econ final review

In the _______, households receive goods and services and pay firms for them

In the _______, households receive goods and services and pay firms for them

goods and services market

Which of the following best describes a monetary policy tool?

interest rates

Which of the following best describes a fiscal policy tool?

government spending

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:

low inflation

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on the behavior of individual consumers and firms while

Macroeconomics primarily examines:

broad issues such as national output, employment and inflation

Specialization:

can lead to an increase in overall production

Which of the following best characterizes the circular flow of income?

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses

In the circular flow diagram model:

households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.

businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.

A term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines

economies of scale

Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

C to F

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is:

all points on the production possibilities frontier are equally efficient

Refer to 2-1. The most inefficient point depicted is:

Point G

Scarcity exists because of:

unlimited wants and limited resources

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam score with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather that a 77 is:

15 points on the history exam

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

budget constraint

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

utility

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis

Economists refer to this pattern, the _________ which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines

law of diminishing marginal utility

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display_______________.

allocative efficiency

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

The demand curve for a typical good has a(n):

negative slope because some consumers switch to other goods as the price rises.

The demand schedule for a good:

indicated the quantities that will be purchased at alternative market prices

The ________ is the only price where quantity demanded is equal to quantity supplies

Equilibrium price

Refer to Figure 3-1. Using the graph above and beginning on D1, a shift ito D2 would indicate a(n):

increase in demand

Refer to Figure 3-2. A change from Point A to Point B represents a(n):

decrease in quantity demanded

Refer to Figure 3-3. A change from Point A to Point E represents a(n):

decrease in supply

Refer to Figure 3-3. A change from Point A to Point D represents a(n):

increase in supply

The _____ is the quantity where quantity demanded and quantity supplied are equal at a certain price

equilibrium quantity

Which of the following results in a rightward shift of the market demand curve for labor?

an increase in demand for the firm's product

Other things being equal, a __________ supply of workers tends to __________ real wages.

larger; decrease

Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.

usury laws

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________.

will increase

The United States has approximately _________ credit card holders.

180 million

Are markets always in equilibrium?

No, but if there is no outside interference, they tend to move toward equilibrium.

The imposition of a price ceiling on a market often results in:

a shortage

Refer to Table 4-1. If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively.

$6; 13

Refer to Table 4-1. If D2 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are _______ and ______, respectovely.

$8, 15

Refer to Table 4-1. Suppose that D2 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D2 to D1 then:

equilibrium quantity decreased from 15 to 13

GDP is:

the value of all final goods and services produced domestically

The demand measure of GDP accounting adds together:

consumption, investment, government purchases, and trade balance

Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:

exports exceed imports by $50 billion

In order to avoid double counting, statisticians just count the _______.

final goods and services

______ is calculated by taking ______ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year.

NNP; GNP

A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are

expansion, peak, recession, trough

Which of the following is true?

The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.

Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP for each country.

Ethiopia = $145.00

Costa Rica = $2250.00

The difference between nominal GDP and the real GDP is:

real GDP adjusts for inflation

During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year.

2%

To achieve a high standard of living, a nation should:

promote economic growth

The value of what is produced per worker, or per hour worked, is called ____________.

productivity

Of the world's population of 6.7 billion people, _______ are scraping by on incomes that average less than $2 per day.

260 million

investment in human capital

• can be acquired through on-the-job training

• is an important source of economic growth

A nation can achieve higher economic growth if:

more resources are allocated to consumption goods

Which of the following is unlikely to affect the rate of economic growth?

the quality of available resources

A country will roughly double its GDP in twenty years if its annual growth rate is:

3.5 %

Which of the following factors contribute to economic growth

the discovery of new oil reserves

A nation's prosperity is sometimes measured in terms of ___________.

GDP

The U.S. employment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ________.

4-6%

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals:

32%

A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:

frictionally unemployed

The type of unemployment that occurs because of a recession is called:

cyclical unemployment

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________.

business cycle

The most significant real economic cost of high unemployment is:

the potential goods and services that might have been produced but weren't

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals:

14.4%

Cyclical unemployment arises when:

business activity in the macroeconomy declines

The labor force consists of:

all adults who are working or actively seeking work.

The effects of inflation are seen in:

goods, services, wages and income levels

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.

all basket of goods

If the price index moves from 107 to 110, the rate of inflation is:

2.8%

The most commonly cited measure of inflation in the United States is:

the Consumer Price Index (CPI)

The basket of goods in the Consumer Price Index consists of about ____ products; that is, several hundred specific products in over _______ broad-item categories

80,000; 200

The Producer Price Index is based on prices paid for supplies and inputs by:

producers of goods and services

The situation where the buying power of money in terms of goods and services increases is called:

deflation

The GDP deflator is a price index that includes the following components of GDP:

Consumption, Investments, Government plus Exports minus Imports

What distinguishes the real value of a statistic from the nominal value of a statistic?

adjusting for inflation

The ________ is the nominal interest rate minus the rate of inflation

real interest rate

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institution, is called:

potential GDP

_______ results when an economy experiences high unemployment and high inflation at the same time

stagflation

Say's Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy.

value of supply; value of demand

When the economy of a country is operating close to full capacoty:

cyclical unemployment is close to zero

The graph above reflects a significant increase in world oil prices. What will impact on aggregate supply most likely to lead to?

an increase in input prices

The graph above refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result?

-the economy will experience lower economic growth

• unemployment is likely to rise

The ______ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment

interest rate effect

As the aggregate price level in an economy rises, ____________________.

interest rates increase

As the aggregate price level in an economy decreases,

imports decrease

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:

potential GDP

What term is used to describe the maximum quantity that an economy can produce, in the context of its existing inputs, market and legal institutions?

potential GDP

In an AD/AS model:

real GDP is shown on the horizontal axis.

The ______ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.

interest rate effect

Aggregate demand curves slopes downwards for each of the following reasons EXCEPT

A) wealth effect

B) substitution effect

C) interest rate effect