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In countries like _____________ the command economy predominates.
Libya and North Korea
Characteristic of Economy
Arrangements that determine what, how, and whom the product is produced for
In which of the following countries will the national government have the greatest influence with respect to the nation's economy?
Cuba
Characteristics of black market
An illegal market that breaks government rules on prices or sales.
4 goals of Macroeconomics
economic growth,
low unemployment,
low inflation,
sustainable balance of trade
In the ____________, households work and receive payment from firms.
labor market
Which of the following best describes a fiscal policy tool?
government spending
The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending.
government
What is meant by microeconomics?
The branch of economics that focuses on actions of particular actors within the economy, like households, workers, and business firms.
When nations desire a healthy macroeconomy, they typically focus on four goals, one of these being:
low inflation
The basic difference between macroeconomics and microeconomics is:
microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
Which of the following is most likely a topic of discussion in macroeconomics?
a decrease in the unemployment rate
Macroeconomics primarily examines:
broad issues such as national output, employment and inflation.
What name is given to policy that involves altering the quantity of money and thus affecting the level of interest rates and the extent of borrowing?
Monetary policy
The circular flow diagram of economic activity is a model of the:
flow of goods, services, and payments between households and firms.
Model is an institution that brings together buyers and sellers of goods or services. (T or F)
false
The opportunity cost of attending university is likely to include all except which of the following?
the cost of haircuts received during the school term
Goods and services market is a market in which firms are sellers of what they produce and households are buyers. (T or F)
true
Scarcity
people's desires exceed possibility
Consumption Choice
budget constraint (range of choices available)
According to the text regarding Intra-Industry U.S. Exports and Imports in 2012, the largest export category for the USA was:
Manufactures
When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.
absolute advantage
Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:
an absolute advantage in coffee production
The idea behind comparative advantage reflects the possibility that one party:
may be able to produce something at a lower opportunity cost than another party.
What term is used to describe international trade of goods within the same industry?
Intra-industry trade
What is meant by comparative advantage?
The goods in which a nation has its greatest productivity advantage or its smallest productivity disadvantage; also, the goods that a nation can produce at a lower cost when measured in terms of opportunity cost.
What term is used to describe when one nation can produce a product at lower cost relative to another nation?
Absolute advantage
In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true? (THINK ratio: higher one wins)
India has a comparative advantage in the production of rice.
A nation cannot have a __________ in the production of every good.
comparative advantage
Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:
Canada has a comparative advantage in the production of hockey sticks.
If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:
The USA specializes in potatoes because of its comparative advantage in producing potatoes.
When nations increase production in their area of _________________ and trade with each other, both sides can benefit.
Comparative advantage
Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.
absolute advantage
What name is given to whatever must be given up to obtain something that is desired?
opportunity cost
The reasons that nations trade includes the fact that:
no one country produces all of what citizens within the country want.
Some nations that seek to produce all of their own needs face the problem that:
some industries are too small to be efficient if restricted to their domestic markets alone.
Which of the following characteristics relate to demand?
A relationship between price and the quantity demanded of a certain good or service.
What term is used to describe the total number of units of a good or service purchased at a certain price?
Quantity demanded
What is meant by law of demand?
The common relationship that a higher price leads to a lower quantity demanded of a certain good or service.
Which of the following refers to a table that shows a range of prices for a certain good or service and the quantity demanded at each price?
Demand schedule
Which of the following characteristics relate to supply?
A relationship between price and the quantity supplied of a certain good or service.
What term is used to describe the total number of units of a good or service sold at a certain price?
Quantity supplied
What is meant by law of supply?
The common relationship that a higher price is associated with a greater quantity supplied.
The nature of demand indicates that as the price of a good increases:
buyers desire to purchase less of it.
Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.
all else is held equal
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.
law of demand
_________________ refers to the total number of units that are purchased at that price.
Quantity demanded
What is meant by surplus?
When at the existing price, quantity supplied exceeds the quantity demanded.
After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:
a shift of the demand curve for beef to the left.
______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
Price floors
Yomi views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:
Yomi's demand for beer to increase.
One alternative reaction occurs when buyers and seller decide to break the government rules on prices or sales, which is referred to as _______________.
black markets
Price floor means a law that prevents a price from falling below a certain level.
True
Price ceiling is a law that prevents a price from rising above a certain level.
True
The term complements describes goods that can replace each other to some extent, so that a rise in the price of one good leads to a lower quantity consumed of another good, and vice versa.
False
Substitutes means goods that can replace each other to some extent, so that a rise in the price of one good leads to a lower quantity consumed of another good, and vice versa.
True
Interest rate (3 components)
risk premium, rate of inflation, and time you wait to spend that money
Intertemporal choices
enjoy rn suffer later vice versa
Labor/Leisure budget
chose budget based to maximize utility
opportunity cost
measures cost by what is being given up
marginal analysis
most decisions are not all or nothing
law of diminishing marginal utility
more of goods we get the less satisfied you are
sunk cost
occurred in the past and canāt be recovered
production possibilities frontier
set of choices faced by society as a whole
law of diminishing returns
more resources marginal benefit will decline
production efficiency
impossible to produce more of x without decreasing production of y
allocative efficiency
mix of goods produced represents what society wants
positive statement
describe world as is
normative statement
describes the world as it should be
5 factors of production
labor, land, capital, tech, entrepreneurship
shortage
more demand
surplus
more supply
Note 
Flashcard (22)