question
How is the question about "how to produce" answered in a market economy?
answer
At lowest cost because consumers demand low prices
question
Why are consumers considered to be the "King" in a Free Market economy?
answer
Because their preferences direct what to produce, how to produce and for whom to produce
question
Which items are included in the factor of production known as land?
answer
The ground and items of value under and sitting on or walking on the ground.
question
Which items are included in the factor of production known as "capital?"
answer
Tools, equipment, buildings
question
Demetri has an extra $50 to spend. His first choice for the $50 is taking his girlfriend out to eat. His second choice is a soccer ball. His third choice is new headphones. What is the opportunity cost of his selected action?
answer
Soccer ball.
question
In a PPC model, what happens to the opportunity cost of each product as more of it is produced?
answer
The opportunity cost increases.
question
An increase in which of the following will NOT shift the PPC outward?
answer
Unemployment
question
Which points are possible to attain in a PPC model?
answer
Points directly on the curve and between the curve and the axes.
question
How is economic growth shown on a PPC model?
answer
Rightward shift of entire PPC curve.
question
As the term is used by economists, the idea of scarcity refers to any item containing resources that are not freely available to everyone and therefore, that item will command some kind of price in the marketplace.
answer
true
question
What is the impact on figs from an increase in the price for figs?
answer
Quantity Demanded of figs decreases.
question
What is the impact of an increase in consumer income on the market for steaks?
answer
Demand for steaks increases.
question
What does the height of a supply curve illustrate?
answer
Minimum necessary price required for suppliers to provide a specific amount.
question
What does the height of the demand curve illustrate?
answer
Maximum price consumers willing to pay for that quantity.
question
What is the impact on the market for tar of an increase in the price for tar?
answer
Quantity demanded of tar decreases.
question
What is the impact of an increase in the price of butter on the market for margarine, a good substitute for butter?
answer
Demand for margarine increases
question
What is the impact of a decrease in the price of grits on the market for grits.
answer
Quantity demand of grits went up
question
What is the economic term for the difference between the height of the demand curve and the price line?
answer
Consumer surplus
question
What is the impact on the market for Cassel watches if consumer preference for Cassel watches suddenly increases?
answer
Demand for Cassel watches increases
question
What is the economic term for the difference between the minimum price suppliers are willing to accept to provide a certain quantity and the actual market price?
answer
Producer Surplus
question
Which category of goods is included in Gross Domestic Product for USA?
answer
Cars produced in USA-located factories owned by foreign firms
question
Which is NOT a reason that lumber sold to furniture makers is not counted in GDP?
answer
Lumber is a natural resource
question
Which of the following items are demanded by Firms and provided by Households through the Factor Market in the Circular Flow Diagram?
answer
Factors of Production (Land, Labor, Capital)
question
How is GDP expressed algebraically using the expenditure approach?
answer
C+ I + G+(X-M)
question
For the USA, what has been the relationship between X (Exports) and M (Imports) for 50 plus years?
answer
M has exceeded X for every year for last 50 years.
question
Which one of the following is an intermediate good?
answer
Wood sold to a pencil making factory
question
Given that GDP can be expressed as C + I + G + (X-M), Consumption comprises the largest category of GDP.
answer
true
question
Which of the following is included in calculating GDP?
answer
Milk sold at Wal Mart.
question
What is Gross Domestic Product (GDP)?
answer
Dollar value of all final goods and services produced within the border of a country
question
Real GDP is Nominal GDP adjusted for inflation.
Correct!
Correct!
answer
true
question
What is the phase of the business cycle where jobs, prices, outputs and income are increasing?
answer
Expansion
question
Which of the following is NOT increasing during an expansion?
answer
Unemployment
question
Which of the following correctly calculates the official BLS unemployment rate?
answer
Unemployed (Not working but looking)/Civilian Labor Force
question
Which is NOT a reason the official BLS unemployment rate likely understates the true level of unemployment?
answer
Because it counts those not working but actively seeking a job as unemployed
question
The "natural" rate of unemployment includes frictional, structural and seasonal unemployment
answer
true
question
This type of unemployment involves those moving between jobs to find a better fit with their skill set and is actually a positive sign of a robust economy and job market
answer
Frictional
question
Which of the following explains a good part of structural unemployment?
answer
People lack skills for new jobs created by technological innovation
question
Cyclical unemployment is unemployment caused by a downturn in the business cycle (contraction or recession).
answer
true
question
If the CPI was 100 on December 30 2016 and is 105 for 2017 , what is the inflation rate for 2017?
answer
5%
question
What economic group benefits from unexpected high inflation?
answer
Borrowers
question
If the inflation for 2016 was 10%, what was the purchasing power of $100 by 12/31/2016?
answer
90$
question
How is CPI calculated?
answer
Cost of market basket of goods at current year prices/cost of same goods at base year prices X 100
question
How is the annual inflation rate calculated?
answer
(CPI Current Year-CPI Prior Year) /CPI Prior Year) X 100
question
What is the Real Interest Rate?
answer
Nominal Interest Rate-Inflation Rate
question
How does inflation reduce consumers' standard of living?
answer
By reducing the purchasing power of money, which means we buy less with same income
question
Which of the following correctly defines purchasing power?
answer
Quantity goods purchased with same amount money
question
What does the Consumer Price Index measure?
answer
The Price Level
question
What economic group loses from unexpected high inflation?
answer
Lenders
question
What is scarcity?
answer
The condition in which human wants are forever greater than the available supply of time, goods, and resources
question
What are resources?
answer
The basic categories of inputs used to produce goods and services
question
land, labor, capitlal =
answer
Entreprenurship organizes resources to produce goods and services
question
What is land?
answer
Any natural resource provided by nature that is used to produce a good or service
question
what is capital?
answer
A human-made good used to produce other goods and services
question
What is a model?
answer
A simplified description of reality used to understand and predict the relationship between variables
question
What is an inverse relationship?
answer
A negative association between two variables. When one variable increases, the other variable decreases,
question
What is an independent relationship?
answer
A zero association between two variables. When one variable changes, the other variable remains unchanged.
question
What are the three fundamental economic questions?
answer
1.What to produce?2.How to produce?3.For Whom to produce?
question
What is opportunity cost?
answer
The best alternative sacrificed for a chosen alternative
question
What is the production possibilities curve?
answer
A curve that shows the maximum combinations of two outputs an economy can produce in a given period of time with its available resources and technology
question
What are the three basic assumptions that underlie the production possibilities curve?
answer
1.All resources are fully employed.
2.The resource base is not allowed to vary during the time period.
3.Technology remains constant.
2.The resource base is not allowed to vary during the time period.
3.Technology remains constant.
question
What is an efficient point?
answer
Any point along the production possibilities curve because each point represents a maximum output possibility
question
What is an inefficient point?
answer
Any point inside the production possibilities curve due to an economy operating without all its resources fully employed
question
What is an attainable point?
answer
Any point inside or along the production possibilities curve because it can be achieved with the economy's present production capabilities
question
What is a demand curve?
answer
A curve that shows the quantities of a good or service that people are willing and able to buy at different prices
question
Why does a demand curve have a negative slope?
answer
As the price per unit of a good or service falls, buyers can afford to buy more units per period of time.
question
When price changes, what is the effect on the demand curve?
answer
The demand curve does not shift, and there is a change in quantity demanded.
question
What causes a shiftin a demand curve?
answer
•Number of buyers in the market•Tastes and preferences•Income•Expectations of buyers•Prices of related goods
question
What is the law of supply?
answer
A curve or schedule showing the various quantities of a product sellers are willing to produce and offer for sale at possible prices during a specified period of time, ceteris paribus
question
When price changes, what is the effect on the supply curve?
answer
The supply curve does not shift, and there is a change in quantity supplied.
question
right shift is supply curve means
answer
increase
question
left shift is supply curve means
answer
decrease
question
What is equilibrium?
answer
A market condition that occurs at any price and quantity at which the quantity demanded and the quantity supplied are equal
question
What is gross domestic product (GDP)?
answer
The market value of all final goods and services produced in a nation during a period of time, usually a year
question
Why is GDP important?
answer
It tells a country how well its economy is doing.
question
What transactionsare excluded from the calculation of GDP?
answer
1.Secondhand transactions2.Nonproductive financial transactions
question
What is the circular flow model?
answer
A diagram showing the exchange of money, products, and resources between households and businesses
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