a free enterprise economic system ultimately determine __________ to produce.

c. what

command economy

central planners make the important decisions about what, how, and for whom to produce

Underlying economic theory is the idea that

choices are affected by both positive and negative incentives.

mixed economy

combines a market economy with significant government involvement and elements of tradition

A communist economy is a type of:

command economy

A socialist economy is a type of:

command economy

a "social order" where the factors of production are owned by everyone and economic output is distributed equally describes

communism

what economic system was the philosopher Karl Marx most influential in shaping

communism

All of the following are examples of macroeconomic problems EXCEPT...

consumers deciding to buy more fish and less beef because of concerns about a healthier diet.

Normative economic statements

contain value judgments

Which if the following is NOT one of the three basic questions faced by countries when deciding how to allocate their scarce resources? a. For whom should it be produced? b. How should it be produced? c. What should be produced?: d. When should it be produced?

d

The study of Economics involves which of the following?

d. All of the Above

Which of the following would result in a change in the production possibilities frontier in the country of New Zealand?

d. All of the Above

Which economic system uses the government to determine the economic questions of what, how, and for whom to produce ?

d. Command Economy

The struggle among sellers to attract consumers by offering the best products at the lowest prices is known as which of the following?

d. Competition

Which of the following describes a move away from pure Capitalism?

d. Economic policies following the Great Depression in these United States.

Which of the following is a risk-taking individual in search of profit?

d. Entreprenuer

Which of the factors of production involves taking risks and combining resources to produce a good or service?

d. Entreprenuers

A general rise in the level of prices for most goods over a period of time is known as which of the following?

d. Inflation

How does the government operate in a free enterprise system?

d. It establishes laws and rules to maintain competition.

Which of the following statements best describes the purpose of the Production Possibilities Frontier?

d. It identifies all possible combinations of goods and services an economy can produce.

Anything drawn from nature for use in the production of goods and services describes which scarce resource?

d. Land

Which of these statements is descriptive of a Market economy?

d. Major economic decisions are made by individuals, not for them.

Which of these countries has an economy most similar to the economic system of the former Soviet Union?

d. North Korea

Which statement describes a disadvantage of a Command Economy ?

d. Nothing stops the government from producing things that people don't need or want.

Which of the following is currently considered one of the seven major economic and social goals in these United States?

d. Price stability

The basic elements from which all goods and services are produced are known as which of the following?

d. Resources

Consumers are expected to read the full information about a product before making a purchase. This is an example of which of the following?

d. Responsibilities

Which of the following is NOT an example of a resource?

d. Services

How is the principle There's not such thing as a free lunch illustrated in a socialist economy?

d. Socialist economies tend to offer extensive government services but have very high tax rates to pay for such services

Dave gets a job at a grocery store, which pays him an hourly wage in exchange for his labor. Dave is participating in which of the following?

d. The Factor Market

What is the main difference between Japanese capitalism and American capitalism?

d. The Japanese government is highly involved in day-to-day business management.

Economics is:

d. The study of choice under conditions of scarcity

Protection from layoffs, illnesses, injuries, or disabilities falls under the goal of _________________.

d. economic security

The four factors of production are land, labour, capital, and ______________.

d. entreprenuership

traditional economy

decisions about resources are made by habit, custom, superstition, or religious tradition

in recent years, ________ has adopted policies to move the economy in a more socialist direction a. north korea b. cuba c. china d. denmark

denmark

A relationship between two variables in which one variable increases at the same time that the other increases is called

direct

The PPF Curve illustrates which economic concepts?

e. All of the Following

Physical items produced in an economy are known as:

e. Goods

What is the primary incentive for business owners in a market economy?

earning profits

what is the primary incentive for business owners in a market economy

earning profits

Government interference with the circular flow is intended to improve each of the following goals except:

economic freedom

in command economies, _________ is sacrificed to ensure that every part of the central plan is obeyed

economic freedom

what economic goals does a traditional economy struggle at achieving

economic growth, equity, freedom, efficiency, high standard of living

Citizens with ________________________ have confidence in their ability to support themselves and their families.

economic security

what economic goals does a traditional economy do well at achieving

economic security, sustainability, equitable distribution of goods and services

what economic goals does a market economy struggle at achieving

economic security, sustainability, equity

A _______ is an organizational structure for addressing, what, how and for whom to produce

economic system

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem

economic system

free-enterprise system

economic system based on private (individual or business) ownership of resources and voluntary exchange

socialism

economic system under which most resources and businesses are publicly owned and economic decisions are made by groups of workers and consumers

By _________, the government helps more mutually beneficial exchanges take place and thereby improves market performance

enforcing property rights

in spite of the promises of their governments, most countries with command economies have failed to achieve acceptable levels of _____

equity

key feature of market economies is that

exchanges of resources or goods for money take place voluntarily between parties

Resources are exchanged for money in:

factor markets

Payments for the use of resources are known as

factor payments

T or F: a planned economic system is essentially the same as communism or socialism

false

T or F: safety nets are needed in command economies more so than in either traditional or market economies

false

T or F: today, almost all the former communist countries still maintain public ownership and central planning

false

A common approach that economists use to understand, explain and predict economic phenomena is to

form a theory or model

how has government involvement in market economies evolved over time?

governments have expanded their roles in pursuit of equity, economic security, and sustainability

Which of the following is most closely associated with larger social safety nets?

higher taxes

consists of an individual or a group of people who live together and share income, such as you and your family

household

A manufacturer who decides to use more labor and fewer machines to produce a given level of output is dealing with the economic question of:

how to produce

if economic research shows one thing it is that _____ shape human behavior

incentives

in a free market economy, ________ controls the factors of production

individuals

_____________________ can disrupt the production of many other goods and cause the entire (command) plan to fail

insufficient production of one good

A relationship between two variables in which one variable increases at the same time as the other decreases is called

inverse

Normative economics

involves value judgments

(Final exam) An economic system:

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.

Self interest

is consistent with many goals that people pursue, including betterment of others

The slope of a straight line

is the same at all points along that line

Economic resources are

items of value that are used to make other things that satisfy people's wants

how are goods distributed under communism

legislators from the Communist party allocate goods according to what they judge to be the needs of their citizens

standard of living in command economies is

low despite an abundance of jobs

in which type of economic system would we expect the government to adopt a laissez faire policy with regards to production and trade

market economy

The study of an individuals choice about what type of computer to buy is a subject of

microeconomists

United States has a ________ economy

mixed

most economies are ________ economies

mixed

All modern market economies are __________________________

mixed economies

An economic theory is also known as an economic...

model

market economy

most key economic decisions are made by business owners and consumers

capitalist system

most resources and businesses are privately owned

economic system

organizational structure for addressing what, how, and for whom to produce

The rationality assumption states that

people do not intentionally make decisions that would leave them worse off.

communism

political-economic system under which all resources and businesses are publicly owned and economic decisions are made by central authorities

To advance economic security, most governments _________

provide a social safety net to assist people who have difficulty supporting themselves

Incentives help individuals make economic decisions by

providing a reason to accept the opportunity cost of a choice

to maintain control, central planners assign _______ for factories

quotas

It is assumed in economics that people make decisions based on

rational self interest

Economists assume people behave

rationally

Economists assume people are motivated by

self interest

Households are ______ in the Factor market

sellers

citizen groups known as general assemblies, along with councils or workers and consumers, are the primary decision makers

socialism

examples of command economies

socialism and communism

how are goods distributed under socialism

socialist economies distribute goods in proportion to the work contributions of citizens

Levi's jeans bought at a mall

Product market

Payment made for Levi's jeans purchased at the mall

Product market

Division of Labor

Production tasks broken down into smaller parts. Should allow for workers to specialize and increase production

Consumer Goods

Products made the individual consumption

Capital Goods

Products manufactured to make other goods or services

A legal claim of ownership

Property right

A good or service that can be consumed by many people at once and that other people can't be prevented from using

Public good

In the context of the circular flow diagram, households:

Purchase goods and services from business

Output

Quantity of goods and services produced

To maintain control, central planners assign _____________ for factories.

Quotas

Advantages of Traditional economies

Tend to provide economic security. Every person has an economic role to play. No dramatic changes in the economy, unless a natural disaster occurs, so people do not have to worry about losing their jobs. Tend to be sustainable, because they grow very slowly. They can achieve a relatively equitable distribution of goods and services.

Modified private enterprise economy

The U.S. economy is mostly free enterprise, but is mixed with elements of other economic systems.

Claims of legal ownership are called a. markets. b. entrepreneurs. c. property rights d. economies.

C

Households that lend firms money to buy capital receive: a. a wage. b. a profit. c. interest. d. rent.

C

In a _____________ economy, decisions about resources are made by some combination of a market economy with significant government involvement and elements of tradition. a. market b. traditional c. mixed d. command

C

A market in which resources are exchanged for money

Product market

ANWR

Alaskan National Wildlife Refuge

Other things equal assumption

All other relevant factors remain unchanged. (Ceteris Paribus assumption)

Trade-off

Alternatives that must be given up when something is chosen.

Production Possibilities Frontier

An economic model that shows what is possible to produce given a set of circumstances.

Mixed economy

An economic system that combines elements of different economic systems

Command Economy

An economic system where the basic economic questions are answered by the government.

Market Economy

An economic system where the basic economic questions are answered in the marketplace by buyers and sellers.

Traditional Economy

An economic system where the basic economic questions are answered the way they always have been.

Traditional economy

An economy in which economic decisions are made based on tradition

Market economy

An economy in which the forces of supply & demand determine how economic questions will be answered

Command economy

An economy in which the government makes all economic decisions about how the factors of production are used

Economic growth

An increase in the maximum amount of goods and services an economy can produce

Which of the following would NOT provide an incentive to reduce the amount of beef consumed?

An increase in the price of beef

A ___________________ consists of an individual or group of people who live together and share income. a. government b. household c. firm d. business

B

A communist economy is a type of: a. traditional economy. b. command economy. c. market economy. d. mixed economy

B

A good or service that can be consumed by many people at once, and that other people can't be prevented from using, is a: a. factor payment. b. public good. c. market good d. transfer payment.

B

Country X has a socialist economy. Which person or group most likely controls energy resources in Country X? a. private companies b. a government agency c. one political leader d. energy industry investors

B

In a _____________ economy, central planners make the important decisions about what, how, and for whom to produce. : a. mixed b. command c. market d. traditional

B

In a _____________ economy, decisions about resources are made by habit, custom, superstition, or religion. a. market b. traditional c. mixed d. command

B

__________ is the quality of being just and fair. a. Sustainability b. Equity c. Economic growth d. Financial security

B

__________________ is an increase in the amount of goods and services an economy can produce over time. a. Equity: b. Economic growth c. Financial security d. Sustainability

B

Macroeconomics is concerned with studying the...

Behavior of the economy as a whole.

Laissez-faire

Belief that the government should have minimal interference with business.

Firms are ______ in the Factor market

Buyers

Households are _______ in the Product market

Buyers

A ____________ is a privately owned organization that produces goods and services and sells them to others. a. government b. household: c. firm d. market

C

A country's ________________________________ is a measure of the wealth of goods and services available to help people in the country live comfortably. a. economic growth b. financial security c. standard of living d. economic freedom

C

A household that provides labor earns: a. a profit. b. interest. c. a wage. d. rent.

C

Achieving economic growth and in the process using up resources faster than they become available puts the goal of economic growth in conflict with the goal of: a. equity. b. standard of living. c. sustainability. d. economic freedom.

C

Employment

Number of people currently employed in the economy

Which of the following statements is a positive economic statement?

One in every five children in the United States is living in poverty

Disadvantages of command economies

Overall, command economies have had a poor economic track record and have failed to meet several important economic goals. Economic freedom is sacrificed to ensure that every part of the central plan is obeyed. People can- not start a business or change jobs in a command economy without government permission, if at all. The standard of living in command economies is low despite an abundance of jobs. To under- stand why, remember that the businesses are not privately owned. Since those who run the businesses don't get to keep the money they earn, there are few incentives to work hard, to innovate, or to use resources efficiently. This incentive problem generally lead to weak economic growth

Economic Freedom

People are free to choose how to use the factors of production

Recessions

Periods of economic downturns when output and employment are falling

Expansions

Periods of economic upturns when output and employment are rising

A market in which goods and services are exchanged for money

Product market

Disadvantages of Traditional Economies

Rarely achieve the goals of economic freedom, economic growth, and a high standard of living. Equity can also be a problem if the standards of the community are unfavorable to certain groups, such as women. Some traditional societies resist the adoption of new technology, such as the internet, or electricity, that contribute to education, health, comfort, and the satisfaction of other needs and wants. Living standards generally remain low. If you live in a traditional economy, your freedom would be limited because your future would be largely determined by your family or by the judgement of the village elders. If you were expected to be a hunter, you could not become a musician, for example.

The placement of limits on the amount of goods each person can purchase.

Rationing

A rule of conduct passed by federal, state, or local governments

Regulation

Which of the following is an example of a public good?

Removing snow from roadways

Inflation

Rising overall price level

Firms are ___ in the product market, ___ in the labor market, and ___ in the capital market

Sellers; buyers; borrowers and lenders

Business Cycle

Short-run alternation between economic downturns, known as recessions, and economic upturns, known as expansions.

Model

Simplified representation used to better understand a real-life situation

Economic models are used to...

Simplify reality to predict outcome.

A ______________ can be any form of government assistance for those with financial needs.

Social safety net

Citizens groups know as general assemblies, along with councils or workers and consumers, are the primary decision makers.

Socialism

Want

Something that is desired, but not necessarily needed.

A countrys _________ is a measure of the wealth of goods and services available to help people in the country live comfortably.

Standard of living

Achieving economic growth and in the process using up resources faster than they become available puts the goal of economic growth in conflict with the goal of what?

Sustainability

___________ is the ability to keep things as they are indefinitely.

Sustainability

A key feature of market economies is that exchanges of resources or goods for money:

take place voluntarily between parties.

Which of the following is a normative economic statement

teenage unemployment is too high

Macroeconomics might study which of the following

the causes of domestic unemployment

A macroeconomist would study

the economy's unemployment level

The macroeconomists would most likely study

the effects of a lower income tax on the nation's total production of goods and services.

in a planned economy, ________ controls the factors of production

the government

incentives in a command economy come from _____

the government

in each type of command economy, key resources and businesses are owned by ________

the government and groups of workers

Which of the following would likely be studied in a macroeconomics course

the inflation rate, total output for an economy, and the unemployment rate.

rationing

the placement of limits on the amount of goods each person can purchase

incentive

the prospect of a reward or punishment that influences a decision or motivates greater effort

The assumption that people do not intentionally make decisions that would leave them worse off is known as

the rationality assumption

Economics

the study of choice under conditions of scarcity

Which of the expressions below best describes the aim of economic theory?

to predict the choices people make.

The primary objective of economics is

to study how people make choices with limited resources

T or F: command economies have the ability to adjust rapidly to changing circumstances

true

T or F: market economies may provide too few incentives to conserve and adopt renewable alternatives

true

T or F; market economies achieve efficiency well

true

T or F: every activity has an opportunity cost

true. by choosing to do one activity, you are foregoing the opportunity to do another activity

According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by

using a simple rule of thumb to choose among a subset of easiest-to-evaluate options

A household that provides labor earns:

wage

the incentive problem in command economies generally leads to

weak economic growth

illegal "underground" markets flourish when....

when the goods consumers want aren't available in adequate quantities

The usefulness of a model is determined by

whether it helps to explain or predict real world phenomena