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PrinEcon1 Final 5-10
Principles of Economics 1 Final Prof Senbeta
| Question | Answer |
|---|---|
| Economics deals primarily with the concept of | Scarcity |
| The ability to produce a good using fewer inputs than another producer is called | Absolute Advantage |
| Resources are _______ for households and ______ for economies | scarce, scarce |
| The opportunity cost of an item is | what you give up to get that item |
| A rational decision maker takes an action if and only if | the marginal benefit of the action exceeds the marginal cost of the action |
| Production is efficient if the economy is producing at a point | on the production possibilities frontier |
| Points inside the production possibilities frontier are | inefficient |
| The principle that "people face tradeoffs" applies to | individuals, families, and societies |
| The term "market failure" refers to | the failure of a market to produce an efficient allocation of resources |
| Causes of market failure include | externalities and market power |
| An example of externality is the impact of | pollution from a factory on the health of people in the vicinity of the factory |
| Market power refers to the | power of a single person or small group to influence market prices |
| The circular flow diagram is a | visual model of the economy |
| Factors of production are | inputs into the production process |
| The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and... | the available production technology |
| A production possibilities frontier can shift outward if | there is a technological improvement |
| A production possibilities front shifts outward when | the economy experiences growth |
| The field of economics is traditionally divided into two broad subfields; | microeconomics and macroeconomics |
| Macroeconomics is the study of | economy-wide phenomena |
| Normative statements are ______, positive statements are ______ | prescriptive, descriptive |
| Trade between countries allows countries to consume... | at a point outside its PPF |
| Economics is the study of | how society manages its scarce resources |
| What does "minimum waste" best describe? | Efficiency |
| In a market economy, economic activity is guided by | self-interest and prices |
| Productivity is defined as the | amount of goods and services produced from each labor of unit input |
| In economics, capital refers to | buildings and machines used in the production process |
| Microeconomics is the study of | how individual households and firms make decisions |
| Positive statements are claims about how the world | is |
| When the government implements programs such as progressive incomes tax rates, what is likely to occur? | equality is increased and efficiency is decreased. |
| The forces that make market economies work are | supply and demand |
| A group of buyers and sellers of a particular good or service is called a | market |
| Buyers determine ______, and sellers determine ______ | demand, supply |
| A competitive market is a market in which | no individual buyer or seller has any significant impact on the market price |
| The quantity demanded of a good is the amount that buyers are | willing and able to purchase |
| The law of demand states that when the price of a good ______, the quantity demanded of the good ______ | falls, rises |
| The line that relates the price of a good and the quantity demanded of that good is called the ______, and it usually ______ | demand curve, slopes downward |
| The market demand curve is the ______ of all individual demand curves | sum |
| If the demand for a good falls when income falls, then the good is called a ______ good | normal |
| Two goods are substitues when a decrease in the price of one good, ______ the demand for the other good | decreases |
| The quantity supplied of a good is the amount that ______ are willing and able to sell | sellers |
| The law of supply states that when the price of a good | rises, the quantity supplied of the good rises |
| The unique point at which the supply and demand curves intersect is called | equilibrium |
| At the equilibrium price, the quantity of the good that buyers are willing and able to buy ______ ______ the quantity that sellers are willing and able to sell | exactly equals |
| Gross domestic product measures two things at once: | the total income of everyone in the economy and the total expenditure on the economy's output of goods and services |
| Gross domestic product is defined as | the market value of all final goods and services produced within a country in a given period of time |
| Government purchases include spending goods and services by ______, ______, ______ governments. | federal, state, and local |
| Real GDP is the yearly production of final goods and services valued at | constant prices |
| GDP per person tells us the income and expenditure of the | average person in the economy |
| When the consumer price index rises, the typical family | has to spend more dollars to maintain the same standard of living |
| The change in the price level from one period to the next is defined as | the inflation rate |
| The CPI is a measure of the overall cost of the goods and services bought by | a typical consumer |
| The steps involved in calculating the consumer price index and the inflation, in order, are as follows: | Fix the basket, find the prices, compute the basket's cost, choose abase year and compute the index, and compute the inflation rate |
| The goal of the consumer price index is to measure changes in the | cost of living |
| The GDP deflator reflects the | current level of prices relative to the level of prices in the base year |
| The nominal interest rate tells you | how fast the number of dollars in your bank account rises over time |
| The real interest rate tells you | how fast the purchasing power of your bank account rises over time |
| A rightward shift of a demand curve is called | an increase in demand |
| The CPI and the GPD deflator | generally move together |
| If the nominal interest rate is 6% and the rate of inflation is 2%, then the real interest rate is | 4 percent |
| If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as | $500 purchased in 1955 |
| A nation's standard of living is best measured by its | real GDP per person |
| The one variable that stands out as the most significant explanation of large variations in living standards around the world is | productivity |
| The quantity of goods and services produced from each unit of labor input is otherwise known as | productivity |
| What are the determinants of of productivity? | human capital per worker, physical capital per worker, natural capital per worker |
| What would not be considered physical capital? | on-the-job training |
| Knowledge and skills that workers acquire through education, training and experience is called... | human capital |
| An example of human capital is | the things you have learned this semester |
| An understand of the best ways to produce goods and servies is called | technology |
| An increase in the physical capital stocker per worker, an increase in human capital per worker, and an increase in natural resources per worker would all ______ productivity | increase |
| It is easier for a country to grow fast and so "catch-up" if it starts out relatively poor | catch-up effect |
| Suppose that an American opens and operates a candy factory in Finland. This is an example of | foreign direct investment. American saving is used to finance American investment. |
| When a country saves a larger portion of its GDP than it did before, it will have ______ capital, and ______ productivity | more, higher |
| Institutions that help to match one person's saving with another person's investment are collectively called the | financial system |
| Alyssa is opening a bicycle shop, and her monthly expenditures to get the shop up and running exceed her monthly income. Alyssa is best described as a ______ or ______ of funds | borrower, demander |
| The economy's two most important financial markets are the ______ market, and the ______ market | bond, stock |
| Two of the economy's most important financial intermediaries are | banks and mutual funds |
| A certificate of indebtedness that specifies the obligation of the borrower to the holder is called a | bond |
| A bond buyer is a ______. Bond buyers may sell their bonds prior to maturity. | saver |
| People who buy stock in a corporation such as General Electric become ______ ______ of General Electric, so the benefits of holding the stock depend on General Electric's profits | part owners |
| As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is | borrowing directly |
| Financial institutions through wich savers can indirectly provide funds to borrowers are | financial intermediaries |
| In a closed economy, what does (T-G) represent? | Public saving |
| In a closed economy, national saving is ______ to investment | equal |
| The amount of incoe that households have left after paying for their taxes and consumption is called | private saving |
| If the tax revenue of the federal government exceeds spending, then the government necessarily runs a | budget surplus |
| The source of the supply of loanable funds is ______, and the source of demand for loanable funds is ______ | saving, investment |
| A higher interest rate induces people to ______ ______< so the supply of loanable funds slopes ______ | save more, upward |
| If the demand for loanable funds shifts to the right, then the equilibrium interest rate and | quantity of loanable funds rise |
| If the supply for loanable funds shifts to the right, then the equilibrium interest rate | falls and the quantity of loanable funds rises |
| A budget deficit changes the | supply of loanable funds |
| Crowding out occurs when investment declines because | a budget deficit makes interest rates rise |
| The amount of unemployment that the economy normally experiences is called the | natural rate of unemployment |
| The deviation of unemployment from its natural rate is called | cyclical unemployment |
| The labor force equals the | number or people employed plus the number of people unemployed |
| Unemployment data are collected through | a regular survey of about 60,000 households |
| A person who is counted as unemployed by the Bureau of Labor Statistics | is also in the labor force, must have recently looked for work or be on temporary layoff, and must be at least 16 years old |
| Are discouraged workers counted as part of the labor force? | No, they are counted as out of the labor force but should be counted as unemployed |
| People who are unemployed because of job search are best classified as | frictionally unemployed |
| The following explains the existence of structural unemployment | efficiency wages, minimum-wage laws, unions |
| When a government runs a budget deficit, | investment is lower than it would be if the budget were balanced |
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k8stricker