BJU Economics Ch. 2 Activity 5

payment for financial capital

interest

household withdrawal from an account or borrowing

dissaving

tax revenues = $1 million; governmental spending = $900,000

budget surplus

payment for entrepreneurship

profit

welfare

transfer payment

governmental borrowing that prevents businesses' borrowing

crowding out

tools used by business firms

real capital

loans to business firms

financial capital

What is the chief advantage of the line graph over the schedule?

The line graph displays more information than the schedule.

Which of the following are the two basic participants in the circular flow model?

- government

- business firms

- households

- federal reserve bank

- financial markets

business firms, households

Which of the following would not be considered "land"?

- hogs

- diamonds

- water

- money

money

What is the most important part of production?

entrepreneurship

Which of the following is not a factor cost?

- transfer payments

- wages

- profits

- interest

transfer payment

Which of the following is a type of dissaving?

- depositing money into a checking account

- spending all of one's income

- a loan from a financial institution to a business firm

- a household's withdrawal from a bank account

a household's withdrawal from a bank account

Economists use ____________ to predict future economic events and to explain to students how economics works.

models

A(n) _____________________________ is a type of economic model that provides a limited number of observations. A(n) _______________________________________, on the other hand, is used to link the limited number of observations to provide a much greater amount of information.

tabular model; line graph model

A(n) _____________________________________________________ is a graph that illustrates the maximum amount of two commodities a business can produce with its limited resources.

production possibilities curve (PPC)

Another name for the sum of all goods and services produced by business firms and sold to final consumers is _______________________________________________________.

gross domestic production (GDP)

A(n) ____________________________________ is a payment of money or goods made by the government to persons and for which no specific economic repayment is expected.

transfer payment

The government is said to have a _______________________________ when its spending exceeds its tax receipts.

budget deficit

Why do economists use models? What are the benefits and limitations of using models?

Economists use models for instruction and to help assist them in predicting future events. The benefits of using models is that it provides abstract concepts for not only economists but even students, in an understandable way. The limitations of using models is that they cannot be 100% accurate because of the inability of humans to know every variable.

List the four factors of production and the factor costs associated with them.

land: rent

labor: wages

capital: interest

entrepreneurship: profit

In your own words, what is entrepreneurship?

The creative process of designing, constructing, and running a new business.

To an economist, what is savings?

When a person puts money into a financial institution.