ECO Test 1

Which of the following is true regarding equilibria in economics?

Equilibrium is sometimes the best possible outcome, but sometimes not

What is the "golden rule" of economics (and all of life)?

MC=MB

1. Why is the goal of government policy in the real world not set to target an inflation rate of 0%?

a. It is difficult to accurately hit a target inflation rate, and deflation is far worse than inflation ("better safe than sorry")

Normative statement

based on opinion

Fill in the Blank: Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called __________.

structural unemployment

Positive statement

Based on facts

1. After spending a few years as a bartender at a local bar, Lauryn was recently laid off due to a downturn in the economy. That is, due to a recession, her employer's business decreased drastically, forcing her employer to lay her off. Lauryn is now actively looking for a new job. How would we classify Lauryn?

Cyclically unemployed

like Freddie, Brian also spent 20 years working for an automobile manufacturing plant, and he was also replaced by a machine 9 months ago. He actively looked for a new job for the first 6 months after being replaced, but he then quit looking 3 months ago - though he still wants a job. When asked why he quit looking, he specifically cited an economic reason ("lack of available jobs"). How would we classify Brian?

Discouraged worker

Fill in the Blank: Correlation __________ causation

Does not

In the most basic, standard version of the Circular Flow Diagram, what are the two main categories of participants in markets?

Firms and Households

After spending years working in IT for a local telecommunications company, Damon decides to quit his job. He is now actively looking for a similar job that more aligns with his preferences, such as flexible work hours. How would we classify Damon?

Frictionally unemployed

Fill in the Blank: Correlation __________ causation

Happiness

What does increasing marginal opportunity costs​ mean?

Increasing the production of a good requires larger and larger decreases in the production of another good.

The concept of increasing marginal opportunity costs causes which of the following characteristics regarding the shape of the production possibilities frontier (PPF)?

It will cause the PPF to be concave (aka, "bow outward")

Fill in the Blank: In general, the opportunity cost of moving right by one unit along the production possibilities frontier is equal to the __________.

Negative of slope

Economists generally fill one of two roles: either scientist or policy adviser. Which role do most economists fill most of the time?

Scientist

1 Freddie spent 20 years working for an automobile manufacturing plant. However, he was replaced by a machine 9 months ago. He is now actively looking for a new job. How would we classify Freddie?

Structurally unemployed

. Natural unemployment is made up of...

both frictional unemployment and cyclical unemployment

The​ short-term unemployment that arises from the process of matching workers with jobs is called

frictional unemployment