econ tests unit 1-4 – Flashcards
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scarcity
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what is the condition all economies must face?
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there's no such thing as a free lunch
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which popular phrase summarizes the economic idea of trade offs? that is, using scarce resources to satisfy wants?
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opportunity cost
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it is a friday night and johnny is trying to decide how to spend time. he has an economics test on monday, but could also choose to read or attend a basketball game. what do economists call the value of these next-best alternatives?
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when the marginal benefit exceeds the marginal cost
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at what point will rational actors change the status quo?
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adam smith
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what economic theorist is associated with the paradox of value, or the "diamond-water paradox"?
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some things are very valuable in exchange but not useful while others are very useful but not valuable in exchange
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what is the paradox of value?
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normative economic statement
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"the u.s. gov should mint two trillion dollar coins" is an example of:
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markets themselves
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in market economics, who or what answers the three questions of economics?
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"the invisible hand"
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what phrase did adam smith use to describe how markets answer the three economics questions?
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micro studies individuals, macro studies whole economics
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what is the difference between micro and macro economics?
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markets are limited, producers are unlimited
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what is the fundamental economic problem?
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amish production of barns and woodworks
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which of the following is an example of traditional economics?
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land, labor, capital
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what are the three factors of production in classical economics?
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the public
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according to the theory of command economics, who should own the means of production?
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centrally planned economies do not provide an incentive to innovate or compete
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why don't planned economies create as many quality consumer goods as market economies?
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the slow sales of CDs in the face of ipods and other technologies
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which of the following would be an example of creative destruction?
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a tractor
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which of the following is an example of economic capital?
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private property
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which of the following is a characteristic of a capitalist or free market economy?
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maximizing utility
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adam smith thought that markets work best when individuals are allowed to pursue their own self-interest. what drives self-interested consumers?
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people produce little of what they consume and consume little of what they produce
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what is the result of specialization?
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P=TR-TC
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what is the equation for profit?
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creative destruction
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jospeph schumpeter coined a phrase in the mid-twentieth century to describe the effects that capitalism has on an economy as production and consumption change over time. what phrase did he use?
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producers in markets adjust to consumer tastes or go out of business
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why do markets adapt to change better than centrally planned economies?
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laissez-faire economics, rational self-interest, the invisible hand of the market
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which of the following ideas are associated with adam smith?
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custom and religion
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in taditional economics, who or what answers the three economic questions?
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entrepeneurship
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which of the following words could be defined as "the willingness to take risks and innovate"?
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land, labor, and capital
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based on the circular flow model of economics, what do households/consumers contribute to resource markets?
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markets produce poor quality goods
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which of the following is not a criticism commonly leveled against market economics?
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prices
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what serve as signals to producers and consumers about the relative scarcity of a good or service?
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microeconomics
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if milton friedman were to study the economy of ford, one company that employs thousands of people, what type of economics would he be studying?
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the law of unintended consequences
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the united states prohibited the production, sale, and distrubution of alchoholic beverages in 1919 as a result of the 18th amendment to the constitution in order to discourage alcohol consumption. as a result, organized crime grew powerful through bootlegging operations. what economic principle did this period in history exemplify?
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the law of increasing opportunity cost
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what does a curved ppf represent?
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the quantity demanded varies inversely to the price
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what is the law of demand?
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equilibrium
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at what point are prices relatively stable and the quantity demanded equals the quantity supplied?
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the more acquired of one good/service, the lower the marginal utility
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what is stated in the law of diminishing marginal utility?
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washer and dryer
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which of the following serve as an example of complementary goods?
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demand for inferior goods would decrease and demand for normal goods would increase
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what impact would an increase in income have on consumer deman for particular goods?
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private good
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you buy a television. it is rival in consumption and exclusive. what type of good is it?
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quasi-public good
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you must purchase a cable service. you find a cable package that suits your demand. it is non-rival in consumption and exclusive. what type of good is it?
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public good
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which type of good has a free rider problem?
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an individual receiving fire protection despite not paying his income taxes
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which of the following would be an example of a free rider?
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supply side problem
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producing qutomobiles increases the pollution levels. we, by and large, don't gain satisfaction from polluting and yet we still produce cars. what type of economic problem is this?
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negative externality
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how would an economist describe pollution?
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$5
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brad goes to the supermarket to buy steak. his weekly grocery budget is $100. he is willing to spend $20 on steak. it's on sale, and he buys the steak for $15. what is his consumer surplus?
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because we are loss averse
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behavioral economists posit that we humans are apt to feel losses far more acutely than gains. why do they suggest so?
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the quantity supplies varies directly to the price
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what is the law of supply?
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market clearing price
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what is another term for equilibrium price?
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law of diminishing marginal returns
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Mr. Condit opens a donut shop. at first, he hires three employees. productivity increases so he hires three more employees and the productivity not only stops increasing it starts decreasing. what economic principle does this exemplify?
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dead weight losses
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what do economists call the result of over or underproduction- that is, when producers are not allocatively efficient?
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the forgotten man
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according to william graham sumner, who pays for the rest of society?
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a refrigerator made by a british company in mexico
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which of the following items would count toward the american GDP?
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# unemployed / # in the labor force
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how does the US gov calculate the unemployment rate?
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C+I+G+(X-M)
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what is the formula for GDP?
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deflation
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what is characterized by a steady, general decline in price levels?
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frictional
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Jerry, a recent college graduate, was working for minimum wage at a pizza parlor. he leaves his min wage job for a better, higher paying job as a saleman. in the meantime he is unemployed. what type of unemployment is this?
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joseph schumpeter
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which economic thinker is associated with the idea of creative destruction found in modern economies?
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structural unemployment
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brett is a factory worker who lost his job when the company he worked for moved overseas. brett would like to get a new job but lacks the skill-set that employers find desirable in a service-based economy. what type of unemployment is this?
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underemployment
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dr. john lewis has his phD in history from Cambridge university in england. because of a severe recession in the US economy, he works at a mcdonalds grilling burgers for $8.10 an hour. what is this an example of?
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perfect competition
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which economic model features many buyers and sellers, ease of entry, and product uniformity?
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frictional
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which type of unemployment (in small doses) is viewed as good for the economy?
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$0 because it is illegal, underground activity
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tony montana sells $2 mil worth of cocaine in miami, florida during the year. how much of this would count for the GDP?
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labor force
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which includes those in the adult, non-institutionalized population who are either working or looking for work?
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monopoly
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which economic model features a single seller that has conrnered the marlet?
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discouraged worker
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alex holds a degree in political science, however rather than get a job he spends his days reading treatsies and poetry. he has not looked for a job in more than one month. what would he be classified as using the same standards as the united states gov?
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50%
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the small country of frye has a population of 2000 people and a labor force of 1000. there are 500 people unemployed in the country. what is the unemployment rate for frye?
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previously discouraged workers join the labor force and are included in the unemployed once again
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why the unemployment rate actually increase as san economy grows?
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4-5%
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what is a healthy level of frictional unemployment (often called the rate of unemployment)?
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buying and selling shares of stock
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which of the following would be an example of a perfectly competitive market?
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weimar germany between world wars
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which historical eample is among the best in demonstaring hyperinflation?
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oligopoly
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which type of market gets its name from the greek meaning "few sellers"?.
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in a recovery
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the united states enter three consecutive quarters of GDP growth. how would econists describe or classify the US economy?
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public education
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which of the following is not found in the big 5 of US gov spending?
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social security
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given the big 5, which of the following represents the single largest expense?
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prisoner's dilemma
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which game theory best demonstrates the bahavior options of oligopolies?
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cartels
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when oligopolies collude, like OPEC, they can be said to behave as what?
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demand-pull inflation
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what is the result a general increase in the entire market demand?
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monopolistic competition
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you hope to purchase a new computer. in your search, you find many different models sold by many companies that broadly fall into the category of "computer", but offer a wide arrange of services, programs, colors, and other options to make each particular computer unique. in what type of market are you shopping?
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product differentiation
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what do economists call the features and services that firms use to make their prodcut stand out?
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relatively stable and trending toward growth
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how could one best describe the trend of the united states economy over the long-run?
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black teenagers
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of the groups listed below, which currently suffers from the highest unemployment rate in the united states?
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more people became discouraged workers
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in amrch 2013, the unemployment rate dropped from 7.7 to 7.6 %. however only 88,000 jobs were added. what explains this statistical oddity?
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a consumer price index (CDI)
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which of the following would be a useful tool in calculating inflation over time?
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standard oil
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which company is probably the greatest example of monopoly in the history of the united states?
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the authority of the US gov
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what backs up the US dollar?
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fiat money
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what type of money does the united states use?
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to fight inflation
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what is the primary job of the federal reserve?
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janet yellen
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who is the current chair of the federal reserve?
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milton friedman
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who is the economist most closely associated with the thoery of monetarism?
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the FDIC insures deposits
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what is the purpose of the FDIC?
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the fed can sell T-bills and decrease the money supply
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how might the federal reserve decrease the money supply?
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low unemployment
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which of the following is not a primary goal of monetarism?
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increase the money supply to decrease the interest rates
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this year, the economy has grinded to a halt. investment is low and there is little economic growth. the fed reserve wants to stimulate economic growth by adjusting the money supply. what should they do?
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they would disagree and argue that the economy has a natural rate of unemployment
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one of the main goals of keynesian theory is to eliminate unemployment. how would a monetarist likely respond to this goal?
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this will increase the interest rate
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the fed reserve sells millions of dollars of treasury bills to private dealers for cash. this decreases the money supply. what impact will this have on interest rates?
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the increased interest rate will decrease aggregate demand, slowing spending
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what impact will the situation in the previous question have on aggregate demand in the short run?
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$10 mil because of the deposit multiplier
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the fed reserve buys a $1 mil t-bill from a private company and that money is injected back into the money supply. the reserve requirement is 10%. by how much has the money supply increased?
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M1
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which of the following types of money is the most liquid?
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the great depression
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when did the ideas of John Keynes become very popular and begin to dominate macroeconomics?
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milton friedman
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which economist argued in favor of free market economics and had a popular television series called free to choose in 70s-80s?
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inflation
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one of the key functions of money is storing value over time. what force counteracts this function, eroding the value of money in the long run?
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FOMC
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what group at the fed reserve directs the open market operations?
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subprime loans
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how would you describe the rislly loans that were central to the financial crisis of 2007-08?
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the general thoery
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what book was joh keynes' most influential work on macroeconomics?
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F.A. Hayek
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which intelluctual challeneged the ideas of keynes is the 40s, albeit largely unsuccessfully?
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fractional reserve banking
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the fed reserve requires 10% of all bank-held assets to be kept on the reserve at all times. what type of banking is this?
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the federal funds rate
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if a bank cannot meet its 10% reserve requirement overnight, it would seek to borrow money from other banks that have excess reserves. what rate would the borrowing bank be forced to pay as a result?
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sticky
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how would a keynesian economist describe the prices and wages?
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cleveland
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where is the nearest fed reserve bank to ashland?
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the troubled asset relief program
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what program was passed by congress in 2008 as a response to the financial crisis of the day?
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the road to serfdom
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what book by hayek continues to sell well, even better than it did during his lifetime?
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the bull and the bear
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what "animal spirits" did keynes think motivated the market?
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to end unemployment
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what is the primary goal of keynesian economics?
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john kenneth galbraith
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what keynesian economist wrote the book the affluent society?
