ECON final

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Marginal Benefits and Marginal Costs Charts....

which of the following is most likely an example of correlation but not an example of causation?

"Usually, if I eat a chili dog and drink a beer before a game, my team wins"

Commodity Money

A monetary system in which the actual money is a commodity, such as gold or silver

Change in Quantity Supplied (move along S curve when Price changes)

A movement between points along a stationary supply curve, ceteris paribus.

renewable resource

A natural resource that can be replaced at the same rate at which the resource is consumed

Which of the following policies would be most effective in promoting monthly water conservation?

A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons

Which of the following policies would be most effective in promoting monthly water conservation? A. A $100 flat fee for any household that uses over 1500 gallons B. A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons C. A $125 fee for all households in addition to a $0.50 per gallon fee for all consumption D. A $200 fee for all households with zero charge per gallon of consumption E. A $50 fee for all households with zero charge per gallon of consumption

A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons

Which of the following policies would be most effective in promoting monthly water conservation?

A per gallon fee that escales from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons

Entrepreneur

A person who organizes, manages, and takes on the risks of a business.

Marginal Principle

Increase the level of an activity as long as its marginal benefit exceeds its marginal cost. Choose the level at which the marginal benefit equals the marginal cost.

Custom Prices

Prices that adjust slowly. Prices for industrial commodities, such as steel rods or machine tools are custom prices and tend to adjust slowly to changes in demand.

Price of bond is

Promised Payment divided by (1+interest rate)

individual supply curve

a curve illustrating the relationship between quantity supplied and price for an individual producer

Aggregate-demand curve

a curve that shows the quantity of goods and services that households, firms, the government, and customers abroad are willing to buy at each price level

Aggregate Demand Curve

a curve that shows the relationship between the level of prices and the quantity of real GDP demanded

with an upward sloping supply curve, which of the following is true

a decrease in price results in a decrease in quantity supplied

Sellers who were originally willing to supply 800 units of a good at $4 per unit are now willing to supply 600 units at $4 per unit. That change would be described as:

a decrease in supply

Which of the following will not increase the demand for iced tea?

a decrease in the price of iced tea

A theory can best be defined as:

a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

A theory can best be defined as: A. an untestable assertion or statement of untestable fact. B. a testable statement that can be definitively proven to be true or false using empirical analysis. C. a normative statement that can be tested empirically through analysis of real-world data. D. a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

inferior good

a good for which, other things equal, an increase in income leads to a decrease in demand

normal good

a good for which, other things equal, an increase in income leads to an increase in demand

import

a good or service produced in a foreign country and purchased by residents of the home country

subsidy

a government payment to an individual, business, or other group to encourage or protect a certain type of economic activity

Capital requirement

a government regulation specifying a minimum amount of bank capital

market supply curve

a graph of the quantity supplied of a good by all suppliers at various prices

supply curve

a graph of the relationship between the price of a good and the quantity supplied

market supply curve

a graph/curve showing the relationship between the market price and quantity supplied by all firms/suppliers

Demand curve

a graphic representation of a demand schedule. Demand curves are downward sloping - the downward slope is a visual representation of the :law of demand": all else equal, as the price of an item rises, the quantity buyers are willing and able to buy decreases. The negative slope of a demand curve shows that there is an inverse relation between price and quantity demanded, all else equal.

demand curve

a graphical representation that shows the inverse relationship between price and quantity demanded. DOWN

Assume the demand schedule for cookies is downward sloping. If the price of cookies falls from $2.50 to $2.25 per dozen:

a larger quantity of cookies will be demanded

The private ownership of property and the use of the market system to direct and coordinate economic activity are the most characteristic of:

a market economy

The completely private ownership of property and the exclusive use of the market system to direct and coordinate economic activity are most characteristic of:

a market economy.

A trade deficit occurs when our exports ______________ imports.

are less than

A trade deficit occurs when our exports our imports.

are less than

In a market economy, the amount of a good that is produced is primarily decided by the interaction of:

buyers and sellers

in a market economy, the amount of a good that is produced is primarily decide by the interaction of:

buyers and sellers

market

buyers and sellers carry out exchange at mutually agreeable terms

In a market economy, the amount of a good that is produced is primarily decided by the interaction of:

buyers and sellers.

In a market economy, the amount of a good that is produced is primarily decided by the interaction of: A. buyers and sellers. B. all consumers. C. producers and input suppliers. D. producers and government planning committees. E. all producers.

buyers and sellers.

An economic hypothesis is tested:

by comparing the hypothesis predictions to real world data

an economic hypothesis is tested:

by comparing the hypothesis's predictions to real-world data

An economic hypothesis is tested:

by comparing the hypothesis's predictions to real-world data.

An economic hypothesis is tested: A. by assessing the realism of its assumptions. B. by comparing the hypothesis's predictions to real-world data. C. most frequently by using a controlled experiment. D. by assessing the level of descriptive detail. E. by none of the above. Economic hypotheses are theoretical and therefore cannot be tested. Reset Selection

by comparing the hypothesis's predictions to real-world data.

Cutting the Length of Patents. Suppose that a group of consumer activists claims that drug companies earn excessive profits because of the patents they have on drugs. The activists advocate cutting the length of time that a drug company can hold a patent to five years. They argue that this will lead to lower prices for drugs because competitors will enter the market after the five-year period. Do you see any drawbacks to this proposal? A. It will result in only induced innovation. B. It will promote "creative destruction," as outlined by Joseph Schumpeter. C. It will reduce the incentive for drug companies to invent new drugs. Your answer is correct. D. All of the above.

normal good

demand increases as income increases

Following the Great Depression, the likelihood of "runs" on banks has been greatly reduced because of the creation of:

deposit insurance.

Reserves

deposits that banks have received but have not lent out

an increase in the supply of money will cause a country's currency to

depreciate

Which of the following is not a component of aggregate demand?

depreciation

Consumer sovereignty

describes how individual consumers in market economies determine what is to be produced

flat tax/proportional tax

designed so that everybody would be charged the same percentage of their income

progressive taxes

designed so that those with higher incomes pay a greater proportion of their income in taxes

A market economy depends on market mechanisms to:

determine the most efficient way of using resources

A market economy depends on market mechanisms to:

determine the most efficient way of using resources.

A market economy depends on market mechanisms to: A. determine the most efficient way of using resources. B. determine how large the government's budget deficit should be. C. decide how much government regulation there should be. D. provide everyone with a minimum level of income. E. do all of the outcomes listed.

determine the most efficient way of using resources.

market mechanism

determines the most efficient use of resources

A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50%. Which of the following is the most likely explanation of this finding?

diminishing returns

Banks borrow from the Fed at the:

discount rate

Financial intermediaries reduce the risk of assets through:

diversification.

The price of a stock can be thought of as the present value of future:

dividends.

The function of an entrepreneur is to:

do all of the tasks listed

The function of an entrepreneur is to:

do all of the tasks listed.

The function of an entrepreneur is to: A. bear the business risks. B. organize the other factors of production. C. innovate. D. do all of the tasks listed.

do all of the tasks listed.

which of the following would break a positive ethic?

driving two mph over the speed limit

One possible solution to the congestion problem that is described in the book is to

force people to pay for using the road

At full employment, there is only structural and

frictional unemployment

Another term for potential output is

full employment output

Another term for potential output is

full-employment output

imports

goods and services purchased from other countries

The aggregate demand curve will shift to the left, and equilibrium income will decrease, if

government expenditures decrease

A surplus will result whenever the

government imposes a price floor above the equilibrium price.

What are the components of gross domestic product?

government purchases, net exports, private investment spending

Elasticity of demand will ____ as the availability of substitutes ____.

increase, increase

A shortage exists in the market for corn at the prevailing price. The shortage can eliminated by a price:

increase, increasing the quantity supplied and decreasing the quantity demanded

If everything else is held equal, increase in the size of the population will

increase; decrease

Negative incentives: A. increase benefits or reduce costs. B. increase behaviors. C. decrease benefits or increase costs. D. include both cash subsidies and taxes.

decrease benefits or increase costs.

For a given increase in price, a greater elasticity of demand will result in a greater

decrease in quantity demanded

A leftward shift of a supply curve is called a(n)

decrease in supply.

An increase in supply causes

decrease in the equilibrium price and increases the equilibrium quantity

To the extent that a government price control succeeds in affecting price, it can be expected to lead to a corresponding:

decrease in the volume of sales whether the price is forced up or down

An increase in the price of inputs used to produce good A will:

decrease supply, increase price and decrease the quantity exchanged.

If the price of the ice cream increases substantially (ceteris paribus), the equilibrium quantity of hot fudge sauce, a complement, is likely to

decrease, and the equilibrium price of hot fudge sauce is likely to decrease

An open market sale will the supply of money, which will cause the interest rate to which will investment, which results in output.

decrease, increase, decrease, a decrease

Understanding M1 and M2. If you write a check from your checking account to your money market account, M1 will ____________ and M2 will ______________

decrease, remain the same

Bad Loans to South America. During the 1980s, U.S. banks made loans to South American countries. Many of these loans turned out to be worthless (they were not repaid). Because of these loans, banks saw their assets ___________, liabilities ____________, and owners' equity

decrease, remain the same, decrease

If everything else is held equal, a decrease in the size of the population will ________ total output and ____________ per capita output.

decrease; increase

Debit Cards. In recent years, debit cards have become popular. Debit cards allow the holder of the card to pay a merchant for goods and services directly from a checking account. The introduction of debit cards most likely _____________ the amount of currency in the economy.

decreased

Trade between different prisoner of war (POW) compounds _______ the difference in the price of beef across the compounds. increased/decreased

decreased

According to the law of demand, an increase in price the quantity demanded

decreases

With the stock of capital fixed, output increases with labor input, but at a rate that

decreases

Suppose that over a one-year period, the nominal wage increases by 4 percent and consumer prices increase by 10 percent. The real wage

decreases by 6%

Outsourcing production costs and consumer prices

decreases; decreases

Upper A decrease in demand (given a typical upward sloping supply curve) for a product the equilibrium price, and the equilibrium quantity.

decreases; decreases

If planned expenditures are currently higher than output, then inventories must be

decreasing

In the short run, when prices are slow to adjust to changes in demand and supply, _____________ determines production

demand

When the quantity demanded exceeds the quantity supplied, there is excess

demand

which of the following is not an example of a resource? a. a forest b. a river c. John Deere Tractor d. the chef at city's best cafe e. all answers are resources

e. all answers are resources term-2

rational self-interest

each individual tries to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit (benefits ur )

market economy

economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets

Adam Smith came up with

economics

Economics is different from a "hard" science like physics because:

economists cannot easily control all the variables that might influence human behavior

Economics is different from a "hard" science like physics because:

economists cannot easily control all the variables that might influence human behavior.

The resources that firms use in production, including land, buildings, and equipment, are called

factors

Economic resources are also known as:

factors of production

Economic resources are also known as: A. profits B. financial capital. C. factors of production. D. costs.

factors of production

Positive economic thinking

facts and figures (what is)

Cost-benefit analysis can determine the optimal amount of all the following EXCEPT:

fairness of rules

Cost-benefit analysis can determine the optimal amount of all the following EXCEPT: A. regulations B. market inspectors C. severity of punishments D. fairness of rules E. inspections

fairness of rules

cost-benefit analysis can determine the optimal amount of all of the following except:

fairness of rules

MB tends to ________ and MC tends to _______

fall, rise

macroeconomics

is the study of the aggregate: inflation, unemployment, business cycles, economic growth

A nation has a comparative advantage in the production of cars over another nation if:

it can produce cars at a lower opportunity cost than the other country

A nation has a comparative advantage in the production of cars over another nation if:

it can produce cars at a lower opportunity cost than the other country.

By promoting competition, the government generates _______ product prices. lower/higher

lower

By promoting competition, the government generates product prices

lower

When the Fed increases the money supply (abroad)

lowers interest & exchange rates and increases Net Exports (higher GDP)

When the Fed increases the money supply (at home),

lowers interest rates and increases investment spending (higher GDP)

The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called:

macroeconomics

The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called:

macroeconomics.

In an open economy, increases in government spending can crowd out consumption, investment, or

net imports

What do we add to GDP to reach GNP

net income earned abroad bu U.S. housholds

Mike, the manager of a car wash, is more productive at washing cars than any potential workers he could hire. Should he wash all the cars himself

competitive market

no single buyer or seller can influence the market price with their similar products

A market economy without any ethics would have:

no value

A market economy without any ethics would have: A. no value. B. immorally high prices and profits. C. too much illegal activity. D. only police and the courts to protect consumers. E. maximum free market freedom to achieve maximum productivity.

no value

a market economy without any ethics would have:

no value

Which of the following is true? A. In the product markets, firms are buyers and households are sellers. B. In the factor markets, firms are sellers and households are buyers. C. Firms receive money payments from households for labor, land, capital, and entrepreneurship. D. All of the above are true. E. None of the above is true.

none of the above are true

Individuals who have stopped looking for work because they could not find adequate child care have stopped looking for work because they could not find adequate childcare are not counted as unemployed in the traditional unemployment statistics

true

When a person possesses a comparative advantage in the production of one good or service, it:

permits gain from trade to be realized due to a more efficient use of resources

When a person possesses a comparative advantage in the production of one good or service, it:

permits gain from trade to be realized due to a more efficient use of resources.

When a person possesses a comparative advantage in the production of one good or service, it: A. means that the person's opportunity cost is higher than for that of other goods. B. discourages specialization. C. promotes greater self-sufficiency. D. permits gains from trade to be realized due to a more efficient use of resources.

permits gain from trade to be realized due to a more efficient use of resources.

When a person possess a comparative advantage in the production of one good or service, it:

permits gains from trade to be realized due to a more efficient use of resources

Consider a decrease in the supply of money that causes output to fall short of full employment as shown in the diagram to the right. 1.) Using the line drawing tool, show how the short-run aggregate supply curve changes to restore full employment. Label the curve AS2. 2.) Using the point drawing tool, locate the new long-run equilibrium point. Label it C.

phone

Faster Depreciation

phone

President Lincoln's discomfort with imports resulted from his failure to recognize that money sent to England eventually returns to the United States to buy American exports

true

If there is a surplus, ____ will be frustrated by their inability to exchange at the current price, and they will ____ the prices as a result.

sellers, lower

If autonomous consumption decreases, then the consumption function will

shift downward

A change in demand causes a _____ at the demand curve

shift of

change in demand

shift of the entire command curve caused by the determinants PYNTE

Changes in Price and real GDP

shift the demand for money

If housing prices rise, you would expect the consumption function to

shift upward

The income-expenditure model is most appropriate for

short run analysis

Political Systems and the Inside Lag for Fiscal Policy. Under a parliamentary system like in Britain, there are fewer checks and balances on the government than in the United States. In a parliamentary system, the party that controls the legislature also runs the executive branch. Consider the inside lag for fiscal policy in England compared to that in the United States. The inside lag would be

shorter in England since it would be easier to reach a consensus on policy changes.

ability to pay principle

simply that those with the greatest ability to pay taxes should pay more than those with the least ability to pay taxes

The Federal Budget and Government Purchases in GDP. An item in the federal budget that is not included as government purchases in GDP is

social security payments

A leftward shift in supply could be caused by:

some firms leaving the industry

mixed economy

some private and some public ownership of resources

which of the following people are more likely to break ethical rules:

someone who is ignorant

diminishing returns

stage of production where output increases at a decreasing rate as more units of variable input are added

The States and Balanced Budgets. Unlike the U.S. federal government, virtually all states have requirements that they either plan for or maintain a balanced budget. If the national economy experiences a recession,

state budgets go into deficits as tax revenues decline

An item included in government purchases but not part of the federal budget is

state government purchases

State and Local Governments and Aggregate Demand. The aggregate demand curve shifts to the left if

state governments cut back their spending

Law of Supply

states that a direct relationship exists between the price of a good and the quantity supplied

At full employment, there is only frictional and

structural unemployment

microeconomics

studies the behavior in particular markets: firms, households

Economics is most importantly concerned with...

studying how we allocate scarce resources to satisfy unlimited wants

Economics is most importantly concerned with... A. how to profit from trading in the stock market. B. government taxation and spending. C. studying how we allocate scarce resources to satisfy unlimited wants. D. how to reduce inflation. E. how to successfully launch a business.

studying how we allocate scarce resources to satisfy unlimited wants

Economics is most importantly concerned with:

studying how we allocate scarce resources to satisfy unlimited wants

Whenever the price of Good A increases, the demand for Good B increases as well. Good A and B appear to be:

substitutes

The market supply schedule reflects the total quantity

supplied at each price by all of the producers

An upward-sloping supply curve shows that:

suppliers are willing to increase production of their goods if they receive higher prices for them.

In free markets which allows a high level of unethical corruption:

suppliers will be forced to be corrupt or to leave the market

The classical school of thought came to its fruition during the 1930s

true

Store of value

the function of money when used to transfer purchasing power to the future

negative externality

the harm, cost, or inconvenience suffered by a third party because of actions by others (the market)

The legal system is an example of an institution that plays a key role in economic growth

true

economics

the study of the allocation of our limited resources to satisfy our unlimited wants.

Microeconomics

the study of the economic behavior and decision making of small units, such as individuals, families, and businesses (the tree)

Economists believe that the CPI tends to overestimate the increase in the cost of living over time

true

Economists may differ in their conclusions from positive analysis.

true

Economists who have studied economic growth find only weak evidence for convergence among countries between 1980 and 2000

true

Feeding the World from a Flowerpot? Comment on the following statement: "If agriculture did not experience diminishing returns, we could feed the world using the soil from a small flowerpot."

true

If a firm is subject to diminishing marginal returns, an increase in the number of workers increases the quantity produced at a decreasing rate.

true

The Federal Budget and Government Purchases in GDP. An item in the federal budget that is not included as government purchases in GDP is

welfare payments

Adam Smith listed three reasons for specialization to increase productivity. What are they?

Repetition, Continuity, and Innovation

Which of the following is most likely a topic of discussion in a microeconomics course?

an increase in the price of lumber used to construct houses

Which of the following is most likely a topic of discussion in a microeconomics course? A. a decrease in the share of national income paid to the government in taxes B. an increase in the price of lumber used to construct houses C. an increase in the rate of inflation D. an increase in the number of jobless individuals filing unemployment claims E. the size of the national debt

an increase in the price of lumber used to construct houses

which of the following is most likely a topic of discussion is a microeconomics course?

an increase in the price of lumber used to construct houses

complements

an increase in the price of one good causes a decrease in the demand for the other good. peanut butter and jelly

A man has been laid off from his job. He has a wife and two children. To cut back on expenses, the family has begun purchasing mega-packs of generic brand macaroni and cheese to use for meals. In this case, macaroni and cheese is an example of

an inferior

Central bank

an institution designed to regulate the banking system and money supply

Which of the following is an example of a capital resource?

an oil rig

Which of the following is an example of a capital resource? A. redwood trees B. unskilled labor C. stocks and bonds D. an oil rig

an oil rig

Inflation that is expected is known as inflation.

anticipated

money multiplier formula

1/reserve ratio

The value of a price index in the base year is equal to

100

Since World War II, the United States has experienced

Since World War II, the United States has experienced _________ recessions.

To help ensure political independence, each member of the Board of Governors is appointed to ____ year terms

Calculating an Inflation Rate. A country reports a price index of 52 in 2005 and 60 in 2006. What is the inflation rate between 2005 and 2006?

15.4

Reserve ratio

the fraction of deposits held as reserves

Negative incentives:

decrease benefits or increase costs.

labor and capital are exchanged in ________ markets

factor

In free market economies,

most market exchanges will result in all parties "winning"

In free market economies,

most market exchanges will result in all parties "winning."

In free market economies, A. most market exchanges will result in a "winner" and a "loser." B. most market exchanges will result in all parties winning. C. any market exchange will follow no rules unless government imposes them. D. regulations and other written ethics will generally limit innovation and profitability. E. there is no way to measure the optimal level or type of market ethics.

most market exchanges will result in all parties "winning."

in free market economies,

most market exchanges will result in all parties "winning."

an increase in the price level will cause ________________ the aggregate demand curve.

movement along

change in quantity demanded

movement along the demand curve- a change in the quantity consumers are willing and able to buy when the price changes

a change in a variable measured on an axis of a graph causes a the curve, while a change in a relevant variable that is not measured on an axis causes a

movement along, shift in

For the trade of producers, the price

must be greater than the opportunity cost

For the trade of consumer, the price

must be less than the opportunity cost

law of demand

negative relationship between price and quantity demanded

perfectly competitive market

A market with many sellers and buyers of a homogeneous product and no barriers to entry

Which of the following statements is most consistent with the rule of rational choice? "

"When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."

Which of the following statements is most consistent with the rule of rational choice? A. "The Environmental Protection Agency should strive to eliminate virtually all air and water pollution." B. "When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects." C. "Police forces should be enlarged until virtually all crime is eliminated." D. "Manufacturers of automobiles should seek to make cars safer, no matter the costs involved."

"When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."

Which of the following statements is most consistent with the rule of rational choice?

"When evaluating new prescription drugs, the Food and Drug administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."

normative economics answers the question

"what ought to be"

Your savings account pays 9 percent per year: Each $100 in the bank grows to $109 over a one-year period. If prices increase by 8 percent per year, by keeping $100 in the bank for a year you actually gain

You earn 5 percent interest on funds in your money-market account. If consumer prices increase by 3 percent per year, your real earnings on $10 comma 000 in the money-market account are

$200 per year

If the private sector saves 5 percent of its income and the government raises taxes by $100 to finance public investments, total investmentlong dash—private and public investmentlong dash—will increase b

$95

Percent change

((New value - old value)/old value) X 100

When demand is elastic:

(All of the above are correct) -price elasticity of demand is greater than one -consumers are relatively responsive to changes in price -the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price

Which of the following is not likely to be an inferior good for most Americans?

(All of the above are likely to be inferior goods for most americans) -Thrift store clothing -Wine in a box -Intercity bus travel -Store brand canned vegetables

Plagiarism is unethical because

(All of the above are reasons) -Plagiarism might result in stealing profits from the original writer -can decrease the value of honest students' diplomas -can make it more difficult for instructors to asses the quality of students' writings -plagiarism is a type of fraud

Ethics violators like embezzlers, frauds, tax cheats and bank robbers

(All of the above may be true) -Usually follow most rules and other ethics most of the time -Not only injure individuals and companies, but also often hurt entire markets -Often use rational cost-benefit analysis when deciding whether or not to cheat -May feel ashamed and guilty of their crimes that they are driven to suicide

Which of the following is true?

(All of the above) -By putting unemployed resources to work of by putting already employed resources to better uses, we could expand output in an economy -To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. -If the production possibility curve is concave from below (that is bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. -Increases in a society's output do not make scarcity disappear.

(All of the above) -California has a comparative advantage in producing almonds -Oregon has a comparative advantage in producing honey -the opportunity cost of growing almonds is lower in California than in Oregon -the opportunity cost of producing honey is lower in Oregon than in California

Which of the following are reasons why most owners of companies want their employees to act ethically?

(All of the above) -Decrease in market demand -Decrease in market supply -Decrease in equilibrium price -Total market collapse

which of the following would reflect self-interested behavior?

(All of the above) -a worker pursuing a higher paying job and better working conditions -a consumer seeking a higher level of satisfaction with her current income -donating a cell phone to a woman's shelter -Mother Teresa using her Nobel Prize money to care for the poor

Which of the following is not a resource exchanged in the factor markets?

(All of the above) -land -capital -labor -entrepreneurship

A student has a chance to see Green Day in concert. The student also has a major economics exam the next morning. If the student goes to the concert:

(All of the above) -she may receive a lower grade on the economics exam -the opportunity cost of the concert is the value of the time spent studying -the decision involves a trade-off

Ethics is defined as:

(Can be defined in any of the ways above) -a branch of philosophy -moral rules or standards governing human conduct, but not necessarily moral rules -the moral principals of an individual person

Which of the following is true?

(None of the above are true) -In the product markets, firms are buyers and households are sellers -In the factor markets, firms are sellsers and households are buyers -Firms receive money payments from households for labor, land, capital, and entrepreneurship

If the government wanted to reduce the quantity of a good traded, it could do so by:

(doing any of the above) -setting a price ceiling for the good below the equilibrium price -setting a price floor for the good above the equilibrium price -tax the good more heavily -tax an input used intensively in the industry more heavily

factors of production(5)

- natural resources(land) -labor -physical capital -human capital -entrepreneurship

Which of the following is true?

-An economy in which labor is relatively scarce would tend to use capital intensive production methods -An increase in the availability of labor relative to capital in the economy would tend to increase how labor intensive the production processes in that economy would be.

Effective free market ethical systems must provide for all of the following:

-Clearly defined rules and regulations -Meaningful punishments for rule breakers -Adequate market oversight and policing -Enough freedom for creativity and competition EXCEPT: a clearly defined moral foundation

More efficient positive market ethics will generally help improve all of the following challenges:

-Positive externalities of a market -Negative externalities of a market -Consumer surplus of a market -Producer surplus of a market

Cost-benefit analysis can determine the optimal amount of all the following:

-Regulations -Market inspectors -Severity of punishments -Inspections EXCEPT: fairness of rules

In order for a market's ethics to be effective, all of the following must occur:

-The ethics must be clearly defined -There must be clear penalties for ethics violators -There must be enough police or inspectors to find most violations -Police or inspectors must be unbiased EXCEPT: everyone must agree to take part in the market

If someone regularly acts unethically in a market:

-They will probably hurt consumers -They will probably hurt suppliers -They will probably hurt the market itself

If the MPS is 0.70, the marginal propensity to consume, MPC, must be equal to

0.30 on phone

1) Everything in M1 2) savings deposits 3) small time deposits 4) money market mutual funds 5) few minor categories

1) currency 2) demand deposits 3) traveler's checks 4) other checkable deposits

Non-price determinants of supply (changes in these shift supply curve)

1. #of firms 2. Prices of inputs 3. Tech. Change 4. Taxes/subsidies 5. Wages 6. Price of Energy 7. Price of Raw materials

Supply decreases if( curve shifts left)

1. #of firms in industry decreases (there are fewer options)- direct 2. Tech. doesn't improve/falls (decrease)- direct 3. Taxes/subsidies rise- inverse 4. Wages increase/rise 5. Price of Energy rise 6. Price of Raw materials increase

Supply increase if (curve shifts right)

1. #of firms in industry increases (there are more options) 2. Tech. Improves 3. Taxes/subsidies fall 4. Wages fall 5. Price of Energy falls 6. Price of Raw materials fall

Name three key facts about economic fluctuations.

1. Economic fluctuations are irregular and unpredictable. 2. Most macroeconomic quantities fluctuate together. 3. When output falls, unemployment rises

Factors which increase the demand for dollars a) Increased desire by foreigners to buy U.S. produced products (when their countries boom, or when U.S. price levels fall, for example?)

1. In order to purchase newly produced goods or services from the United States For example: If a person living in Oaxaca wants to purchase a Harley-Davidson motorcycle produced in the U.S., the product has to be paid for with dollars so they ahve to change pesos to dollars first.

What are the three functions of money?

1. Medium of exchange 2. Unit of account 3. Store of value

Meaning of points on and off a PPC

1. Points on the PPC mean we are using all our resources efficiently. 2. Points inside the PPC indicate that it is inefficient. We are not using all our resources fully and efficiently. 3. Points outside the PPC indicate that it is unattainable. Scarcity of our resources prevents us from getting there right now

What are the two main jobs of the Federal Reserve?

1. Regulate banks to ensure the health of the banking system 2. Control the quantity of money in the economy

What are the 3 reasons the aggregate-demand curve slopes downward? Explain them.

1. Wealth effect: lower prices increase the value of money holdings and consumer spending increases. 2. Interest-rate effect: lower prices reduce the quantity of money held, some is loaned, interest rates fall, and investment spending increases. 3. Exchange-rate effect: lower prices decrease interest rates, the dollar depreciates, and net exports increase.

What are the two basic kinds of money?

1. commodity money 2. fiat money

3 key questions of economics

1. what should we produce? 2. how do we produce the products we produce? 3. who consumes the products?

Multiplier=

1/(1-MPC)

Calculating an Inflation Rate. A country reports a price index of 5050 in 2005 and 5858 in 2006. What is the inflation rate between 2005 and 2006

16%

If the price of a gallon of gasoline a gallon of gasoline in 1940 was $0.18 and $3.10 in 2015, the percentage rate of change for a gallon of gasoline a gallon of gasoline over this period was

1622

At a 4 percent annual growth rate in GDP per capita, it will take

17.5

If a price index is 55 in 1998 and 65 in 1999, the rate of inflation between the two years is

18.2

If the MPC is 0.50, the simple multiplier will be equal to

2 (1/1-MPC)

approximately of job losses in the first three months of 2004 were caused by outsourcing

Factors which increase the demand for dollars b) Increased desire by foreigners to purchase assets (stocks, bonds, real estate, etc.) in the U.S. (happens when interest rates in U.S. rise or when conditions in other countries look unsafe or unprofitable relative to U.S, for example?)

2. In order to invest or purchase assets in the United States For example Mexican citizens may wish to buy U.S. real estate, stocks or bonds, enterprises, government bonds, or other things of value ("assets'). In order to do so they must first buy dollars with their pesos.

If the interest rate is 11 percent, the present value of $225 paid one year from now equals

202.7 (on phone)

Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased. What is the elasticity of demand facing Bailey's Barber Shop?

3.0

At a 2 percent annual growth rate in GDP per capita, it will take _____ years for GDP per capita to double

If the price of a loaf of bread in 1940 was $0.08 and $3.59 in 2015, the percentage rate of change for a loaf of bread over this period was

4,387.5%

Most states do not replace the entire wages of individuals on unemployment insurance; instead, they replace about percent.

If a price index is 50 in 1998 and 70 in 1999, the rate of inflation between the two years is

40%

Estimates of the Natural Rate and Full Employment. Two economists differ on their estimates of the natural rate of unemployment. One economist believes it is 6 percent, while the other believes it is 5 percent. All else being equal, the economist who estimates the natural rate at

Hyperinflation occurs when the inflation rate exceeds

50 % per month

Hyperinflation occurs when the inflation rate exceeds

50%

Growth in Per Capita GDP. The growth rate of real GDP per capita equals the growth rate of real GDP minus the growth rate of the population. If the growth rate of the population is 1 percent per year, how fast must real GDP grow for real GDP per capita to double in 14 years?

If a project costs $100 and pays $106 next year, the maximum interest rate at which the present value of the investment exceeds its cost is

6% (on phone)

Oprah just inherited a house with a market value of $100,000, and she does not expect the market value to change. Each year, she will pay $500 for utilities and $1,000 in taxes. She can earn 5 percent interest on money in a bank account. Her cost of living in the house for the year is

6500

Suppose you currently live and work in Cleveland, earning a salary of $70 comma 000 per year and spending $25 comma 000 for housing. You just heard that you will be transferred to a city in California where housing is 45 percent more expensive. In negotiating a new salary, your objective is to keep your real income constant

81250

GDP

= C+J+G+NX

Variable

A measure of something that can take on different values

Gold Standard

A monetary system in which gold backs up paper money

Fiat Money

A monetary system in which money has no intrinsic value but is backed by the government

GDP Statistics and Unemployed Workers. In Economy A, the government puts workers on the payroll who cannot find jobs for long periods, but these "employees" do no work. In Economy B, the government does not hire any long-term unemployed workers but gives them cash grants. Comparing the GDP statistics between the two otherwise identical economies, what can you determine about measured GDP and the actual level of output in each economy? A. Measured GDP is higher in Economy A, though the actual level of output in each economy is the same. Your answer is correct. B. Measured GDP is the same in each economy, though the actual level of output is higher in Economy A. C. Measured GDP is higher in Economy B, though the actual level of output in each economy is the same. D. Measured GDP and the actual level of output are the same in each economy.

Health Care Subsidies. If the federal government provides subsidies for individuals to buy health care, this is A. included in the federal budget but not in GDP. Your answer is correct. B. not included in the federal budget but is included in GDP. C. not included in the federal budget or GDP. D. included in the federal budget and GDP.

High Prices and Inflation. Critically evaluate the following statement: "Tokyo is an expensive place to live. They must have a high inflation rate in Japan." A. False. Inflation measures price changes, not price levels. Your answer is correct. B. False. The inflation rate tends to overstate the cost of living. C. False. Tokyo and Japan do not face the same prices. D. True. If Tokyo is expensive, then Japan's inflation rate will be high.

Tax Revenue and Labor Supply. Tax revenue collected from a payroll tax equals the tax rate times the earnings of individuals subject to the payroll tax. Let's say the labor-supply curve is close to vertical. Explain why raising payroll tax rates will increase the total revenue the government receives from the tax. A. The tax will have little effect on employment. Your answer is correct. B. The tax will increase productivity. C. The tax will increase wages. D. Both a and b.

The effects of unemployment today may carry over into the future because A. those that experience prolonged unemployment lose job skills that are difficult to recover. This is the correct answer. B. a person must be actively seeking work to be counted as unemployed. C. discouraged workers are not measured in the unemployment rate. D. none of the above.

The labor force participation rate shows A. the percentage of the relevant population that is in the labor force. This is the correct answer. B. the percentage of the relevant population that is employed. C. the percentage of the labor force that has a job. D. the percentage of the labor force that is unemployed.

The production function illustrates the relationship between A. factors of production and output. This is the correct answer. B. output and the cost of production. C. capital and labor. D. the natural rate of unemployment and full employment.

The single largest component of the basket of goods that comprises the CPI is the category for A. rent. This is the correct answer. B. medical services. C. transportation. D. food and beverages.

Understanding the Circular Flow Diagram. In the circular flow diagram, why do the arrows corresponding to the flow of dollars and the arrows corresponding to the flow of goods go in the opposite direction? A. Income is exchanged for goods and goods are exchanged for income. Your answer is correct. B. GDP is growing and the value of the dollar is decreasing. C. Dollars are spent on foreign imports and dollars are earned from U.S. exports. D. None of the above.

Unemployment Rates in Large African Cities. In many African countries, the government and international corporations pay high wages for jobs in the major cities, and many people migrate to the cities from farms where earnings are low. Unemployment rates in the city, therefore, are large. This can be explained in terms of A. frictional unemployment because people are migrating and changing jobs. Your answer is correct. B. structural unemployment because there is a mismatch of skills and jobs. C. unexpected unemployment because they come from farms where earnings are low. D. cyclical unemployment because people need to migrate.

When online movies began to replace stores renting DVDs, what type or types of unemployment was created? A. Structural and frictional. This is the correct answer. B. Frictional and cyclical. C. Structural and cyclical. D. Discouraged and cyclical.

Which of the following methods has the World Bank not tried to assist developing countries? A. Promotion of population growth. This is the correct answer. B. Increases in foreign aid. C. Promotion of universal education. D. Infusions of new machinery.

Central Bank

A banker's bank, usually an official institution that controls the supply of money in a country. (normally regulate commercial banks)

Fractional-reserve banking

A banking system in which banks hold only a fraction of deposits as reserves

Lender of Last Resort

A central bank is the lender of last resort, the last place, all others having failed, from which banks in emergency situations can obtain loans.

change in quantity supplied

A change in the quantity firms are willing and able to sell when the price changes; represented graphically by movement along the supply curve.

Flexible exchange rate system

A currency system in which exchange rates are determined by free markets

Production possibilities curve

A curve showing the possible combinations of products that an economy can produce, given that its production resources are fully employed and efficiently used

production Possibilities Curve

A curve that shows the possible combinations of products that an economy can produce, given that its productive resources are fully employed and efficiently used.

Aggregate-supply curve

A curve that shows the quantity of goods and services that firms are willing to produce at each price level

outsourcing

A decision by a corporation to turn over much of the responsibility for production to independent suppliers (or other countries)

A decrease in supply occurs when

A decrease in supply could occur for two other reasons. First, if firms believe next month's pizza price will be higher than they had initially expected, they may be willing to sell a smaller quantity today and a larger quantity next month. That means that the supply of pizza today will decrease. Second, because the market supply is the sum of the quantities supplied by all producers, a decrease in the number of producers will decrease market supply, shifting the supply curve to the left.

a decrease in supply occurs when

Devaluation

A decrease in the exchange rate to which a currency is pegged under a fixed exchange rate system

Depreciation of a currency

A decrease in the value of a currency

Demand schedule

A demand schedule presents the same information as a demand curve but in a chart or non-graphical form; it examines how much quantity demanded would be at a variety of prices, not just a single price This about it as a listing of the quantities of an item buyers wish to buy in a time period at various possible prices ceteris paribus.

circular flow model

A diagram that traces the flow of resources, products, income, and revenue among economic decision makers

An example of a capital resource is: A. stock in a computer software company. B. the funds in a CD account at a bank. C. a bond issued by a company selling electric generators. D. a dump truck. E. an employee of a moving company.

A dump truck

Medicaid

A federal and state government health program for the poor

Medicare

A federal government health program for the elderly

Social security

A federal government program to provide retirement support and a host of other benefits

export

A good or service produced in the home country and sold in another country.

price floor

A legal minimum on the price at which a good can be sold (pizza has to be sold for 5$ no less)

Equilibrium price

A market condition that occurs at any price and quantity at which the quantity demanded equals the quantity supplied.

resource market

A market in which a resource is bought and sold. Ex. Gas companies (labor or job)

Price ceiling- purpose and effects

A price ceiling is the maximum legal price that can be charged for a good. To have any effect, a price ceiling is always below the equilibrium price Purpose: to prevent the market price from rising to the height it would otherwise reach. Example: A price ceiling of $600 has been set by the government because it believes that the market price of $900 is too high to provide decent housing for everyone. Therefore, markets will NOT clear. Note, at a price ceiling of $600, there is a shortage Effects: Black markets

Price Floor- purpose and effects

A price floor is the minimum legal price that can be charged/paid. By definition, a price floor is always above the equilibrium price. Purpose: prices are not be allowed to reach their equilibrium level due to government intervention Example: A price floor of $17 has been set by the government because it believes that the market wage of $6.00 is too low to provide a decent standard of living. Therefore, markets will not clear. At a minimum wage of $17, 2 million workers are willing to offer their labor services, but firms only want to hire 1 million workers. This results in a surplus of 1 million workers.

entrepreneur

A profit-seeking decision maker who starts with an idea, organizes an enterprise to bring that idea to life, and then assumes the risk of operation.

Laffer curve

A relationship between the tax rates and the tax revenues that illustrates that high tax rates could lead to lower tax revenues if economic activity is severely discouraged

Negative relationship

A relationship in which two variables move in the opposite directions

Positive relationship

A relationship in which two variables move in the same direction

Supply-side economics

A school of thought that emphasizes the role that taxes play in the supply of output in the economy

change in demand

A shift of the demand curve caused by a change in a variable other than the price of the product

Economic model

A simplified representation of an economic environment, often employing a graph

shortage

A situation in which quantity demanded is greater than quantity supplied

Recession

A slowdown in a nation's economy

Marginal change

A small, one-unit change in value

Production possibilities

A society's "production possibilities" are the various combinations of goods and services it is capable of producing at a certain moment. How many hamburgers, tanks, haircuts, etc. it can possibly produce, given its scarce resources.

Unit of account

A standard unit in which prices can be stated and the value of goods and services can be compared; one of the three functions of money.

positive economic statement

A statement that can be proved or disproved by reference to facts

Fixed exchange rate system

A system in which governments peg exchange rates to prevent their currencies from fluctuating

Balance of payments

A system of accounts that measures transactions of goods, services, income, and financial assets between domestic households, businesses, and governments and residents of the rest of the world during a specific time period

good

A tangible product used to satisfy human wants

Which of the following is correct?

A theory may result from a tested and confirmed hypothesis

Which of the following is correct?

A theory may result from a tested and confirmed hypothesis.

Which of the following is correct? A. "Theory" and "hypothesis" are interchangeable terms meaning the same thing. B. A hypothesis may result from a tested and confirmed theory. C. A theory may result from a tested and confirmed hypothesis. D. A hypothesis is a theory whose formulation relies on mathematics.

A theory may result from a tested and confirmed hypothesis.

Purchasing power parity

A theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries

Some markets are dominated by a few large firms, leading to... A) high prices and small quantities. B) high prices and many choices. C) large quantities and high profits. D) intense competition and low profits.

A) high prices and small quantities.

How Many Hours at the Barber Shop? Your opportunity cost of cutting hair at your barbershop is $15 per hour. Electricity costs $5 per hour, and your weekly rent is $275. You normally stay open nine hours per day. a. What is the marginal cost of staying open for one more hour? b. If you expect to give two haircuts in the 10th hour and you charge $15 per haircut, is it sensible to stay open for the extra hour?

A. $20; B. yes

Does Spending Measure Welfare? Suppose a community spends $1 million on salaries and equipment for its police department. Because it believes that citizens are now more law abiding, the community decides to cut back on the number of police it employs. As a result, the community now spends $800,000 less on the police officers. The crime rate remains the same. a. What happens to measured GDP? A. GDP falls by $800,000. Your answer is correct. B. GDP does not change. C. GDP increases by $800,000. D. GDP falls by $200,000. b. Does this change in GDP accurately reflect welfare in this case? A. Yes, because the community is spending less on police officers. B. Yes, because the savings on police officers can now be spent on welfare. Your answer is not correct. C. No, because the crime rate has not changed. This is the correct answer. D. No, because the community is spending less on police officers.

A. C.

Explain how an increase in government spending may lead to crowding out.

An increase in government spending raises incomes, shifts money demand right, raises the interest rate, and reduces investment.

The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of A. increasing opportunity cost. B. decreasing opportunity cost. C. comparative advantage. D. consumer sovereignty.

A. increasing opportunity cost

Future Generations. Some economists say that economic growth involves a trade-off between current generations and future generations. If a current generation raises its saving rate, what does it sacrifice? A. Current consumption. Your answer is correct. B. Human capital. C. Capital deepening. D. Both a and b. What will be gained for future generations? A. More output. B. More capital. C. Less inequality. D. Both a and b.

A;D

market supply curve

ADD UP supply curves for individual firms

Market Price

Actual price that prevails in a market at any particular moment

MCP =

Additional Consumption/Additional Income

MPS=

Additional Saving/Additional Income

Ceteris Paribus

All else constant

Land

All nature-given factors, above or below the ground, of use in producing goods and services. Examples might be water, water-power, timber, minerals, or the agricultural fertility of the soil.

Which of the following is an example of market failure? A. Overuse of highways that leads to traffic congestion B. Reduced levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub-prime lending D. All of the above

All of the above

All of the above A. Overuse of highways that leads to traffic congestion B. Reduced levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub-prime lending

Plagiarism is unethical because A. plagiarism might result in stealing profits from the original writer B. plagiarism can decrease the value of honest students' diplomas C. plagiarism can make it more difficult for instructors to assess the quality of students' writings D. plagiarism is a type of fraud

All of the above are reasons

Which of the following are reasons why most owners of companies want their employees to act ethically? A. Because they care about the well-being of their customers B. To enhance productivity C. To maximize public good will toward the company D. To avoid large fines and expensive lawsuits

All of the above are reasons why

Which of the following is true? A. By putting unemployed resources to work or by putting already employed resources to better uses, we could expand output in an economy. B. To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. C. If the production possibility curve is concave from below (that is, bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. D. Increases in a society's output do not make scarcity disappear.

All of the above are true.

Ethics violators like embezzlers, frauds, tax cheats and bank robbers A. usually follow most rules and other ethics most of the time. B. not only injure individuals and companies, but also often hurt entire markets. C. often use rational cost-benefit analysis when deciding whether to cheat. D. may feel so ashamed and guilty of their crimes that they are driven to suicide.

All of the above may be true of ethics violators.

Which of the following would reflect self-interested behavior? A. A worker pursuing a higher paying job and better working conditions. B. A consumer seeking a higher level of satisfaction with her current income. C. Donating a cell phone to a woman's shelter. D. Mother Theresa using her Nobel Prize money to care for the poor. E. All of the answers would reflect self-interested behavior.

All of the answers would reflect self-interested behavior.

Which of the following would reflect self-interested behavior?

All of the answers would reflect self-interested behavior. A. A worker pursuing a higher paying job and better working conditions. B. A consumer seeking a higher level of satisfaction with her current income. C. Donating a cell phone to a woman's shelter. D. Mother Theresa using her Nobel Prize money to care for the poor.

Which of the follwing is a resource exchanged in the factor markets? A. land B. Capital C. Labor D. Entrepreneurship E. All the above

All the above

wages

An amount of money paid to an employee at a specified rate per hour worked

Permanent income

An estimate of a household's long run average level of income

How currency exchange rated are determined

An exchange rate is the number of units of one currency it takes to buy one unit of a second currency. How they are determined: The basic answer why one $ = 18 pesos (in January 2016) is: supply and demand

Revaluation

An increase in the exchange rate to which a currency is pegged under a fixed exchange rate system

Why does an increase in the price level reduce the quantity demanded of real output? (Use interest-rate effect to explain the slope of the aggregate demand curve).

An increase in the price level shifts money demand to the right, increases the interest rate, and decreases investment.

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold? -an increase in the price of peanut butter, a complement to jelly -an increase in the price of Marshmallow Fluff, a substitute for jelly -an increase in the price of grapes, an input to jelly -an increase in consumers' incomes, as long as jelly is a normal good

An increase in the price of grapes,, an input to jelly If a change occurs in any of the factors that determine supply - such as an increase in the price of grapes, an input to jelly-the result is a shift of the supply curve. In this case, the change in he price of jelly causes the supply curve of jelly to fall. This leads to an increase in the equilibrium price of jelly, and a decrease in the equilibrium quantity of jelly sold (Question #6 graph)

Appreciation of currency

An increase in the value of a currency

Change of Supply (shift of S curve)

An increase or decrease in the quantity supplied at each possible price. An increase in supply is a rightward shift in the entire supply surve. A decrease in supply is a leftward shift in the entire supply curve.

Positive analysis

Answers the question "what is?" Or "what will be?"

Normative analysis

Answers the question "what ought to be?"

Serivce

Any activity that fulfills a human want or need and returns money to those who provide it.

Excess Reserves

Any additional reserves that a bank holds above required reserves

medium of exchange

Any item that buyers give to sellers when they purchase goods and services

Money

Any items that are regularly used in economic transactions or exchange and accepted by buyers and sellers.

Sovereign investment fund

Assets accumulated by foreign governments that are invested abroad

Which of the following is the correct way to describe equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied

Apartment Vacancies and Unemployment. In a major city, the vacancy rate for apartments was approximately 55 percent, yet substantial numbers of individuals were searching for new apartments. Why would this occur, and how is this phenomenon similar to unemployment? A. Low-income renters receive public housing assistance if they search for new abodes just as unemployed workers receive unemployment compensation if they search for new jobs. B. Some renters are looking for better apartment matches just as some unemployed workers are looking for better job matches. Your answer is correct. C. Some renters are spatially mismatched with apartments just as some unemployed workers are spatially mismatched with jobs. D. All of the above.

Diminishing Returns to Capital and Real Wages. Consider this statement: Since capital is subject to diminishing returns, an increase in the supply of capital will reduce real wages. This statement is wrong because an increase in the supply of capital will A. increase the marginal benefit from employing labor and therefore decrease the demand for labor and real wages. B. increase the marginal benefit from employing labor and therefore increase the demand for labor and real wages. Your answer is correct. C. decrease the marginal benefit from employing labor and therefore decrease the demand for labor and real wages. D. decrease the marginal benefit from employing labor and therefore increase the demand for labor and real wages.

Disappearing FishFish and National Income. Suppose you were worried that national income does not adequately take into account thedepletion of the stock of fish in the economydepletion of the stock of fish in the economy. How would you advise the Commerce Department to take this into account in its calculations? A. Identify the value of the total fish stocktotal fish stock, and subtract the value of the fish caughtfish caught from national income. B. Identify the value of the proven fish stockproven fish stock, and subtract the net change in the proven fish stockproven fish stock from national income. This is the correct answer. C. Identify the value of the proven fish stockproven fish stock, and subtract the value of the fish caughtfish caught from national income. D. Identify the value of the proven fish stockproven fish stock, and subtract the net change in total fish stocktotal fish stock from national income.

Germany and the United States. Per-capita output is higher in the United States than in Germany and yet output per worker is higher in Germany. According to recent studies, the main cause for this is the difference in A. workers' attitudes towards working. B. the amount of labor their workers supply to the market. Your answer is correct. C. the amount of labor demanded by the market. D. the age of the workforce.

Measured price changes do not depend on the particular base year chosen when calculating A. real GDP. B. the chain-weighted GDP deflator. Your answer is correct. C. the traditional GDP deflator. D. none of the above.

Part Time Work. Paul has young children at home and his wife is an executive at a major corporation.has young children at home and his wife is an executive at a major corporation. He has decided to work part time as a freelance blogger for an entertainment Web site part time as a freelance blogger for an entertainment Web site. nothing Paul is considered to be A. unemployed. B. employed. Your answer is correct. C. voluntarily unemployed. D. working part time for economic reasons working part time for economic reasons.

Recessions and the Duration of Unemployment. During a recession, the fraction of workers with spells of unemployment less than five weeksless than five weeks can be expected to A. increase then decrease. B. decrease. Your answer is correct. C. remain unchanged. D. increase

The natural rate of unemployment consists solely of A. frictional and cyclical unemployment. B. frictional and structural unemployment. Your answer is correct. C. cyclical and structural unemployment. D. none of the above

The single largest component of the basket of goods that comprises the CPI is the category for A. food and beverages. B. rent. Your answer is correct. C. medical services. D. transportation.

What do we add to GDP to reach GNP? A. Net exports. B. Net income earned abroad by U.S. households. This is the correct answer. C. Depreciation. D. Personal income.

What is the largest component of national income? A. Proprietor's income (income of unincorporated business). B. Compensation of employees (wages and benefits). This is the correct answer. C. Corporate profits. D. Net interest. Your answer is not correct. E. Rental income.

What part of government spending is excluded from GDP? A. Purchases of police cars. B. Transfer payments. Your answer is correct. C. Education. D. National defense.

Which government department produces the National Income and Product Accounts? A. The Department of Homeland Security. B. The Department of Commerce. This is the correct answer. C. The Council of Economic Advisors. D. The Congressional Budget Office.

The three key types of unemployment are A. cyclical, natural, and full. B. frictional, natural, and total. C. cyclical, frictional, and structural. Your answer is correct. D. none of the above

The three key types of unemployment are A. cyclical, natural, and full. B. frictional, natural, and total. C. cyclical, frictional, and structural. Your answer is correct. D. none of the above.

Which of the following is not included in the labor force? A. People working 30 hours a week. B. People who do not have jobs, and do not want one. Your answer is correct. C. People who are employed. D. People who do not have jobs, but who are actively searching for one.

Long-Term Effects of Unemployment. Why might you expect individuals who were unemployed in their 20s to have lower wages at the age of 40 than individuals with identical educational backgrounds but who were not unemployed? A. While unemployed, workers receive unemployment insurance. B. While unemployed, workers lose some of their skills. Your answer is correct. C. While unemployed, workers face financial hardships. D. All of the above.

To gauge living standards across countries with populations of different sizes, economists use A. the growth rate. B. technological progress. C. real GDP per capita. Your answer is correct. D. measures of human capital.

PYNTE- demand shifters

Prices of related goods, Yincomes, Number of demanders, Tastes, Expectations of demanders

Does Spending Measure Welfare? Suppose a community spends $1 million on salaries and equipment for its police department. Because it believes that citizens are now more law abiding, the community decides to cut back on the number of police it employs. As a result, the community now spends $800,000 less on the police officers. The crime rate remains the same. a. What happens to measured GDP? A. GDP increases by $800,000. B. GDP falls by $800,000. Your answer is correct. C. GDP falls by $200,000. D. GDP does not change. b. Does this change in GDP accurately reflect welfare in this case? A. Yes, because the community is spending less on police officers. B. No, because the crime rate has not changed. Your answer is correct. C. No, because the community is spending less on police officers. D. Yes, because the savings on police officers can now be spent on welfare.

B ; B

Approximately _______ percent of job losses in the first three months of 2004 were caused by outsourcing. A) 1 B) 2 C) 4 D) 6

B) 2

Why might pollution from a paper mill be an example of a market failure? A) The paper mill is ignoring property rights by polluting. B) People living downwind of the mill bear part of the cost of production. C) People living near the paper mill are not offered jobs there. D) None of the above.

B) People living downwind of the mill bear part of the cost of production.

Adam Smith listed three reasons for specialization to increase productivity. What are they? A) Determination, Motivation, and Innovation. B) Repetition, Continuity, and Innovation. C) Repetition, Continuity, and Motivation. D) Repetition, Determination, and Innovation.

B) Repetition, Continuity, and Innovation.

B. "When evaluating new prescription drugs, the food and drug administration should weigh each drugs potential health benefits against the potential health risks posed by known side effects"

Which of the following is true? A. An advanced market economy would tend to use both labor intensive and capital intensive production methods. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be. D. All of the above are true. E.Both b. and c. are true.

Both b and c are true

B. a per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons

The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25. A. If you purchase iced tea you will suffer a net loss of 25 cents per bottle. B. If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents. C. You will not purchase iced tea if you are acting rationally. D. If you are acting rationally, you will purchase iced tea until the marginal benefit falls to 25 cents.

B. if you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000. A. If you are acting rationally, you will borrow $2,000 and purchase a new sport utility vehicle. B. You will not purchase the new sport utility vehicle at this time if you are acting rationally. C. If you do not purchase the new sport utility vehicle, your net loss will be $2,000. D. If you are acting rationally, you will purchase sport utility vehicles until the marginal cost of doing so falls to $20,000.

B. you will not purchase the new sport utility vehicle at this time if you're acting rationally

Demand deposits

Balances in bank accounts that can be accessed on demand by check

What is a barter? Why does it limit trade?

Barter is trading goods and services directly for other goods and services. It requires a double coincidence of wants.

Why is a decrease in the money supply unlikely to be neutral in the short run?

Because a decrease in aggregate demand from a decrease in the money supply may reduce the price level unexpectedly. In the short run, some prices and wages are stick, and some producers have misperceptions regarding relative prices causing output to fall.

Why is the money supply curve vertical when it is drawn on a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis?

Because the quantity of money is fixed at whatever value the Fed chooses and this quantity is not dependent on the interest rate.

If the economy is in a recession, why might policymakers choose to adjust aggregate demand to eliminate the recession rather than let the economy adjust(Self-correct) on its own?

Because they think they can get the economy back to the long-run natural level of output more quickly or, in the case of a negative supply shock, because they are more concerned with output than inflation.

Bill says: "The imposition of a tax on tequila will increase its price." Bob says, "Taxes should be imposed on tequila because college students drink too much."

Bill's statement is positive, and Bob's statement is normative

Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much."

Bill's statement is positive, and Bob's statement is normative.

Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much." A. Both statements are normative. B. Both statements are positive. C. Bill's statement is normative, and Bob's statement is positive. D. Bill's statement is positive, and Bob's statement is normative.

Bill's statement is positive, and Bob's statement is normative.

Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much."

Bills statement is positive, and Bobs statement is normative

Both b. and c. are true.

Both b. and c. are true. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be.

markets

Bring buyers and sellers together to exchange goods and services

If the Fed wished to expand the money supply, how should they adjust each of their policy instruments that underlie the tools described in the monetary policy tools of the Fed?

Buy U.S. government bonds, loan more reserves to banks by lowering the discount rate and/or increasing loans available at the Term Action Facility, lower the reserve requirement, and decrease interest paid on reserves.

Suppose the government spends $10 billion on a public works program in order to stimulate aggregate demand. If the crowding-out effect exceeds the multiplier effect, will the aggregate-demand curve shift to the right by more or less than $10 billion? Why?

By less than $10 billion because the crowding-out effect, which reduces the shift in aggregate demand, more than offsets the multiplier effect, which amplifies the shift.

Does Money Buy Happiness? Although people with high incomes appear to be happier than those with low incomes, people in the United States in general have become less happy over the last 30 years even though real GDP has risen. Why might increases in real GDP not necessarily have increased happiness? A. The happiness of men has decreased relative to the happiness of women. B. The happiness of African Americans has decreased relative to the happiness of whites. C. Everyday life has become more stressful. Your answer is correct. D. All of the above.

Long-Term Effects of Unemployment. Why might you expect individuals who were unemployed in their 20s to have lower wages at the age of 40 than individuals with identical educational backgrounds but who were not unemployed? A. While unemployed, workers receive unemployment insurance. B. While unemployed, workers face financial hardships. C. While unemployed, workers lose some of their skills. This is the correct answer. D. All of the above.

Marital Gifts and Savings. In Japan, it is a custom for the bride's family to give a gift having very large monetary value to the family of the groom. How might this affect the savings rate in this country? A. Families that anticipate receiving large marriage gifts will save less. B. Families that anticipate providing large marriage gifts will save more. C. Both a and b. Your answer is correct. D. None of the above.

Technological Progress in Banking. Computers have revolutionized banking for consumers through the growth of ATMs and electronic bill paying capabilities. All of these improvements for consumers might not be counted as technological progress because technological progress A. occurs only in some sectors and not in others. B. cannot be counted. C. is defined by economists as an increase in output with no additional increases in inputs. This is the correct answer. D. is defined by economists as an increase in buildings and equipment.

The effects of unemployment today may carry over into the future because A. a person must be actively seeking work to be counted as unemployed. B. discouraged workers are not measured in the unemployment rate. C. those that experience prolonged unemployment lose job skills that are difficult to recover. Your answer is correct. D. none of the above.

The natural rate of unemployment consists solely of A. cyclical and structural unemployment. B. frictional and cyclical unemployment. C. frictional and structural unemployment. Your answer is correct. D. none of the above.

The production function illustrates the relationship between A. capital and labor. B. output and the cost of production. C. factors of production and output. Your answer is correct. D. the natural rate of unemployment and full employment.

Entrepreneurs play a key role in a market economy by

bringing together factors of production

Under these circumstances, do changes in the measured U.S. unemployment rate accurately reflect changes in the underlying economic situation and production? A. Yes. GDP will increase and the underlying economic situation will have improved. B. No. GDP will remain unchanged and the underlying economic situation will not have improved. C. No. GDP will increase though the underlying economic situation will not have improved. This is the correct answer. D. Yes. GDP will remain unchanged though the underlying economic situation will have improve

When calculating GDP using the production method, which of the following would you not include? A. Value added. This is the correct answer. B. Government purchases. C. Net exports. Your answer is not correct. D. Investment. E. Consumption.

Which of the following are not included in GDP? A. Economics textbooks sold in the bookstore. B. Strawberries sold in a grocery store. C. A mother taking care of children at home. Your answer is correct. D. Professors teaching at a university

Which of the following are not included in GDP? A. Professors teaching at a university. B. Strawberries sold in a grocery store. C. A mother taking care of children at home. D. Economics textbooks sold in the bookstore.

Which of the following are not included in GDP? A. Professors teaching at a university. B. Strawberries sold in a grocery store. C. A mother taking care of children at home. Your answer is correct. D. Economics textbooks sold in the bookstore.

Which of the following is not included in the labor force? A. People who are employed. B. People who do not have jobs, but who are actively searching for one. C. People who do not have jobs, and do not want one. Your answer is correct. D. People working 30 hours a week.

Who developed the theory of scale of the marketscale of the market? A. Joseph SchumpeterJoseph Schumpeter B. John Maynard Keynes C. Adam SmithAdam Smith This is the correct answer. D. Milton Friedman

Unemployment Rates in June. Unadjusted unemployment data show that the number of unemployed rise in June because A. people look for jobs to earn extra money for vacations. B. many businesses close for the summer. C. teenagers are looking for summer jobs. Your answer is correct. D. teachers are looking for summer jobs. If the government decided that homemakers should be counted as employed because they perform important services, this would A. decrease the labor force, decrease the labor force participation rate, and increase the unemployment rate. B. increase the labor force, decrease the labor force participation rate, and decrease the unemployment rate. C. increase the labor force, increase the labor force participation rate, and decrease the unemployment rate. Your answer is correct. D. increase the labor force, increase the labor force participation rate, and increase the unemployment rate.

C ; C

Could Raising Capital Gains Taxes Reduce Revenues? The U.S. government currently taxes increases in the value of stocks when they are sold. This is called the capital gains tax. If the government significantly decreaseddecreased the tax rate on capital gains, it could actually receive moremore total revenue because people will A. buy less stock and their income will fall. B. sell more stock and their income will fall. C. pursue morepursue more stock sales, raisingraising this source of revenue. Your answer is correct. D. work less and pay less in taxes. Which of the following statements is true? A. The tax rate is the overall value of an asset that is subject to tax and tax revenue is the tax rate times the value of the asset. B. The tax rate is the proportion of an asset that is subject to tax and tax revenue is the tax rate times the value of the asset. Your answer is correct. C. The tax rate is the overall investment that is subject to tax and tax revenue is the tax rate times the value of the asset. D. Tax revenue is the proportion of an asset that is subject to tax and the tax rate is the value of the asset divided by income.

C B

Understanding the 45° Line. Use the simple income-expenditure diagram depicted to the right to answer the questions that follow. a. In the diagram to the right, if output equals y0, the level of expenditures is equal to

C+I,or the height of point a0 picture on phone

An individual has a comparative advantage in production if that individual:

can produce at the lowest opportunity cost.

You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that: A. you estimate the expected cost of searching for one hour to be greater than $20. B. you must earn more than $20 per hour. C. in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage. D. you are irrational, since it is always a waste of time to search for lost money. E. you place no value on your time.

C. In your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage

Physical capital

The stock of equipment, machines, structures, and infrastructure that is used to produce goods and services

Which of the following is true with regard to production possibilities curves? A. Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve. B. Economic growth means a movement along an economy's production possibilities curve in the direction of producing more consumer goods. C. Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future. D. From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else.

C. investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now can be able to produce and therefore consume more in the future

The completely private ownership of property and the exclusive use of the market system to direct and coordinate economic activity are most characteristic of: A. a command economy. B. a mixed economy. C. a market economy. D. a traditional economy.

C. market economy

Microeconomics

Concerns the behavior of economic decision-makers (firms, consumers, etc.) and markets for individual products. Microeconomics focuses on markets for one good or service at a time.

Economics

The study of choices when there is scarcity

Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would: A. make it more expensive for parents to provide for their children. B. reduce the value of children to their parents and therefore lead to a reduction in the birth rate. C. reduce the after-tax cost of raising children and therefore increase the birth rate. D. exert no impact on either the cost of raising children or the birth rate since parenting children is a non-economic activity.

C. reduce the after-tax cost of raising children and therefore increase the birth rate

In a market economy how do we determine who will get the goods and services that have been produced? A. Whoever wants them B. Whoever needs them C. Whoever can afford them D. None of the above.

C. whoever can afford them

Automatic stabilizers

Changes in fiscal policy that do not require deliberate action on the part of policymakers

Fiscal policy

Changes in government taxes and spending that affect the level of GDP

What is the economist's solution to the congestion problem?

Charge a toll during rush hour

What is the largest component of national income?

Compensation of employees (wages and benefits).

Monopoly

Complete control of a product or business (market) by one person or group

the opportunity cost of a college degree includes the

Consider a student who spends a total of $40,000 for tuition and books. Instead of going to college, the student could have spent this money on a wide variety of goods, including housing, electronic devices, and world travel. Part of the opportunity cost of college is the $40,000 worth of other goods the student sacrifices to pay for tuition and books. Also, instead of going to college, the student could have worked as a bank clerk for $20,000 per year and earned $80,000 over four years. That makes the total opportunity cost of this student's college degree $120,000:

The manager of a pizza shop must decide how much pizza he will produce at a given price. Which of the following would NOT be a consideration for the manager?

Consumer income

Gross Domestic Product (GDP)

Consumption Spending + Investment Spending + Government Purchases + Net Exports

What two main assets are clearly money in the United States, and how do they differ from all other assets?

Currency and demand deposits. They are the assets that are directly spendable and are commonly accepted in trade for goods and services.

An example of a major technological innovation that could have caused major economic fluctuations is A. computers. B. electricity. C. steam power. D. all of the above.

An example of a major technological innovation that could have caused major economic fluctuations is A. steam power. B. electricity. C. computers. D. all of the above.

Capital deepening comes to an end because of the A. reality principle. B. marginal principle. C. principle of opportunity cost. D. principle of diminishing returns

Discouraged Workers in Japan and the United States. Japan was concerned about "NEETs," which meant "not in education, employment, or training." In the United States, we also have young, discouraged workers. What are the types of young, discouraged workers you would most likely find in the United States? A. Young workers living in inner cities where few jobs are available. B. Young, minority workers who feel discriminated against. C. Young, single workers with children who need flexible work schedules. D. All of the above.

In an economy with no government sector or foreign sector, saving must equal investment because A. total demand is equal to consumption and investment. B. total income is equal to consumption and saving. C. total income is equal to total demand. D. all of the above. This is the correct answer. E. none of the above.

Labor market equilibrium occurs at a real wage at which the quantity demanded for labor equals A. full employment. B. the natural rate of unemployment. C. the quantity demand of capital. D. the quantity supplied of labor.

Labor market equilibrium occurs at a real wage at which the quantity demanded for labor equals A. the natural rate of unemployment. B. full employment. C. the quantity demand of capital. D. the quantity supplied of labor.

Real business cycle theorists have attempted to integrate shocks to _______ into the full employment model. A. consumer prices B. inflation C. the unemployment rate D. technology

The labor force participation rate shows A. the percentage of the labor force that is unemployed. B. the percentage of the relevant population that is employed. C. the percentage of the labor force that has a job. D. the percentage of the relevant population that is in the labor force.

The organization that officially dates recessions is the A. Congressional Budget Office. B. Department of Commerce. Your answer is not correct. C. Council of Economic Advisors. D. National Bureau of Economic Research.

What are the components of gross domestic product (GDP) in a closed economy? A. investment, government spending, imports B. consumption, government spending, net exports C. consumption, investment, exports D. consumption, investment, government spending

What do we add to GDP to reach GNP? A. Net exports. B. Depreciation. C. Personal income. D. Net income earned abroad by U.S. households.

What part of government spending is excluded from GDP? A. National defense. B. Purchases of police cars. C. Education. D. Transfer payments.

When calculating GDP using the production method, which of the following would you not include? A. Consumption. B. Government purchases. C. Net exports. D. Value added. Your answer is correct. E. Investment.

Which government department produces the National Income and Product Accounts? A. The Council of Economic Advisors. B. The Department of Homeland Security. C. The Congressional Budget Office. D. The Department of Commerce.

Which of the following are included in GDP? A. leisure time B. repairs that a homeowner makes C. production of illegal drugs Your answer is not correct. D. paid child care

Which of the following may influence technological progress? A. The scale of the market. B. Research and development spending. C. Monopolies. D. All of the above.

Which of the following methods has the World Bank not tried to assist developing countries? A. Infusions of new machinery. B. Promotion of universal education. C. Increases in foreign aid. D. Promotion of population growth.

measures the output per hour of work. A. Gross domestic product B. Gross national product C. Potential output D. Labor productivity

Taxes on Stocks and Inflation. Because they use mortgages to buy homes, most homeowners are debtors. Homeowners A. gain from anticipated inflation because it will be easier for them to repay their loans with inflated dollars. B. lose from unanticipated inflation because it will be harder for them to repay their loans with inflated dollars. C. lose from anticipated inflation because it will be harder for them to repay their loans with inflated dollars. D. gain from unanticipated inflation because it will be easier for them to repay their loans with inflated dollars. Your answer is correct. The real tax burden on buying and then selling stocks tends to A. decrease with inflation because the nominal gain, on which the tax burden is based, increases with inflation; but inflation reduces the real gain. B. increase with inflation because the nominal gain, on which the tax burden is based, decreases with inflation; but inflation increases the real gain. C. decrease with inflation because the nominal gain, on which the tax burden is based, decreases with inflation; but inflation reduces the real gain. D. increase with inflation because the nominal gain, on which the tax burden is based, increases with inflation; but inflation reduces the real gain.

D ;D

Suppose the United States imposes higher steel tariffs. How does the change in steel import restrictions affect automobile manufacturers who use steel as an input? A) The cost of producing automobiles will decrease. B) Automobile manufacturers will become more profitable as the price of steel falls. C) The tariff change will prompt automobile manufacturers to lowerlower the price of vehicles. D) The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries.

D) The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries.

an example of market failure: A. overuse of highways that leads to traffic congestion B. Reduces levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub prime lending D. All the above

D. All the above

Economics is concerned with: A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires. D. all of the answers are correct.

D. all of the answers are correct.

A downward sloping straight-line production possibilities curve implies: A. an inefficient use of resources. B. an efficient use of resources. C. an increasing opportunity cost. D. a constant opportunity cost.

D. constant opportunity cost

Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk: A. equals $6.00. B. equals $4.00. C. equals $3.00. D. equals $2.00. E. equals zero dollars.

D. equals to $2.00

From an economists' perspective, which of the following observations is not true? A. self-interest is purely monetary in nature B. Self interest can include benevolence C. Self interest is a good predictor of human behavior in most situations D. Self interest is not the same as selfishness

D. self interest is purely monetary in nature

if a student enrolls in an additional course at the university, an economist would conclude that: A. comparing the total benefits of all actions to the total costs incurred as a result of those actions. B. abstract thinking, which is never actually utilized by consumers when making purchasing decisions. C. holding all other variables constant when isolating the relationship between two variables. D. comparing the additional benefit from an action to the additional cost.

D. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course

b. Suppose economists see that inventories are suddenly increasing. Which of the following may be causing this increase in inventories?

Decrease in demand for goods and services

With the stock of capital fixed, output increases with labor input, but at a rate that

Decreases

Suppose there is no deposit insurance. Suppose rumors circulate that banks have made many bad loans and may be unable to repay their depositors. What would you expect depositors and banks to do, and what would their behavior do to the money supply?

Depositors will withdraw their deposits reducing bank reserves. Banks will try to hold excess reserves to prepare for the deposit withdrawal. Both will reduce bank lending and the money supply.

Direct relationship

Direct relationship (positive): positive slope. ie. as x increases, y increases.

Function of an Entrepreneur: A. bear the business risks B. Organize the other factors of production C. Innovate D. do all tasks

Do all tasks

Net international investment position

Domestic holding of foreign assets minus foreign holdings of domestic assets

New Government Employment and True Unemployment. Suppose the U.S. government hires workers who are currently unemployed but does not give them any work to do. What will happen to the measured U.S. unemployment rate? The unemployment rate will

Drcrease

Which of the following would break a positive ethic?

Driving two miles per hour over the speed limit

Which of the following would break a positive ethic? A. Having lustful daydreams about your best friend's girlfriend (or boyfriend) B. Driving two miles per hour over the speed limit C. Cursing your instructor when you're alone at home at 3 AM answering these stupid questions D. Spending the day sleeping & watching TV instead of studying for your classes E. None of the above

Driving two miles per hour over the speed limit

Most Severe Recession? Using the data in the table shown at right, the two most severe recessions since World War II in terms of the fall from peak to trough are 6 and 11. What other information might you want to know about these and other recessionary periods to judge their severity? A. Changes in interest rates. B. Changes in the unemployment rate. C. Changes in employment. D. Changes in the price level. E. All of the above.

What is the largest component of national income? A. Proprietor's income (income of unincorporated business). B. Corporate profits. C. Rental income. D. Net interest. E. Compensation of employees (wages and benefits).

ethics A. is a branch of philosophy B. are moral rules or standards governing human conduct C. are rules more standards governing human conduct, but not necessarily moral rules D. the moral principles of an individual person E. All the above

E. all the above

plagiarism is unethical because: A. Plagiarism might result in stealing profits from the original writer B. can decrease the value of honest students' diplomas C. can make it more difficult for instructors to asses the quality of students' writings D. plagiarism is a type of fraud E. All the above

E. all the above

Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that: A. California has a comparative advantage in producing almonds. B. Oregon has a comparative advantage in producing honey. C. the opportunity cost of growing almonds is lower in California than in Oregon. D. the opportunity cost of producing honey is lower in Oregon than in California. E. all of the above are true.

E. all the above are true

E. all the above is true

market economy

Economic decisions are made by individuals or the open market

Related to Application: The Links Between Self-Reported Happiness and GDPLOADING... Does Money Buy Happiness? Although people with high incomes appear to be happier than those with low incomes, people in the United States in general have become less happy over the last 30 years even though real GDP has risen. Why might increases in real GDP not necessarily have increased happiness?

Every day life has become more stressful

Voluntary Exchange

Exchange between two people makes both people better off.

Most recessions are also depressions

False

Positive Statements answer questions like " What ought to happen to..."

False

Residential Housing Investment, Before and After the Last Two Recessions. Relying on the website for the Federal Reserve Bank of St. Louis (www.research.stlouisfed.org/fred2), investment in residential housing during the periods bracketing the two most recent recessions is shown below.

From the data, we can see that investment in residential housing fell most during the 2006-2017 period

marginal analysis involves:

comparing the additional benefit from an action to the additional cost

GDP falls by $800,000. ;No, because the crime rate has not changed.

Understanding Inventory Behavior. Use the simple income-expenditure model to analyze the following scenarios. a. Suppose clothing stores anticipate a good fashion season and add substantially to inventories in their stores. As a result of this,

GDP will increase since planned increases in inventory adds to planned expenditures.

natural resources

Gifts of nature used to make goods and services

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

Goods X and Y are complements

exports

Goods and Services sold to other countries

complementary goods

Goods that are consumed together, such as cars and gasoline or peanut butter and jelly.

Contractionary policies

Government policy actions that lead to decreases in aggregate demand

Expansionary policies

Government policy actions that lead to increases in aggregate demand

The Broken Window Fallacy. Critics of Keynes pointed out that not all spending is really productive. If vandals break windows and you replace them, GDP will certainly rise. Yet, you are probably worse off than before because you had to use resources to repair the windows. Which of the following statements describes this best?

Government spending will not benefit all groups of people equally, but government spending can be valuable as a economic stimulus tool.

GDP

Gross domestic product is a monetary measure of the market value of all the final goods and services produced in a period of time, often annually

Personal income and personal disposable income refer to payments ultimately flowing to

Households

labor

Human effort directed toward producing goods and services (mental or physical)

Labor

Human effort, including both physical and mental effort, used to produce goods and services

Which of the following best illustrates the fallacy of composition?

If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.

Which of the following best illustrates the fallacy of composition? A. If Mr. Smith had more money, he could buy more scarce goods; if the Adams family had more money, it could buy additional goods. B. If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. C. If other variables are not held constant, economists may not observe the relationship between price and quantity demanded that is expected. D. Aggregate consumption may not behave in the same manner as the consumption of a particular individual.

If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.

Change in quantity demanded (move along D curve when prices changes)

If all that changes is the price of the product, we move along an unchanged demand curve from one point to another. In fact, the only thing that will move you along the demand curve is a change in the price of the good in question. This is known as a change in quantity demanded.

Which of the following is true?

If input prices fall, this will lower the costs of production, causing the supply curve to shift to the right

The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25.

If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.

colluding

In business, where several businesses (or countries) make agreements among themselves which benefit them at the expense of either rival businesses or customers

International Trade Effect

In open economy , a lower price level with mean domestic goods become cheaper relative to foreign goods, so demand for domestic goods increase

Explain the slope of the short-run aggregate-supply curve using the sticky-wage theory.

In the short run, nominal wages are fixed based on fixed-price expectations. If actual prices unexpectedly fall while nominal wages remain fixed, firms are less profitable, and they cut back on production.

Income is exchanged for goods and goods are exchanged for income.

Which of the following represents a normative statement?

The study of economics is more important than the study of history

Which of the following will decrease the supply of money?

Increasing reserve requirements.

marginal

Incremental, additional, or extra; used to describe a change in an economic variable (is the marginal benefit higher than the marginal cost?")

Inverse relationship

Inverse relationship (negative): negative slope. ie: as x increases, y decreases.

Which of the following is true with regard to production possibilities curves?

Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future

Which of the following is true with regard to production possibilities curves?

Which component of aggregate demand is most volatile over the business cycle?

Investment

Slope of a straight line

It is always constant. Measures the rate at which changes are being made.

What must the Fed do with open-market operations and the money supply if it wishes to reduce the federal funds rate?

It must buy bonds, which injects reserves into the banking system and increases the money supply.

Which of the following countries experienced a deflation in the 1990s?

Japan

Who among the following was the first president to consciously use fiscal policy to stabilize the economy?

John F. Kennedy.

Theory of liquidity preference

Keyne's theory that the interest rate is determined by the supply and demand for money in the short run

Economic Resources

Land, Labor, Capital, Entrepreneurship

Macroeconomics

Looks at the whole economy and worries about economy-wide issues like unemployment and inflation. We will look at the U.S. economy as a whole system of interacting parts. We will also look at the swings in the system -- business cycle ups and downs as well as the studies government policy tools for combating cyclical swings.

Interest Rate Effect

Lower price leads to lower interest rates. Cheaper to borrow money. (Consequence- demand for goods in economy will increase)

M1 plus other assets, including deposits in savings and loans accounts and money market mutual funds

What is the decision rule?

MB >_ MC , MB<MC

Which of the following serve as the language of the market system?

Market prices

Which of the following serve as the language of the market system? A. Monetary and fiscal policies B. Morals C. Market prices D. Governments

Market prices

which serves as the language of the market system?

Market prices

Auction Prices

Prices that adjust on a nearly daily basis. Prices of fresh fish, veggies, and other food products. Very flexible and change rapidly.

Measured GDP is higher in Economy A, though the actual level of output in each economy is the same

analogy

Microeconomics looks at the trees; Macroeconomics looks at the forest

Mike can wash a car faster and has comparative advantage in washing cars.

Mike can wash a car in 5 minutes and wax a car in 15 minutes. Tony can wash a car in 10 minutes and wax a car in 20 minutes. Which of the following is true? Mike can wash a car faster and has comparative advantage in washing cars. a.) Mike can wash a car faster and has comparative advantage in washing cars. b.) Mike can wax a car faster and has comparative advantage in waxing cars. c.) Tony can wash a car faster and has comparative advantage in washing cars. d.) Tony can wax a car faster and has comparative advantage in waxing cars. e.) Both a. and b. are true.

Mike can wash a car faster and has comparative advantage in washing cars.

Does a shift in aggregate demand alter output in the long run? Why or why not?

No. In the long run, output is determined by factor supplies and technology (long-run aggregate supply). Changes in aggregate demand only affect prices in the long run.

None of the above is true.

If the economy goes into a recession and incomes fall, what happens in the market for inferior goods? - Prices and quantities both rise - Prices and quantities both fall - Prices rise, quantities fall - Prices fall, quantities rise

Prices and quantities both rise If the demand for a good rises when income falls, the good is called an inferior good. An increase in demand results in a rise in both the equilibrium price and quantity of a good (question #5 graph)

a) Income (normal goods/inferior goods)

Normal Goods If income increases in the U.S., ceteris paribus, demand for the normal good will increase. Conversely, if income decreases in the U.S., demand for the normal good will also decrease. When average income in U.S. rises from $30,000 to $31,000, the demand curve for automobiles, a normal good, will shift to the right. Inferior Goods If income increases in the US, ceteris paribus, demand for the inferior good will decrease. Conversely, if income decreases, demand for the inferior good will increase. When average U.S. income rises from $25,000 to $26,000, the demand curve for potatoes, an inferior good, will shift to the left We know that a particular product is a "normal" if statistically its demand exhibits a positive relationship with income in the economic data —economics is an empirical science

Is the president doing a good job?

Normative

Should the government raise taxes

Normative

Should the highway speed limit be raised?

Normative

Ethical rules based on morals or concepts of fairness are called:

Normative ethics

Illiquid

Not easily transferable to money

Fiscal year 2018 began on

October 1, 2017

which of the following is an example of a capital resource? A. Redwood trees B. unskilled labor C. stocks and bonds D. an Oil Rig

Oil Rig

Federal Reserve Bank

One of 12 regional banks that are an official part of the Federal Reserve System

What are the monetary policy tools of the Fed?

Open-market operations, Fed lending to banks, reserve requirements, and the Fed paying interest on bank reserves.

What does the Latin expression ceteris paribus mean?

Other things being held fixed.

Understanding Convergence in a Figure.

PHONE

Sources of long-term economic growth: a. More land, labor, capital, or entrepreneurship b. Technological progress; better human skills

PPC's shift out and up in response to long-term economic GROWTH. Long-term growth occurs when a society either gets more economic resources or learns to use its resources more efficiently (technological change occurs). 1.Technological advances allow us to produce more over time - as society learns how to produce more output per unit of resource used. 2.Increases in the availability of resources allow us to produce more over time. 3. Increases in the quality of resources (or of organizational ability to use resources) can also contribute to economic growth. For details look on Lecture 2 notes and Chapter 20-2

interest

Payment to resource owners for the use of their capital

Opportunity Cost

People like goods and services, and some goods and services have to be given up when more of one type good or service is produced. The real cost is thus an opportunity cost: a lost opportunity. More precisely the opportunity cost of a choice is the best alternative given up when that choice is made. Opportunity cost applies to decisions individual people make about their scarce personal resources (their time, money, etc.) as well as to decisions society makes about its scarce economic resources (land, labor, capital, and entrepreneurship).

Why might pollution from a paper mill be an example of a market failure?

People living downwind of the mill bear part of the cost of production

Which of the following must be true for markets to operate efficiently?

People must bear the full cost and reap the full reward from their decisions.

Which is likely to have a greater impact on aggregate demand: a temporary reduction in taxes or a permanent reduction in taxes? Why?

Permanent because it improves the financial condition of the household more, and thus, they spend more.

Stabilization policies

Policy actions taken to move the economy closer to full employment or potential output

The market ethics that have been discussed in this section are:

Positive

Which of the following is true?

Poverty could be eliminated but scarcity could not.

Which of the following is true? A. Poverty could be eliminated but scarcity could not. B. Scarcity could be eliminated but poverty could not. C. Both scarcity and poverty could be eliminated. D. Neither scarcity nor poverty could be eliminated.

Poverty could be eliminated but scarcity could not.

Aggregate demand rises if

Price level goes down, wealth goes up, consumption increases, interest rate decreases, investment spending increases, exchange rate decreases, net exports increase.

Natural resources

Resources provided by nature and used to produce goods and services

People enjoy eating two types of cereal, Frosted Mini-Wheats and Rice Kris

Rice Krispies and Frosted Mini-Wheats are subsitutes

the economic problem

Scarcity forces us to make choices

Which of these conditions are most likely to motivate honest people to become corrupt? A. Reading that Bernie Madoff was sentenced to life in prison after stealing billions of dollars B. Having your boyfriend (or girlfriend) elope with someone who is rich C. Seeing a film of Bonnie and Clyde being shot by machine guns D. Seeing your boss and fellow workers get rich by lying and cheating E. None of the above; if you're an honest person, you'll stay that way

Seeing your boss and fellow workers get rich by lying and cheating

From an economists' perspective, which of the following observations is not true?

Self-interest is purely monetary in nature.

From an economists' perspective, which of the following observations is not true? a.) Self-interest is purely monetary in nature. b.) Self-interest can include benevolence. c.) Self-interest is a good predictor of human behavior in most situations. d.) Self-interest is not the same as selfishness.

Self-interest is purely monetary in nature.

Suppose OPEC breaks apart and oil prices fall substantially. Initially, which curve shifts in the aggregate-supply and aggregate-demand model? In what direction does it shift? What happens to the price level and real output?

Short-run aggregate supply shifts right. Prices fall, and output rises.

The business cycle

Short-run economic fluctuations

Shortages and their effects on Market price

Shortage: A market condition existing at any price at where the quantity supplied is less than the quantity demanded Increase in Demand -->rightward shits--> excess demand (quantity demanded, Q3, is greater than quantity supplied, Q1—a shortage) --> Increase in Pe , Increase in Qe-->shortage Decrease in Supply-->leftward shits--> excess demand (quantity demanded (Q1) is greater than quantity supplied (Q3) --> increase in Pe , decrease in Qe-->shortage

Supply schedule

Shows quantity of a offered for sale at different possible prices.

"Ninja" Loans. During the housing boom, overeager lenders were said to have made "ninja" loanslong dash—that is, loans to individuals with "no income, job, or assets." How did "ninja" loans contribute to the securitization crisis in financial markets in 2007 and 2008?

Some borrowers had limited ability to repay their mortgages and stopped making payments, causing the collapse of repackaged, securitized mortgages.

Which of the following people are more likely to break ethical rules:

Someone who is ignorant

Which of the following people are more likely to break ethical rules?

Someone who is ignorant

Entitlement and mandatory spending

Spending that congress has authorized by prior law, primarily providing support for individuals

If Stephanie buys a laptop for $700 and the maximum she would have paid was $1,000, which of the following is true?

Stephanie received a consumer surplus of $300

Automatic stabilizers

Taxes and transfer payments that stabilize GDP without requiring policymakers to take explicit action

Which of the following would shift a supply curve to the right?

Subsides

b) Prices of related goods (substitutes/complements)

Substitutes Substitutes are goods that serve the same purpose. Generally, we substitute the cheaper for the more expensive good. For example, when the price of "good a" increases, the demand for "good b" will also increase Complements Complements are goods that are consumed together. If you consume one good, you must consume the other as well. When the price of "good m" increases, the demand for "good n" will decrease. We already know that we will buy less of "good m"—this is simply the law of demand. And if we buy less of "good m, " we will buy less of "good n" because they are complements. In the case of complements in consumption, there is a negative relationship between the price of "good m" and the demand for "good n"—the complement. Conversely, if the price of "good m"decreases, the demand for "good n" will increase, ceteris paribus.

SPENTRW- supply shifters

Supplier input, Prices of substitutes, Expectations, Number of suppliers, Technology, Regulations, Weather

In free markets which allows a high level of unethical corruption

Suppliers will be forced to be corrupt or to leave the market

How ill a decrease in price tend to affect supply?

Supply will not change

The discovery of a large new reserve of crude oil will shift the ___ curve for gasoline, leading to a ___ equilibrium price. -Supply, higher -Supply, lower -Demand, higher -Demand, lower

Supply, lower The supply curve for gasoline shows the relationship between the price of gasoline and the quantity of gasoline supplied by production, assuming that all the determinants of supply are held constant. The following list displays determinants of supply, which are the factors that affect the quantity of gasoline producers want to sell at a given price: FACTORS THAT DETERMINE SUPPLY -Price of inputs -Production technology -Number of producers -Expectations of producers Therefore, if the price of gasoline changes, the result is a movement along the supply curve from the old place to the new one. However, if a change occurs in any of the factors that determine supply, such as the discovery of a large new reserve of crude oil, the result is shift of the supply curve. In this case, the supply of gasoline increases because of the new oil reserve causing the equilibrium price to decline. (Question #4 for graph)

An increase in ___ will cause a movement along a given demand curve, which is also called a change in ___. - Supply, demand - Supply, quantity demanded - Demand, supply - Demand, quantity supplied

Supply, quantity demanded Demand refers to the position of the demand curve Quantity demanded refers to the amount consumers wish to buy Supply refers to the position of the supply curve Quantity supply refers to the amount of supplies you wish to sell In this case, an increase in supply will cause the equilibrium price to decrease, resulting in a movement along the demand curve. The demand curve itself remains unchanged, but the quantity demanded is affected. (Question 2 to see graph)

Principle of Diminishing Returns

Suppose output is produced with two or more inputs, and we increase one input while holding the other input or inputs fixed. Beyond some point output will increases at a decreasing rate.

Principle of Diminishing Returns

Suppose output is produced with two or more inputs, and we increase one input while holding the other input or inputs fixed. Beyond some point—called the point of diminishing returns—output will increase at a decreasing rate.

according to the principle of diminishing returns, if the number of workers is increased beyond the point of diminishing returns, then the additional worker

Surplus and their effects on Market price

Surplus: A market condition existing at any price at where the quantity supplied is greater than the quantity demanded Decrease in Demand -->leftward shits-->excess supply (quantity supplied, Q1, is greater than quantity demanded, Q3—a surplus)--> decrease in Pe , decrease in Qe-->surplus Increase in Supply-->rightward shits--> excess supply (quantity supplied, Q3, is greater than quantity demanded, Q1—a surplus)--> decrease in Pe , Increase in Qe-->surplus

If the GDP deflator equals 100 then real and nominal GDP in 2010 will be equal

TRUE

Shoe-leather costs typically increase with the rate of inflation

TRUE

Which of the following statements is TRUE?

TRUE: The U.S. government defines and enforces business ethics in order to protect the economy

c) Tastes, Population

Tastes There is a positive relationship between tastes and preferences and demand. If a good becomes more popular, ceteris paribus, demand for the good will increase. Conversely, if a good becomes less popular, the demand for the good will decrease. Population Positive Relationship. If Population INCREASES, Demand INCREASES (shifts to the right) for most goods, if Population DECREASES, Demand DECREASES (shifts to the left) for most goods

The Rise and Fall of Fiscal Surpluses. Which of the following factors led the United States from federal surpluses at the end of the 1990s to deficits in the first decade of 2000?

Tax cuts combined with increased spending.

Which government department produces the National Income and Product Accounts?

The Department of Commerce

Open Market Purchases

The Fed's purchase of government bonds to the private sector

Open Market Sales

The Fed's sale of government bonds to the private sector

which of the following is not an example of the use of the problem solving perspective provided by economics?

The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember

Which of the following is NOT an example of the use of the problem solving perspective provided by economics?

The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.

Which of the following is NOT an example of the use of the problem solving perspective provided by economics? A. An investor considers the tax consequences of selling stocks in order to buy bonds (which she believes offer a better return). B. A rancher recognizes that raising more cattle this year will damage his pasture and limit next year's herd size. C. The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember. D. An economics student considers the scarcity of available study time for studying the other subjects that she should be studying before deciding to study economics this evening.

The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.

Marginal Propensity to Consume (MPC)

The Fraction of Additional Income that is spent

Ceteris paribus

The Latin expression meaning that other variables are held fixed

The Latin phrase ceteris paribus means that when a relationship between two variables is being studied

The Latin expression meaning that other variables are held fixed.

Law of demand

The Law of Demand: All else constant, there is a Negative (or "Inverse") Relationship between P and QD. Ceteris Paribus, if P rises, Qd decreases (a move up and to the left along an unchanged demand curve) Ceteris Paribus, if P falls, Qd increases (a move down and to the right along an unchanged demand curve) There is a negative relationship because consumers prefer lower to higher prices. This is a rational, common sense reaction.

Production possibilities curve (PPC)

The PPC shows a menu of choices, showing all the different combinations of (item A for example clothing) and (item B for example food) that can be produced given our resources and technology. All points on the ppc represent combinations of the two products we are capable of producing - IF we use all our resources efficiently. (ppc's slope is NEGATIVE. The negative slope illustrates scarcity.)

Which of the following statements is TRUE? A. The U.S. government specifies all business ethics adopted by American corporations. B. Ethics decisions are for philosophers, churches and individuals, not government. C. The U.S. government insists that foreign trading partners adopt systems of business ethics identical to ours. D. The U.S. government defines and enforces business ethics in order to protect the economy. E. The U.S. government does not define or enforce any ethical rules.

The U.S. government defines and enforces business ethics in order to protect the economy.

comparative advantage

The ability of a person or nation to produce a good at a lower cost than another person or nation

Economic growth (definition)

The ability of an economy to produce greater levels of output, represented by an outward shift of the production possibilites curve. Also, an expansion in the national output measured by the annual percentage increase in a nation's GDP.

marginal benefit

The additional benefit resulting from a small increase in some activity.

marginal cost

The additional cost resulting from a small increase in some activity

marginal cost

The additional cost resulting from a small increase in some activity.

Budget surplus

The amount by which government revenues exceed government expenditures in a given year

Budget deficit

The amount by which government spending exceeds revenues in a given year

Multiplier effect

The amplification of the shift in aggregate demand from expansionary fiscal policy, which raises incomes and further increases consumption expenditures.

Suppose the United States imposes higher steel tariffs. How does the change in steel import restrictions affect automobile manufacturers who use steel as an input?

The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries

Euro

The common currency in Europe

Crowding-out effect

The dampening of the shift in aggregate demand from expansionary fiscal policy, which raises the interest rate and reduces investment spending

Principle of Opportunity Cost

The opportunity cost of something is what you sacrifice to get it.

Which of the following represents a normative statement?

The study of economics is more important than the study of history.

Movie tickets and DVDs are substitutes. If the price of DVDs increases, what happens in the market for movie tickets? - The supply curve shifts to the left - The supply curve shifts to the right - The demand curve shifts to the left - The demand curve shifts to the right

The demand curve shifts to the right When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes. If movie tickets and DVDs are substitutes and the price of DVDs increases, this means he demand for movie tickets will also increase. This results in the demand curve shifting to the right.

The demand for dollars in a 2-country model

The demand for dollars comes from people who have pesos and are seeking to trade them for dollars.

Transaction Demand for Money

The demand for money based on the desire to facilitate transactions

Speculative Demand for Money

The demand for money that arises because holding money over shout periods is less risky than holding stocks or bonds

Liquidity Demand for Money

The demand for money that represents the needs and desires individuals and firms have to make transactions on short notice without incurring excessive costs

Maps are a good non-economic example of using assumptions to make things simpler. Which of the following are assumptions used to make maps useful?

The earth is flat. and The roads are flat

Entrepreneurship

The effort used to coordinate the factors of production—natural resources, labor, physical capital, and human capital—to produce and sells products

Barter

The exchange of one good or service for another

Nominal Value

The face value of an amount of money.

Marginal Propensity to Save (MPS)

The fraction of additional income that is spent

Marginal propensity to consume (MPC)

The fraction of extra income that a household spends on consumption

Medium of exchange

The function of money when used to purchase goods and services

Owner's Equity

The funds provided to a bank by its owners

Federal Open Market Committee (FOMC)

The group that decides on monetary policy: It consists of the seven(7) members of the Board of Governors plus 5 of 12 regional bank presidents on a rotating basis.

Which of the following is a statement of positive economics?

The income tax reduces after-tax incomes of the rich

Which of the following is a statement of positive economics? A. The income tax reduces after-tax incomes of the rich. B. A reduction in tax rates makes the after-tax distribution of income fairer. C. Tax rates ought to be reduced so that people will work more. D. All of the above are statements of positive economics. E. None of the above is statements of positive economics.

The income tax reduces after-tax incomes of the rich

Discount Rate

The interest rate at which banks can borrow from the Fed

Why does the money demand curve slope negatively when it is drawn on a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis.

The interest rate is the opportunity cost of money since money earns no rate of return. Thus, an increase in the interest rate causes people to economize on cash balances and hold more wealth in interest-bearing bonds.

Federal Funds Rate

The interest rate on reserves that banks lend each other

Human capital

The knowledge and skills acquired by a worker through education and experience and used to produce goods and services

Money Market

The market for money in which the amount supplied and the amount demanded meet to determine the nominal interest rate

Federal Funds Market

The market in which banks borrow and lend reserves to and from one another

Reserve requirments

The minimum legal percent of deposits that banks must hold as reserves

Explain how an increase in the money supply shifts the aggregate-demand curve.

The money supply shifts right, the interest rate decreases, investment increases at each price level, which is a rightward shift in the aggregate-demand curve.

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes?

The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes? A. He has already made all the clothes he will need for a few years. B. The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career. C. Sergei just can't find the material he likes in the United States. D. Sergei has a comparative advantage in tailoring clothes. E. The opportunity cost of making clothes instead of playing hockey is relatively low, so he should instead concentrate on his hockey career (for which the opportunity cost is very high).

The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.

Autonomous Consumption Spending

The part of consumption spending that does not depend on income

Short Run in Macroeconomics

The period of time in which prices do not change very much

Reserves

The portion of banks' deposits set aside in either vault cash or as deposits at the Federal Reserve.

Exchange Rate

The price at which currencies trade for one another in the market

Exchange rate

The price at which currencies trade for one another in the market

Real exchange rate

The price of U.S. goods and services relative to foreign goods and services, exposed in a common currency

A change in which of the following will NOT shift the demand curve for hamburgers - The price of hot dogs - The price of hamburgers - The price of hamburger buns - The income of hamburger consumers

The price of hamburgers The demand curve for hamburgers shows the relationship between the price of hamburgers and the quantity of hamburgers demanded by consumers, assuming that all the determinants of demand are held constant. The following list displays determinants of demand, which are the factors that affect the quantity of hamburgers consumers want to buy at a given price: FACTORS THAT DETERMINE DEMAND -Price of a related good (complement or substitute) -Income of consumers -Tastes of consumers -Number of consumers -Expectations of consumers Therefore, if the price of hamburgers changes, the result is a MOVEMENT along the demand curve from the old price to the new one. However, if a change occurs in any of the factors that determine demand - such as the price of hot dogs ( a substitute), the price of hamburger buns (a complement), or the income of hamburger consumers - the result is a shift of the demand curve

Law of Supply

The principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus.

double coincidence of wants

The problem in a system of barter that one person may not have what the other desires

Store of Value

The property of money that holds the money preserves value until it is used in an exchange

Open-market operations

The purchase and sale of U.S. government bonds by the Fed

Open Market Operations

The purchase or sale of U.S. government securities by the Fed

Foreign exchange market intervention

The purchase or sale of currencies by the government to influence the market exchange rate

A surplus currently exists in the market for apples. Which of the following statements is correct?

The quantity of apples supplied exceeds the quantity demanded and the market price is above the equilibrium price

Monetary Policy

The range of actions taken by the Federal Reserve to influence the level of GDP or inflation

Reserve Ratio

The ratio of reserves to deposits

Money Multiplier

The ratio of the increase in total checking account deposits to an initial cash deposit

Factors of production

The resources used to produce goods and services; also known as production inputs or resources

Scarcity

The resources we use to produce goods and services are limited

Money

The set of assets generally accepted in trade for goods and services

Board of Governors of the Federal Reserve

The seven-person governing body of the Federal Reserve System in Washington, D.C.

excess demand

The situation that exists when, at the prevailing price, demand is greater than supply.

excess supply

The situation that exists when, at the prevailing price, supply is greater than demand.

Liabilities

The sources of funds for a bank, including deposits and owners' equity.

Required Reserves

The specific fraction of their deposits that banks are required by law to hold as reserves

Discretionary spending

The spending programs that congress authorizes on an annual basis

Which of the following represents a normative statement? A. A decrease in price leads to an increase in quantity demanded. B. The temperature outside is 90 degrees. C. The study of economics is more important than the study of history. D. People will buy less butter at $1.50 per pound then they will at $1.00 per pound. E. Normally, as an economy develops, the nation's birth rate tends to fall.

The study of economics is more important than the study of history.

Microeconomics

The study of the choices made by house-holds, firms, and gov't and how these choices affect the markets for goods and services

Macroeconomics

The study of the economy as a whole (the forest)

Macroeconomics

The study of the nation's economy as a whole; focuses on the issues of inflation, unemployment, and economic growth

The sum of currency in the hands of the public, demand deposits, other checkable deposits, and traveler's checks. (commercial banks and thrift institutions) Doesn't include all assets we use to make economic exchanges

Current account

The sum of net exports (exports - imports) plus net income received from abroad plus net transfers from abroad

The market supply curve is positively sloped because a higher price

The supply curve slopes upward, reflecting the higher price needed to cover the higher marginal cost of production. The higher marginal cost arises because of diminishing marginal returns to the variable factors

The supply of dollars in a 2-country model

The supply of dollars comes from people who have dollars and are seeking to trade them for pesos.

Law of one price

The theory that goods easily tradable across countries should sell at the same price expressed in a common currency

Outside lags

The time it takes for a policy to actually work

Inside lags

The time it takes to formulate a policy

Assets

The uses of the funds of a bank, including loans and reserves

Financial account

The value of a country's net sales (sales - purchases) of assets

Real Value

The value of an amount of money in terms of what it can buy.

Capital account

The value of capital transfer and transaction in nonproduced, nonfinancial assets in the international accounts

Slope of a curve

The vertical difference between two points (the rise) divided by the horizontal difference (the run)

Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.

Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy? A. Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments. B. Their positive statements help us understand the good results of a policy change, and their normative statements help us understand the negative results. C. We really do not have to worry about them since trained economists never make normative statements. D. Economists are always making assumptions, and policy should not be based on assumptions. E. Economists are "tricky" by nature, so we need to be able to distinguish truth from political rhetoric.

Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.

what are resources?

They are inputs to produce goods and services

Which of the following is true of resources? A. Their availability is unlimited. B. They are the inputs used to produce goods and services. C. Increasing the amount of resources available could eliminate scarcity. D. They are inputs used to produce goods and services and increasing the amount of resources available could eliminate scarcity.

They are the inputs used to produce goods and services.

Which principle suggests that the demand for money should increase as prices increase?

The real-nominal principle

"As a rational person, you would expect individuals to always avoid actions that are illegal." T or F

This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.

"As a rational person, you would expect individuals to always avoid actions that are illegal." T or F A. This is a true statement because most people don't want to suffer the penalties associated with criminal behavior. B. This is a true statement because most individuals are good citizens and prefer not to commit crimes. C. This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway. D. This is a false statement because only people with certain genetic predispositions are likely to commit crimes.

This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.

Tom should catch more birds and fish less, then trade birds for fish.

Tom is a castaway who washes up on a remote island. He can catch eight birds per day or catch ten fish per day. The natives on the island can catch ten birds per day or catch twenty fish per day. According to comparative advantage, A. Tom should catch more birds and fish less, then trade birds for fish. B. Tom should catch fewer birds and fish more, then trade fish for birds. C. Both should catch more birds and fish less. D. Both should catch fewer birds and fish more.

Tom should catch more birds and fish less, then trade birds for fish.

individuals who have stopped looking for work because they could not find adequate childcare are not counted as unemployed in the traditional unemployment statistics.

True

How a change in dollar value (for example an increase) affects U.S. exports

U.S. goods and services become more expensive for foreigners to purchase, so Exports fall. (Exports are goods and services produced in the U.S. and sold to foreigners.) As imports become cheaper to buy (since a $ buys more of the foreign currency than it did before), Imports increase. (Imports are goods and services produced abroad and sold to U.S. buyers.)

Balance of payments surplus

Under a fixed exchange rate system, a situation in which the demand of a country's currency exceeds the supply for currency at the current exchange rate

Balance of payments deficit

Under a fixed exchange rate system, a situation in which the supply of a country's currency exceeds the demand for the currency at the current exchange rate

Which of the following is most likely an example of correlation but not an example of causation?

Usually, if I eat a chili dog and drink a beer before a game, my teams wins.

Which of the following is most likely an example of correlation but not an example of causation? A. In the U.S., more pizza is consumed on Super Bowl Sunday than any other day of the year. B. The cost of advertising during the first half of the Super Bowl is greater than the cost of advertising in the second half. C. Usually, if I eat a chili dog and drink a beer before a game, my teams wins. D. Generally speaking winning football teams tend to average more rushing yards than losing football teams.

Usually, if I eat a chili dog and drink a beer before a game, my teams wins.

Which of the following is most likely an example of correlation but not an example of causation?

Usually, if I eat chili dog and drink a beer before a game, my team wins

what according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances?

Values and Information

What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances?

Values and information

What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances? A. Scarcity and rarity B. Opportunities and pay-offs C. Values and information D. Legal consequences

Values and information

Aggregate Demand Curve purchasing power affected by

Wealth Effect, Interest Rate Effect, International Trade Effect

Which of the following does not specify positive ethical rules? A. Webster's Dictionary B. Robert's Rules of Order C. Hoyle's Rules of Games D. The San Marcos Land Development Code E. The Amy Vanderbilt Complete Book of Etiquette

Webster's Dictionary

Which of the following does not specify positive ethical rules?

Webster's dictionary

which of the following does not specify positive ethical rules? A. Websters Dictionary B. Roberts rules of Order C. Hoyle's rules of games D. San Marcos land development code E. Army Vanderbilt complete book of etiquette

Webster's dictionary

Real-Nominal Principle

What matters to people is the real value of money or income- its purchasing power- not the face value of money or income

Real-Nominal Principle

What matters to people is the real value of money or income—its purchasing power—not its "face" value.

The real-nominal principle states that

What matters to people is the real value of money or income—its purchasing power—not its face value.

Real-Nonimal Principle

What matters to people is the real value or purchasing power of money or income, not the face value

Opportunity cost

What you sacrifice to get something

opportunity Cost

What you sacrifice to get something.

Explain the intuition of the multiplier effect resulting from an increase in government spending. Why should a bigger MPC make the multiplier effect larger?

When the government purchases goods, it causes an increase in the incomes of the sellers. They spend some percent of their new higher income on goods and services, raising others' incomes, and so on. The higher the MPC, the greater the percent of new income spent in each round.

Demand

When we speak of demand, we are referring to the quantities that people are willing and able to buy at various possible prices. *Note, along with the willingness to buy, the consumer must also have the wherewithal to purchase the good.

Which of the following is not one of the three questions individuals, firms, and governments use to make economic decisions?

Where is the product made?

Which of the following are NOT very important to maintaining effective market ethics?

Whether people understand the reasons for the rules and regulations

Which of the following are NOT very important to maintaining effective market ethics?

Whether people understand the reasons for the rules or regulations

Which of the following are NOT very important to maintaining effective market ethics? A. A willingness by the vast majority of market participants to obey the ethics and report violators B. The number of inspectors or police C. The severity of punishments for cheating D. Whether people understand the reasons for the rules or regulations E. Whether the likely penalties for cheating are greater than the rewards

Whether people understand the reasons for the rules or regulations

In a market economy how do we determine who will get the goods and services that have been produced?

Whoever can afford them

In a market economy how do we determine who will get the goods and services that have been produced? A. Whoever wants them B. Whoever needs them C. Whoever can afford them D. None of the above.

Whoever can afford them

Independent relationship

Y is independent of X: horizontal line X is independent of Y: vertical line

Does a shift in aggregate demand alter output in the short run? Why or why not?

Yes. Changes in aggregate demand cause actual prices to deviate from expected prices. Due to sticky wages, sticky prices, and misperceptions about relative prices, firms respond by changing output.

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.

You will not purchase the new sport utility vehicle at this time if you are acting rationally

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.

You will not purchase the new sport utility vehicle at this time if you are acting rationally.

pollution

externality (situation where a 3rd party is effected by market activity they are not directly involved in)

You will not purchase the new sport utility vehicle at this time if you are acting rationally.

A change in demand causes a shift of the demand curve. A change in quantity demanded causes a movement along the demand curve.

A change in supply causes a shift of the supply curve. A change in quantity supplied causes a movement along the supply curve.

If both demand and supply decrease simultaneously, the equilibrium price will increase if the change in supply is relatively large.

If supply decreases while demand increases, the equilibrium price will increase

If supply decreases while demand increases, the equilibrium quantity will decrease if the change in demand is relatively small

Suppose the equilibrium price of housing recently decreased and the equilibrium quantity decreased as well. These changes were caused by a(n) decrease in demand .

The price of the product is not held fixed in drawing a market demand curve. Consumer income is held fixed in drawing a market demand curve. The price of other related goods is held fixed in drawing a market demand curve. Consumer expectations about future prices are held fixed in drawing a market demand curve. The quantity of the product purchased is not held fixed in drawing a market demand curve

The price of the product is not held fixed when drawing a market supply curve. Wages paid to workers are held fixed when drawing a market supply curve. The price of materials used in production is held fixed when drawing a market supply curve. Taxes paid by producers are held fixed when drawing a market supply curve. The quantity of the good produced is not held fixed when drawing a market supply curve.

Unemployment Insurance. Each worker employed by Risky Business has a 20 percent chance of losing his or her job in the next year. Each worker employed by Safe Business has a 2 percent chance of losing his or her job. You manage an insurance company that provides a lump sum of $10 comma 000 to each unemployed worker. a. The minimum amount you would charge Risky Business for each employee covered by the unemployment policy is $ 2000. (Enter your response as an integer.) b. The minimum amount you would charge Safe Business for each employee covered by the unemployment policy is $ 200. (Enter your response as an integer.) c. Suppose you charge the same premium to both businesses. The companies have the same number of workers and are required to purchase unemployment insurance. The minimum amount you would charge is $ 1100. (Enter your response as an integer.)

When demand changes, the equilibrium price and equilibrium quantity move in the same direction. When supply changes, the equilibrium price and equilibrium quantity move in opposite directions

in the supply of a product decreases the equilibrium price and increases the equilibrium quantity

positive externality

a benefit received by someone who had nothing to do with the activity that generated the benefit

If the price of ice cream increases and the quantity demanded decreases, economists would describe this as:

a change in quantity demanded

Effective free market ethical systems must provide for all of the following EXCEPT:

a clearly defined moral foundation

Effective free market ethical systems must provide for all of the following EXCEPT: A. Clearly defined rules and regulations. B. meaningful punishments for rule breakers. C. a clearly defined moral foundation. D. adequate market oversight and policing. E. enough freedom for creativity and competition.

a clearly defined moral foundation

public goods

a commodity or service that is provided without profit to all members of a society, either by the government or a private individual or organization. (air, etc.)

and Terry run a landscaping firm that prunes trees and cuts lawns. Sandy is more productive than Terry at both tasks. Sandy should prune trees and Terry should cut lawns if Sandy has advantage in pruning trees

a comparative

A downward sloping straight-line production possibilities curve implies:

a constant opportunity cost

A downward sloping straight-line production possibilities curve implies:

a constant opportunity cost.

a market economy.

product market

a market in which a good or service is bought and sold

price ceiling

a maximum price that can be legally charged for a good or service (pizza can be sold for 17$ no more)

exhaustible resource

a natural resource that does not renew itself and so is available in a finite amount, such as oil or coal

Stagflation

a period of falling output and rising prices

Recession

a period of mildly falling incomes and rising unemployment

Depression

a period of unusually severe falling incomes and rising unemployment

Accommodative policy

a policy of increasing aggregate demand in response to a decrease in short-run aggregate supply

tasha decides that when homes in her neighborhood are selling for 150,000 she will not sells her home but when the average price rises to 175,000 she decides that she will put her home on the market. this is an example of

a positively sloped supply curve

increase in demand

a rightward shift of the demand curve (greater quantity is demanded at each price)

excise tax

a sales tax on individual products such as alcohol, tobacco, and gasoline

A change in demand causes

a shift

In the diagram to the right, the economy is currently at point A. President Donald Trump lowered taxes in 2018. The Congress also increased government spending that year. Ceteris paribus, these actions are represented by

a shift of the aggregate demand curve from AD11 to AD22 (point A to C).

change in supply

a shift of the supply curve caused by any variable than the price of the product

The imposition of a price ceiling on a market often results in:

a shortage

economic theory

a simplification of economic reality used to make predictions about the real world

market equilibrium

a situation in which quantity demanded equals quantity supplied, at prevailing market price

Sticky Prices

a situation where prices of goods and services are slow to respond to changes in supply and demand

Which of the following lies primarily within the realm of microeconomics?

a study of supply and demand conditions in the market for orange juice

Which of the following lies primarily within the realm of microeconomics? A. an empirical analysis of the relationship between the growth of the money supply and the rate of inflation B. an economic model forecasting the impact of a tax increase on consumer spending and national output C. a study of supply and demand conditions in the market for orange juice D. a model forecasting the impact of a change in interest rates on the level of investment in the economy

a study of supply and demand conditions in the market for orange juice

what lies primarily within the realm of microeconomics?

a study of supply and demand conditions in the market for orange juice

Which of the following would be least likely to affect the supply of automobiles?

a successful physical fitness plan encouraging Americans to walk rather than to drive to their destinations

Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price. An increase in supply in both the wheat and gasoline markets will create:

a surplus in the wheat market and an increase the quantity of gasoline traded.

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded, ceteris paribus

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

Hypothesis:

a testable proposition

A hypothesis is:

a testable proposition.

A hypothesis is: A. a normative economic statement. B. a testable proposition. C. a statement that cannot be evaluated using real-world data. D. a model with no connection to the real world.

a testable proposition.

voluntary exchange

a trade that makes both parties better off

a shift of the demand curve also called a change in

a variable other than the price of a product

Principle of Voluntary Exchange

a voluntary exchange between two people makes both people better off

Calculating the MPS and MPC. In one year, a consumer's income increases by $200 and her consumption increases by $80. a) Her marginal propensity to consume is equal to b) Her marginal propensity to save is equal to

a) .40 b).60 formula on phone

Non-price determinants of demand (changes in these shift demand curve)

a) Income (normal goods/inferior goods) b) Prices of related goods (substitutes/complements) c) Tastes, Population

Stock Prices, Interest Rates, and Corporate Earnings. a. Holding other factors constant, stock prices tend to rise when expected corporate earnings rise because higher expected corporate earnings ____________ investors' expectations about future dividends, ___________ the demand for stock and stock prices. b) When interest rates fall, lower interest rates make borrowing ________ expensive, __________ the total level of investment. All other things being equal, when investment spending rises, stock prices ________ .

a) increase, increasing b) less, increasing, rise

Consider a bicycle producer that initially employs 200 production workers and 10 customer-service workers. When the firm outsources its customer-service operation to India, the 10 customer-service workers lose their jobs. a. The net effect from outsourcing could be a loss of fewer than 10 jobs in the firm because b. There will be a net gain in jobs in the firm if

a. the savings may allow the firm to hire more production workers. b. additional demand for bicycles creates a large boost in production.

Marginal Airlines. Marginal Airlines runs 10 flights per day at total cost of $50 comma 000, including $30 comma 000 in fixed costs for airport fees and the reservation system and $20 comma 000 for flight crews and food service. a. If an 11th flight would have 25 passengers, each paying $125, would it be sensible to run the flight? b. If the 11th flight would have only 15 passengers, each paying $125, would it be sensible to run the flight?

a. yes b. no

We say that a person has an absolute advantage in producing a particular product if he or she

absolute advantage · The ability of one person or nation to produce a product at a lower resource cost than another

The Federal Reserve is not the:

agency that decides the tax rate.

At any price level, the income-expenditure model determines the level of equilibrium output and the corresponding point on the

aggregate demand curve

which of the following is an example of an individual motivated by self interest? A. student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. Man buying a new Camaro E. all answers are correct

all answers are correct

A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer: A. decrease in market demand. B. decrease in market supply. C. decrease in equilibrium price. D. total market collapse.

all of the above

The President of the New York Federal Reserve Bank. Which of the following is a reason that the president of the New York Federal Reserve Bank is always a voting member of the Federal Open Market Committee?

all of the above

Which of the following is one of the three basic questions a society must answer?

all of the above

which of the following is true? A. people specialize by concentrating their energies on activities they are best suited B. the primary reason people pursue their comparative advantage is their self interest C. one advantage of specialization is that workers acquire greater skill from repetition D. if a person, region, or country ... E. all of the above

all of the above

A student has a chance to see Green Day in concert. The student also has a major economics exam the next morning. If the student goes to the concert: A. she may receive a lower grade on the economics exam. B. the opportunity cost of the concert is the value of the time spent studying. C. the decision involves a trade-off.

all of the above are correct

Which of the following is a resource exchanged in the factor markets? A. land B. capital C. labor D. entrepreneurship

all of the above are traded in the factor markets.

Which of the following is a resource exchanged in the factor markets? A. land B. capital C. labor D. entrepreneurship E. all of the above are traded in the factor markets.

all of the above are traded in the factor markets.

all of the above are true

Which of the following is true? a.) voluntary trades give both parties more in value than what they give up b.) w/o the ability to trade, ppl would not tend to specialize in those areas where they had a comparative advantage c.) ppl can gain by specializing in the production of the good in which they have a comparative advantage. d.) voluntary trade directly increases....

all of the above are true

Which of the following is true? a.) people specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result. b.) the primary reason people pursue their comparative advantage is their self-interest c.) one advantage of specialization is that workers acquire greater skill from repetition d.) if a person, a region, or a country....

all of the above are true.

Which of the following is an example of an individual motivated be self-interest? A. a student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. a man buying a new Camaro

all of the answers

all of the answers A. a student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. a man buying a new Camaro

all of the answers are correct

all of the answers are correct A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires.

Which of the following is not an example of a resource? a.) a forest b.) a river c.) a John Deere tractor d.) the chef at the city's best café e.) all of the answers are resources

all of the answers are resources

Which of the following is not an example of a resource? a.) a forest b.) a river c.) a John Deere tractor d.) the chef at the city's best café e.) all of the answers are resources

all of the answers are resources a.) a forest b.) a river c.) a John Deere tractor d.) the chef at the city's best café

Ceteris Paribus

all other things held constant

A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer: A. decrease In market demand B. decrease in market supply C. decrease in equilibrium price D. total market collapse E. all the above

all the above

Ethics violators like embezzlers, frauds, tax cheats and bank robbers: A. usually allow most rules and other ethics most of the time B. not only injure individuals and companies, but also often hurt entire markets C. often use rational cost benefit analysis when deciding wether to cheat D. may feel so ashamed and guilty of their crimes that they are driven to suicide E. All the above

all the above

which of the following are reasons why most owners of companies want their employees to act ethical? A. becasuser they care about the well being of their customers B. to enhance productivity C. to maximize public good will toward the company D. to avoid large fines and expensive lawsuits E. all the above

all the above

A student has a chance to see Green Day in concert. The student also has a major economics exam in the morning. If the student goes to the concert: A. shimmy recieve a lower grade on Econ exam B. the opportunity cost of the concert is the value of the time spent studying C. the decision involves a trade-off D. all the above are correct

all the above are correct

The term "ceteris paribus" means that:

all variables except those specified are constant

The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

all variables except those specified are constant.

The real core of most economic problem is to:

allocate limited resources among competing uses

The real core of most economic problem is to:

allocate limited resources among competing uses.

The real core of most economic problem is to: A. increase the amount of leisure time available to people. B. guarantee everyone on the planet a minimum level of food, shelter and clean water. C. allocate limited resources among competing uses. D. eliminate scarcity.

allocate limited resources among competing uses.

The importance of the ceteris paribus assumption is that it:

allows one to analyze the relationship between two variables apart from the influence of other variables

The importance of the ceteris paribus assumption is that it:

allows one to analyze the relationship between two variables apart from the influence of other variables.

The importance of the ceteris paribus assumption is that it: A. allows one to separate normative economic issues from positive economic ones. B. allows one to generalize from the whole to the individual. C. allows one to analyze the relationship between two variables apart from the influence of other variables. D. allows one to hold all variables constant so the economy can be carefully observed in a suspended state.

allows one to analyze the relationship between two variables apart from the influence of other variables.

As a country's income increases, imports will

also increase

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 5% increase in price would lead to:

an 8% decrease in the quantity of gourmet coffee demanded

Balance Sheet

an account statement/report for a bank that shows the sources of its funds(liabilities) as well as the uses of its funds (assets)

cartel

an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.

behavioral assumption

an assumption that describes the expected behavior of economic decision makers; what motivates them

Centerally planned economy

an economic system in which the government makes all decisions on the three key economic questions

centrally planned economy

an economy in which a government bureaucracy decides how much of each good to produce, how to produce the good, and who gets the good.

Buyers who were originally willing to buy 800 units of a good at $4 per unit are now willing to buy 1200 units at $4 per unit, That change would be described as:

an increase in demand

nominal value

face value of a given amount of money

Gift Cards. Gifts cards have grown in popularity as a mechanisms to give gifts. Cards are available for popular book stores and for coffee shops. Gift cards Traveler's checks are sold by

are not considered part of the money supply since they have a fixed value paid for in advance banks and non-banks and can be used for purchases in any enterprise

regressive tax

as a person's income rises, the amount his or her tax as a proportion of income falls

Pollution damages the environment we live in. An economist would advise that we reduce air pollution:

as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction

Pollution damages the environment we live in. An economist would advise that we reduce air pollution:

as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

Pollution damages the environment we live in. An economist would advise that we reduce air pollution: A. as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction. B. until the total benefit from air pollution reduction just equals the total cost of pollution reduction. C. until air pollution levels reach near-zero levels. D. to the levels experienced in the 1950s when air was much cleaner near big cities.

as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

Joe runs a business and needs to decide how many hours to stay open. Figure 2.2 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 6 hours per day. If he is following the marginal principle, what must his marginal cost be?

at 6 hrs per day where MB=MC

The Paradox of Thrift. According to the paradox of thrift, when investment is autonomous and independent of income, policy makers cannot increase aggregate savings by affecting citizens' savings rates, because

at equilibrium, aggregate savings must be equal to aggregate investment.

Which of the following appropriately describes the intercept of the consumption function

autonomous consumption

Technological Progress in Banking. Computers have revolutionized banking for consumers through the growth of ATMs and electronic bill paying capabilities. All of these improvements for consumers might not be counted as technological progress because technological progress A. cannot be counted. B. is defined by economists as an increase in output with no additional increases in inputs. Your answer is correct. C. is defined by economists as an increase in buildings and equipment. D. occurs only in some sectors and not in others.

Setting the Interest Rate on Reserves. If the Fed set an interest rate on reserves close to the market interest rate on commercial loans,

banks would have little incentive to make loans

Money solves the problem of double coincidence of wants that would regularly occur under a system of

barter

the principle of voluntary exchange is the concept that a voluntary exchange between two people makes both people better off

based on the notion by Adam Smith that a distinct human trait is that people act in their own self-interest, making themselves better off //// The principle of voluntary exchange is based on the notion that people act in their own self-interest. Self-interested people won't exchange one thing for another unless the trade makes them better off.

Rates on Two-Year Bonds and One-Year Bonds. Suppose the interest rate on a two-year bond was higher than the interest rate on a one-year bond. The market must believe that next year one-year interest rates will

be above the current year's one-year bond rate

b. At the level of output, y1,the corresponding level of expenditures fall ________ the 45 degree line

below picture on phone

Marginal benefit

benefit of one more unit

An increase in international trade generates for consumers in the form of lower

benefits, prices

An increase in international trade generates benefits for consumers in the form of lower prices .

benefits; prices

Pirating Textbooks? The government protects intellectual property rights by enforcing copyright rules on textbooks. Suppose Google scans the pages of this and other introductory economics textbooks and makes them available for downloading at no charge. a. Supposing you are a current textbook consumer, you would be b. What are the implications for the next generation of economics students?

better off; all of the above

If people are self-interested, A. they will always choose work over leisure. B. they will never choose work over leisure C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more. E. both c. and d. are true.

both c. and d. are true.

both c. and d. are true. C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more.

Opportunity cost includes

both monetary and non-monetary costs

Opportunity cost includes A. monetary costs only. B. non-monetary costs only. C. both monetary and non-monetary costs. D. neither monetary nor non-monetary costs.

both monetary and non-monetary costs

opportunity cost includes:

both monetary and non-monetary costs

the opportunity cost of going to college includes:

both tuition and the value of the student's time

The opportunity cost of going to college includes:

both tuition and the value of the students time

The opportunity cost of going to college includes: A. both tuition and the value of the student's time. B. tuition, but not the value of the student's time, which is a cash cost. C. tuition, but not the value of the student's time, which is a monetary cost. D. neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future. E. neither tuition nor the value of the student's time, at least at state-supported universities and colleges.

both tuition and the value of the students time

Hurricanes and Subsequent GDP Growth. Devastating hurricanes, such as those that afflicted the Gulf Coast during the first decade of the 2000s are terrible events. Yet, economists believe that GDP typically rises after them. Explain why this happens and whether that means that hurricanes are really "good things." Hurricanes

can actually stimulate GDP because of the direct effects and the multiplier effects associated with the rebuilding expenditures.

Ethics A. is a branch of philosophy. B. are moral rules or standards governing human conduct. C. are rules or standards governing human conduct, but not necessarily moral rules. D. the moral principles of an individual person. E. can be defined in any of the ways above.

can be defined in any of the ways above

An individual has a comparative advantage in production if that individual:

can produce at the lowest opportunity cost

An individual has a comparative advantage in production if that individual: A. can produce at the highest opportunity cost. B. is more self-sufficient than others. C. can produce at the lowest opportunity cost. D. both a. and b. E. both b. and c.

can produce at the lowest opportunity cost.

Interest Rates and ATM Trips. Carlos, who lives in a country where interest rates are very high, goes to an ATM every day to get $10 of spending money. Jim, who lives in a country with relatively low interest rates, goes to the ATM once a month to get $300 of spending money. Why does Carlos use the ATM more frequently?

carlos' opportunity cost of holding cash is higher.

Flea Markets and the Demand for Money. People often like to visit flea markets to look for unexpected opportunities. Flea markets also typically use cash. This is an example of the liquidity demand for money because

cash purchases are expected, and cash is the most liquid asset.

Shift

caused by a change in a variable not on an axis

Movement along a line/curve

caused by a change in a variable on an axis

three things that plant cells have that animal cells don't?

cell wall, chloroplast, vacuole

command economy

central planning

which of the following will cause a movement along the supply curve

changes in the market price of a good other things held constant

What is the economist's solution to the congestion problem?

charge a toll during rush hour

In poor countries, the relative prices for nontraded goods (such as household services) to traded goods (such as jewelry) are

cheaper

Economics is best defined as the study of

choices when there is scarcity

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time

Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs. C. acquiring the information relevant to a choice before making that choice. D. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake. E. choosing to purchase beer until there is no additional enjoyment from the consumption of beer.

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time

Economic models that assume that wages and prices adjust freely to changes in demand and supply are known as

classical

Economic models that assume that wages and prices adjust freely to changes in demand and supply are known as

classical models

The Fed provides a system of check collection and

clearing

Pat and Marty run a landscaping firm that prunes trees and cuts lawn. Pat is more productive than Marty at both tasks. Pat should prune trees and Marty should cut lawns if Pat has a _______ advantage in pruning trees. comparative/absolute

comparative

it is impossible to have ___ in both goods

comparative advantage

specialize according to ____ to maximize your gains from trade

comparative advantage

trade results from

comparative advantage

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n):

comparative advantage in production

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n):

comparative advantage in production.

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n): A. disincentive to trade with others. B. higher opportunity cost. C. absolute advantage in production. D. comparative advantage in production. E. None of the above. People, regions, and countries should learn to be self-sufficient.

comparative advantage in production.

Marginal analysis involves:

comparing the additional benefit from an action to the additional cost

Marginal analysis involves: A. comparing the total benefits of all actions to the total costs incurred as a result of those actions. B. abstract thinking, which is never actually utilized by consumers when making purchasing decisions. C. holding all other variables constant when isolating the relationship between two variables. D. comparing the additional benefit from an action to the additional cost.

comparing the additional benefit from an action to the additional cost

To decrease the level of output in the short run, the Fed should

conduct an open market sale.

An economy's resources:

consist of land, labor, capital and entrepreneurial skills

An economy's resources:

consist of land, labor, capital, and entrepreneurial skills.

An economy's resources: A. consist of land, labor, capital, and entrepreneurial skills. B. are unlimited in a country like the United States. C. are always efficiently utilized in wealthy nations. D. consist of land, labor, and entrepreneurial skills but not capital.

consist of land, labor, capital, and entrepreneurial skills.

An economy's resources:

consists of land, labor, capital, and entrepreneurial skills

The difference between the value of a good to consumers and its price is known as:

consumer surplus

total surplus

consumer surplus + producer surplus

Ceteris paribus, an increase in the price of a good will cause the:

consumer surplus derived from the good to decrease

When calculating GDP using the production method, which of the following would you include?

consumption, government purchases, net exports, investment

"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation:

contains positive statements only

"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation:

contains positive statements only.

"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation: A. contains positive statements only. B. contains normative statements only. C. contains both normative and positive statements. D. contains neither normative nor positive statements.

contains positive statements only.

Four social inventions that support markets are , which specify the terms of exchange; , which reduces the risk of entrepreneurs; , which increase the profitability of inventions; and rules, which provide potential investors with reliable information about the financial performance of firms.

contracts; insurance; patents; accounting

Marginal cost

cost of one more unit

Menu costs

costs associated with changing prices

individual demand curve

curve showing relationship between the price of a good and the quantity demanded for an individual consumer

market demand curve

curve showing the relationship between price and quantity demanded by all consumers- the horizontal sum of all individual demand curves

There is no _______ unemployment at full employment.

cyclical

there is no _________ unemployment at full employment

cyclical

Going to Medical School at the Age of 50. Although we might admire someone who decides to attend medical school at the age of 50, explain using human capital theory why this is so rare. A. Younger students have more time in which to earn higher wages after graduation. B. Younger students face a lower opportunity cost of forgone earnings while in school. C. Younger students have lower direct out-of-pocket costs associated with school. D. Both a and b. Your answer is correct. E. All of the above.

Inflation and Currency Held Abroad. Suppose inflation in the United States rose to around 9 percent a year; this would _____________ the demand for U.S. currency by foreigners

decrease

The present value of lottery winnings paid over a 20-year period will ____________ with an increase in interest rates.

decrease

money demand will ___________ as price level falls

decrease

Monetary policy

decisions by the central bank concerning the money supply

A policy of not enforcing patents or copyrights would ____________ the incentive to be innovative.

decrease

If the MPC decreases, the slope of the consumption function will

decrease

Negative incentives:

decrease benefits or increase costs

Shifts in the Demand Curve

due to changes in variables other than the price of the good itself and are known as a change in demand, which shift in the demand curve. Increase in demand represents a rightward shift in the demand curve A decrease in Demand represents a leftward shift in the demand curve

An example of a capital resource is:

dump truck

nominal value

face value of a given amount of money (# of dollars)

Economics is different from a "hard" science like physics because: A. economists abstract from reality in creating their theories. B. economics is easier to study than physics. C. economists must explain their theories to policy makers who lack formal mathematical training. D. economists cannot easily control all the variables that might influence human behavior. E. research in economics is primarily conducted in a very "social" way via interviews of consumers and corporate leaders.

economists cannot easily control all the variables that might influence human behavior.

A new hormone will increase the amount of milk each cow produces

effect on the milk market is an increase in supply, lower equilibrium price and a higher equilibrium quantity

ADC Shifts to Left w/ decrease & Right w/increase of

either changes in Supply of Money, Taxes, Government Spending, All other changes in Demand

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

elastic

If an increase in price causes total expenditure on a product to decrease, then the price elasticity of demand is:

elastic

increase in supply

entire curve shifts rightward, greater quantity supplied at each price

profit

entrepreneurial ability

Every time an individual decides to try out new equipment, or finds better ways to manage exhibiting traits of:

entrepreneurship

Every time an individual decides to try out new equipment, or finds better ways to manage money, he or she is exhibiting traits of:

entrepreneurship.

Every time an individual decides to try out new equipment, or finds better ways to manage money, he or she is exhibiting traits of: A. money management. B. entrepreneurship. C. strategic management. D. capital management.

entrepreneurship.

If the supply curve for a product is vertical, then the elasticity of supply is:

equal to zero

Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk:

equals $2.00

Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk:

equals $2.00.

The intersection of the supply curve and the demand curve is known as the

equilibrium

In order for a market's ethics to be effective, all of the following must occur, EXCEPT

everyone must agree to take part in the market

In order for a market's ethics to be effective, all of the following must occur, EXCEPT: A. the ethics must be clearly defined. B. there must be clear penalties for ethics violators. C. everyone must agree to take part in the market. D. there must be enough police or inspectors to find most violations. E. police or inspectors must be unbiased.

everyone must agree to take part in the market

Economics

examines how people use their scarce resources to satisfy their unlimited wants

A trade surplus occurs when our exports _____ our imports?

exceed

patent

exclusive rights over an invention, copyright

Problem of scarcity

exists because resources are limited relative to wants

The problem of scarcity:

exists because resources are limited relative to wants.

The problem of scarcity: A. exists because resources are limited relative to wants. B. exists because resources are unlimited relative to wants. C. is solved by economists using abstract models. D. can be eliminated through appropriate government intervention into markets. E. does not exist in communist societies.

exists because resources are limited relative to wants.

The problem of scarcity:

exists because resources are limited to relative to wants

c. The planned expenditures line is shown by C+I. As for the relationship between output and planned expenditures, when output exceeds the equilibrium output,

expenditures fall short of output and output begins to fall. [icture on phone

To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.

export, import

To obtain the greatest gains from trade, a country should specialize in and _____ those goods for which it has a comparative advantage and ______ those goods for which other countries have a comparative advantage

export; import

Clear property rights reduce growth in an economy because producers are not able to freely use innovations.

false

Debtors lose from unanticipated inflation

false

Deposits in checking accounts are not included in the definition of money because they are not a very liquid asset

false

Economist William Easterly is a strong proponent of foreign aid

false

If a country runs a trade deficit to finance increased current consumption, it will have to increase consumption in the future to pay back its borrowings

false

If a country runs a trade deficit to finance increased current consumption, it will have to increase consumption in the future to pay back its borrowings

false

If wages and employment both fall, this is likely caused by an increase in the demand for labor

false

If wages and employment both rise, this is likely caused by a decrease in the demand for labor

false

Interest rates typically rise in a recession because the demand for money increases when real income falls.

false

Investment in human capital includes the purchases of computers used by professors

false

Investment is a smaller component of GDP than consumption, but it is much more stable.

false

Money market mutual funds are hard to classify in a definition of money because they are only held to facilitate transactions

false

Most recessions are also depressions.

false

New growth theory suggests that consumption spendingconsumption spending will lead to permanent increasesincreases in the rate of technological progress

false

Normative statements answer questions like "What will happen if...

false

Not much U.S. currency is in global circulation because it is an unsafe asset compared to assets denominated in foreign currency

false

The Fed directly controls long-term interest rates

false

The classical school of thought came to its fruition during the 1960s

false

The typical European works more hours per year than the typical U.S. worker

false

To explain the virtues of markets, Adam Smith used the metaphor of the invisible pancreas

false

When applying the marginal principle, you should pick the level at which the activity's marginal benefit is less than its marginal cost

false

When the economy operates at full employment, an increase in government spending must crowd out consumption

false

When the economy operates at full employment, an increase in government spending must crowd out consumption.

false

diminishing returns

false

diminishing returns occur when we increase both labor and capital

false

true or false: what one trader gains from a trade, the other must lose

false

imperfect information

false information

Positive Statements answer questions like " What ought to happen to..." Normative statements answer questions like "What will happen if..." Economists may differ in their conclusions from positive analysis.

false; false; true

Banks trade reserves with one another in the

federal funds market.

a $100 bill

has no intrinsic value

fiat money

has no intrinsic value

Some markets are dominated by a few large firms, leading to

high prices and small quantities.

ceteris paribus

holding everything else constant

A perfectly elastic supply curve is

horizontal

The market demand curve is the sum of the individual demand curves.

horizontal

The market supply curve is the sum of the individual supply curves

horizontal

Personal income and personal disposable income refer to payments ultimately flowing to

households

four types of decision makers in the economy

households, firms, governments, and the rest of the world

A supply schedule shows

how many units producers are willing and able to sell at various prices

The supply curve shows

how the quantity produced varies with price

Deciding if a company will produce automobiles by robotics or manual labor answers the economic question of

how will we produce it

Labor

human mental and physical capacity to work.

Capital

human-made goods useful in producing other goods or services. Capital in this context includes buildings ("plant"), equipment, and machinery. Any produced product useful for producing other products is a capital good.

Which of the following best illustrates the fallacy of composition?

if a person had more money they could buy more scarce goods, if the nation had more money, everyone could but more scarce goods

a supply curve

illustrates the positive relationship between price and quantity supplied

Unlike the CPI, the chain-weighted price index for GDP does not include used goods or

imported goods

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:

impose a tax on production of the good in order to decrease production.

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:

in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:

increase tuition in order to increase revenue

To increase aggregate demand, a government can either ________ spending or ____________ taxes.

increase, decrease

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that: A. in the man's judgment, the expected marginal cost of smoking the cigarette outweighs the expected marginal benefit. B. the man is behaving irrationally. C. the smoker is unconcerned about his future health. D. in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost. E. smoking should be banned by the government in order to ensure the safety of smokers.

in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:

in the mans judgement, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost

You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that:

in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage

What is Scarcity?

inability of limited resources to satisfy unlimited wants

Child Care Subsidies. If the federal government provides subsidies for individuals to buy child care, this is

included in the federal budget but not in GDP

The circular flow describes the process by which GDP generates ________ which is spent on goods and services.

income

The circular flow describes the process by which GDP generates _________ which is spent on goods and services.

income

The circular flow describes the process by which GDP generates ____________ which is spent on goods and services.

income

inferior good

income increases, demand for the good decreases. If income decreases, demand for the good increases

If interest rates decrease, the present value of a fixed payment in the future will

increase

If supply decreases while demand increases supply decreases while demand increases the equilibrium price will

increase

If supply decreases while demand increases supply decreases while demand increases, the equilibrium price will

increase

If the MPC increases, the value of the multiplier will

increase

Open market sales lead to falling bond prices, which cause interest rates to

increase

Purchasing Long-Term Government Bonds. If the Fed purchased long-term government bonds held by the public, then the supply of money would

increase

The longer the time period considered, the elasticity of supply tends to

increase

Upper A worldwide patent and copyright systemA worldwide patent and copyright system would the incentive to be innovative

increase

a decrease in the price level will______________ GDP and thereby move the economy ___________ the aggregate demand curve.

increase , down

For a given increase in price, the greater is the elasticity of supply, the greater is the resulting

increase in quantity supplied

economic growth

increase in the economy's ability to produce goods and services-outward shift in the PPC

substitutes

increase in the price of one causes an increase in the demand for the other good. coke and pepsi

an increase in the number of producers will

increase the martlet supply because market supply is the sum of all individual supply curves

Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely:

increase the opportunity cost of going on the date

Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely: A. not affect the opportunity cost of going on the date. B. reduce the opportunity cost of going on the date because giving up the additional work dollars will make his girlfriend feel even more appreciated. C. increase the opportunity cost of going on the date. D. reduce the opportunity cost of working.

increase the opportunity cost of going on the date

Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely:

increase the opportunity cost of going on the date.

A government mandated price increase of doodads will:

increase the quantity of doodads supplied but decrease the quantity of doodads demanded

According to the law of supply, an increase in a good's price the quantity supplied of that good

increases

An increase in the wage for high-school graduates the opportunity cost of college

increases

which of the following will cause a movement upward along a supply curve

increases in the market price of a good, other things being equal

A decrease in the supply of a product_______ the equilibrium price and _________ the equilibrium quantity

increases; decreases

As a farmer adds more and more fertilizer to the soil, the crop yield, but at a rate.

increases; decreasing

An increase in demand (given a typical upward sloping supply curve) for a product

increases; increases

The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of

increasing opportunity cost

The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of

increasing opportunity cost.

benefits received principle

individuals receiving the benefits are those who pay for them: gas tax- the more you drive on the highway, the more gas you use, the more gas tax you pay

Specialization is a way for:

individuals to make the best use of resources by devoting themselves to one primary productive activity

Specialization is a way for: A. individuals to make the best use of resources by devoting themselves to one primary productive activity. B. society to become wealthier while not using their resources. C. people to avoid having to trade. D. increasing one's opportunity cost for an activity.

individuals to make the best use of resources by devoting themselves to one primary productive activity

A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is:

inelastic

Supply is said to be ____ when the quantity supplied is not very responsive to changes in price

inelastic

Once the U.S. economy recovered from the recession triggered by the financial crisis of 2007, the focus of policy makers shifted to concerns about

inflation

For the Fed, which lag tends to be shorter?

inside lags

The time taken by policy makers to recognize an economic problem and take appropriate actions is known as

inside lags

outsourcing offsets

insourcing

substitute goods

interchangeable goods. If A&B are substitutes, an increase in the price of A causes and increase in the demand for B

As money supply increases

interest rates fall, investment spending increases

There is ___________ relationship between the price and the quantity demanded

inverse / nagative

there is a ____ relationship between the price of a good or service and the quantity demanded

inverse/ negative

The law demand illustrates a(n) _____ relationship between price and _____

inverse; quantity demanded

The provision of educational services __ counted as output in modern economies.

gold

is a good example of commodity money

silver

is a good example of commodity money

The current supply of Rembrandt paintings:

is perfectly inelastic

A nation has a comparative advantage in the production of cars over another nation if: A. it can produce cars with fewer resources than the other country. B. it can produce cars at a lower opportunity cost than the other country. C. it can produce cars at a higher opportunity cost than the other country. D. it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country. E. it is more self-sufficient in all areas of production, including automobile manufacturing.

it can produce cars at a lower opportunity cost than the other country.

which of the following corresponds to the definition of the supply curve

it depicts a positive relationship between prices and quantity supplied

Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because:

it is a proposition that can be tested

Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because:

it is a proposition that can be tested.

Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because: A. your mother says it with a positive tone in her voice. B. your mother is positive that you are stupid. C. it is a proposition that can be tested. D. your mother is only thinking of your best interest. E. you're positive that your mother is stupid.

it is a proposition that can be tested.

Is the Wealth Effect on Consumption from Housing Symmetrical? When housing prices rose, some households took out a larger loan on their homes and used the additional funds they borrowed to finance purchases of consumer durables. This option is not available when housing prices fall. The wealth effect might be larger for increases in housing prices than decreases in housing prices because

it is easier to increase spending than it is to decrease spending

Four categories of resources

land, labor, capital, entrepreneurship

scare resources

land, labor, capital, entrepreneurship

Compared to other countries, the united states has a relatively _____________ share of consumption spending in GDP.

large

In the first three months of 2004, the number of jobs moving to another state was _______ than the number of jobs moving to another country. larger/smaller

larger

In the first three months of 2004, the number of jobs moving to another state was than the number of jobs moving to another country.

larger

A decrease in labor force participation will shift thelabor-supply curve to the

left

a decrease in labor force participation will shift the labor-supply curve to the ________ leading to higher real wages and lower emplolyment

left

Excess demand occurs when the price is the equilibrium price; excess supply occurs when the price is the equilibrium price.

less than ; greater than

At any point below the 45 degree line, planned expenditures are

less than output or income

Calculating Real GDP, Price Indices, and Inflation. Using the data from the table below, answer the following questions: Quantities Produced Prices CDs Tennis Rackets Price per CD 2011/105/200/20/105 2012/125/220/26/130 a. Real GDP in 2011 using 2011 prices is $ b. Real GDP in 2012 using 2011 prices is $

look at notes 23100 25600 10.8 124.41 24.41

an increase in demand occurs

look at table 4.1 in textbook or possibly picture on phone

The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called: A. macroeconomics. B. Marxian economics. C. positive economics. D. normative economics. E. microeconomics.

macroeconomics.

normative economics

makes prescriptions about the way the economy should work based on opinión

A small, one-unit change in value is called

marginal change

a small, one-unit change in value is called

marginal change

Market Effects of a Tax. Consider the market for fish. Use the line drawing tool to show the effect of a $1.00 per pound tax levied on fish producers. Be sure to properly label this line.

market effects on increased income

The intersection of the supply curve and the demand curve is known as the

market equilibrium

when economists speak of markets, they primarily mean:

mechanisms that coordinate actions of buyers and sellers

When economists speak of markets, they primarily mean:

mechanisms that coordinate actions of buyers and sellers.

When economists speak of markets, they primarily mean: A. places where production of goods and services take place. B. those locations where sales of stocks and bonds of corporations take place. C. mechanisms that coordinate actions of buyers and sellers. D. the trillions of dollars that change hands in the foreign exchange markets.

mechanisms that coordinate actions of buyers and sellers.

Which of the following is an entitlement program?

medicaid spending

Mike can wash a car in 5 minutes and wax a car in 15 minutes. Tony can wash a car in 10 minutes and wax a car in 20 minutes. Which of the following is true?

mike can wash a car faster and has comparative advantage in washing cars

price floor

minimum wage

An economic _______ is used to explore the choices people make and the consequences of those choices.

model

An economic is used to explore the choices people make and the consequences of those choices.

model

The Federal Open Market Committee (FOMC) votes on:

monetary policy.

Which of the following is not a factor of production

money

Which of the following is not a factor of production?

money

Commodity Money

money in the form of a commodity with intrinsic value

Fiat Money

money without intrinsic value that is used as money because of government decree

More efficient positive market ethics will generally help improve all of the following challenges EXCEPT:

moral externalities of a market

More efficient positive market ethics will generally help improve all of the following challenges EXCEPT: A. positive externalities of a market B. negative externalities of a market C. moral externalities of a market D. consumer surplus of a market E. producer surplus of a market

moral externalities of a market

more efficient positive market ethics will generally help improve all of the following challenges except:

moral externalities of a market

Unlike its competitors, one glass producer can use its equipment to make either windows for houses or windows for cars. Other things equal, compared to its competitors, its supply curve of windows for cars would be:

more elastic than the supply curves of competitors

according to the law of supply

more of a good will be offered by suppliers as the price rises

Ethical rules based on morals or concepts of fairness are called

normative ethics

Scarcity

not enough resources

Scarcity

not having sufficient resources to produce all the goods and services we want.

eukaryotic cells have

nucleus

scarcity

occurs when the amount people desire exceeds the amount available

THE labor market

on phone

an increase in the stock of capital shifts the production function

on phone

labor market

on phone

production function

on phone

the labor market

on phone

If we know someone pays all their taxes and gives money to charity, we know that

only that they pay their taxes and give money to charity

an __________ economy is open to trade, whereas a closed economy is not

open

economy is open to trade, whereas a closed economy is not

open

Ceteris Paribus

other things constant

law of supply

other things constant, the quantity supplied will vary directly with the price of the good

Currency

paper bills and coins in the hands of the publlic

Who was the economist that developed the multiplier-accelerator model

paul samuelson

rent

pay for natural resources

wages

pay for their labor

rent

payment to resource owners for the use of their natural resources

The date that a recession starts is called the

peak

the date that a recession starts is called the

peak

When economists assume that people are rational and respond to incentives, they mean

people act on their own self interest

What is Economics about?

people and the choices they make in a world of scarce resources

because resources are limited

people must make choices

An externality occurs when:

people other than those making the demand and supply decisions share the benefits or the costs of an activity.

rational

people try to make the best choices they can, given the available time and information

Long-run average income is known as

permanent income

Unit of account

the function of money when used as a yardstick to post prices and record debts

Suppose the national economy experiences a recession. 1.) Using the line drawing tool, show the effect of the recession by appropriately shifting the AD-AS curves. Label the new curve(s) AD2 and AS2 as appropriate. 2.) Using the point drawing tool, label the new equilibrium F. Unlike the U.S. federal government, virtually all states have requirements that they must either plan for or maintain a balanced budget. 3.) Using the line drawing tool, show the impact on the national economy of the actions taken by the states to balance their budgets when the national economy experiences a recession. Appropriately shift the AD-AS curves and label the shifted curve(s) AD3 and AS3 as needed. 4.) Using the point drawing tool, label the new equilibrium G.

phone

Use the 3-point curved line drawing tool to draw and label a new short-run aggregate supply curve that shows the effect of an increase in wages. Carefully follow the instructions above, and only draw the required objects

phone

What will happen to my income if I have to pay more taxes?

positive

Who is the United States largest trading partner

positive

the supply curve reflects the

positive relationship between price and quantity offered

law of supply

positive relationship between price and quantity supplied

The law of supply states that there is a ___ relationship between the price and ___. a. Thus, as the price decreases, b. According to the law of supply, as the price of the good decreases, it causes

positive, quantity supplied a. the quantity produced by firms decreases. b. a movement downward along the supply curve.

The question "What is?" is associated with _______ economic analysis, whereas the question "What ought to be?" is associated with _______economic analysis.

positive; normative

The question "What is?" is associated with economic analysis, whereas the question "What ought to be?" is associated with economic analysis

positive; normative

Who is the United States largest trading partner? Is the president doing a good job? Should the highway speed limit be raised? What will happen to my income if I have to pay more taxes? Should the government raise taxes?

positive; normative; normative; positive; normative

The U.S. economy witnessed federal budget surpluses in the late 20th century under

president clinton

law of demand

price and quantity demanded are inversely related

demand decrease

price decrease, quantity decrease

supply increase

price decrease, quantity increase

supply decrease

price increase, quantity decrease

demand increase

price increase, quantity increase

What is Terms of Trade?

price of one good service or resource in terms of another

when econmist say the quantity supplied of a product has increased, they mean the

price of the product has risen, and consequently, suppliers are producing more of it

If real salaries increase but nominal salaries do not, this means that

prices have fallen

The principle that "as one input increases while the other inputs are held fixed, output increases at a decreasing rate" is known as the

principle of diminishing returns

entrepreneurship

process of combining the labor, land and capital together to produce goods and services

Because investment spending moves in conjunction with GDP, investment spending is:

procyclical

What is comparative advantage?

produce a good service at a lower opportunity cost than another producer

an increase of supply of the product implies

producers will now charge a lower price for a given quantity of output

goods and services are exchanged in

product markets

As a result of an increase in a product's price:

product supply does not change, but quantity supplied increases

primary source of state and local revenue

property taxes

the supply schedule shows the specific quantity of a good that suppliers are willing and able to

provide at different prices

What part of government spending is included in GDP?

purchases of police cars, education, national defense

market economy

pure capitalism, no government regulation

the change of price changes

quantity demanded

amount of shortage

quantity demanded - quantity supplied (at mkt price)

What is Microeconomics?

the study of economy at the small scale level

The difference between a change in quantity demanded and a change in demand is that a change in:

quantity demanded is caused by a change in good's own current price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations

If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?

quantity demanded will fall to zero

If the demand is perfectly inelastic, what would happen to the quantity demanded if there is a tiny increase in price?

quantity demanded will remain the same

A shortage is the amount by which the exceeds the

quantity demanded, quantity supplied

change in price causes change in

quantity supplied

Along a supply curve:

quantity supplied changes as price changes

The difference between a change in quantity supplied and a change in supply is that a change in:

quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes

surplus

quantity supplied is greater than quantity demanded

Philippines and Emigration. Roughly 10 percent of the populations of the Phillipines works overseas. Suppose overseas Philippine workers returned to their home country. Relying on the linked figure this reverse flow of people on wages and employment will

raise wages in the U.S. and lower wages in the Phillipines

When economists refer to economic behavior, they mean that:

rational people try to anticipate the likely consequences of their actions.

When economists refer to economic behavior, they mean that: A. from time to time, everyone behaves irrationally. B. changes in incentives influence behavior in unpredictable ways. C. the pursuit of money is the most significant factor influencing decision making. D. rational people try to anticipate the likely consequences of their actions.

rational people try to anticipate the likely consequences of their actions.

The GDP deflator is calculated for any given year by dividing nominal GDP by GDP and multiplying by 100.

real

The GDP deflator is calculated for any given year by dividing nominal GDP by ________ GDP and multiplying by 100.

real

The GDP deflator is calculated for any given year by dividing nominal GDP by ______________ GDP and multiplying by 100.

real

The States and Balanced Budgets. In the U.S., virtually all states have requirements that they either plan for or maintain a balanced budget. If the national economy experiences a recession, states should ________ their spending and perhaps also ___________ their taxes to balance their budgets.

reduce , increase

reduce the after-tax cost of raising children and therefore increase the birth rate

reduce the after-tax cost of raising children and therefore increase the birth rate.

Advantages of specialization do not include:

reduced interdependence

Advantages of specialization do not include:

reduced interdependence.

Advantages of specialization do not include: A. reduced interdependence. B. the exploitation of comparative advantage. C. the ability to utilize more complex production processes. D. gains from learning by doing. E. All of the above are advantages of specialization.

reduced interdependence.

Interest Rates, Durable Goods, and Nondurable Goods. Refrigerators and clothing are to some extent durable goods. The decision to purchase a refrigerator is likely to be more sensitive to interest rates than the decision to buy clothing because

refrigerators are expensive and sometimes payment is financed

A good economic theory:

relies on simplifying assumptions in order to explain economic behavior

A good economic theory:

relies on simplifying assumptions in order to explain economic behavior.

A good economic theory: A. includes every detail that affects the economic behavior of interest. B. relies on simplifying assumptions in order to explain economic behavior. C. does not rely on simplifying assumptions. D. is impossible to achieve because of the difficulty of conducting controlled experiments. E. is normative and therefore not testable.

relies on simplifying assumptions in order to explain economic behavior.

The Paradox of Thrift. According to the paradox of thrift, when investment is autonomous and independent of income or output, if people wish to save more, equilibrium aggregate savings in the economy:

remain unchanged

price ceiling

rent control

production possibilities curve

represents the potential total output combinations of any two goods for an economy

Banks are required by law to keep a fraction of their deposits as

reserves

reserve ratio formula

reserves/deposits

increasing oppurtunity cost

resources are not equally well suited to each output

Economists believe that individuals act as if they are motivated by self-interest and:

respond in predictable ways to changing circumstances

Economists believe that individuals act as if they are motivated by self-interest and:

respond in predictable ways to changing circumstances.

Economists believe that individuals act as if they are motivated by self-interest and: A. respond selfishly. B. respond in predictable ways to changing circumstances. C. it leads to inconsistent and unpredictable behavior. D. all of the above.

respond in predictable ways to changing circumstances.

What is a resource?

result of production or the result of human effort

an increase in the amount of capital in the economy will shift the demand for labor curve to the __________ leading to higher real wages and employment.

right

An expansionary fiscal policy shifts the aggregate demand curve to the _________, __________ prices, and ____________ real GDP

right, raises , increases

Supply curves slope upward because

rising prices provide producers with the incentives needed to increase the quantity supplied

most used source for revenues

sales and income tax

are the two factors that determine how the stock of capital changes over time.

saving and depreciation

The largest component of Upper M2 is/are

saving deposits

Economic goods are:

scarce products that are created from scarce resources

economic goods are

scarce products that are created from scarce resources

Economic goods are:

scarce products that are created from scarce resources.

Economic goods are: A. only those commodities priced in monetary terms. B. scarce products that are created from scarce resources. C. the opposite of normative economic goods. D. not subject to scarcity. E. only theoretical, not real.

scarce products that are created from scarce resources.

Economic choices or tradeoffs are the result of:

scarcity

Economic choices or tradeoffs are the result of: A. basic human greed B. scarcity. C. poverty. D. private ownership of resources. E. the fallacy of composition.

scarcity

Acres of Land Tanks of Fertilizer Truckloads of Potatoes 20 0 28 20 1 70 20 2 105 20 3 135 20 4 152 20 5 141 Table 2.4 The principle of diminishing returns sets in with the addition of the ________ tank of fertilizer

second

If a financial intermediary buys loans from a mortgage company and then packages them to sell in the financial markets, this is known as

securitization

Which of the these conditions are most likely to motivate honest people to become corrupt?

seeing your boss and fellow workers get rich by lying and cheating

which of these conditions are most likely to motivate honest people to become corrupt?

seeing your boss and fellow workers get rich by lying and cheating

Buy or Sell Bonds? If you strongly believed that the Federal Reserve was going to surprise the markets and increase interest rates, you would want to ____ bonds

sell

To decrease the supply of money, the Fed should _____ bonds

sell

Total revenue represents the amount that:

sellers receive for a good or service which is computed as PxQ

In free markets which allows a high level of unethical corruption: A. Suppliers may be forced to be corrupt or to leave the market. B. Consumers will be forced to be corrupt. C. Firms will always earn large long-term profits. D. the products sold will be worthless. E. there will be more creativity and competition than in highly ethical markets.

suppliers will be forced to be corrupt or to leave the market

In free markets which allows a high level of unethical corruption:

suppliers will be forces to be corrupt or to leave the market

The law of ________ says there is a positive relationship between price and quantity demanded, ceteris paribus

supply

When the quantity supplied exceeds the quantity demanded, there is excess

supply

Ceteris paribus, if an 8% increase in price leads to a 6% increase in the quantity supplied, then:

supply is inelastic

Which of the following is not determinant of supply?

tastes

Once we account for changes in the labor force _____________ is the next biggest source of the growth of GDP in the United States.

technological progress

Once we account for changes in the labor force, is the next biggest source of the growth of GDP in the United States.

technological progress

Robert Solow added to the conventional production function to account for technological change.

technological progress

invisible hand

term economists use to describe the self-regulating nature of the marketplace

fact

texas has no income tax

If the elasticity of demand coefficient for a good is one-sixth (in absolute terms), we know:

that for every 1% increase in quantity, there will be a 6% decrease in price.

absolute advantage

the ability of a person or nation to produce a product at a lower resource cost than another person or nation

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

absolute advantage

the ability to produce a product in less time (less resources) than another company

quantity demanded

the actual amount of a good or service consumers are willing to buy at some specific price

marginal benefit

the additional benefit resulting from a small increase in some activity

Lack of Credit and Aggregate Demand and Supply. In the 2008 recession, both firms and households had limited access to credit.

the aggregate demand decreases; and the aggregate supply will fall as borrowing costs increase

quantity supplied

the amount a supplier is willing and able to supply at a certain price

quantity demanded

the amount of a good that buyers are willing and able to purchase

quantity supplied

the amount of a product that firms are willing and able to sell

Which of the following is not a factor of production?

the amount of money required to buy a car / The resources used to produce goods and services; also known as production inputs or resources. / consumer goods

Money multiplier

the amount of money the banking system generates from each dollar of reserves

quanitity supplied

the amount that firms are willing and able to sell

Investment accelerator

the amplification of the shift in aggregate demand from expansionary fiscal policy, which raises investment expenditures

Graphically, consumer surplus is measured by:

the area below the demand curve, but above the market price.

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour.

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing because he enjoys playing basketball more than studying. B. the benefit to his grades from studying for an hour. C. the increase in skill he obtains from playing basketball for that hour. D. nothing because he had a free pass into the sports complex to play basketball.

the benefit to his grades from studying for an hour.

capital

the buildings, equipment, and human skills used to produce goods and services

Federal Reserve (Fed)

the central bank of the US

Entrepreneurship

the decision-maker role which in a market economy organizes the other kinds of resources so as to produce and sell a product, thereby earning a profit or taking a loss.

As prices &/or Real GDP increase

the demand for money shifts to the right

Consumer surplus is:

the difference between what consumers are willing to pay and what they are required to pay for a good.

Liquidity

the ease with which an asset can be converted into the economy's medium of exchange

Market failure occurs when:

the economy fails to allocate resources efficiently on its own.

Market failure occurs when: A. the stock markets tumble due to heavy selling. B. the economy fails to allocate resources efficiently on its own. C. demand shows signs of slowing down. D. a country cannot produce a good or service at a lower opportunity cost than others.

the economy fails to allocate resources efficiently on its own.

marginal/ on the margin

the effect of one more unit

The fallacy of composition is:

the erroneous view that what is true for the individual will also be true for the group

The fallacy of composition is:

the erroneous view that what is true for the individual will also be true for the group.

The fallacy of composition is: A. the erroneous view that an economic activity can sometimes exceed the sum of its components. B. the erroneous view that what is true for the individual will also be true for the group. C. the view that the aggregation of economic activity will necessarily lead to an outcome that is different than the outcome generated by each individual in the group. D. the idea that association need not imply causation. E. the failure to hold other variables constant when analyzing the relationship between two particular variables.

the erroneous view that what is true for the individual will also be true for the group.

If a student enrolls in an additional course at the university, an economist would conclude that:

the expected marginal benefit of an additional course must exceed the expected marginal cost of the course

If a student enrolls in an additional course at the university, an economist would conclude that: A. the total benefit that the student expects to receive as a result of completing her college degree exceeds the total cost of her college education. B. the student is not following the rule of rational choice. C. the student must not be involved in extracurricular campus activities. D. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.

the expected marginal benefit of an additional course must exceed the expected marginal cost of the course

Human capital is:

the expertise of knowledge possessed by workers

Human capital is:

the expertise or knowledge possessed by workers.

Human capital is: A. the same as labor. B. a term describing the tools and equipment owned by households. C. a worker's physical effort when working with machines. D. the expertise or knowledge possessed by workers. E. the money in checking, savings, or CD accounts at banks.

the expertise or knowledge possessed by workers.

Nominal Value

the face value of an amount of money

Marginal Propensity to Save (MPS)

the fraction of additional income that is saved

Real Interest Rates and Opportunity Cost. "When real interest rates are high, so is the opportunity cost of funds." This statement is true because:

the higher interest rates make it more costly to use or borrow funds. the real interest rate is important when considering the cost of funds. the opportunity cost of funds is the interest rate.

the opportunity cost of an item is:

the highest valued alternative you give up to get that item

The opportunity cost of an item is:

the highest valued alternative you give up to get that item.

The opportunity cost of an item is: A. The total value of opportunities you give up to get that item. B. the highest valued alternative you give up to get that item. C. the value of all available alternatives you sacrifice to get that item. D. always equal to the dollar value of the item. E. always less than the dollar value of the item.

the highest valued alternative you give up to get that item.

The opportunity cost of an action is equal to:

the highest valued opportunity that must be sacrificed in order to take the action

the opportunity cost of an action is equal to:

the highest valued opportunity that must be sacrificed in order to take the action

The opportunity cost of an action is equal to:

the highest valued opportunity that must be sacrificed in order to take the action.

The opportunity cost of an action is equal to: A. the monetary payment the action required. B. the total time spent by all parties in carrying out the action. C. the highest valued opportunity that must be sacrificed in order to take the action. D. the value of all of the alternative actions that could have been taken. E. zero, as only goods cost money.

the highest valued opportunity that must be sacrificed in order to take the action.

physical capital

the human-made objects used to create other goods and services (machines,buildings and tools)

what statement is described as positive economics?

the income tax reduces after tax incomes of the rich

Wealth Effect

the increase in spending that occurs because the real value of money increases when the price level falls

Resources

the inputs used to produce goods and services

We measure the opportunity cost of holding money with

the interest rate

Federal funds rate

the interest rate at which banks make overnight loans to one another

Discount rate

the interest rate the Fed charges on loans to banks

human capital

the knowledge and skills a worker gains through education and experience

minimum supply price

the lowest price at which a product will be supplied

We can tell if a market has too many ethics rules because:

the marginal cost of the ethics rule is higher than the marginal benefit

A quantity of a good bought and sold in a market will be below the equilibrium quantity if:

the market price is either above or below the equilibrium price

The market supply curve is positively sloped because a higher price

the market supply curve shows the marginal cost of production for different quantities produced//// Higher prices encourage individual firms to increase output and hire new workers; new firms can enter the market and encourage existing firms to expand facilities

Model of aggregate demand and aggregate supply

the model most economists use to explain short-run fluctuations in the economy around its long-run trend

During the Great Depression, prices in the United States fell by 33 percent. Ceteris paribus, this led to an increase in aggregate demand through three channels. Which one of the following is not one of these channels through which aggregate demand increased?

the multiplier effect

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes?

the opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career

Price elasticity of demand is defined as

the percentage change in quantity demanded divided by the percentage change in price

Equilibrium price

the price at which the quantity demanded equals the quantity supplied

In the long run, if aggregate demand increases,

the price level will increase and output or real GDP will remain unchanged

Natural level of output

the production of goods and services that an economy achieves in the long run when unemployment is at its natural or normal rate

Macroeconomic topics do not usually include:

the profit maximizing decisions of an individual manufacturer.

Macroeconomic topics do not usually include: A. the rate of inflation. B. the rate of unemployment. C. economic growth. D. the profit maximizing decisions of an individual manufacturer. E. the control of the money supply by the central bank.

the profit maximizing decisions of an individual manufacturer.

A change in price causes movement along a demand curve and a change in

the quantity demanded

Whenever there is a surplus at a particular price, the quantity sold at that price will equal:

the quantity demanded at that price

when the price of apples goes up

the quantity demanded for apples will decrease

law of demand

the quantity of a good or service demanded varies inversely with its price

Supply

the quantity of a good or service that sellers wish to sell in a time period

Money supply

the quantity of money in the economy

A change in price causes movement along a supply curve and a change in

the quantity supplied .

Equilibrium Quantity

the quantity supplied and the quantity demanded at the equilibrium price

a decrease in supply means that

the quantity supplied at every price will decrease

Each point on the supply curve shows the

the quantity supplied at that price

Leverage ratio

the ratio of assets to bank capital

Consumption Function

the relationship between consumption spending and disposable income

demand

the relationship between price and the quantity demanded of a certain good or service (the entire curve)

supply

the relationship between price and the quantity supplied of a certain good or service

Ceteris paribus, if the vacancy rate in an apartment complex increased from 5% to 20% over the past two years, we would expect to see

the rent decrease leading to an increase in quantity demanded.

Entrepreneurship is:

the resource that organizes the other factors of production in order to produce goods and/or services

Entrepreneurship is:

the resource that organizes the other factors of production in order to produce goods and/or services.

Entrepreneurship is: A. human capital. B. another word for the financial capital that can be used to start a business. C. the resource that organizes the other factors of production in order to produce goods and/or services. D. another word for physical capital that is used to produce goods and services.

the resource that organizes the other factors of production in order to produce goods and/or services.

Bank capital

the resources a bank's owners have put into the institution

Economic Fluctuations

the rise and fall of economic activity relative to the long-term growth trend of the economy; also called business cycles

Fiscal policy

the setting of the level of government spending and taxation by government policymakers

Human capital is:

the skill or knowledge of individuals

Human capital is:

the skill or knowledge of individuals.

Human capital is: A. machinery owned by firms, but not by individuals. B. machinery owned by individuals, but not by firms. C. machinery owned by individuals or firms, but not by the government. D. the skill or knowledge of individuals.

the skill or knowledge of individuals.

Which of the following is one of the primary sources of federal government revenue

the social insurance tax

Which of the following represents a normative statement? A. a decrease in price leads to an increase in quantity demanded B. The temperature outside is 90 degrees C. the study of economics is more important than the study of history D. people will buy less butter at $1.50 per pound then they would at $1.00 per lb E. Normally, as an economy develops, the nations birth rate tends to fall

the study of economics is more important that the study of history

What is macroeconomics?

the study of economy at the large scale level

Aggregate Demand

the total demand for final goods and services in an economy at a given time

division of labor

the type of arrangement in which each worker specializes in a particular task or job

Leverage

the use of borrowed money to supplement existing funds for purposed of investment

Stabilization policy

the use of fiscal and monetary policies to reduce fluctuations in the economy

real value

the value of an amount of money in terms of what it can buy

opportunity cost

the value of an item or activity that is not chosen

What is Opportunity Cost?

the value of the opp. that you gave up when you chose one activity instead of another

Suppose there are two members of he U.S. congress who were once economics professors. Why is It important to be able to distinguish their positive from their normative statements about economic policy?

their positive statements help us understand the economies response to a particular policy, while their normative statements reflect their value judgements

the law of supply states

there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers

which of the following states the definition of supply

there is a positive relationship between the price of a good and the quantity offered for sale by suppliers

Credit Cards. Credit cards are not considered part of the money supply because:

they are a loan which you have to use money to pay for later

Economists believe that in regards to criminal behavior:

those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs

Economists believe that in regards to criminal behavior: A. people engage in criminal activity because they are genetically predisposed to do so. B. those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs. C. individuals are irrational and don't respond to incentives. D. economics can shed very little light on the subject.

those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs

economists believe that in regards to criminal behavior:

those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs

fundamental resource of labor

time

Long-Run Deficit Projections. The Congressional Budget Office (CBO) makes long-run budget deficit projections. Although these projections are based on restrictive and often unrealistic assumptions, the CBO makes these projections

to help guide future fiscal policy

tom should catch more birds and fish less, then trade birds for fish

profit

total revenue minus total cost

A 25% decrease in the price of breakfast cereal leads to 20% increase in the quantity of cereal demanded. As a result:

total revenue will decrease

The demand for money arising from individual and business use in ordinary business is the

transaction demand.

What part of government spending is excluded from GDP?

transfer payments

A higher saving rate will lead to a higher stock of capital in the long run.

true

A liquid financial asset is one that can easily be used to buy goods and services

true

Adam Smith suggested that self minus interest is more powerful than kindness or altruism.

true

Understanding Banks. One reason a bank can invest in illiquid loans (say, lend depositors' savings to home buyers over 25 years) and still provide liquid deposits (provide depositors with their savings when they ask for it) is because depositors typically do not withdraw all of their deposits at the same time.

true

creditors lose from unanticipated inflation

true

true of false: "poverty could be eliminated but scarcity could not"

true

true or false: "The U.S. government defines and enforces business ethics in order to protect the economy"

true

true or false: "a theory may result from a tested and confirmed hypothesis"

true

complements

two goods for which a decrease in the price of one leads to an increase in the demand for the other

substitutes

two goods for which an increase in the price of one leads to an increase in the demand for the other

Inflation that is unexpected is known as

unanticipated

Along a supply curve, a decrease in price will increase total revenue:

under no circumstances

If there are significant external costs associated with the production of a product, it can be said that the private cost of production to the firm ____ the cost to society associated with this product and output should ____ to move toward the efficient situation.

understates, decreases

Which of the following best defines rational behavior?

undertaking activities whenever the marginal benefit exceeds the marginal cost

Which of the following best defines rational behavior? A. analyzing the total costs of a decision B. analyzing the total benefits of a decision C. undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities D. undertaking activities whenever the marginal benefit exceeds the marginal cost E. undertaking activities as long as the marginal benefit exceeds zero

undertaking activities whenever the marginal benefit exceeds the marginal cost

what defines rational behavior?

undertaking activities whenever the marginal benefit exceeds the marginal cost

In a boom, real GDP exceeds potential GDP. This implies that

unemployment has fallen, driving wages up. This results in a leftward shift of the short-run aggregate supply curve

A secondary effect of an action that may occur after the initial effects is known as a(n):

unintended consequence

The wages of which of the following groups will not adjust quickly?

union workers

Demand is said to be ___ when the quantity demanded changes the same proportion as the price

unit elastic

change in quantity demanded

up and down the same demand line because of change in price

changes in quantity supplied

up and down the same supply line because of change in price

an increase in the stock of capital shifts the production function

upward

interest

use for the capital

Price controls

use of the power of the state to establish prices different from the equilibrium prices

efficiency

using resources to the fullest extent

When calculating GDP using the production method, which of the following would you not include?

value added

Normative economic thinking

value judgment (what should be)

oppertunity cost

value of next best alternative given up when the choice is made (what you sacrifice to get something)

The long-run aggregate supply curve is

vertical

For most firms, the biggest cost of doing business is

wages

Because of scarcity

we must sacrifice valuable alternatives to obtain more goods and services we desire

Because of scarcity:

we must sacrifice valuable alternatives to obtain more goods and services we desire

Because of scarcity: A. we must sacrifice valuable alternatives to obtain more goods and services we desire. B. the opportunity cost of consumption is zero. C. we can obtain more of a desirable good without sacrificing other goods and services. D. shortages of goods prevail at current market prices. E. both a. and d. are correct.

we must sacrifice valuable alternatives to obtain more goods and services we desire

The Federal Budget and Government Purchases in GDP. An item in the federal budget that is not included as government purchases in GDP is __________. An item included in government purchases but not part of the federal budget is ____________.

welfare payments; state government purchases

Which of the following is not true?

what one trader gains from a trade, the other must lose.

Which of the following is not true? a.) voluntary exchange is expected to be advantageous to both parties to the exchange b.) what one trader gains from a trade, the other must lose c.) if one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade. d.) the expectation of gain motivates ppl to engage in trade.

what one trader gains from a trade, the other must lose.

opportunity cost

what you sacrifice to get something

which of the following are not very important to maintaining effective market ethics?

whether people understand the reasons for the rules of regulations

In a market economy how do we determine who will get the goods and services that have been produced?

whoever can afford them

For a given good, the market demand curve is generally ______ than the demand curves for the individual consumers

wider

The Trade Adjustment Assistance program assists

workers displaced by international trade

The government protects intellectual property rights by enforcing patents on new pharmaceutical drugs. Suppose the government, by enforcing patent laws, prevents a new drug by Merck from being copied by another company and made available at a dramatically reduced price. If you were a current consumer of this new pharmaceutical drug, you would initially be as a result of the government's action. What are the implications for the next generation of pharmaceutical drug users?

worse off ; Pharmaceutical companies will have more revenue to cover research and development costs.

A taxi company currently has nine cabs in its fleet, and its total daily cost is $4,000. If a taxi company adds a tenth cab, the company's total daily cost will increase to $4,200 and its total revenue will increase by $250 per day. Should the company add the tenth cab?

yes

Between 1974 and 2011, the federal minimum wage increased from $2.00 to $7.25. Was the typical minimum-wage worker worse off in 2011?

yes

Extending Trade outside the Camp. Late in World War II, a German guard exchanged bread and chocolate at a rate of 2 loaves for 1 chocolate bar. Inside the Allied POW camp, the price of chocolate was 15 cigarettes per bar, and the price of bread was 30 cigarettes per loaf. Is there an opportunity for beneficial exchange?With the guard, a POW could exchange 2 chocolate bars for 4 loaves of bread. In the camp, the POW could exchange the extra loaves for 120 cigarettes, and then exchange the extra cigarettes for 8 chocolate bars. In other words, the POW's net gain from trade is 6 chocolate bars.

yes

Late in World War II, a German guard exchanged tea and chocolate at a rate of 3 tea bags for 1 chocolate bar. Inside the British POW camp, the price of chocolate was 5 cigarettes per bar, and the price of tea was 10 cigarettes per bag. Is there an opportunity for beneficial exchange?

yes

Suppose that in the French compound of a POW camp, the price of cheese is 28 cigarettes per cheese ration and the price of tea is 4 cigarettes per tea ration. In the British compound, the price of tea is 24 cigarettes per ration. Is there an opportunity for beneficial exchange?

yes

Suppose that stricter emissions standards would reduce health-care costs by $60 million but increase the costs of fuel and emissions equipment by $20 million. Is it sensible to tighten the emissions standards?

yes

Higher Gas Prices, Frugal Consumers, and Economic Fluctuations. Suppose gasoline prices increased sharply and consumers became fearful of owning too many expensive cars. As a consequence, they cut back on their purchases of new cars and decided to increase their savings. Assuming a short-run aggregate supply curve, this behavior shifts the aggregate demand curve to the

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