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Economics studies how decision makers use scarce resources to satisfy unlimited wants.
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a. True
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In Economics, money is an example of capital.
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b. False
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Profit is the payment to resource owners for the use of their capital.
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b. False
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The problem of scarce resources:
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there are not enough resources to satisfy unlimited wants
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Economics is the study of:
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how societies decide what to produce, how to employ resources and how to allocate
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An economist would classify 100 shares of Apple Computer as capital.
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False
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Resources are divided into the following broad categories:
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land, labor, capital and entrepreneurial ability
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In economics, "capital" refers to:
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Machines, buildings, tools and knowledge
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The assumption that individuals act rationally implies that:
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people implicitly calculate cost versus benefit in economic decisions
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Which of the following is a positive statement?
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An employment rate of 7% is too high.
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The fallacy of composition:
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What is good for the individual is necessarily good for the aggregate. another
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The statement that there is an inverse relationship between x and y means that:
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x and y move in opposite directions
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The law of comparative advantage says that:
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The producer with the lowest opportunity cost of producing a good should produce it
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If two persons exchange four ginger snaps for two chocolate chip cookies, we may assume:
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Both persons are at least as well off.
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A person who can produce more of a good than another is said to have a comparative advantage.
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False
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17. The impact of a $200 increase in income on quantity demanded would be called the Income effect.
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False
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The law of increasing opportunity costs implies that:
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The PPF curves convex to the origin.
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If sugar and honey are substitutes, a price increase in sugar will:
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The demand for honey will increase.
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Recently, it has been discovered that lobsters can be fed algae, a lower cost food, therefore:
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The supply curve for lobster should shift to the right.
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A surplus occurs when: (when the market price is higher than equilibrium)
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Price is greater than equilibrium price.
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A recession is a period during which:
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Employment, output and income decline
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Economic fluctuations:
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are linked, but not perfectly among countries
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The aggregate supply curve:
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Is the quantity of aggregate output that suppliers are willing to supply at each price.
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An increase in the price level will cause:
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an increase in the quantity of aggregate output supplied
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In terms of aggregate demand and supply, the great depression can be viewed as:
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a shift to the left of the aggregate demand curve
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Keynes proposed that the government bring the economy out of the depression by:
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increasing aggregate demand
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Stagflation refers to:
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an increase in the price level with decreases in output and employment (economy isn't doing well but prices are raising anyways)
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Stagflation can be shown as:
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a leftward shift of the aggregate supply curve
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Between 1947 and 1998, U.S. real GDP per capita
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increased because real GDP grew faster than population
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Gross Domestic Product equals the (equals everything made domecticly)
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total output of all goods and services
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Which of the following would be included in this year's GDP?
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e. that bucket of Kentucky Fried Chicken you bought this July (bought this year, made this year, consumed this year. Therefore, this year's GDP)
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Which of the following would not be an expenditure on final goods and services?
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a medical clinic's purchase of flu vaccine
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The largest component of aggregate expenditure is
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government purchases
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The final market value of a good is
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the sum of values added at all stages of production
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The most important determinant of a household's consumption is
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its disposable income
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The primary determinant of saving is the rate of interest.
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b. False (income)
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The primary determinant of consumption spending is the price level.
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True
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Sarah moves from Upperland, which has no taxes or transfer payments, to Lowerland, where she is hit with taxes of $2,000 and receives transfer payments of $3,000. She earns the same wage in both countries, but in Lowerland her disposable income is
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is $1,000 higher
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If a household's income rises from $16,000 to $16,700 and its consumption spending rises from $15,800 to $16,400, then its
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marginal propensity to consume is 0.86
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