Chapter 2
_______________ _______________ _______________ measures changes in prices of goods and services purchased for consumption by typical urban households.
Consumer Price Index (CPI)
What happens when too many products are produced and not enough buyers?
Deflation
Refers to the quantity of products that people are willing to buy at different prices at a specific time.
Demand
_______________ is the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.
Economics
True or False. There are only 3 different degrees of competition: Monopoly, Perfect competition, and Oligopoly.
False, There are 4. Monopolistic competition is also part of it.
True or False. National debt is when the government takes in more revenue than it spends.
False, that is National surplus .
True or False. Demand is the quantity of products manufacturers/owners are willing to sell at different prices at a specific time.
False, that is the definition of supply.
What refers to the government's efforts to keep the economy stable by increasing or decreasing taxes or government spending?
Fiscal Policy
What is an economy where the market largely determines what goods and services get produced?
Free-Market
What is the total value of final goods and services produced in a country in a given year?
GDP (Gross Domestic Production)
_______________ is a general rise in the prices of goods and services over time.
Inflation
_______________ _______________ is the phrase coined by Smith in relationship with the process that turns self-directed gain into social and economic benefits for all.
Invisible hand
The federal government's efforts to keep the economy stable through spending and taxation is an example of _______________ economic theory.
Keynesian
The part of economics study that looks at the operation of a nation's economy as a whole?
Macroeconomics
_______________ looks at how many jobs exist in the whole economy.
Macroeconomics
Which is not part of the business cycle?
Maximum. The parts of the business cycle are: expansion, peak, contraction and trough.
What is it when a large number of sellers produce very similar products that buyers perceive as different?
Monopolistic competition
_______________ _______________ help gauge the health of the economy by measuring the levels of inflation, disinflation, deflation, and stagflation.
Price indexes
Which is not a type of unemployment?
Situational. The types are: Frictional, Structural, and Cyclical
All are benefits of Socialism except:
Social inequality, Benefits of socialism include free education, shorter work weeks, free child care, and social equality.
What is the economic system based on the premise that basic businesses should be owned by the government so profit can be distributed easier?
Socialism
What does demand curve show?
The relationship between quantity of items demanded
True or False. An economy where the buyers and sellers together decide what needs to be produced is a free-market economy.
True
True or False. An economy where the government decides what will be produced and who gets it is a command economy.
True
True or False. Communism is an economic and political system where the government makes almost all economic decisions.
True
True or False. Inflation is a general increase in prices and fall in the purchasing value of money.
True
True or False. Market price is determined by supply and demand.
True
True or False. Mixed economy is part capitalist and part socialist.
True
True or False. Socialism and Communism are variations of Command economy.
True
Current event: Are wages low in growing job market?
Yes, they are lower than expected for the amount of unemployment. Labor markets may be weaker than they appear, Increasing employer concentration, Changes in labor market institutions, The growth in productivity for workers and businesses has been low
Business like McDonald's and Burger Kind have some power over the price they charge in monopolistic competition because they can make consumers aware of product differences through _______________.
advertising
The demand curve slopes down from left to right showing that:
as the price decreases, the quantity demanded increases
Due to much higher taxes in socialist countries, the best and brightest tend to leave such countries causing a _______________ _______________.
brain drain
The periodic rises and falls that occur in economies over time are called:
business cycles
In a free market system, decisions about what and how much us produced are made by:
buyers and sellers negotiating prices
The popular term for free-market economies is _______________.
capitalism
The government in a _______________ economic and political system makes almost all economic decisions and owns almost all of the factors of production, whereas in capitalism the people make almost all economic decisions.
command
When the government makes almost all economic decisions and owns almost all the major factors of production, the country is considered to be under the political system called _______________.
communism
Command economies include those that are:
communist, socialist
Productivity in the U.S. has risen because:
computers have increased the speed of production, changes to computerized equipment has improved speed and accuracy of production
The monthly statistic that measures the pace of inflation or deflation is called the _______________ price index.
consumer
CPI minus food and energy cost is called _______________ inflation.
core
Businesses offer goods and services with the purpose of making a profit and eventually increasing their owners' wealth. Simultaneously, businesses that pursue profit also:
create the opportunity for more wealth by producing goods and services used by other businesses, increase their employees' wealth by paying them for their work
The periodic rises and falls that occur in economies over time are called business _______________.
cycles
The sum of government deficits over time is called the national _______________.
debt
If too many firms are selling too many products of the same type, the firms will be unable to sell all their products. That causes an increase in inventory. In order to sell the remaining inventory and recover some of the money invested, the firms will have to:
decrease product prices
Fiscal policy is the government's efforts to keep the economy stable by:
decreasing taxes, increasing or decreasing government spending, increasing taxes
The national _______________ refers to the difference between government spending beyond what it gathers in taxes in a given fiscal year.
deficit
Rising unemployment levels tend to stifle demand for goods and services, which can have the effect of forcing prices downward, a condition known as _______________.
deflation
The situation is which prices are declining is called:
deflation
_______________ is the quantity of goods and services consumers are willing to buy at different prices.
demand
On a graph showing both supply and demand curves, the intersection point between the two curves shows the:
equilibrium point
By increasing or decreasing taxes or government spending, the government is affecting _______________ policy to keep the economy stable.
fiscal
Increased government spending is a main _______________ policy tool.
fiscal
The government's increase in spending on projects, such as the infrastructure, aims to keep the economy stable. This is an example of _______________ policy.
fiscal
Adam Smith believed _______________ was essential to the survival of any economy.
freedom
Mark graduated from college a short time ago and is still looking for his first (dream) job. Mark is part of the unemployment category known as _______________ unemployment.
frictional
In government-controlled economies, the decision of what and how much to produce rests with:
government agencies
A profitable business will benefit the society by:
hiring other small businesses to provide it with needed services such as maintenance and painting, purchasing needed supplies and materials, hiring more employees
When oil prices doubles in 2008, people became more interested in solar power, and businesses started to offer a multitude of solar power products such as outdoor and indoor solar lighting and solar battery, camera, and laptop chargers. This is an example of:
how scarce resources lead to innovation
Maria owns a home-based business specializing in accounting services. By offering excellent service, she can satisfy her clients and make a profit. She then buys goods and services from local merchants to supply her home and business. This is an example of:
how self-directed gain benefits the whole society
The supply concept refers to the relationship between the quantity of products produced and price. If the market price of a product increases, quantity supplied will _______________. If the market price of a product decreases, quantity supplied will _______________.
increase, decrease
The fed will lower _______________ _______________ in order to spark business borrowing which allows for operational expansion that leads to job growth.
interest rates
Who determines the prices in a Free Market?
it is negotiated by buyers and sellers
The Commerce Department has concluded that Gross Output is a better indicator than GDP because:
it shows that consumer spending is the effect, not the cause, of prosperity, it is a better indicator of the business cycle, it is more consistent with economic growth theory
An oligopoly is a degree of competition in which:
just a few sellers dominate the market
The operation of a nation's economy as a whole is _______________.
macroeconomics
The trend toward a(n) _______________ price occurs naturally as supply and demand of products is negotiated between buyers and sellers.
market
Studying the economic behavior of individual people and organizations in markets for particular products or services is _______________.
microeconomics
The United States free-market economy of the past now represents that of a _______________ market economy since the government offers and controls programs such as Medicare, Medicaid, and Social Security.
mixed
The three different types of economic systems are command, free-market, and _______________ market economies.
mixed
When some allocation of resources is made by the market and some is made by the government an economy is said to be a(n) _______________ economy.
mixed
The Federal Reserve Bank manages the money supply and interest rates in an effort to balance the economy. This is referred to as _______________ policy.
monetary
During the latest recession, the Fed lowered interest rates sharply. This is an example of:
monetary policy
When one seller controls the total supply of a product or service and sets the price, that seller is said to have a _______________.
monopoly
The degree of competition in which just a few sellers dominate the market, such as the gasoline market, because the initial investment to enter the market is very high is called a(n) _______________.
oligopoly
The degree of competition where there are many sellers of identical products in a market is called:
perfect competition
List the four degrees of competition generally agreed on by economists, starting with the most competitive one at the top.
perfect competition, monopolistic competition, oligopoly, monopoly
In a free market, the _______________ tells producers how much to produce.
price
The _______________ for goods and services in a free market are determined by buyers and sellers.
prices
A major problem with communism as an economic system is that the government has no idea what should be produced because:
prices do not reflect supply and demand as they do in free markets
Producers are likely to be interested in a measurement of prices at the wholesale level so they will refer to the _______________ price index.
producer
An increase in _______________ means a worker can produce more goods and services than before in the same time period, reducing costs.
productivity
Under monopolistic competition:
products are perceived as different by the buyers, there are large number of sellers in the market
Businesses contribute to an economic system by:
providing jobs and economic growth for their employees and communities
The United States, which has a very capitalistic economy, has introduced social welfare programs such as social security. China, which is a Communist country, has adopted many capitalist practices. One can conclude that:
pure communist or capitalist countries rarely exist today
A problem with measuring productivity in the service sector is that the new technology improves the _______________ of the service, but not the _______________.
quality, productivity
The study of how to increase resources or create conditions that will make better use of them is _______________ _______________.
resource development
Socialism tends to result in less innovation and invention because innovators don't receive as much of the _______________ as in a free market economy.
reward
Jonathan is a very bright student who dreams of becoming the next Bill Gates. After graduation, he started working hard but soon realized that the amount of money he received after taxes will never allow him to save enough to become rich or open a high-growth business. However, he soon remembered in his country students do not have to pay for college and therefore has no debt. Jonathan most likely lives in a(n):
socialist country
When the economy is slowing down, but prices are still going up it is called _______________.
stagflation
In free markets the price of a product depends on how much consumers are willing and able to buy and how much the producers are willing and able to sell. What does the market price depend on in a free market?
supply and demand
One of the most important fiscal policy tools is:
taxation
Socialism offers such benefits as free education and health care. However, the government has to pay for these services. Therefore:
taxes need to be higher in socialist countries
Fiscal policy is the federal government's effort to keep the economy stable by increasing or decreasing:
taxes, government spending
According to Adam Smith, as long as farmers, laborers, and businesspeople received economic reward for their efforts, they would work hard. As a result of this self-directed desire to gain, the economy would prosper and everyone would become wealthier. Smith called this process:
the invisible hand
How are taxes used to influence the economy?
they are used to stabilize the economy, low taxes increase the profits a small business can earn, high taxes draw the money away from the private sector
GDP is the _______________ value of final goods and services produced in a _______________ in a given year.
total, country
One possible microeconomic topic is:
understanding the supply of automobiles in the U.S. market
Anyone 16 years or older who tried to find a job in the last four weeks will be included in the _______________ rate.
unemployment
