Chapter 2

Question 1

Consumption goods and services

Answer 1

are goods and services that individuals and governments buy and use in the current period (Ex: Food and drink; Electronics; Doctor visits; Police and fire services

Question 2

Capital goods

Answer 2

are goods bought by businesses and governments to increase productive resources and to use over future periods to produce other goods and services (Ex: Machinery and equipment; Public schools; Interstate highways)

Question 3

Factors of production

Answer 3

are the productive resources that are used to produce goods and services

Question 4

Four categories of the factors of production

Answer 4

Land, labor, capital, entrepreneurship

Question 5

Land

Answer 5

The natural resources that we use to produce goods or services

Question 6

Labor

Answer 6

The work time and work effort that people devote to producing goods and services

Question 7

Human Capital

Answer 7

The knowledge and skill that people obtain from education, on-the-job training, and work experience

Question 8

Capital

Answer 8

Tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services

Question 9

Entrepreneurship

Answer 9

The human resource that organizes labor, land, and capital to produce goods and services

Question 10

People earn their incomes by

Answer 10

selling the services of the factors of productivity they own.

Question 11

Rent

Answer 11

is paid for the use of land

Question 12

Wages

Answer 12

are paid for the services of labor

Question 13

Interest

Answer 13

is paid for the use of capital

Question 14

Entrepreneurs receive

Answer 14

a profit or incur a loss

Question 15

The world’s economies are broke up into what two broad groups

Answer 15

Advance economies; Emerging market and developing economies

Question 16

Advance economies

Answer 16

are the wealthiest 29 countries that make up approximately 15% of the world population (1 billion people) and 50 percent of the global output.

Question 17

Emerging market economies

Answer 17

are 28 countries generally located in Central and Eastern Europe, as well as Asia. Approximately 7.5 percent of the world population (500 million people) live in emerging market economies with the majority of the production coming from the BRICS economies (Brazil, Russia, India, China, and South Africa).

Question 18

Developing economies

Answer 18

reflect the remaining 119 countries and almost 80 percent of the world population (5.5 billion people).

Question 19

Households

Answer 19

are individuals or groups of people living together who own the factors of production.

Question 20

Firms

Answer 20

are the institutions that organize the production of goods and services and choose the quantities of factors to employ and the quantities of goods and services to produce.

Question 21

A market

Answer 21

is any arrangement that brings buyers and sellers together and enables them to get information and do business together.

Question 22

Good Markets

Answer 22

are ones in which goods and services are bought and sold.

Question 23

Factor Markets

Answer 23

are ones in which the services of factors of production are bought and sold.