Chapter2

Question 1

study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.

Answer 1

Economics

Question 2

Looks at the operation of a nation’s economy as a whole (the whole United States

Answer 2

Macroeconomics

Question 3

looks at the behavior of people and organizations in markets for particular products or services.

Answer 3

Microeconomics

Question 4

study of how to increase resources

Answer 4

Resource development

Question 5

process that turns self-directed gain into social and economic benefits for all.

Answer 5

“Invisible hand”

Question 6

The economic system that has led to wealth creation in much of the world

Answer 6

Capitalism

Question 7

combination of freer markets and some government control.

Answer 7

State capitalism

Question 8

Basic rights of capitalism

Answer 8

Own property
Own a business
Freedom of competition
Freedom of choice

Question 9

buyers and sellers negotiating prices for goods and services.

Answer 9

Free market

Question 10

quantities of products manufacturers or owners are willing to sell at different prices at a specific time.

Answer 10

Supply

Question 11

quantity of products that people are willing to buy at different prices at a specific time.

Answer 11

Demand

Question 12

where quantity demanded and quantity supplied meet

Answer 12

equilibrium point

Question 13

exists when there are many sellers in a market and none is large enough to dictate the price of a product.

Answer 13

Perfect competition

Question 14

large number of sellers produce very similar products that buyers nevertheless perceive as different, such as hot dogs, sodas, personal computers, and T-shirts.

Answer 14

Monopolistic competition

Question 15

degree of competition in which just a few sellers dominate a market, as we see in tobacco, gasoline, automobiles, aluminum, and aircraft.

Answer 15

oligopoly

Question 16

occurs when one seller controls the total supply of a product or service, and sets the price.

Answer 16

Monopoly

Question 17

economic system based on the premise that some, if not most, basic businesses (e.g., steel mills, coal mines, and utilities) should be owned by the government so that profits can be more evenly distributed among the people.

Answer 17

Socialism

Question 18

loss of the best and brightest people to other countries

Answer 18

Brain drain

Question 19

an economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.

Answer 19

Communism

Question 20

when the market largely determines what goods and services get produced, who gets them, and how the economy grows. (Capitalism)

Answer 20

Free market

Question 21

when the government largely decides what goods and services will be produced, who gets them, and how the economy will grow. Socialism and communism are variations on this economic system.

Answer 21

Command economies

Question 22

exist where some allocation of resources is made by the market and some by the government

Answer 22

Mixed economies

Question 23

the total value of final goods and services produced in a country in a given year.

Answer 23

Gross domestic product

Question 24

a measure of total sales volume at all stages of production.

Answer 24

Gross output

Question 25

refers to the percentage of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks.

Answer 25

Unemployment rate

Question 26

general rise in the prices of goods and services over time.

Answer 26

Inflation

Question 27

when price increases are slowing

Answer 27

Disinflation

Question 28

prices are declining.

Answer 28

Deflation

Question 29

occurs when the economy is slowing but prices are going up anyhow. Some economists fear the United States may face stagflation in the near future.

Answer 29

Stagflation

Question 30

consists of monthly statistics that measure the pace of inflation or deflation.

Answer 30

Consumer price index

Question 31

measures prices at the wholesale level.

Answer 31

Producer price index

Question 32

means the CPI minus food and energy costs.

Answer 32

Core inflation

Question 33

periodic rises and falls that occur in economies over time.

Answer 33

Business cycles

Question 34

two or more consecutive quarters of decline in the GDP.

Answer 34

Recession

Question 35

severe recession, usually accompanied by deflation.

Answer 35

Depression

Question 36

occurs when the economy stabilizes and starts to grow.

Answer 36

Recovery

Question 37

to the federal government’s efforts to keep the economy stable by increasing or decreasing taxes or government spending. The first fiscal policy tool is taxation.

Answer 37

Fiscal policy

Question 38

sum of government deficits over time.

Answer 38

National debt

Question 39

theory that a government policy of increasing spending could stimulate the economy in a recession.

Answer 39

Keynesian economic theory

Question 40

the management of the money supply and interest rates by the Federal Reserve Bank.

Answer 40

Monetary policy