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Economics is the study of Choice
Economics is not a Natural science
Adam Smith wrote "The Wealth of Nations", which was published in 1776
Karl Marx wrote "Capital" published in 1867
Economic resources in America are limited
The cost of capital is interest
The U.S. does not have a trade surplus
Comparative advantage is not the basic rational for trade
NAFTA has - increased trade between Mexico and U.S. - Resulted in small loss of U.S. jobs - North American Free Trade Agreement
Which one of the following expressions best states the idea of opportunity cost? "There is no such thing as a free lunch"
The four factors of production are Land, labor, capital, and entrepreneurial ability
Which of the following is a land resource? Natural Gas
Refer to the above table. If the economy is producing at production alternative D, the opportunity cost of the fourth unit of consumer goods will be 4 units of capital goods
Refer to the above table. As compared to production alternative D, the choice of alternative C would tend to generate a more rapid growth rate
Refer to the above table. A total output of 4 units of capital goods and 4 units of consumer goods would involve an inefficient use of the economy's scarce resources
Refer to table. For this economy to produce a total output of 9 units of capital goods and 3 units of consumer goods it must Achieve the full employment of available resources
Refer to the table For these date the law of increasing opportunity costs is reflected in the fact that larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods
Which of the following do economists consider capital a construction crane
Unemployment is illustrated by a point inside the production possibilities curve
The construction of a production possibilities curve assumes technology is fixed
Which of the following is a distinguishing feature of a command system central planning
command systems are also known as communism
The division of labor means that workers specialize in various production tasks
The use of money contributes to economic efficiency because it promotes specialization by overcoming the problems with barter
Which of the following is one of the five fundamental questions What goods and services will be produced?
The competitive market system encourages innovation because successful innovators are rewarded with economic profits
Refer to above data. In view of the indicated resource prices, the economically most efficient production technique is technique #3
Refer to above data. If a new production technique is developed that enables a firm to produce 20 units of output with 3 units of land, 3 of labor, 1 of capital, and 2 of entrepreneurial ability, this technique would be adopted because it would lower production costs and increase economic profits
The market system's answer to the fundamental question "What will be produced?" is essentially "Goods and services that are profitable"
"Consumer sovereignty" refers to the idea that the decisions of producers must ultimately conform to consumer demands
Which of the following best describes the invisible-hand concept? The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest
Two major virtues of the market system are that it allocates resources efficiently and allows economic freedom
The above data indicate that production in both Latalia and Trombonia is subject to constant opportunity costs
Refer to tables. In Latalia the domestic real cost of 1 ton of pork is 5 tons of beans
Refer to tables. If these two nations specialize on the basis of comparative advantage Latalia will produce beans and Tombonia will produce pork
Assume that before specialization and trade, Latalia produced combination C and Trombonia produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization will be 4 tons of beans
Refer to tables. Which of the following would be feasible terms for trade between Latalia and Trombonia 4 tons of beans for 1 ton of pork
The simple circular flow model shows that households are on the selling side of the resource market and on the buying side of the product market
The two basic markets shown by the simple circular flow model are product and resource
If the price of steak decreases, the demand for hamburger (a substitute for steak) will decrease
If the price of peanut butter decreases, the demand for jelly will increase
Supply is not determined by the market price of the product
If the price of oranges increases, the supply of orange juice will decrease
If demand increases and supply remains constant, market price will ____ and market quantity will be ____ increase, increase
If demand increases and supply decreases, market price will ____ but market quantity will ____ increase, be unknown
Excludability does not apply to the negative externalities
Markets, viewed from the perspective of the supply and demand model assume many buyers and sellers of a standardized product
The demand curve shows the relationship between price and quantity demanded
In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by a change in buyer tastes
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that bicycles are normal goods
If two goods are complements a decrease in the price of one will increase the demand for the other
By an "increase in demand" economists mean that the quantity demanded at each price in a set of prices is greater
An increase in product price will cause quantity demanded to decrease
An improvement in production technology will shift the supply curve to the right
Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect the supply to increase as farmers plant more corn
Refer to data. Equilibrium price will be $2
Refer to data. If the price in this market was $4 farmers would not be able to sell all their wheat
Refer to data. If price was initially $4 and free to fluctuate, we would expect the quantity of wheat supplied to decline as a result of the subsequent price change
Refer to diagram. The equilibrium price and quantity in this market will be $1.00 and 200
Refer to diagram. A surplus of 160 units would be encountered if the price was $1.60
Refer to diagram. A shortage of 160 units would be encountered if the price was $0.50
A market is in equilibrium if the amount producers want to sell is equal to the amount consumers want to buy
If the supply and demand curves for a product both decrease, then equilibrium quantity must decline, but equilibrium price may rise, fall, or remain unchanged
Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement suggests that the supply of DVD players has increased
With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will decrease equilibrium price and increase equilibrium quantity
Market failure is said to occur whenever private markets do not allocate resources in the most economically desirable way
The two main characteristics of a public good are nonrivalry and nonexcludability
Cost-benefit analysis attempts to compare the benefits and costs associated with any economic project or activity
Refer to data. For Plan D marginal costs and marginal benefits are $28,000 and $12,000
Refer to data. On the basis of cost-benefit analysis government should undertake Plan B
Refer to data. Plan C entails an overallocation of resources to flood control
A positive externality or spillover benefit occurs when the benefits associated wit ha product exceed those accruing to people who consume it
One year after the crash ___ banks had failed 800
One year after the crash _______ families were without any means of support 4,000,000
During the depression, the ___ was the one appliance people could not live without radio
Roosevelt called _____ the most dangerous man in America Huey Long
The purpose of a tight money supply is to ____ the supply of money decrease
If you are estimating your total expenses for school next semester, you are using money primarily as a unit of account
In the U.S. the money supply is comprised of coins, paper currency, and checkable deposits
Currency held in a vault is not counted as part of the money supply
The basic policy-making body in the U.S. banking system is the board of governors of the federal reserve
The federal reserve system was created in 1913
The goldsmith's ability to create money was based on the fact that paper money in the form of gold receipts was rarely redeemed for gold
The claims of the owners of a firm against the firm's assets are called net worth
Excess reserves refer to the difference between actual reserves and required reserves
Refer to data. This commercial bank has required reserves of $20,000
Refer to data. This commercial bank has excess reserves of $6,000
Refer to data. This bank can safely expand its loans by a maximum of $6,000
Refer to data. This bank can safely expand the money supply by a maximum of $6,000
Refer to data. Assuming the bank loans out all of its remaining excess reserves as a checkable deposit, and has a check cleared against it for that amount, its reserves and checkable deposits will now be $20,000 and $100,000
Refer to data. If the original balance sheet was for the commercial banking system, rather than a single bank, loans and checkable deposits could have been expanded by a maximum of $30,000
A single commercial bank must meet a 25% reserve requirement. If the bank has no excess reserves initially and $5,000 of cash is deposited in the bank, it can increase its loans by a maximum of $3,750
If you deposit a $50 bill in a commercial bank that has a 10% reserve requirement the bank will have $45 of additional excess reserves
When a bank has a check drawn and cleared against it the amount of required reserves the bank must have will fall
The multiple by which the commercial banking system can expand the supply of money on the basis of excess reserves is larger the smaller the required reserve ratio
The transactions demand for money is most closely related to money functioning as a medium of exchange
The equilibrium rate of interest in the market for money is determined by the intersection of the supply of money curve and the total demand for money curve
Federal Reserve Notes in circulation are A liability as viewed by the Federal Reserve Banks
The four main tools of monetary policy are the discount rate, the reserve ratio, the term auction facility, and open-market operations
An increase in the legal reserve ratio decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier
The discount rate is the interest rate at which the Federal Reserve Banks lend to commercial banks
The purpose of a restrictive monetary policy is to raise interest rates and restrict the availability of bank credit
An increase in the money supply will Lower interest rates and increase the equilibrium GDP
The purpose of a tight money policy is to raise interest rates and restrict the availability of bank credit
Which of the following actions by the Fed would cause the money supply to increase Purchases of government bonds from banks
Which of the following actions by the Fed would cause the money supply to decrease Sales of government bonds to the public
Henry Ford saw a direct relationship between the ____ people were paid and the ____ of cars he could sell wages, number
Alfred P. Sloan did not make capital funds available for expanding businesses
The labor union movement tried to institutionalize the concept behind the $5.00 a day wage
The growth of the Sun Belt was made possible by the invention of air conditioning
Real GDP has _____ in the past 50 years increased
Nominal GDP has ____ in the past 50 years increased
Real GDP minus nominal GDP does not equal the GDP gap
The business cycle is not an outdated concept
_____ and _____ are the two major problems associated with the business cycle Unemployment, inflation
Inflation is the general rise in prices
Inflation causes the dollar to decrease in value
The system that measures the economy's overall performance is formally known as National income accounting
A nation's GDP is the dollar value of all final output produced within the borders of the nation
A nation's GDP can be found by summing C+Ig+G+Xn
GDP measures and reports output in dollar amounts
If intermediate goods and services were included in GDP the GDP would be overstated
Tom Atoe grows fruits and veggies for home consumption. This activity is productive but is excluded from GDP because no market transaction occurs
Net exports are exports less imports
Which of the following do national income accountants consider to be investment purchase of a new house
In calculating GDP, governmental transfer payments, such as social security or unemployment compensation are not counted
Which of the following best defines disposable income income received by households less personal taxes
Recurring upswings and downswings in an economy's real GDP over time are called business cycles
The phase of the business cycle in which real GDP declines is called a recession
In the U.S. the rate of unemployment is highest for African-American teenagers
According to the Bureau of Labor Statistics, to be officially unemployed a person must be in the labor force
The labor force includes employed workers and persons who are officially unemployed
Official unemployment statistics understate unemployment because discouraged workers are not counted as unemployed
Part-time workers are counted as fully employed and therefore the official unemployment rate may understate the level of unemployment
The unemployment rate is the percentage of the labor force that is unemployed
Which of the following constitute the types of unemployment ocurring at the natural rate of unemployment Structural and frictional unemployment
Rising per-unit production costs are most directly associated with cost-push inflation
The most important determinant of consumer spending is The level of income
the APC is calculated as consumption/income
As disposable income increases, consumption and saving both decrease
Dissaving means that households are spending more than their current incomes
Refer to data. At the $250 level of disposable income, savings is $5
Refer to data. At the $200 level of disposable income, average propensity to consume is 1.025
Refer to data. At the $275 level of disposable income, average propensity to save is 0.036
Refer to data. The marginal propensity to consume is 0.80
Refer to data. The marginal propensity to save is 0.20
Refer to data. If disposable income was $325, we would expect consumption to be $305
Created by: 738230186