Macroeconomics Test 1

Making decisions "at the margin" means that people

Compare marginal costs to marginal benefits

Public Policies

May be able to improve either economic efficiency or equality.

Suppose price is measured along the vertical axis on a graph. When price changes, there will be a movement or shift?

Movement along the curve

In economics, capital refers to

Buildings and machines used in the production process.

The economy of the former Soviet Union is best described as a

Centrally-planned economy

Efficiency refers to _______________ Equality refers to _______________

Efficiency refers to size of economic pie. Equality refers to how the pie is divided.

When society gets the most it can from its scarce resources, then the outcome is called

Efficient

Central planning government means:

Government guided economic activity. Most countries have abandoned this.

Something that induces a person to act is called

Incentive

Another term for factors of production is

Inputs

Factors of production:

Land, labor, and capital

For markets to work well, there must be

Property rights

Coal is considered to be a non-renewable energy source. So coal is considered to be ____________

Scarce

The production possibilities frontier is used to illustrate some basic economic ideas, including

Scarcity, economic growth, and opportunity cost

Law of demand

The claim that, with other things being equal, the quantity demanded of a good falls when the price of that good rises

A production possibilities frontier can shift outward if

There is a technological improvement

The circular flow diagram is a

Visual model of the economy

The short-run tradeoff between inflation and unemployment implies that, in the short run,

a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate.

In a particular country in 1998, the average worker needed to work 40 hours to produce 100 units of output. In that same country in 2008, the average worker needed to work 36 hours to produce 72 units of output. In that country, the productivity of the average worker__________ and standard of living _________.

decreased between 1998 and 2008, so we would expect the standard of living to have decreased accordingly.