Chapter 2

In the circular flow model, consumption goods are bought and sold in the

goods market

In the circular flow model, there are two types of markets: the ________ market and the ________ market.

goods; factor

Households and firms in the U.S. economy interact with those in the rest of the world in the ________ market and in the ________ market.

goods; financial

As the circular flow model shows, the factors of production flow from

households to firms through the factor market.

Jan is attending college and studying to be an investment broker. To improve her chances of employment following college, she has interned at a top brokerage firm during the last two summers. Jan's internship has increased her

human capital

U.S. exports of goods and services flow to households and firms in ________, and U.S. financial inflows of capital flow to households and firms in ________.

the rest of the world; the United States

Which of the following are sources of revenue for state and local governments?

-property taxes -sales taxes -transfers from the federal government

In the United States, the poorest 20 percent of households earn roughly ________ percent of total income.

3

Approximately ________ people live in the United States and ________ people live in the world.

310 million; 7 billion

What would be an example of capital good?

Antonio, the manager of the local Taco Hut, purchases a new deep fryer.

________ the owners of the factors of production, while ________ what amounts of those factors to hire.

Households are; firms determine

Which of the following is NOT classified as an advanced economy?

Russia

A real flow in the circular flow diagram is

a household's purchase of a new car and a farmer's use of land to grow corn.

Which of the following is a consumption good or service?

a personal computer purchased in order to play games at home

The circular flow model is used to show the

flow of expenditures and incomes in the economy.

The total amount the federal government has borrowed to make expenditures that exceed tax revenue is called

the national debt.

An example of a U.S. export is

a washing machine made in Indiana sold to a buyer in France.

Which of the following is NOT directly related to human capital?

an MRI machine

Canada is classified by the International Monetary Fund as

an advanced economy.

Poland is classified as

an emerging market economy.

The circular flow model shows that goods and services flow from

businesses to households.

Which of the following is NOT a function of the federal government?

collecting property taxes

Items that are purchased by individuals for their own enjoyment are called

consumption goods and services.

The largest share of total production in the United States is

consumption goods and services.

Most of the world's population lives in

developing economies.

The most people live in ________ economies and the fewest people live in ________ economies.

developing; emerging market

The productive resource that organizes labor, land, and capital is

entrepreneurship.

In the circular flow model with the government sector, transfers

flow in the opposite direction as do taxes.

The concept of human capital describes

human skills, that is, the quality of labor

As a factor of production, oil reserves are counted as

land

In the circular flow model, the factor markets are the markets in which

land, labor, capital, and entrepreneurship are bought and sold.

Physical capital differences across countries can be seen in the fact that

more advanced economies typically have more sophisticated technology.

Payments to the factors of production are

rent, wages, interest, and profit or loss.

Which of the following is NOT considered capital?

stocks and bonds that are sold by Pepsico

Which of the following is NOT considered one of the factors of production?

technology

Of the following, the country with the highest average income per day in the world is

the United States.

The personal distribution of income in the United States shows that

the richest 20 percent of individuals receive approximately 50 percent of total income.

Capital, as a factor of production, refers to

the tools and instruments used to produce other goods and services.

The majority of the income earned in the United States is paid in

wages

In the circular flow model, which of the following flows in the opposite direction from the flow of factors of production?

wages, rent, interest, and profit