Economics Flashcard Test Questions

Q: good

object that can satisfy people\'s needs or wants

Q: service

action that can satisfy people\'s needs or wants

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consumer

answer

person whose needs and wants are satisfied by using goods and services

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economics

answer

social science that focuses on decision making

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good

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object that can satisfy people's needs or wants

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need

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a good or service required for survival

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producer

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person who makes goods or provides services

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service

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action that can satisfy people's needs or wants

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want

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a good or service that people would prefer to have, but do not need

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An example of a need is _____.

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a drink of water

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Select the items below that are examples of goods.

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a two-bedroom house a sports car a pair of shoes

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Which of the following best describes a consumer?

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a person who buys goods and services

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Select the items below that describe specific kinds of producers.

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grocery store owner medical doctor trial lawyer

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The 3 kinds of producers in an economy:

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Companies: A large section of producers are companies. They make the goods and services that you find in malls, restaurants, and other businesses. Companies produce goods and services that are wants or needs. For example, companies make economic wants, including laptops, iPods, and expensive clothing. They also make needs, such as medicines and food. Consumers pay for and then own the goods and services made by companies. When you go into a store and buy a pair of shoes, you pay for and own shoes produced by a company. Governments: In the U.S., the government produces goods and services, such as public education, mail delivery, and road construction. These goods and services are called public goods. They are products that are accessible to everyone. For example, the government provides the service of mail delivery. People do not pay a specific mail delivery charge and yet they receive this service. But people do pay for public goods by paying taxes. Nonprofit organizations: These organizations include charities and private clubs. They produce goods and services mainly to benefit their group members or causes. Like a company, they produce goods and services that are sold to consumers for specific prices. For example, a school music group may hold a bake sale to raise money to pay for new uniforms. Consumers attend the sale and buy cakes, cookies, and other baked goods. But like a government good, the money raised goes to benefiting everyone in the group equally.

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acronym

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a composite of a larger term, created by using only the first letter of the most important words in that term.

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artiste

answer

a skilled musical or theatrical performer

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barometer

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an instrument for measuring air pressure

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basso profundo

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a deep bass voice that extends to C below bass staff

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bells

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percussion instruments consisting of metal bars or tubes

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cuisine

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manner of preparing food

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cymbal

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a concave brass plate that produces a brilliant clashing tone

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dome mountain

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a natural formation that resembles a dome

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euphemism

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the substitution of an inoffensive expression for one that may offend

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igneous

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formed by solidification of molten magma

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jargon

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the language of a particular group, profession, or activity

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maitre d'

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headwaiter, a shortened form of maitre d' hotel, literally master of the house

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metamorphic

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referring to a pronounced change caused by pressure, heat, and water that results in a more compact and more highly crystalline condition

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sedimentary

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formed by or from deposits of sediment

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texturing

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the application of a plaster-like product over wallboard in a manner that produces a different look

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vertebrate

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an animal having a spinal column in contradistinction to an invertebrate, an animal that does not have a spinal column

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Which is not a class of rock?

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disturbed

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The special vocabulary of a particular field of interest is called _____.

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jargon

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A more polite term used to replace an objectionable one is called a(n) _____.

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euphemism

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What is the study of weather is called?

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meteorology

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Heterotropia is _____.

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cross-eyes

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A medical term for measles is _____.

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morbilli rubeola

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Who directs an orchestra?

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both conductor and maestro

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An abbreviated name made by using only the first letter of the most important words in a longer name is called _____.

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acronym

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When we speak of inanimate objects as if they were human, what are we using?

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personification

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An ophthalmo-orhinolaryngololist is _____.

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an eye, ear, nose, and throat specialist

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What is the main character in a short story called?

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protagonist

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What is a type or classification of writing in literature called?

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genre

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Match the terms to the technical fields in which they are most commonly used. 1. mezzo 2. arachnid 3. igneous 4. troposphere 5. monolithic pour 6. entree 7. heterotropia 8. allusion 9. stinger

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1. music 2. biology 3. geology 4. meteorology 5. monolithic pour 6. culinary arts 7. medicine 8. literature 9. fire fighting

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analysis

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in-depth study

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benefit

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what is gained when a decision is made

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condition

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circumstance

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cost

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what is given up when a decision is made

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maximize

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to receive the most from

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rational behavior

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receiving the most satisfaction, under certain conditions

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rational thinking

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to consider something in a logical way

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satisfaction

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happiness

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Maximizing satisfaction means ________.

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receiving the most benefits, with relatively few costs

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Select the items below that describe rational behavior in economics.

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maximizes benefits makes a decision given certain conditions applies to both consumers and producers depends on the individual

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Which action illustrates rational behavior?

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making a decision after logically thinking about the choices

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Select the items below that are part of a cost-benefit analysis.

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advantages and disadvantages of making a decision what you gain and give up from each choice a way to find the choice that gives you the most gains from a decision a rational approach to decision making

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capital good

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goods that are made and used to make other goods and services

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human capital

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quality of labor resources

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human resource

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quantity and quality of human effort used for production of goods and services

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natural resource

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factors derived from nature that are used to achieve a goal

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productive resource

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factors used to achieve a goal (ex: land, cotton plants, people, and machines)

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Select the items below that describe nonrenewable resources.

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limited can be fossil fuels, metals, and minerals

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Productive resources are _____.

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factors that are used to make goods and services

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Select the items below that describe natural resources.

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renewable or nonrenewable come from nature include minerals, air, and sunlight used in everything that we make

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Both the quantity and quality of a workforce that makes cars describes the company's _____.

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human capital

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A machine that is used to print newspapers is a _____.

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capital good

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People design computers, and machines assemble them. Gas is then used to transport the finished computers to stores. Select the factors used in producing computers.

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natural resources human resources capital goods

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Sergio likes to drive and thinks that gas will be around forever. What is the problem with Sergio's thinking?

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Gas is a nonrenewable resource.

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Susan bought a new computer. She purchased a ____.

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good

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Select the items below that describe the field of economics.

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is a social science. focuses on decision making. involves consumers and producers.

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A cost-benefit analysis is a way _____.

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to make a decision using a rational approach

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Select the items below that are kinds of services.

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going to the doctor getting a haircut mowing the lawn

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conserve

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to save

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distribute

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to divide among

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quantity

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amount

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scarce

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limited

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Select the items below that describe why scarcity exists.

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People's wants are unlimited. Resources are limited.

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Select the items that describe the results of scarcity.

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There are not enough goods and services to meet everyone's wants. Using resources today means having fewer of them in the future.

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Dividing up scarce resources refers to resource _____.

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distribution

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A person shuts off the lights before leaving a room. This is an example of _____

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conservation

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advertising

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use of media to persuade consumers to buy a product or service

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celebrity endorsement

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use of famous people to promote a product

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desire

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want

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peer pressure

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when friends influence people to behave in a certain way

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physiological needs

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things essential for a person's body

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prefer

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to like one thing better than another

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preferences

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the people, objects, or actions that are chosen over other options

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Preferences _____.

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are based on the individual

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You have a choice between buying a cell phone or a camera. You choose the cell phone. The cell phone represents your _____.

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preference

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Select all the factors that might determine your preference for a new shirt.

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cost of the shirt design on the shirt color of the shirt how the shirt looks on you

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Select all the items that describe advertising.

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can be in print or on the Internet might use celebrity endorsements

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You don't want to buy one of the new music downloads, but your friends convince you to buy it anyway. This is an example of _____.

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peer pressure

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accounting cost

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cost of producing a good or service

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alternative

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option

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monetary

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relating to money

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opportunity cost

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value of the best alternative given up

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retail price

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money value of a good or service that is charged to the customer

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trade-off

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value of all the alternatives given up

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utility

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happiness; satisfaction

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A music download costs $1.00 for one song. $1.00 is an example of _____ .

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a retail price

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Select the items that can reduce the amount you pay for a good or service.

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mail-in rebate coupon comparative shopping

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Select a situation that describes the utility derived from purchasing a cell phone.

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happiness from using your new cell phone

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Shari is trying to decide how she should use her cash birthday gifts. Her choices are new clothes, a concert ticket, or donating the money to her favorite charity. Shari decides to donate the money. The value given up by not choosing both the clothes and the concert ticket is called a _____ .

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trade-off

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investor

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people who put their money into something (such as stocks), because they hope to make more money

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penalty

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negative incentive that makes people worse off

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reward

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positive incentive that makes people better off

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risk

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the chance of something turning out differently than expected

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saver

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people who put aside some of their money for future use

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Pam and Roger go skiing on Sunday morning, and they enjoy their time. On Monday, they go skiing again. This time they fall a lot, and Roger has to sit out the rest of the day. After Monday, Pam and Roger would most likely want to _____.

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stop skiing and find something else to do

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You just received your driver's license. You went for your first drive, and you had an amazing time! This incentive will most likely result in you _____.

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going driving again

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Select all the items that describe incentives.

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can be positive or negative can be monetary or non-monetary can change affect people's choices and behavior

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You have some materials (otherwise known as your resources) at home including poster board, construction paper, markers, and colored pencils. You want to earn some extra money, and you have two choices: go into the card making business or the banner business. You choose banner making. After four days of trying to find customers, you end up with zero orders. This incentive will most likely cause you to _____.

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use your resources to make cards instead

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consequence

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effect

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employee

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worker

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entrepreneur

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someone who organizes productive resources to make goods and services

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expectations

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things that are anticipated will happen

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public good

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item that is provided to society; something that can be used by everyone, provides benefits to more than one person at a time, and whose use cannot be restricted to only those people who have paid for it

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salary

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payment for work

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A company bought a piece of land. It can use this resource to build a factory on or to plant crops on. The company can also hold onto the land and try to resell it later for more money. The company decides to build a factory on the land. Any value given up from not choosing the other options is the _____ .

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trade-off

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A person who owns a bakery figured out that cookies were selling better than brownies. So she took the resources that she was using to make the brownies and allocated them to making more cookies. This can happen because _____ .

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resources can be used to make different goods and services

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Governments cannot produce enough goods and services to satisfy everyone's wants because _____ .

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resources are scarce

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marginal

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extra or additional (in economics)

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marginal benefit

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change in total benefit resulting from an action

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marginal cost

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change in total cost resulting from an action

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marginal utility

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change in total utility resulting from an action

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utility

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happiness; satisfaction

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The expense of making an additional shirt is known as the _____ .

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marginal cost

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The law of diminishing utility states that as you consume more of a good, the satisfaction that you feel _____ .

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decreases

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If the marginal benefit of an activity is greater than its marginal cost, people are better off doing _____ .

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more of the activity

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Effective decision-making means comparing the additional costs of alternatives with the _____ .

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marginal benefits

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externality

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unintended (or "spillover") effects that result from an action

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marginal analysis

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using marginal measurements to allocate scarce resources for benefit maximization

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marginal revenue

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change in total revenue resulting from adding one more unit of a good or service

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net benefit

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total benefit minus total cost

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regulations

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rules that control the behavior of others

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revenue

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money earned from selling a good or service

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Select all the choices that decision makers could use marginal analysis for to make effective decisions.

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-producing another car -consuming one more slice of pizza -adding a machine to the factory -buying an extra concert ticket

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Business employees calculated that the expense to produce an additional cell phone is $50. This monetary amount represents a _____

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marginal cost

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After determining the marginal cost and the marginal benefit of an option, the next step is to _____ .

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decide which is greater: marginal cost or marginal benefit

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A company charges $5 for its product. This monetary amount represents the __________ of making an extra unit of the product.

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marginal benefit

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Select all items that describe kinds of externalities.

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secondhand smoke air pollution from trucks unclean water from fertilizers spillovers from medical research

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In 2-3 sentences, list the three steps for effective decision-making using marginal analysis.

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-figure out the marginal cost and marginal benefit of your choice -determined which is greater; the marginal cost or the marginal benefit -if the marginal cost is greater, then do not add the additional unit. if the marginal benefit is greater, then add the additional unit

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command economy

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economy where goods, services, and resources are distributed by the government

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free market economy

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economy where goods, services, and resources are distributed by price

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price

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monetary cost of an item

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standard of living

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level of comfort that people feel when goods and services are available to them

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wage

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amount that a person earns for working expressed in a unit of time, like $9 an hour

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Phil wanted the computer that Amy had, so he just took it. This is an example of distribution by _____ .

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force

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Jacob wanted a parking space in a nearby lot. He filled out an application and a computer generated his choices. This is an example of distribution by _____ .

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lottery

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Ellen had a bag full of pencils. She gave out one pencil to everyone in the class. This is an example of distribution by _____ .

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sharing

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Select all the items that describe a free market economy.

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freedom for consumers and producers competition between businesses distribution by price motivated by self-interest

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Select all the items that describe a command economy.

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-allocation of resources and distribution by the government (the central authority) -poor selection of goods and services -shortage of goods -limited freedom for both consumers and producers -governments strive for equal pay little to no competition between businesses

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barter

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to exchange goods and services without the use of money

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competitor

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person or group that rivals another

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exchange

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to trade, or a market where buyers and sellers interact

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market

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place where buyers and sellers exchange goods and services

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market share

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a company's sales divided by the total sales in the industry over a certain period of time

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trade

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to exchange goods and services, with or without the use of money

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value

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an item's worth

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voluntary

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willing

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Select the items that describe voluntary exchanges.

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trading money for a car bartering baseball cards occurs between individuals and countries

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Ben wants to sell his used couch to Pam. Ben and Pam will trade the couch for money, if both individuals expect to _____.

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gain

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The interaction between buyers and sellers in the marketplace leads to goods and services being distributed by _____.

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price

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When people buy something, they value it ______ than it costs them. But, when people sell something, they value it _______ than the payment they receive.

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more; less

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Two Wheel Bicycle Company increased its market share from 10 percent to 25 percent during one year. Select statements that could be true as a result of this increase.

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Two Wheel Bicycle manufactures more bicycles. Employees get a raise. Two Wheel Bicycle increases its advertising budget. The owner opens another Two Wheel Bicycle store.

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consumer

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person whose economic wants re satisfied by using goods and services

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demand

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the willingness and ability of consumers to buy a good or service

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fad

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goods and services that become peopler very quickly and then lose their popularity very fast

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investment

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something that people put their money into because they hope to make more money in the future

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return

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money earned on an investment

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Consumers influence how goods and services are made by _____.

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choosing which goods and services to buy

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A consumer uses goods and services to _____.

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satisfy economic wants

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Select the items that support the statement: Consumer preferences affect how producers make goods.

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buying organic products and non-GMO foods purchasing products made from recycled materials consuming food made in a fair trade way

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Select the economic questions that involve the consumer.

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Who will consume the goods and services? What goods and services will be produced? How will the goods and services be produced?

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Gum and candy are often for sale right next to cash registers. This buying situation encourages consumers to use their money to make ______ purchases.

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impulse

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capital

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money used for an economic purpose, such as investment

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innovation

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when an invention becomes usable in a way that has economic value

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invent

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to make a new product

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Both the satisfaction of creating new products and the possibility of earning money are _____ for an entrepreneur.

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incentives

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You are running a business, and each good that you produce costs $1.50. In order to earn a profit, you could choose a price of _____ for your product.

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$2.00

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Entrepreneurs and other sellers ________ when buyers purchase the product they sell at prices more than high enough to cover the costs of production.

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earn profits

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Select all the items that describe an entrepreneur.

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can invent new products can start new businesses takes on risks can create jobs

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Select the true statement(s) about entrepreneurs.

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A small business owner may be an entrepreneur and a producer. Entrepreneurs believe they can make a profit from their invention. Entrepreneurs usually work longer hours than most people.

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labor

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human resource that is used to produce goods and provide services

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productivity

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the amount of output that comes from a unit of input

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references

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people that comment on a person's character and qualifications

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salary

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price of labor, usually expressed on a yearly basis

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wage

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price of labor, often given on an hourly, daily, or weekly basis

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Select the items that describe labor.

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earns wages or salaries a human resource and factor of production used to produce goods and services includes teachers, pilots, and doctors

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Employers are willing to pay _______ and ______ to workers, because they expect to be able to sell the goods and services at prices high enough to cover the costs of production.

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wages; salaries

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Select the items that describe incentives for an employee to accept a job offer.

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high wages good benefit package safe work environment

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Factors that improve human capital and can increase labor productivity include choosing a career, training, and _____.

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education

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________ productive workers are likely to be of greater value and earn higher wages than ________ productive workers.

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more; less

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antitrust laws

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rules that prevent the creation and behavior of monopolies

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legal contract

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agreement enforceable by law

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liability

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legal obligation to repay a debt

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property rights

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privileges of deciding how resources are used

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Select the items that describe antitrust laws.

answer

created to prevent monopolies intended to promote competition can have unintended consequences

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Which of the following situations is an example of the kind of decision a government would make in regard to its property rights?

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Should this land be used to build a library?

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Select items that affect incentives for people to produce and exchange goods and services.

answer

liability rules property rights contract enforcement standards for weights and measures

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Select the true statement about standards for weights and measures.

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A pound of flour from the Fluffy Flour Company will be the same weight as a pound of flour from another company.

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copyright

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sole right to publish or sell a form of artistic work

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intangible

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something that cannot be touched

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intellectual property

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intangible assets that result from creativity

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piracy

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stealing intellectual property

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royalty

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payment to a person with a copyright or patent to use his or her product

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tangible

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something that can be touched

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trademark

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word(s), symbol, or design that identifies a certain good or service

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trade secret

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something that gives a producer an economic advantage over other producers

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The government defines, establishes, and _________ property rights.

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enforces

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A movie writer can ______ his movie script in order to benefit financially from his creation.

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copyright

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Select the items granted by the government to provide intellectual property rights.

answer

copyrights trademarks patents trade secrets

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By establishing property rights, governments provide ________ for people to create new goods and services.

answer

incentives

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Select the items that describe potential benefits of providing intellectual property rights.

answer

more innovations more economic growth more job opportunities more sales to other countries

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checking account

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bank service that allows a person to keep his or her money in the bank and to take out the money on demand

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denomination

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paper money of a certain value

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exchange rate

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amount of one currency that can be traded for a unit of another currency

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minting

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the process of stamping out a coin from metal

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money

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items that are widely accepted as final payment for goods and services (also called currency)

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Select the items that describe the benefits of coins and paper money.

answer

easy to carry valuable easily divisible

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Early Form of Money: cattle limestone grain shells cocoa beans salt

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Problem: hard to transport and perishable hard to carry and transport eventually spoiled could break wore out (not durable) ruined when wet

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When money is deposited in the bank for later use, it is a _____.

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store of value

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When you compare the prices of two different pairs of shoes, money is a _____.

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unit of account

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When you use paper money to pay for food, the money is a _____.

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medium of exchange

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Select a form of money not used in the United States.

answer

euros

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Select the statements that are true.

answer

-The amount of one currency that can be traded for a unit of another currency is the exchange rate. -Many exchange rates float, or constantly change. -It is best to travel abroad when the exchange rate gets you more units of a foreign currency. -Units of currency from different countries have the same value.

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check

answer

a set of written directions that tells a bank how to use money to pay someone

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exchange costs

answer

what is given up from trading or bartering

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specialization

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focusing on one area

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Select the statement that is not true about bartering.

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It's difficult to determine fair values for goods and services.

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Money makes trading easier by replacing ________ with transactions involving paper money, coins, and checks.

answer

bartering

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Select all the items that producers use to make goods and services.

answer

money natural resources human resources capital goods

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Select the items that people consume to satisfy their economic wants.

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goods services

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Money encourages specialization by decreasing the ________.

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exchange costs

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economies of scale

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decreasing the average cost of each good as output increases

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financial capital

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money used for investments

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grant

answer

monetary aid given by another organization (such as the government or corporations)

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not-for-profit organizations

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organizations established mainly for religious, health, educational, civic, or social purposes

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Select the producers that have earning profits as a main goal.

answer

small firms corporations

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Select the organizations that use grants as a means to raise money.

answer

small firms not-for-profit organizations

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Sally works for a big corporation because she wants to earn a high salary. Fred works for a not-for-profit organization because he wants to help people in medical need. This illustrates that the goals of different organizations affect _____.

answer

the benefits of the people who work for these businesses

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In 1-3 sentences, explain economies of scale.

answer

Economies of scale are all about lowering the average cost of an item, which means that making more of a product results in lowering the average cost of the product.

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Corporations have more ways to raise _______ to pay for productive resources than small firms or not-for-profit organizations.

answer

capital

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If an empty building costs nearly a million dollars to purchase, which organization would likely be the most able to purchase it?

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corporation

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bank balance

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amount of money in a bank account

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bond

answer

type of security that is issued for a certain amount

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depository institutions

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financial institutions whose funds come mainly from deposits

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interest

answer

price of money borrowed or saved

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loan

answer

money to be paid back under certain terms

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risk

answer

chance that things will turn out differently than expected

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T/F: Simple interest is calculated as a percentage of the bank balance and interest already earned.

answer

False

question

Select the items that can result in higher interest earned.

answer

higher interest rate higher balance

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Select the items that are considered low risk investments.

answer

bonds the bank

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Individuals and companies respond to incentives in order to allocate their scarce resources in ways that provide the _______ possible returns to them.

answer

highest

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budget deficit

answer

amount of money that a government overspends in a certain amount of time

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fiscal policy

answer

when the government uses government spending and taxes to affect economic performance; decisions to change spending or tax levels by the federal government

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public good

answer

item that can be used by everyone, provides benefits to more than one person at a time, and whose use cannot be restricted to only those people who have paid to use it

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taxes

answer

fees that the government charges on products, activities, or income

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The two main sources of government revenue are __________

answer

taxes and borrowing

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Select all the items that are public goods or services.

answer

roads education military police force

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What person or organization will usually supply goods and services when it appears that the benefits to society outweigh the costs to society?

answer

government

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A budget deficit is the _____.

answer

amount overspent in a certain time

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Select the items that describe possible effects of incentives for political leaders.

answer

favor programs with immediate benefits provide policies whose costs outweigh the benefits

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Suppose that the economy is suffering from a recession (or type of economic downturn). Businesses are closing, and people are losing their jobs. In 1 or 2 sentences, list two fiscal policy actions that could help the economy to recover faster.

answer

Two fiscal policy actions that could help the economy to recover faster would be for the government to lower taxes, and to spend money.

question

central bank

answer

a country's primary authority on areas related to money

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federal reserve

answer

the central bank of the United States

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monetary policy

answer

when the central bank uses money supply and interest rates to affect a country's economy; the influence of the central bank on the growth of the money supply

question

money supply

answer

amount of money available in the economy, including money in circulation, such as the money in your wallet and money in demand deposits, such as money held in checking accounts in the bank, and demand deposits; currency, coins, and checking account deposits

question

open-market operations

answer

when a central bank buys and sells securities to influence the growth of the money supply

question

Select the items that are jobs of the Federal Reserve.

answer

manage risk in the financial markets watch banks and protect customers provide banking services influence the money supply

question

The Federal Reserve helps protect people who borrow money to pay an expense by _____.

answer

enforcing the Truth in Lending Act

question

When the Federal Reserve influences the growth of the money supply, it is carrying out _________.

answer

monetary policy

question

Open-market operations are when the Federal Reserve buys and sells securities to influence the _____.

answer

money supply

question

To help the economy grow, the federal government can _____.

answer

decrease tax levels

question

Select all the items that describe factors that market participants face as part of the decision process

answer

costs and benefits incentives and disincentives

question

In 1 or 2 sentences, describe how money that you save in the bank can be channeled to an investor.

answer

Money that you save in a bank can be channeled to an investor when your bank issues a loan.

question

market economy

answer

economy in which market forces determine prices of resources and the prices and distribution of goods and services

question

planned economy

answer

economy in which a central authority owns productive resources and distributes goods and services

question

Select all the items that describe price.

answer

what a producer receives from selling a good what a consumer pays when buying a good

question

Your friend is a business owner in a planned economy. What decides how to allocate the productive resources he uses?

answer

central authority

question

Your friend is a business owner in a Market economy. What decides how to allocate the productive resources he uses?

answer

Prices on Production and Consumption

question

collusion

answer

agreement between two or more people to limit competition and earn higher profits

question

competition

answer

contest between rivals

question

customer service

answer

service provided to consumers during and after the buying process

question

profit maximization

answer

profit level that earns the most money after expenses are paid

question

quality

answer

degree of excellence for something, such as a product

question

Competition in the cell phone market results in _____.

answer

better quality cell phones

question

When Edison Electric Company and the Thomson-Houston Electric Company engaged in collusion, the two companies _______ the level of competition in their industry.

answer

reduced

question

demand

answer

willing and able to consume

question

demand curve

answer

graph that shows the relationship between price and quantity demanded

question

demand schedule

answer

table that shows the relationship between price and demand

question

law of downward-sloping demand

answer

when a product's price rises, the quantity of the product demanded decreases, and when a product's price falls, the quantity of the product demanded increases

question

You go clothes shopping and find a great pair of jeans. They fit you perfectly, but they also cost $100. You are willing to buy them, but you only have $50 in your wallet to spend on new clothes. The pair of jeans _____ as demand for you.

answer

do not count

question

You and a friend go clothes shopping and find a great pair of jeans. They fit you perfectly, but they also cost $100. You are willing to buy them, but you only have $50 in your wallet to spend on new clothes. Your friend likes the jeans and has the money to buy them. The jeans would count as a demand for _____.

answer

your friend, because he likes the jeans and has the money to buy them

question

The price of gas just increased. This will most likely make people buy _____ gas in the future.

answer

less

question

complements

answer

goods that go together

question

income

answer

money earned

question

relative prices

answer

prices of a good or service compared to the prices of another product

question

substitutes

answer

goods or services that can replace other goods or services

question

The grocery store wants to increase the demand for ice cream cones, so it puts ice cream on sale. This shows that the grocery store owner thinks that ice cream and ice cream cones are _____.

answer

complements

question

You just received a raise at work and consider meat a normal good. This means that your demand for meat will _____.

answer

increase

question

supply

answer

quantity of a good or service that producers make and sell in the market

question

supply curve

answer

graph that shows the relationship between price and quantity supplied

question

supply schedule

answer

table that shows the relationship between price and quantity supplied

question

The main factors that determine quantity supplied are price and _____.

answer

costs of productive resources

question

A supply curve for the car industry would show the quantity of cars supplied at different _____.

answer

prices

question

A supply curve for the car industry would show that automakers supply the most cars at the _____ price.

answer

highest

question

input costs

answer

expenses of productive resources

question

interrelated markets

answer

markets that are connected in a mutual way

question

production substitute

answer

good that can be used as a replacement for another good in the production process

question

supply

answer

quantity of a good or service that producers make and sell in the market

question

Fifty new food businesses have entered the food market. The supply of food at each price level will _____.

answer

increase

question

An oil refinery makes both gasoline and diesel fuel. The price of gas has increased, which means that the supply of diesel fuel will most likely _____.

answer

decrease

question

When the light bulb industry went from being a single-seller market to a competitive market, the price of light bulbs

answer

decreased

question

The shoe industry has many sellers, many buyers, and similar products. Shoe companies function in a _______ market.

answer

competitive

question

The cost of producing a new watch is $50. At a price of $100, watches will most likely be _____ and _____.

answer

supplied and demanded

question

The cost of making a new skirt is $20. At a price of $15, consumers will demand 600 skirts, and producers will ______ skirts.

answer

not supply

question

Sixty new grocery stores opened. This will _____ both the price and quantity of food in the marketplace.

answer

affect

question

A producer charges $500 for a cell phone, but buyers are not buying any cell phones at this price. So at this price, the producer is willing to supply _____ phones, and consumers are willing to buy _____ phones.

answer

many, zero

question

In 2 or 3 sentences, explain why putting the demand and supply schedules together can help you to see what price and quantities will be demanded and supplied in the marketplace.

answer

By putting demand and supply schedules together, you can view the lowest price (where demand is greatest and supply is least) and at the highest price (where demand is least and supply is greatest). By having these schedules together as a table, you are able to see the highest price and quantities that are acceptable for consumers to consider a demand.

question

equilibrium point

answer

point at which the supply and demand curves intersect

question

equilibrium price

answer

price at which quantity supplied equals quantity demanded

question

excess demand

answer

more demand than needed

question

excess supply

answer

more supply than needed

question

At a price of $100, consumers demand 450 pairs of shoes, and sellers supply 800 pairs of shoes. At $100, there is _____.

answer

excess supply (supply is greater than demand)

question

At a price of $50, consumers demand 1,000 pair of shoes, and sellers supply 500 pairs of shoes. At $50, there is _____.

answer

excess demand (demand is greater than supply)

question

At a price of $65, consumers demand 650 pairs of shoes, and sellers supply 650 pairs of shoes. At $65, there is _____.

answer

no excess supply or demand

question

At a price of $65, consumers demand 650 pairs of shoes, and sellers supply 650 pairs of shoes. The price of $65 (where quantity supplied and quantity demanded both equal 650 pairs of shoes) is the _____.

answer

equilibrium price

question

In 1 or 2 sentences, identify a change (either increase or decrease) in supply or demand that would cause the equilibrium price to increase.

answer

If a company has a product that has been out for a while, and they have steady income, they likely know their equilibrium price. However, if they decide to start advertising their product or if it's endorsed by a celebrity, more people will discover the product and will increase the demand, making the equilibrium price increase.

question

market-clearing price

answer

price at which quantity supplied equals quantity demanded (also known as the equilibrium price)

question

price ceiling

answer

when a price is set below the equilibrium price and not allowed to increase (maximum price)

question

price floor

answer

when a price is set above the equilibrium price and not allowed to decrease (minimum price)

question

shortage

answer

when buyers want to purchase more than the producers want to sell at the given price

question

surplus

answer

when producers want to sell more than buyers want to purchase at the given price

question

People are demanding more apartments than sellers are willing to offer. This means that there is a _____ of apartments.

answer

shortage

question

There are more jeans in the stores than consumers are willing to buy, at the given price. This means that there is a _____ of jeans.

answer

surplus

question

For several years in the late twentieth century, the government set the price of gasoline below the equilibrium price. This is an example of a _____.

answer

price ceiling

question

Minimum wage and farming price control are examples of _____.

answer

price floors

question

In a free market economy, the decisions made by buyers and sellers push the price of a good or service toward the _____.

answer

equilibrium price

question

efficiency

answer

using resources effectively, without wasting them

question

Select the situation that will occur when a shortage of bread exists, and consumers pressure producers to change their actions.

answer

Producers respond by supplying more bread.

question

In an economy without price controls, market pressures _____ increase or decrease prices.

answer

can

question

Market pressures tend to move prices toward a(n) _____.

answer

equilibrium price

question

Select all the items that occur at the equilibrium price.

answer

Producers earn revenue to cover costs. There are no shortages or surpluses. Consumers buy all the goods that are supplied.

question

Select the situation that describes an efficient use of resources.

answer

producing the same number of cell phones that consumers demand

question

In 3 or 4 sentences, explain the relationship between the equilibrium price and efficiency.

answer

At equilibrium price, producers are not wasting resources. They are allocating their productive resources efficiently because the supply meets the demand. If they were not at the equilibrium price, they would either have shortages or surpluses.

question

Summing It Up: Being at Equilibrium Means:

answer

-Producers supply enough goods and services for consumers. -Producers earn revenue that is used to cover costs. -Consumers have enough goods and services at the given price. -There are no shortages or surpluses. -Producers are using their resources efficiently. -Markets and the whole economy are functioning more efficiently.

question

inefficient

answer

using resources in a wasteful way

question

minimum wage

answer

lowest amount of money that an employer can pay a person for working

question

personal income

answer

money that a person has to buy goods and services

question

price control

answer

government limit on the maximum or minimum price of a good or service

question

rent control

answer

maximum amount that a property owner can charge a renter

question

Adam Smith called the force that guided the competition for scarce resources in a free market the ________ hand.

answer

invisible

question

Supporters of minimum wage believe that it provides _____.

answer

more personal income

question

Select the items that are kinds of price controls.

answer

rent control minimum wage

question

Opponents of rent control believe that it causes _____.

answer

housing shortages

question

In 1 or 2 sentences, describe why some people support rent control.

answer

People believe rent control can make it possible for people with low-paying job to afford, because the cost of renting is lower.

question

Price controls can cause _____.

answer

shortages and surpluses

question

Select the items that increase personal income.

answer

Earned Income Tax Credit rent subsidy

question

The Earned Income Credit is one alternative to ________ controls.

answer

price

question

fixed cost

answer

costs that does not change as output changes (are paid, even if the producer does not sell any goods or services)

question

market share

answer

part of total sales held by one seller

question

price setter

answer

seller that determines a product's price

question

price taker

answer

seller that cannot affect a product's price

question

variable cost

answer

cost that changes as output changes (depend on how many goods and services are sold. So even if no one demands a room, the hotel owner still pays the fixed costs)

question

Select all the items that describe the role of a producer.

answer

You want to charge a price that earns profits. You want to charge a price that covers variable costs. You want to have a large market share.

question

Rockin' Radio has one hundred percent of the market share in the music industry. This means that this music business also has a lot of _____.

answer

market power

question

You are more likely to sell your goods at very high prices if you are in a _____ market.

answer

single seller

question

As a market moves from a single seller to a competitive one, a product's price _____.

answer

decreases

question

A person who charges a price that is determined by buying and sales decisions is a _____.

answer

price taker

question

In 1 or 2 sentences, describe why sellers in a perfectly competitive market have no control over price.

answer

In a purely competitive market, producers have much lower market shares and therefore take the price determined by the interaction of buying and sales decisions in the marketplace.

question

marginal cost

answer

cost of producing an extra unit of output

question

marginal revenue

answer

money earned from producing an extra unit of output

question

maximizes

answer

makes as big as possible

question

monopoly

answer

market structure with one single seller, who produces a good or service with no close substitutes

question

natural monopoly

answer

business that has large economies of scale and can make a product more efficiently than other sellers

question

Steps for a monopolist in choosing quantity and price:

answer

-Find the point at which marginal revenue equals marginal cost. -Choose the quantity at which marginal revenue equals marginal cost. -Look at the demand for the product, using a demand table or demand curve. -Find the price that matches the quantity you chose on the demand table or demand curve. -Select this price and quantity pair.

question

A monopolist's goal is to maximize _____.

answer

profits

question

To find the price, a monopolist looks at the price _____ at the chosen quantity.

answer

demanded

question

A natural monopoly can occur when the average cost of making a good _____ a lot as output increases.

answer

decreases

question

In 1 or 2 sentences, explain whether a monopolist uses resources efficiently

answer

A monopolist chooses a quantity that is less than the equilibrium level. The single seller does this to maximize profits. But keeping the quantity lower than the equilibrium level means that resources are not being used efficiently.

question

imperfect competition

answer

when individual sellers have some control over the price of a product in a market

question

monopoly

answer

market structure with a single seller who produces a product with no close substitutes

question

monopolistic competition

answer

market structure with large number of sellers who produce differentiated products

question

oligopoly

answer

market structure with a few sellers who produce either identical or differentiated products

question

perfect competition

answer

-market structure with many sellers who produce identical products -price takers -open entry and exit

question

A monopoly has _____ seller(s), but perfect competition has _____ seller(s).

answer

one, many

question

The car market is an example of _____ because it has few sellers who offer differentiated products.

answer

oligopoly

question

Select the kinds of market structures in which sellers have some (including complete) control over price.

answer

monopoly monopolistic competition oligopoly

question

The ice cream market is an example of _____ because it has many sellers who offer differentiated products.

answer

monopolistic competition

question

In 1 or 2 sentences, explain the similarities between monopolistic competition and oligopoly.

answer

Monopolistic competition and oligopoly are similar because they both can influence their prices, and they have differentiated products.

question

Select the items that describe perfect competition.

answer

identical products many sellers cannot influence price

question

collective bargaining

answer

process of negotiating work-related terms between workers' representatives and businesses

question

division of labor

answer

when the production of a good or service is broken down into several separate tasks, with different people performing each task

question

economic specialization

answer

when people concentrate their production on fewer kinds of goods and services than they consume

question

gross pay

answer

full amount of wages or salary that you earn

question

net pay

answer

gross pay minus deductions, such as income taxes and Social Security contributions

question

Select the items that can help you earn higher wages.

answer

more education more training more skills

question

If you earned $10 per hour and worked 40 hours a week, your gross pay would be _____.

answer

$400

question

Your _____ is the full amount of money that you earn without anything taken out for items such as taxes and Social Security.

answer

gross pay

question

In 1 or 2 sentences, describe which is greater: gross pay or net pay.

answer

Gross pay is higher than net pay because it is the full amount of wages or salary that you can earn, which does not include deductions.

question

Division of labor can lead to higher wages because it increases _____.

answer

labor productivity

question

Select the items that describe how labor unions try to increase the wages of workers.

answer

collective bargaining reducing the supply of labor increasing the demand for labor

question

commission

answer

money earned as a percentage of sales revenue

question

price discrimination

answer

when producers sell identical goods or services to different buyers at different prices

question

salary range

answer

scope (or range) of earnings

question

wage discrimination

answer

when people receive different wages based on factors such as race and gender

question

wage structure

answer

levels of jobs and earning ranges

question

You work as a salesperson in an electronics store. You earn an hourly wage plus a commission based on a percentage of your _____.

answer

sales revenue

question

You start your own company and decide that administrative assistants will earn between $30,000 and $40,000 each year. This scope refers to the administrative assistant's _____.

answer

salary range

question

Producers _____ labor, and workers _____ labor.

answer

demand, supply

question

Suppose that Joe does the same job as Susan but receives a lower salary. This is an example of _____.

answer

wage discrimination

question

Joshua pays a higher concert ticket price than Raffi because Joshua buys his ticket on the day of the concert. This is an example of _____.

answer

price discrimination

question

exports

answer

goods and services sold to foreign countries

question

externalities

answer

unintended consequences

question

imports

answer

goods and services bought from foreign countries

question

regulations

answer

rules that govern behavior

question

Pollution from a factory that produces cleaning products is a(n) _____.

answer

externality

question

Governments use _____ to make companies take responsibility for unintended effects.

answer

regulations

question

In 1 or 2 sentences, explain if a country would rather have a trade surplus or a trade deficit. Then, in 2 or 3 sentences, explain the difference between balance of trade and balance of payments.

answer

A country would want to have a trade surplus opposed to a trade deficit, because that means they are making more sales, earning more revenue, growing, and hiring more workers, rather than buying more products from the other country than they are selling to them, which hurts the economy and can result in slower economic growth and fewer jobs. Balance of payments is the overall record of all economic transactions of a country with the rest of the world. Balance of trade is the difference in the value of exports and imports of only visible items.

question

tariff

answer

tax on imported goods

question

Quotas

answer

Quantitative restrictions on imported goods

question

Embargoes

answer

Prohibitions on trade, usually imposed for political reasons, by a government against a foreign nation

question

Standards

answer

Requirements pertaining to health, product safety, packaging, labeling, etc., that are imposed on imported goods

question

Subsidies

answer

Payments made by the government to particular industries

question

Jerry's Phone Service is a monopoly. Select the items that describe the price and quantity chosen by Jerry.

answer

will maximize profits will cause shortage of goods

question

incentive

answer

something that encourages people to act; something that motivates someone to act in a certain way

question

patent

answer

sole right granted to an individual who invents a good or service; a grant by the government to make, use, and sell an invention for a certain amount of time

question

property right

answer

the right to decide how a resource is used; the right to exclude others from using the good or service and the right to transfer the ownership or use the resources to others

question

The government wants to ensure that emergency exits are accessible in office buildings. Its incentive is to _____.

answer

provide safe workplaces

question

The government imposes regulations that reduce pollution. Its incentive is to _____.

answer

protect the environment

question

People who think that businesses should decide everything about their production also believe that the government _____ impose regulations that tell businesses what to do.

answer

should not

question

Externalities can distort the true _____ and _____ of goods and services.

answer

costs, benefits

question

In 1-2 sentences, explain why the private businesses will not provide public goods.

answer

Private businesses will not provide public goods because they are provided by the government from our taxes. If a good or service cannot be withheld from those who do not pay for it, private businesses will not produce it, because they do not believe they can earn profit.

question

Externalities distort _____ by not reflecting the true costs and benefits of producing a good or service.

answer

price signals

question

Absolute advantage

answer

A nation is able to produce more of a good or service than its trading partner in the same amount of time and using the same amount of resources

question

Comparative advantage

answer

A nation is able to produce more of a good or service at a lower opportunity cost than its trading partner

question

Balance of trade

answer

The difference in value between a country's imports and exports; a country's balance of trade can be favorable (exports are greater than imports) or unfavorable (imports are greater than exports)

question

Balance of payments

answer

A summary of the transactions (or payments and receipts) between one country and another over a period of time

question

aggregate

answer

adding things together

question

economic cycle

answer

time from one economic peak to another economic peak; behavioral pattern in the economy that includes growing and shrinking phases

question

Gross Domestic Product (GDP)

answer

market value, in dollar amounts, of all final goods and services produced within a country's borders; includes net exports - the dollar amount of exports minus the dollar amount of imports.

question

Gross National Product (GNP)

answer

market value, in dollar amounts, of all final goods and services produced by domestically owned factors of production

question

macroeconomics

answer

the study of the whole economy Prices - Price of many goods and services Unemployment - Number of people who lost their jobs in a country Output - Quantity of all goods and services made in a country during the year

question

microeconomics

answer

the study of individual parts of the economy Prices - Price of a cell phone Unemployment - Number of people who lost their jobs in a market Output - Quantity of cars produced

question

net exports

answer

exports minus imports

question

When the economy is growing, producers are making _____ goods and services.

answer

more

question

total income

answer

money earned from all producers in a country

question

total output

answer

all goods and services produced by using the factors of production

question

Total output refers to the goods and services made by _____ producers in a country.

answer

all

question

economic cycle

answer

- Growing ; Total output increasing ; Total income increasing - Peak ; Total output hits its highest level of the economic cycle ; Total income hits its highest level of the economic cycle - Shrinking ; Total output decreasing ; Total income decreasing - Trough (Bottom) ; Total output hits its lowest level of the economic cycle ; Total income hits its lowest level of the economic cycle

question

_____ includes the goods and services made in a country, and _____ includes goods and services made from domestically owned factors of production.

answer

Gross Domestic Product, Gross National Product

question

Consider a French-owned cheese factory located in Paris, France. Are the goods made by the cheese factory part of the U.S. Gross Domestic Product (GDP)? Are these goods included in the U.S. Gross National Product (GNP)? In 1 or 2 sentences, explain your response.

answer

A French-owned cheese factory located in Paris, France would not be apart of the U.S. Gross Domestic Product. The goods are also not included in the U.S. National Product because it is French-owned and located in Paris, which means it is not produced and does not receive profits in/from America.

question

consumption

answer

buying of final goods and services by households

question

final goods and services

answer

end products of the production process

question

nominal GDP

answer

Gross Domestic Product in current dollars

question

real GDP

answer

Gross Domestic Product adjusted for price changes

question

product approach (measures GDP)

answer

adds up the final goods and services, using their market prices.

question

income approach (measures GDP)

answer

This method adds up all the incomes earned by producers, including profits; also includes taxes paid to the government.

question

expenditure approach (measures GDP)

answer

add together all the money spent on final goods and services in one year Money Spent on Consumption + Money Spent on Investment + Money Spent by the Government + Money Spent on Net Exports

question

Gross Domestic Product that is adjusted for price changes is called _____.

answer

real Gross Domestic Product

question

Select the items that apply to calculating the Gross Domestic Product.

answer

final goods and services new products

question

Real GDP shows changes in GDP and changes in prices, but nominal GDP shows only changes in GDP. So you would use real GDP to accurately find out if GDP increased 2011.

answer

--

question

labor productivity

answer

output (of goods and services) divided by number of workers used to produce the output

question

economic growth

answer

continual rise in a nation's production of goods and services -makes more products -spends more money -earns more income -means that the Gross Domestic Product continues to increase

question

Select the items that describe why consumption might increase during periods of economic growth.

answer

Workers receive higher wages. More people acquire jobs and earn wages. Cost of borrowing money is lowered.

question

Select the items that describe how business investments can cause economic growth.

answer

Investments increase GDP Investments create more jobs Investments can lead to more demand for goods.

question

During periods of economic growth, an increase in consumption causes companies to make_____ goods and services.

answer

more

question

Economic growth can result from a(n) _____ in government expenditures and a(n) _____ in net exports.

answer

increase, increase

question

GDP per capita

answer

GDP divided by the number of people living in a country

question

material goods

answer

products that are bought and sold, including food, clothes, computers, and cars

question

Real GDP per capita is the most popular way to measure _____.

answer

standard of living

question

An increase in GDP means:

answer

-consumers are buying more goods and services and spending more money -producers are making and selling more goods and services -producers are earning more money and making more investments -more jobs are created, and more people are working

question

During a period of _____, real GDP per capita can increase.

answer

economic growth

question

Real GDP per capita for the United States is calculated by dividing real GDP by the _____.

answer

number of people living in the country

question

One of the problems with using real GDP per capita to determine the quality of life is that it does not fully account for _____.

answer

negative externalities

question

problems with using real GDP per capita to measure standard of living

answer

Real GDP per capita does not reflect distribution of wealth - Real GDP per capita shows the level of output in a country divided equally by the number of people living in a country. But, in reality, output may not be distributed equally among everyone in the country. For example, suppose a country makes a lot of money from the production of one good, such as oil. Imagine that there are only a few people in the country who own and benefit from selling that good. These few people are very, very wealthy. But the rest of the country's population is relatively poor. Overall, this country may have an acceptable level of GDP per capita because it produces a lot of oil. But does real GDP per capita truly represent the standard of living for most of the population? No, real GDP per capita does not show the material comfort level for most of the country's people. Real GDP per capita does not show unpaid work - Many people do work that is very important to society, but they are not paid for their labor. Volunteer work is an example of this kind of labor. People devote their time to preparing food for those who cannot afford basic needs, helping out with special needs children, visiting the elderly, and educating others about promoting a cleaner environment. All these jobs improve the quality of life for many Americans. Yet they are not included in GDP or GDP per capita. Real GDP per capita does not reflect changes in the quality of life - Real GDP per capita does not fully count things that affect the quality of life, such as clean air, clean water, and leisure time. Negative externalities, such as pollution, also do not fully show up in the real GDP per capita.

question

Select examples of unpaid work that are not included in the real GDP per capita.

answer

taking care of your parents washing dishes doing laundry

question

In 2 or 3 sentences, explain why real GDP per capita does not reflect the actual distribution of wealth.

answer

Real GDP per capita does not reflect the actual distribution of weath because there may be a few very wealthy people, while the others are at poverty level. Because GDP is an average, it does not reflect reality of the area as a whole.

question

During a period of _____, real GDP per capita can increase.

answer

economic growth

question

In 2 or 3 sentences, explain what happens to jobs and the sales of goods and services during economic growth.

answer

Economic growth is when more products are being made, more money is being spent, higher income is earned, and the Gross Domestic Product continues increasing. When this does occur, the government may create more public goods and companies may expand their business, both of which require more employees, which allows people to obtain a job easier due to the demand. When more people are given jobs, and the wages are raised, they are able to afford products they couldn't before, and the influx of money earned from the higher demand, the companies are able to invest, and continue the cycle.

question

Human Development Index (HDI)

answer

quality of life measurement that includes form of GDP per capita, how long people are expected to live, and education

question

Examining the real GDP per capita in different countries allows economists to compare _____ in different parts of the world.

answer

standards of living

question

Countries with the highest Gross Domestic Product (GDP) _____ have the highest GDP per capita.

answer

never

question

According to the United Nations, many countries with very high development are located in _____, and many countries with low development are located in _____.

answer

Europe, Africa

question

In 1 or 2 sentences, mention two factors that are not included in real GDP per capita, but are included in another standard of living measurement.

answer

The Human Development Index is a measurement of how long people are expected to live from birth, and education. The Index of Social Health stresses three main factors in its standard of living measurement: child poverty, health care coverage, and how many people complete high school.

question

Other standard of living measurements besides real GDP per capita may include _____.

answer

education

question

Select other ways to measure the quality of life in a country besides the real GDP per capita.

answer

Human Development Index Genuine Progress Indicator Index of Social Health

question

national debt

answer

total amount of money the federal government owes

question

personal income tax

answer

tax paid by individuals on money they earn

question

The largest amount of money the government lays out is for the transfer program, _____. And its largest expenditure is for _____.

answer

Social Security, national defense

question

In 1 or 2 sentences, explain how a government pays for expenses that are more than its revenues.

answer

The government pays for expenses that are more than its revenues by borrowing from individuals and foreign countries, and they pay interest until they are able to return the money.

question

cyclical unemployment

answer

unemployment that happens when the economy is growing slowly or shrinking

question

labor force

answer

people who are sixteen years old or older who are actively seeking work

question

unemployment

answer

number of working-age people who do not have jobs

question

unemployment insurance

answer

money that the government gives to unemployed people who meet certain requirements

question

unemployment rate

answer

percentage of the labor force that is willing and able to work, does not currently have a job, and is actively looking for work

question

Frictional Unemployment

answer

Unemployment that happens when people leave their jobs to look for new ones, or when students finish school and are looking for jobs.

question

Structural Unemployment

answer

Unemployment that happens from the changes in the structure of the economy, such as when jobs are cut because computers replace working people.

question

Seasonal Unemployment

answer

Unemployment that happens because certain periods of times require more workers and other times require fewer workers. For example, more people are hired by department stores during the holiday season because there are more customers. But then after the holiday times, the department stores eliminate these jobs.

question

Select the items that describe possible problems with being unemployed and not earning income.

answer

People cannot afford to buy food. People cannot support their families. People cannot afford medical treatment. People cannot afford housing.

question

Brian has given up looking for a job. He has searched for more than a year and does not believe that a job for him exists. He is _____ in the unemployment rate.

answer

not counted

question

In 1 or 2 sentences, explain how unemployment insurance helps people who do not have jobs.

answer

Unemployment insurance helps people without jobs by giving enough money to pay their bills.

question

Consumer Price Index (CPI)

answer

average change in prices of commonly used goods and services; the basket of goods and services includes food and beverages, housing expenses, clothing, transportation, medical care, recreation, education and communication, and other things.

question

inflation

answer

increase in the prices of commonly used goods and services

question

interest rate

answer

price of money that is borrowed or saved

question

purchasing power

answer

person's ability to buy goods and services, given his or her income

question

Inflation is a(n) _____ in the prices of many goods and services, which _____ purchasing power.

answer

increase, decreases

question

Federal Reserve decreases money supply

answer

interest rates rise > individuals and businesses borrow less money for consumption and investments > consumption and investments go down > Gross Domestic Product (GDP) goes down > economy is growing more slowly, or not at all (economic downturn)

question

Federal Reserve increases money supply

answer

interest rates fall > individuals and businesses borrow more money for consumption and investments > consumption and investments go up > Gross Domestic Product (GDP) goes up economic growth

question

_____ is caused when the Federal Reserve increases the money supply.

answer

Monetary inflation

question

confidence

answer

trust

question

contradictionary policy

answer

actions intended to slow economic growth

question

expansionary policy

answer

actions intended to encourage (or expand) economic growth

question

The Federal Reserve _____ the money supply to lower inflation.

answer

decreases

question

Suppose the Federal Reserve wants to stop inflation from growing. In 2 or 3 sentences, explain how its actions slow economic growth.

answer

If the Federal Reserve wants to stop inflation from growing, they will decrease the money supply. In doing so, the interest rates rise, which leads individuals and businesses to borrow less money, resulting in little to no consumption or investments. Not having enough money supply prevents the economy to grow, and could possibly cause an economic downturn.

question

Select the policies that are intended to encourage economic growth.

answer

increasing government spending reducing interest rates increasing the money supply

question

The federal government spends most of its money on _____, lays out the most money for the transfer program _____, and receives a large part of its revenue from _____.

answer

national defense, Social Security, personal incomes taxes

question

When the economy is growing, total output is _____ and total income is _____.

answer

increasing, increasing

question

_____ are counted in both the Gross Domestic Product (GDP) and the Gross National Product (GNP).

answer

Services from an American-owned hospital in Montana

question

Gross Domestic Product (GDP) includes _____ goods and services.

answer

new

question

Select all the items included in the Gross Domestic Product (GDP), according to the expenditure approach.

answer

net exports consumption investment government spending

question

Suppose you were hired to calculate the Gross Domestic Product (GDP) by using the expenditure approach. You would count buying a new house as _____.

answer

investment

question

If a government is interested in knowing the total income of its citizens (including remittances, or money earned in a foreign country and sent back home), it should look at the _____.

answer

Gross National Product (GNP)

question

Suppose adding cameras to cell phones caused the demand for cell phones to increase. As a result of this investment, cell phone producers sold more cell phones and earned more revenue. This investment most likely also _____ opportunities in the digital camera industry.

answer

reduced

question

Select the items counted in U.S. Gross National Product.

answer

food from an American-owned restaurant in Chicago clothes from an American-owned store in London

question

Part of U.S. Gross Domestic Product (GDP)? Part of U.S. Gross National Product (GNP)?

answer

Food from an American-owned pizza store in Chicago Yes, Yes Service from an American-owned hospital in St. Louis Yes, Yes Clothes from an American-owned store in Los Angeles Yes, Yes Cell phones from an American-owned store in Dallas Yes, Yes Cars produced by a Japanese-owned company located in North Carolina Yes, No Services provided by American-owned restaurant in London, England No, Yes

question

In 1 or 2 sentences, mention (1) one disadvantage of using real GDP per capita as a standard of living measurement and (2) one factor that is included in an alternative measurement for the quality of life, but not found in the GDP per capita.

answer

Using real GDP per capita as a standard of living measurement can be a problem because it does not reflect the distribution of wealth. However, when using the Human Development Index, you see that it measures child poverty, which may indicate that the GPD is high due to very wealthy individuals, while the majority of the population is poor.

question

In 2 or 3 sentences, explain how to calculate Gross Domestic Product using the expenditure approach.

answer

You can calculate the Gross Domestic Product by adding together all the money spent on final goods and services in one year. In doing so, you determine how much money is spent on consumption, money spent on investment, money spent by the government, and money spent on net exports.

question

Real Gross Domestic Product (GDP) is _____ adjusted for price changes.

answer

nominal GDP

question

Free Market Economy

answer

-Price allocates resources and distributes goods and services. -A lot of freedom for consumers and producers -Competition among businesses -Large selection of goods and services -Efficient market system

question

Command Economy

answer

-Government allocates resources and distributes goods and services. -Limited freedom for consumers and producers -Little (to no) competition among businesses -Small selection of goods and services -Inefficient market system

question

Economics is the study of _____ resources. These resources include natural, _____, and capital goods.

answer

scarce, human

question

Main economic questions that all countries face.

answer

What goods and services will be produced? How will goods and services be produced? Who will consume the goods and services?

question

monopoly

answer

no substitutes barriers to entry resources used inefficiently

question

Select the items that describe how the government is involved in the economy.

answer

provides public goods collects taxes enforces antitrust laws imposes price floors and ceilings carries out fiscal policy

question

Select the items that describe what most likely happens when the Federal Reserve increases the money supply.

answer

interest rates fall people borrow more money investment increases

question

Economic growth may cause _____ unemployment to decrease, but it may also cause a rise in the prices of commonly used goods and services, known as _____.

answer

cyclical, inflation

question

The market value of cell phones made and sold in America by a Japanese-owned company is included in _____.

answer

only the Gross Domestic Product (GDP)

question

In a market economy, market prices are determined through buying and _____ decisions.

answer

selling

question

The decision by shoe store owners to fix their prices will result in consumers paying _____ prices.

answer

higher

question

In 2 or 3 sentences, explain if rent control is a price floor or price ceiling. Then name one advantage and one disadvantage of rent control.

answer

Rent control is a price ceiling because the owner cannot charge any higher. The advantage lies with the renter, because his cost of renting can never go up. The disadvantage is for the property owner, because he is limited in the amount of income he can receive, even if his expenses go up.

question

In 1 or 2 sentences, define an externality and explain how the government makes companies take responsibility for negative externalities.

answer

An externality is an unintended effect that result from an action. The government then creates regulations to prevent negative externalities, which if not followed could result in fines and/or harsher penalties.

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