Economics Chapter 2

Approximately ________ people live in the United States and ________ people live in the world. A) 210 million; 5 billion B) 310 million; 3 billion C) 310 million; 7 billion D) 410 million; 8 billion E) 210 million; 6 billion

310 million; 7 billion

What are consumption goods and services? `

goods and services that are bought by individuals and used to provide personal enjoyment and contribute to a person's standard of living. Examples: movies and laundromat services.

In the circular flow model, consumption goods are bought and sold in the A) government market B) goods market C) financial market D) factor markets E) monetary flows

goods market

What are capital goods?

goods that are bought by businesses to increase their productive resources. Examples: cranes and trucks.

In the circular flow model, there are two types of markets: the ________ market and the ________ market. A) producers; consumers B) service; goods C) supply; demand D) goods; factor E) households; firms

goods; factor

As the circular flow model shows, the factors of production flow from A) firms to households through the goods market B) the goods market through firms to the factor markets C) households to firms through the factor market D) households to firms through the goods market E) firms to households through the factor market.

households to firms through the factor market

What levels is government divided into?

1) Federal gov 2) State and local gov

The federal government's major expenditures are to provide:

1. Goods and Services 2. Social Security and welfare benefits 3. Transfers to state and local governments

State and local governments expenditures provide:

1. Goods and services 2. Welfare benefits

What are the main taxes by the federal government?

1. Personal Income Taxes 2. Corporate (Business) Taxes 3. Social Security Taxes

What are the main taxes from state and local governments?

1. Sales Taxes 2. Property Taxes 3. State Income Taxes

In the United States, the poorest 20 percent of households earn roughly ________ percent of total income. A) 0.5 B) 10 C) 15 D) 3 E) 20

3

Money flows

Firms pay households incomes for the services of factors of production. Households pay firms for the goods and services they buy. Blue flows=income. Red flows=expenditures.

In goods market:

Firms supply goods and services produced. Households buy goods and services.

________ the owners of the factors of production, while ________ what amounts of those factors to hire. A) Households are; the government determines B) Firms are; households determine C) The government is; firms determine D) Firms are; the government determines E) Households are; firms determine

Households are; firms determine

In factor markets:

Households supply factors of production. Firms hire factors of production.

Profit

Income earned by an entrepreneur for running a business.

Wages

Income paid for the services of Labor

Interest

Income paid for the use of Capital

Rent

Income paid for the use of Land

International trade

Many of the goods that you buy were not made in the United States―your iPod, Wii games, and Nike shoes. U.S. Imports: The goods and services that we buy from firms in other countries. Much of what is produced in the United States doesn't end up being sold here―Boeing sells most of the airplanes it makes to foreign airlines. U.S. Exports: The goods and services that we sell to households and firms in other countries.

What direction do Money Flows run in?

Opposite to real flows (clockwise)

Which of the following is NOT classified as an advanced economy? A) Australia B) South Korea C) Hong Kong D) the United Kingdom E) Russia

Russia

Items that are purchased by individuals for their own enjoyment are called A) exports of goods and services B) government goods and services C) consumption goods and services D) private goods E) capital goods

consumption goods and services

The largest share of total production in the United States is A) consumption goods and services B) imported goods and services C) capital goods D) exported goods and services E) government goods and services

consumption goods and services

Most of the world's population lives in A) emerging market economies B) developing economies C) advanced economies D) island nations E) transition economies

developing economies

Personal distribution of income

distribution of income among households.

What are factors of production and what are the 4 categories it's grouped in?

productive resources used to produce goods and services. Factors of production are grouped into four categories: Land Labor Capital Entrepreneurship

Which of the following is NOT considered capital? A) an assembly line at a General Motors plant B) a computer used by your instructor for presentations in class C) stocks and bonds that are sold by Pepsico D) a nail gun used for building houses E) the furniture in the President's office

stocks and bonds that are sold by Pepsico

Net borrower

when the value of U.S. imports exceeds the value of U.S. exports, the United States must borrow from the rest of the world

What is labor?

work time and work effort that people devote to producing goods and services. The quality of labor depends on how skilled people are—what economists call Human Capital.

What would be an example of capital good? A) Jeanette buys a new dress B) Antonio, the manager of the local Taco Hut, purchases a new deep fryer C) The local driver's license office purchases a new digital camera and printer D) Rhianna gets a haircut E) Apple sells computers to Japan

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

Developing economies

Developing economies are the 119 countries in Africa, Asia, the Middle East, Europe, and Central and South America that have not yet achieved high average incomes for their people. More than 5.5 billion people live in these countries.

Emerging market

Emerging market economies are the 28 countries of Central and Eastern Europe and Asia. Almost 500 million people live in these countries.

Advanced economies

The richest 29 countries (or areas). Almost 1 billion people (15 percent of the world's population) live in advanced economies

International finance

When firms or governments want to borrow, they look for the lowest interest rate available. Sometimes, that is outside the United States.

Which of the following is a consumption good or service? A) a United Airline ticket counter B) a satellite dish installed by Cox Cable to download programs that are then distributed through its cable system C) a personal computer purchased in order to play games at home D) a United Parcel Service truck delivering Christmas gifts E) the Endeavor space shuttle

a personal computer purchased in order to play games at home

Which of the following is NOT directly related to human capital? A) an understanding of real estate markets B) a college education C) a summer internship D) knowledge of computer programming E) an MRI machine

an MRI machine

Canada is classified by the International Monetary Fund as A) an emerging market economy B) a transition economy C) a developing economy D) a natural-resource based economy E) an advanced economy

an advanced economy

Poland is classified as A) a developing economy B) a transition economy C) an emerging market economy D) private economy E) an advanced economy

an emerging market economy

Market

any arrangement that brings buyers and sellers together and enables them to get information and do business with each other.

The circular flow model shows that goods and services flow from A) businesses to households B) households to business C) the factor markets to the goods markets D) the factor market to businesses E) the goods market to businesses

businesses to households

Which of the following is NOT a function of the federal government? A) making transfers to state and local governments B) providing public goods and services C) making social security and welfare payments D) imposing a personal income tax E) collecting property taxes

collecting property taxes

What is capital?

consists of tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services. Capital includes: semi-finished goods, office buildings, and computers. Capital does not include: money, stocks, and bonds. They are financial resources.

The most people live in ________ economies and the fewest people live in ________ economies. A) advanced; developing B) developing; advanced C) developing; emerging market D) emerging market; developing E) advanced; emerging market

developing; emerging market

Functional distribution of income

distribution of income among the factors of production.

The productive resource that organizes labor, land, and capital is A) entrepreneurship B) capital C) financial capital D) human capital E) government

entrepreneurship

In the circular flow model with the government sector, transfers A) flow in the same direction as do taxes B) to firms flow in the same direction as do rent, wages, interest, and profits C) flow only through the goods market D) to households flow in the same direction as do expenditures on goods and services E) flow in the opposite direction as do taxes.

flow in the opposite direction as do taxes

The circular flow model is used to show the A) flow of renewable natural resources B) expansions and contractions of economic activity C) flow of expenditures and incomes in the economy D) flow of supply and the flow of demand E) recycling process of production materials

flow of expenditures and incomes in the economy

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 A) consumption services B) natural resources C) natural labor D) human capital E) entrepreneurship capital

human capital

What is entrepreneurship?

human resource that organizes labor, land, and capital. Entrepreneurs come up with new ideas about what and how to produce, make business decisions, and bear the risks that arise from these decisions.

The concept of human capital describes A) the number of workers per operating machine B) human population, that is, the quantity of labor C) human skills, that is, the quality of labor D) the number of machines (capital) that have been produced by people (humans) E) the number of machines per employed worker.

human skills, that is, the quality of labor

Which of the following are sources of revenue for state and local governments? i. property taxes ii. sales taxes iii. transfers from the federal government A) i and ii B) i and iii C) i, ii and iii D) ii and iii E) i only

i, ii and iii

A real flow in the circular flow diagram is i. a firm's payments of wages to its workers. ii. a household's purchase of a new car. iii. a farmer's use of land to grow corn. A) i, ii and iii B) i and iii C) i only D) ii only E) ii and iii

ii and iii

What is land?

includes all the "gifts of nature" that we use to produce goods and services. Land includes all the things we call natural resources. Land includes: minerals, water, air, wild plants, animals, birds, and fish as well as farmland and forests.

As a factor of production, oil reserves are counted as A) land B) labor C) capital D) entrepreneurship E) financial capital

land

In the circular flow model, the factor markets are the markets in which A) consumption goods and services are bought and sold B) land, labor, capital, and entrepreneurship are bought and sold C) governments impose all their taxes D) government goods and services are provided E) investment goods and services are bought and sold

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

Factor markets

markets in which factors of production are bought and sold.

Goods markets

markets in which goods and services are bought and sold.

Circular flow model

model of the economy that shows: The circular flow of expenditures and incomes that result from decision makers' choices and The way those choices interact in markets to determine what, how, and for whom goods and services are produced.

Physical capital differences across countries can be seen in the fact that A) more advanced economies typically have more sophisticated technology B) the iPhone's components are produced in 30 countries C) advanced economies produce 53 percent of the world's income D) students in India study the same subjects as those in the United States E) furniture factories in China use machines like those in North Carolina

more advanced economies typically have more sophisticated technology

Payments to the factors of production are A) rent, interest, bonds, and profit or loss B) land, labor, capital, and entrepreneurship C) rent, mortgage, interest, and bonds D) rent, wages, profit or loss, and bonus E) rent, wages, interest, and profit or loss

rent, wages, interest, and profit or loss

Which of the following is NOT considered one of the factors of production? A) technology B) capital C) land D) labor E) entrepreneurship

technology

Of the following, the country with the highest average income per day in the world is A) Germany B) the United States C) China D) France E) Japan

the United States

The total amount the federal government has borrowed to make expenditures that exceed tax revenue is called A) total government spending B) personal income taxes C) the national debt D) the net government revenue E) federal expenditures

the national debt

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 ________. A) the United States; the United States B) the rest of the world; the rest of the world C) the United States; the rest of the world D) the rest of the world; the United States E) the United States; the rest of the world and the United States

the rest of the world; the United States

The personal distribution of income in the United States shows that A) the richest 20 percent of individuals receive approximately 25 percent of total income B) the poorest 20 percent of individuals receive approximately 20 percent of total income C) the poorest 60 percent of individuals receive approximately 50 percent of total income D) income is equally distributed E) the richest 20 percent of individuals receive approximately 50 percent of total income

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

Capital, as a factor of production, refers to A) the tools and instruments used to produce other goods and services B) the production factors imported from abroad C) money, stocks, and bonds D) the production technology used by firms E) stocks and bonds, but not money

the tools and instruments used to produce other goods and services

The majority of the income earned in the United States is paid in A) rent B) dividends C) wages D) profit E) interest

wages

In the circular flow model, which of the following flows in the opposite direction from the flow of factors of production? A) interests payments of Federal, state, and local governments B) the goods market C) wages, rent, interest, and profit D)finished goods and services E) firm's profit incentives

wages, rent, interest, and profit