question

1. Any resources that are made by humans and used to create other goods and services are called _____.

answer

capital

question

2. The resources used to make all goods and services are the _____.

answer

factors of production

question

3. An efficient economy is one that _____.

answer

uses its resources to make the most goods and services

question

4. The law of increasing costs means that when an economy increases the production of one item, ______.

answer

the opportunity cost goes up

question

5. The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a _____.

answer

guns and butter

question

6. Why are all goods and services scarce?

answer

People's wants are unlimited while supplies to create those goods are limited

question

8. The value of what you must give up when you make a particular choice

answer

opportunity cost

question

9. What is a factory building an example of?

answer

physical capital

question

10. What does a production possibilities frontier show?

answer

the maximum combinations of goods and services

question

11. The struggle among various producers for the consumer's business

answer

Competition

question

12. Why does even a free market economy need some government intervention?

answer

provide for things market does not

question

13. What is one of the most important advantages of a free market?

answer

it encourages growth

question

14. What incentive motivates a manufacturer to sell a products?

answer

profit

question

15. Which of the following is characteristic of a traditional economy?

answer

Adam Smith

question

16. The total range of products offered by a business

answer

product market

question

17. In what kind of economy does the government make all the decisions?

answer

centrally planned

question

18. Who was the leader that introduced communism and central planning to the former Soviet Union?

answer

Lenin

question

19. What is the most effective way for consumers to make their desires known to businesses?

answer

by the purchases they make

question

20. What is a positive externality?

answer

an economic side effect that generates unexpected benefits

question

21. What effect does new technology usually have on an economy?

answer

It can make the economy more efficient and stronger. May take jobs away but allow companies to do more with less.

question

22. Why does the government require businesses to disclose so much information to the public?

answer

To keep the market functioning smoothly and to avoid instability caused by dramatic price swings.

question

23. Total value of all goods and services produced in a particular economy

answer

Gross National Product (GNP)

question

24. What are benefits provided by Social Security?

answer

Provides direct cash transfers of retirement income to the elderly and living expensive to the disabled

question

25. A person who consumes a good or service but does not pay for it is called which of the following?

answer

free rider

question

26. When a consumer is able and willing to buy a good or service, he or she creates which of the following?

answer

demand

question

27. Goods that consumers demand less of when their incomes increase

answer

inferior goods

question

28. How is future price related to current demand?

answer

Future price rises - demand (CURRENT) will rise (Vice Versa)

question

29. What kind of system is the United States economy based on?

answer

market

question

30. Ceteris paribus, or "all other things held constant," means ____.

answer

it takes only prices into account

question

31. A situation in which an increase or a decrease in price will not significantly affect demand for the product

answer

inelastic demand

question

32. What is a basic principle of the law of demand?

answer

when a good's price is lower, people will buy more of it

question

33. How is the current demand for a good related to its future price?

answer

If the price is expected to drop, current demand will fall

question

34. A shift in the demand curve means which of the following?

answer

a decrease in both price and quantity demanded

question

35. What is a company's total revenue?

answer

amount a company receives for selling its goods

question

36. What do sellers do if they expect the price of goods they have for sale to increase dramatically in the near future?

answer

Keep products untill price rises

question

37. What happens when wages are set above the equilibrium level by law?

answer

firms employ fewer workers than they would at the equilibrium range

question

38. On which kinds of goods do governments generally place price ceilings?

answer

those that are essential but too expensive for some consumers

question

39. When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached?

answer

equilibrium

question

40. Why did Communist governments use a command economic system for many years?

answer

in an attempt to create a society in which everyone is equal

question

41. What is the name of the smallest amount that can legally be paid to most workers for an hour of work?

answer

minimum wage

question

42. The price ceiling that was used to control the price of housing in New York City and other cities was called?

answer

rent control

question

43. When is a buyer NOT willing to spend a lot of time and energy researching the market?

answer

when the savings to be made are small

question

44. What kind of market runs most efficiently when one large firm supplies all of the output?

answer

a natural monopoly

question

45. What is monopolistic competition?

answer

many firms sell similar but not identical products

question

46. Why does the government sometimes give monopoly power to a company by issuing a patent?

answer

the company can then make a profit from their research without competition

question

47. What is the definition of an oligopoly?

answer

two to four firms producing 70=80% of the output

question

48. If a general partnership fails, who is responsible for the debts?

answer

all of the partners

question

49. What are royalties?

answer

A percentage of actual sales

question

50. What are the money and other valuables that belong to a corporation or partnership called?

answer

assets

question

51. What are organizations that are in the business of benefiting society and operate like a business called?

answer

nonprofit organizations

question

52. What percentage of U.S. businesses are sole proprietorship?

answer

75%

question

53. Why is it easier for a partnership to borrow money and to hold good employees than it is for a sole proprietorship to do so?

answer

a partnership has more personal stability and access to more money

question

54. What is collective bargaining?

answer

The right of unions to bargain with management for all workers

question

55. In inflation-adjusted dollars, how have average wages in the United States changed in the last 20 years?

answer

they have gone up

question

56. What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?

answer

insure savings accounts against future bank failures

question

57. What did the Federalists believe about banking?

answer

they believe that a centralized banking system was necessary

question

58. Why is using coins as money easier than using gold bars?

answer

coins are more portable

question

59. What happens during a bank run?

answer

more customers withdraw money than the bank has on hand

question

60. What condition is necessary for a fiat money system to work?

answer

the government must control the money supply

question

61. The main advantage of diversification as an investment policy is that it _____.

answer

reduces risks to investors

question

62. The interest rate the bond issuer pays to the bondholder is called the ____.

answer

discount rate

question

63. An example of blue chip stock might be ____.

answer

a large, well-known company traded on the NYSE

question

64. The Dow Jones Industrial Average consists of ____.

answer

The average stock prices of major industries.

question

65. Products that would be used in calculating GDP include ____.

answer

cars manufactured in Tennessee at a factory owned by a Japanese automobile company

question

66. An example of a durable good would be ____.

answer

a car

question

67. An example of capital deepening would be ____.

answer

Paying for an employee to get more skills or education

question

68. The calculation of GDP would include _____.

answer

the income of a high school English teacher

question

69. GDP expressed in constant, or unchanging, prices is called _____.

answer

real GDP

question

70. The lowest point in an economic contraction is called _____.

answer

trough

question

71. When the economy is working properly, what is the unemployment rate?

answer

4% - 6%

question

72. What is a major difference between an operating budget and a capital budget?

answer

an operating budget is for day-to-day expenses; a capital budget is for investment spending

question

73. What is the major source of tax revenue for local governments?

answer

property taxes

question

74. An example of expansionary fiscal policy would be ____.

answer

cutting taxes

question

75. In contrast with classical economics, Keynesian economics _____.

answer

includes government intervetion

question

76. When revenues exceed expenditures, _____.

answer

there is a budget surplus

question

77. Keynesian economics failed to deal successfully with ____.

answer

high inflation of the 1970's.

question

78. The Office of Management and Budget _____.

answer

is responsible for deciding how much money each government agency receives in the budget

question

79. An example of contractionary fiscal policy would be _____.

answer

A decrease in government spending and increase in taxes

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