HCM 402 Module 1 Quiz, HCM 402 Module 1 - Practice Quiz, 1 - Welcome to Economics!

theory

a representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation

Resources exist in limited supply, and as a result, economics is the study of how societies make decisions based on __________. a. labor b. raw materials c. scarcity d. division of labor

c. scarcity

If economic activity in a society is mostly organized and directed among the family, then this society is an example of a(n) ________ economy. a. command b. capitalist c. traditional d. market

c. traditional

Specialization: leads to greater self-sufficiency. can lead to an increase in overall production. allows workers to develop skills by working on a large number of tasks is always the result of an inefficient use of resources

can lead to an increase in overall production.

The value of the total amount of output produced in an economy in a given year is measured by ______. a. exports b. imports c. division of labor d. gross domestic product

d. gross domestic product

The circular flow diagram of economic activity is a model of the: flow of goods, services, and payments between households and firms. influence of government on business behaviour. role of unions and government in the economy. interaction among taxes, prices, and profits.

flow of goods, services, and payments between households and firms.

In the ______________, households receive goods and services and pay firms for them. labor market financial capital market goods and services market savings market

goods and services market

The best way to describe economics is that it is the study of __________

how decisions are made.

market

interaction between potential buyers and sellers; a combination of demand and supply

Which of the following best describes a monetary policy tool? interest rates taxes household savings government spending

interest rates

In the ____________, households work and receive payment from firms. financial investment market financial capital market labor market savings market

labor market

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: balanced budget prudent monetary policy low inflation assuring competition between firms

low inflation

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. market-oriented economy macroeconomy microeconomy command economy

market-oriented economy

gross domestic product (GDP)

measure of the size of total production in an economy

microeconomics

the branch of economics that focuses on actions or particular agents within the economy, like households, workers, and business firms

macroeconomics

the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance

labor market

the market in which households sell their labor to business firms or other employers

Macroeconomic topics do not usually include: the profit maximizing decisions of an individual manufacturer. the rate of inflation. the rate of unemployment. economic growth.

the profit maximizing decisions of an individual manufacturer.

economics

the study of how humans make choices under conditions of scarcity

globalization

the trend in which buying and selling in markets have increasingly crossed national borders

division of labor

the way in which the work required to produce a good or service is divided into tasks performed by different workers

traditional economy

typically an agricultural economy where things are done the same as they have always been

imports

when goods and services are made abroad and sold domestically

exports

when goods and services are made domestically and sold abroad

scarcity

when human wants for goods and services exceed the available supply

economies of scale

when the average cost of producing each individual unit declines as total output increases

specialization

when workers or firms focus on particular tasks in which they are well-suited within the overall production

Which factors contribute to globalization?

Cheaper transportation Innovation in technology

What is most likely to encourage underground economies?

Command economies — Correct. Control economies are characterized by heavy government regulations, which limit development and motivate underground economies to emerge.

Which statements are true of the study of microeconomics?

It is concerned with how individual households spend their budgets. It examines how a business decides if and when to borrow money.

In the circular flow diagram, what do households sell to business firms?

Labor — Correct. In the simple circular flow model, all labor is owned by households. They offer their labor services to business in return for income (wages and salaries), which is then used to buy the goods and services made by the businesses.

Match the types of economies with their characteristics.

Traditional economies have minimal growth and production and distribution is determined by tradition. Command economies are emphasized by government control, centralizing production & distribution decisions. Economic goals are dictated by a ruling class. Communism/socialism are current forms of command economies. Market economies have the fewest regulations and a decentralized structure of production and distribution. Economic goals are determined by individuals. Free market capitalism is the current form of market economies.

Which of the following best denotes the reason for the existence of substantial black markets? a market-oriented economy a command economy government laws and rules the microeconomy

a command economy

Which of the following is most likely a topic of discussion in macroeconomics? an increase in the price of a hamburger a decrease in the production of DVD players by a consumer electronics company an increase in the wage rate paid to automobile workers a decrease in the unemployment rate

a decrease in the unemployment rate

Circular flow diagram

a diagram that views the economy as consisting of household and firms interacting in a goods and services market and a labor market

goods and services market

a market in which firms are sellers of what they produce and household are buyers

As an exercise to understand macroeconomics, an instructor presents her students with the national economy of a fictitious country. She divides the students in her class into two groups. Students in Group A will identify and analyze the spending by the country's government and its taxes. Group B will focus on the country's bank lending policy, interest rates, and financial capital markets. -Group A is tasked with the country's _______ policy, while group B has the focus of its ______ policy.

fiscal/monetary — Correct. Government spending and taxes are a part of fiscal policy, while bank lending, interest rates, and financial capital markets represent monetary policy.

private enterprise

system where the mean of production are owned and operated by private individuals or groups of private individuals

Match the scenarios with the concepts of economics. 1. Within 3 months of starting work at the book publishing company, Shawn has greatly increased his skill and speed at packaging books for shipping. 2. Everyone in the Jackson family is equally good at baking, so they have begun selling pies at a local farmer's market. Mr. Jackson realizes they can be more productive if each member of the family does a different task associated with making the pies. 3. Though it required an increase in workforce, Tiny House Manufacturers has expanded its level of production and can now manufacture each home more affordably and efficiently.

1) Specialization of Labor 2) Division of Lavbor 3) Economies of Scale

_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. Skill Specialization Economies of scale Division of labor

Economies of Scale

Which two primary markets interact in the circular flow diagram?

Goods and services and labor — Correct. Goods and services and labor are the two markets that interact in the circular flow diagram.

What is used in economics interchangeably with the term "theory"?

Model — Correct. Though a model is more applicable and empirical in representation, and a theory is more abstract, the terms are used interchangeably.

Which factor drives the study of economics?

Scarcity

Which are concepts that Adam Smith first introduced in his 1776 book The Wealth of Nations?

Specialization of labor Division of labor

As students in both groups make their analysis, which factors will help them define the overall macroeconomic health of the fictitious country's economy?

Standard of living Employment rate

Which of the following is a microeconomic problem? a. determining how many workers a firm needs to hire to maximize profit b. determining the number of underemployed people in the nation c. calculating the change in economic growth over time d. examining the change in the nation's production possibility frontier

a. determining how many workers a firm needs to hire to maximize profit

Which of the following increases as the level of globalization in a country increases? a. exports b. interest rates c. unemployment d. prices

a. exports

People have unlimited desires but limited resources. Economics tries to understand how we make decisions in such a world of ______ resources. a. scarce b. unlimited c. sufficient d. raw materials

a. scarce

Firms are primarily ________ in the goods and services market and ________ in the labor market. a. sellers, buyers b. buyers, buyers c. buyers, sellers d. sellers, sellers

a. sellers, buyers

Which of the following best describes the tools economists use to examine and solve problems in the economy? a. theoretical models b. the division of labor c. monetary policy d. specialization

a. theoretical models

market economy

an economy where economic decisions are decentralized, resources are owned by private individuals and businesses supply goods and services based on demand

command economy

an economy where economic decisions are passed down from government authority and where resources are owned by the government

Understanding the determinants of long-run economic growth is an example of a ________ problem. a. microeconomics b. macroeconomics c.fiscal policy d. monetary policy

b. macroeconomics

Suppose that a central bank decides to lower interest rates to boost the economy. This is an example of a _______ policy. a. long-run b. monetary c. fiscal d. division of labor

b. monetary

In the circular flow diagram, _______ is an example of a flow from households to firms. a. goods sold b. services sold c. wages, salaries, and benefits paid d. labor services performed

d. labor services performed

________ allows workers to do what they are best at to increase production. a. scarcity b. economies of scale c. trade d. specialization

d. specialization

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. division of labor interconnected economy task economy modern economy

division of labor

fiscal policy

economic policies that involve government spending and taxes

Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change. market economy production firm

economy

The basic difference between macroeconomics and microeconomics is: microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

The basic difference between macroeconomics and microeconomics is that: microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

monetary policy

policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing

model

see theory