Economics Flashcards
A pizza oven is best described as which type of factor of production?
capital
Flashcards cost $15. Using flashcards results in your not earning $20 in income. What are the accounting, opportunity, and economic costs respectively?
$15. $20, and $35`
Coal is an example of what type of resource?
land resource or natural resource
A wage is the price paid for what type of resource?
Labor
A carpenter uses several tools to make a table out of wood. The tools are an example of what type of resource?
capital
The value that is forgone when a choice is made is what type of cost?
opportunity cost
Labor resources are sometimes called “_________ capital.”
human
What is the term for goods that are used to produce other goods?
capital
A person who starts a small business is providing what factor of production?
entrepreneurial resources
Air is best described as which type of resource?
land resource (or natural resource)
What is a free good?
A non-exclusive, non-limitable good: something that one has unlimited access to that everyone can have at the same time, i.e. air.
The term “natural resource’ is another name for which factor of production?
land
The decision-making involved in using resources is what type of factor of production?
entrepreneurial
an office building is best characterized as what type of resource
capital
mike is a farmer who wants to plant several crops but has only enough to plant one. mike is facing what economic problem
scarcity
noah decided to order a hamburger instead of a hotdog, the value of the hamburger is the _____ cost of his decision
opportunity
land, labor, capital, and entrepreneurship are the four ___ of production
factors
bill gates and demidec have this factor of production in common
entrepreneurship
the workers on an assembly line represent what factor of production
labor resources
the letters TANSTAAFL stand for what economic principle
there aint no such thing as a free lunch
which factor of production can best be said to consist of “things used to make other things”
capital
an oil reserve is what type of factor of production
a natural resource
vehicles and buildings are examples of what factor od production
capital
what are the four factors of production
land, labor, capital, entrepreneurship
which factor of production involves organizing the other three factors into production
entrepreneurship
a river is an example of which factor o production
land
humans have (unlimited/ limited) wants, but the earth has (unlimited/limited) resources
unlimited, limited
define opportunity cost
the value of the next best alternative
what is a capital good
a good that helps make other goods later that can be used repeatedly
what do you call a person who takes advantage of free public goods without paying for a them
a free rider
although naturally found, coal as an intermediate good is this type of factor of production
capital
what is the basic economic problem
scarcity
what is the name of adams smiths most famous book
an inquiry into the nature and causes of the wealth of nations (or just the wealth of nations)
this occurs when there just arent enough hours in the day
scarcity
one must determine this, or the value of his next best alternative when making a decision
opportunity cost
why does scarcity exist
people have unlimited wants and earth has limited resources
what does a production possibilities frontier represent
all the efficient and attainable combinations of the production of two goods
when a producer decides to move from one point on his ppf to another point, what type of decision is he making
a trade off decision
what are two properties of every point along the production possibilities frontier
efficiency and attainability
what are twi qualities of any point between a production possibilities frontier and the origin
all points in this region are attainable but inefficient
what can we infer about two goods when their production possibilities frontier is nearly a straight line
the resources used to produce one good are close, efficient substitutes for the resources used to produce the other
what does the economic cost of a decision include
the explicit costs and the implicit costs
what is a free good
a resource that nonrival and non excludable
on a ppf for guns and butter, what type of goods does butter represent
consumer goods
what law explains the shape of a typical production possibilities frontier
the law of increasing opportunity costs
what is the future consequence of a decision
the result that occurs after the present consequence
which points on the production possibilities frontier have the highest opportunity costs
the endpoints, where all resources are used to produce only one good or the other
what is the intended consequence of a decision
the desured result of a decision, the reason the decision is made
what would cause an economic decision to be difficult to make
if there were only a very small difference between the benefits and the costs of the alternative
what is the unintended consequence of a decision
the unwanted and unexpected result
what is the present consequence of a decision
the result that happened when the decision is made
what type of consequences would a president facing reelection most be concerned with in regards to his actions
the present consequences
what factors of production are human resources
labor and entrepreneurship
which factor of production includes human capital
labor
which two factors of production are non human resource
land and capital
what is a trade off
a decision to give up something in order ot have something else
what is the basic economic problem
scarcity
in a market economy, who or what answers the question of how to produce
market forces
in a mixed market economy, who or what answers the question how to produce
either by a central authority or by market forces
in a command economy, who or what answers the questions how to produce
a central authority
do economists think that people act out of self interest
hell yea
many production possibilties frontiers compare the production of capital and ____ goods
consumer
true or false: self interest is the same as selfishness
nah son
self interest is a result of the value of (public/ private) property
private
when a nation moves from one point on its production possibilities curve to another, what is it doing
making a trade off between two equally viable and efficient production combinations
what does it mean to produce a t a point within the production possibilities curve
not all resources are being used efficiently; the economy could produce more but is not doing so
describe the shape of a production possibility curve for two goods that use the same productive inputs
a straight line
why does the production possibility hcurve have a downward slope
any increase in the production of one good decreases the production of another
Which country is the world’s largest exporter of corn?
the U.S.
How does a market price act as a signal to producers
by signaling that profit can be made
Why might two countries trade when they can each produce the same good for the same relative price?
They can probably benefit from trading other goods
What is an absolute advantage
the position of an individual or a nation that can produce a good with the fewest inputs
what basic concept underlies the theory of trade
comparative advantage
if price elasticity of demand is equal to zero, then demand is…
THIS IS A TRICK QUESTION. ped can never equal zero
what is commodity money
a form of money that people value both because it serves as a medium of exchange and because of its intrinsic quality
what is the relative price of a good
the opportunity cost of producing it, expressed in units of the next best alternative good
what is the major reason that an assembly line can produce an automobile faster than a group of individuals who work in a small garage
In the assembly line, each worker is a specialist in a particular part of the production process
what conditions must be met in order for the barter to occur
all participating parties must expect to gain and there must be a double coincidence of wants
what is a subsidy
a payment from the government to an individual or group to encourage or support production but without any anticipation of production in return
what is a quota
a limit on the quantity of a good that may be imported or exported
what are complementary goods
goods that are purchased together such that the demand for one can directly affect the demand for the other. the classic example: hot dogs and hot dog buns
what is a tariff
a tax on an imported good
what is token money
money whose face value is greater than the cost of producing it
What happens to total world output if every nation specializes in the goods in which it has a comparative advantage
total world output increases
The (supply/demand) curve for a profit-maximizing firm is equal to its rising marginal cost curve.
supply
The law of demand states that quantity demanded is (directly/inversely) related to price.
inversely
How are exchange rates determined?
Supply and demand for both currencies naturally sets an equilibrium price.
The Paris Conference of 1867 set most of the world on a ____ exchange rate system based on the ____ gold standard.
fixed, gold
One ice cream cone may be very satisfying. The next ice cream cone will probably be less so. Ten ice cream cones would probably make a person sick. This example illustrates what economic law?
the law of diminishing marginal utility
Complementary goods have a (positive/negative) cross-price elasticity.
negative
You can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Demand in this price range is (elastic/inelastic).
inelastic; $54 is more than $50
Suppose that the price elasticity of demand of bread is 0.2, and the price of bread increases by 10%. What will happen to the quantity demanded of bread?
It will decrease by 2%.
If the cross-price elasticity between two products is negative, what can be said about the two products?
They are complements.
If the cross-price elasticity between two products is positive, what can be said about the two products?
They are substitutes.
If a change in price has no effect on the quantity demanded, demand is completely (elastic/inelastic).
inelastic
What type of elasticity represents the relationship between the demand for one product and the price of another?
Cross-price elasticity.
If demand is elastic, what does this mean for the price elasticity of demand?
The price elasticity of demand is greater than one.
What is marginal utility?
the value of consuming an additional unit of a good or service
Why can’t a supply curve extend infinitely to the right?
At some point, producers will not have enough resources to produce additional units of a good or service, no matter how high the price.
The downward slope of the demand curve is explained by the law of ______ marginal utility.
diminishing (or decreasing)
In a graph of supply and demand, what does the vertical axis represent?
price
True or false: Supply and demand curves are always straight lines.
False (but they are usually drawn as straight lines in economics textbooks)
The law of diminishing marginal utility helps to explain the law of (supply/demand).
demand
Spaghetti and tomato sauces are (complements/substitutes).
complements
What factors affect the supply of a good or service?
productivity changes, taxes, subsidies, expectations, regulation. the number of sellers
What factors affect the demand of a good or service?
the number of buyers, consumer, income, tastes and preferences, consumer expectations, the prices of complements and substitute
You can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Demand in this price range is (elastic/inelastic).
inelastic; $54 is more than $50
what is the balance of trade
the difference in value between a nation’s exports and imports
how does the concept of absolute advantage apply to international trade
it doesn’t. international trade is based on comparative advantage.
what is a resource market
a market in which resources are bought and sold
how does the division of labor save time in the production process
workers do not spend any time moving from one task to another, and each worker becomes a specialist in his particular part of the production process
when is the best time for two countries to set an exchange rate for an international transaction
at the time of the trade (in order to avoid changes in the exchange rate before the transactions occurs)
in general, what happens to people and countries who specialize and trade?
they become independent
what is an unfavorable balance of trade
a condition in which a nation imports more than it exports
what are three reasons why the division of labor is effective
tasks are assigned according to each worker’s preference and abilities, more sophisticated technology can be used, and each worker can become very good at one isolated part of the production process.
what is an embargo
a restriction on exports intended for sale in another country
what happens to total production for two nations who specialize according to their comparative advantages and then trade?
total production increases
how did many Asian economies achieve rapid economic growth in the 1970s and 1980s
their goods were competitively priced because their wage rates and capital costs were low
what is money
anything that is generally accepted in return for resources, goods. or services, or for the repayment of debts
what is a favorable balance of trade
a condition in which a nation exports more than it imports
what is the main reason that a fast food restaurant produces a meal faster than the average person can produce it in his/her kitchen
a fast food restaurant has division of labor, so large scale production machinery is practical
what is an exchange
a reciprocal transfer of money or a resource, good, or service in return for a resource, good or service
how do people and nations become economically interdependent
by specializing in the production of some goods and trading to obtain others
what is an export
a good that is produced domestically but sold to consumers in a foreign country
what is a comparative advantage
the position of an individual or a nation that can produce a good for the lowest opportunity cost
why is the concept of comparative advantage important to international trade
nations specialize in the production of goods in which they have a comparative advantage and this gives them an incentive to trade with other nations that specialize in the production of other goods
why is a barter system inefficient
finding a double coincidence of wants for every transaction is costly and time consuming
what condition must be met in order for voluntary exchange to occur
all participating parties must expect to gain
what is a trade barrier
a government imposed restriction that prevents or inhibits free trade between countries
what good was the subject of an embargo that devastated the US economy in the 1970s
oil ( the embargo was imposed by OPEC)
quantity demanded decreases as price increases because higher prices provide a (positive/negative) incentive for consumers
negative
on a graph of the supply and demand for a particular god, where is the equilibrium price found
at the intersection of the supply and demand curves
what happens to exchange quantity if there is a decrease in demand
exchange quantity decreases
as the price of a good increases what typically happens to the quantity supplied
quantity supplied increases
what is quantity supplied
the amount of a good that producers are willing and able to sell at a particular price
what is the equilibrium price of a good or service
the price at which the quantity demanded equals the quantity supplied
what happens to exchange quantity if there is a simultaneous decrease in demand and increase in supply
we cannot tell exactly
how is quantity demanded related to demand
demand is the quantity demanded at each price within a range of prices
what happens to exchange quantity if there is an increase in demand
exchange quantity increases
what area of economics explores how a firm decides what price to charge for its product
microeconomics
how do prices act as signals to consumers
they help consumers decide how best to allocate their incomes
what happens to the equilibrium price of a good if there is a decrease in supply, ceteris paribus
the price increases
as the price of a good decreases, what typically happens to the quantity supplied
quantity supplied decreases
how is an internet website an example of a market
a website may be used to bring buyers and sellers together to make an exchange
what happens to exchange quantity if there is a simultaneous increase in both supply and demand
exchange quantity increases
what happens to exchange quantity if there is a simultaneous decrease in both supply and demand
exchange quantity decreases
what is supply
the relationship between the price of a good and the quantity of it that sellers are willing and able to produce and sell
what is market demand
the sum of individual demand for every consumer in a market
what happens to equilibrium price if there is a simultaneous decrease in both supply and demand
we cannot tell exactly
what happens to the equilibrium price of a good if there is an increase in demand ceteris paribus
the price increases
what is the market supply of a good
the sum of individual supply for each supplier in a market
what happens to the exchange quantity of a good if there is an increase in supply ceteris paribus
the exchange quantity increases
what is the market clearing price of a good
the equilibrium price
the upward slope of the supply curve is explained by the law of increasing marginal…
cost
you can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Calculate the PED
10% change in quantity demanded/20% change in price PED=1/2=.5
income elasticity of demand measures…
responsiveness of demand to consumer income
cross elasticity of demand measures
responsiveness of demand for a good to the price of complimentary and substitute goods
if price elasticity of demand is equal to one, the demand is…
unit elastic
if price elasticity of demand is equal to zero, then demand is…
this
what is the most important resource market in the us
the labor market
how do most economists feels about free trade
most economists support free trade
what happens to the total consumption possibilities for two nations that specialize according to their comparative advantages and then trade
total possible consumption increases
what is barter
the exchange of resources goods or services without using money
how did japan achieve rapid economic growth in the 1970s and 1980s
by training its workforce well and by applying technology
what do we use to avoid the inefficiency of a barter system
money or any other medium of exchange
what is a market
a mechanism that brings buyers and seller together for the purpose of making an exchange
what is division of labor
the act of dividing the production of a good into simple separate tasks
what is fiat money
a form of money that is only valuable as a medium of exchange not as a commodity and only because people believe the issuing government can back its value
what kind of money s paper currency
fiat money
what happens to the quantity demanded of a good as the price increases
quantity demanded decreases
what happens to the equilibrium price of a good if there is an increase in supply, ceteris paribus
the price decreases
what is demand
the relationship between the price of a good and the quantity of it that consumers are willing and able to buy
how is quantity supplied related to supply
supply is the quantity supplied at each possible price within a range of prices
what happens to exchange quantity if there is a simultaneous increase in demand and decrease in supply
we cannot tell exactly
what happens to the quantity demanded of a good as the price decreases
quantity demanded increases
why is the equilibrium price of a good sometimes called the market clearing price
because when there is an equal number of buyers and sellers, the market is said to clear
what happens to the equilibrium price of a good if there is a decrease in demand, ceteris paribus
the price decreases
what is quantity demanded
the quantity of a good that consumers are willing and able to buy at a particular price
what are of economics explores the individuals preference for a particular good
microeconomics
what is the term for a situation in which resources, goods, or services are exchanged
market
how are two boys trading baseball cards an example of a market
they are exchanging goods
what happens to equilibrium price when there is a simultaneous decrease in demand and increase in supply
equilibrium price decreases
what happens to equilibrium price if there is a simultaneous increase in both supply and demand
we cannot tell oops
what is the equilibrium quantity of a good or service
the quantity at which sellers ask the price that buyers are willing to spend
what happens to equilibrium price if there is a simultaneous increase in demand and decrease in supply
equilibrium price increases
what area of economics explores the behavior of individual producers and consumers
microeconomics
what happens to exchange quantity if there is a decrease in supply
exchange quantity decreases
what area of economics explores the components and behaviors of individual markets
microeconomics
how does a market system eliminate the need for buyers and sellers to negotiate over every individual change
with a price system
what is individual supply of a good
the supply of an individual producer
what is individual demand
the demand of one consumer for a good
quantity supplied increases as price increases because higher prices provide a (positive/ negative) incentive for producers
positive
if five dollars are worth two franc, then the ____ rate is 2.5 to 1
exchange
specialization in trade result in (increased/decreased) production
increased
when people specialize, how do they satisfy their wants and needs for goods and services they do not produce?
trade
specialization (increased /decreases) efficiency
increases
specialization (increases /decreases) dependence on the self-intrest of others.
they become interdependent
when individuals specialize, what must they do to satisfy their wants
trade
are the workers in an assembly line independent or interdependent?
interdependent
what term refers to any situation in which goods, services, or resources are exchanged?
a market
trading is simpler with money than with a better system because bartering requires a “double _____ of wants”
coincidence
what is the economic term for goods that are produced in a foreign country and purchased by domestic consumers?
imports
people tend to specialize in goods in which they have (an absolute advantage/a comparative advantage)
a comparative advantage
tim can write more flashcards per hour than sam can. Does tim have an absolute or a comparative advantage in flashcards?
Absolute (he many have a comparative advantage as well, but there is not enough information in the question to determine this)
Specialization and trade result in (increased/decreased) consumption
increased
specialization leads to (interdependence/independence)
interdependence
what is required for specialization to occur?
voluntary exchange
who experiences a greater level of interdependence: “jack-of-all-trades” or a specialist?
specialist
which is likely to require the most education and skill: division of labor or specialization?
specialization
what component of a market economy allows producers to specialize?
voluntary exchange
producers tend to specialize in the good or service that they can produce at the lowest _____ cost
opportunity
what is the economic term for good that are produced domestically and sold to consumers in another country
exports
t/f: barter requires fewer transactions than trade with the use of money?
True
What is the term for the unique type of specialization that occurs in an assembly line?
division of labor
international trade occurs when one country produces a product and (imports/exports) it to another country
exports
What is required for voluntary exchange to occur?
al participating parties must expect to benefit from the exchange
t/f: people desire money for its intrinsic value.
false
tariffs and quotas are examples of barriers to _____.
trade
what term refers to the trade of one good directly for another, without the use of money?
barter
A negative cross elasticity of demand tells us that two goods are (complements/substitutes).
complements
A positive cross elasticity of demand tells us that two goods are (complements/substitutes).
substitutes
Ticket prices go up at Clippers games, and overall ticket revenue increases at the Staples Center. This means that demand in this price range is _____.
inelastic
Prices increase on Daewoo automobiles, and quantity demanded plunges to zero. Demand in this price range is _____.
perfectly elastic
”% change in quantity divided by % change in price” is the generic formula for ________.
price elasticity of demand
If demand for a good is highly elastic, then an increase in price will _______.
significantly decrease quantity demanded
What is the formula for price elasticity of demand?
PED = % change in quantity demanded / % change in price
If price elasticity of demand is greater than one, then demand is _____.
elastic
Pens and pocket protectors are complementary goods. The supply of pocket protectors decreases. What happens to the equilibrium price of pens?
decreases - the price of pocket protectors increases, which causes the demand for pens to decrease; as a result, the price of pens decreases
What does price elasticity of demand tell us?
Price elasticity of demand tells us how much quantity demanded will be affected by a change in price.
The equilibrium point is at the intersection of what two curves?
the supply curve and the demand curve
What does it mean for a market to “clear”?
A market “clears” at the price where the quantity demanded equals the quantity supplied, so there is no surplus or shortage.
What effect does a price floor set over the equilibrium price have on a market?
Suppliers supply more, and consumers demand a lesser quantity. A surplus results.
Which two curves interest at the point of market equilibrium?
supply and demand
What does the market “do” at the point of equilibrium?
it “clears”
What is the term for the quantity at which buyers and sellers ask the same price?
equilibrium quantity
What usually results from a price floor?
a surplus
In a market, what is the “common language” that helps a buyer and seller agree on the value of the resources, goods, and/or services to be exchanged?
price
Define “market equilibrium.”
The point at which quantity exchanged equals quantity supplied.
How do price signals affect markets?
Price signals are instrumental to markets. Depending on prices, consumers decide whether or not to consume and businesses decide whether or not to produce
True or false: A market consists of an exchange that takes place at a given location and at a particular time.
False
What effect does a price ceiling set below the equilibrium price have on a market?
Suppliers supply less, and consumers demand a greater quantity. A shortage results.
A surplus is a normal result of a price (ceiling/floor).
floor
What usually results from a price ceiling?
a shortage
What do you call a buyer and a seller, exchanging resources, goods, and/or services?
a market
What effect does a price ceiling set over the equilibrium price have on a market?
none
Rent control is a price (ceiling/floor).
ceiling
To keep farmers in business, the government often sets a price (ceiling/floor) on agricultural goods.
floor
What is the common economic language that makes comparison of values easier?
prices
What determines price in free market economy?
te interaction of supply and demand
What is another term for the equilibrium price?
the market-clearing price
Does a market have to occur in a physical place?
No
Equilibrium is best represented as a (curve/straight line/single point)/
single point
What effect does a price ceiling have on demand?
none
As the price of a good increases, what happens to the quantity demanded of that good?
quantity demanded decreases
In general, as the price of a good decreases, quantity demanded of that good (increases/decreases/stays the same).
increases
As price increases, the quantity demanded (increases/decreases).
decreases
in a free market, (self-interest) results from the value of private property.
self-interest
do economists think people are selfish?
no
what law can explain the bowed-out shape of a typical production possibilities curve?
the law of increasing opportunity cost
what will cause a production possibilities curve to shift inward?
a decrease in the amount of a factor of production
what will cause a production possibilities to shift outward?
an increase in a factor of production
describe the shape of a typical production possibilities curve.
bowed outward from the origin
what must an economy do in order to consume at a point beyond its production possibilities curve?
it must engage in trade
list two qualities of the points along a possibilities curve
- all points are attainable and 2. all points are efficient
what dos PPC stand for?
production possibilities curve
what happen to a production possibilities curve when the amount of a factor of production is increased?
the curve expands outward
what happens to a production possibilities curve when the amount of a factor of production diminishes in availibility?
the curve shifts inward
in which type of economic system are all resources owned by private fims and individuals?
a pure market system
is economic regulation more likely to favor producers or consumers?
producers
what type of economic system is in place in cuba?
a mostly command/ planned system
What country has the most market-oriented economic system in the world?
the United States
what drives self-interest in a market economy?
the value of private property and ownership
if two countries have similar resources, but one has a command economic system and the other has a market system, which country will most likely have the higher income per capita?
the country with a market system
what type of firm has the greatest amount of market power?
a monopoly
what country has the most centrally-planned economic system in the world?
north korea
in which type of economic system is a person who owns no resource most likely to starve?
a pure market system
“pure capitalism” is another name for which type of economic system?
pure market economy, free enterprise system or free market system
since the former soviet union dissolved, what type of economic system has been in place in the majority of the resulting independent republics?
mixed market systems; most are trying to increase privatization
what does the herfindahl index measure?
the sales concentration among firms in a given industry; the degree of competition in the industry
In a market economy, ho is the question of “what to produce”answered?
by market forces
what is a horizontal merger?
a merger of two or more firms in the same market
What type of economic system is in place un the U.S.?
a mixed market system
What is a trade deficit?
a condition in which a nation spends more on imports than what it receives for its exports
How does an embargo differ from a tariff or a quota?
Tariffs and quotas are intended to help domestic producers, but embargoes are intended to hurt foreign consumers
How do two nations trade when they each use different currencies and different price structures?
Each nation uses an exchange rate to determine the value of its goods in terms of the other country’s currency
How do political leaders tend to act toward foreign competition with domestic industries?
Many political leaders urge other countries to engage in free trade, but promote protectionist policies in their own countries
What is a product market?
a market in which goods or services are bought and sold
What kind of money is a gold coin?
commodity money
What is a market system?
an economic system in which a group allows market forces and the behavior of buyers and sellers to influence economic decision-making
What is an import?
a good produced in a foreign country but purchased by domestic consumers
How do rational people decide how to specialize?
People specialize in the production of the good they can produce for the lowest opportunity cost
What does a price floor have on demand?
none
As the price of a good increases, what happens to the demand for that good?
nothing
Define comparative advantage
the ability of one country to produce a good at a lower opportunity cost (with a greater efficiency relative to other goods) than another country
True or False: a change in price results in a change in the quantity demanded
True
True or False: a change in price results in a change in the demand
False
A minimum wage is a price floor or ceiling
floor
Movement along the demand curve represents a change in (demand or quantity demanded)
quantity demanded
As price increases, the quantity supplied (increases or decreases)
increases
For a price ceiling to achieve its purpose, it must be imposed (above or below) market equilibrium
below
For a price floor to achieve its purpose, it must be imposed (above or below) market equilibrium
above
A shortage is a normal result of a price (floor or ceiling)
ceiling
If the government sets a minimum exchange price above market equilibrium, resulting in a quantity supplied in excess of quantity demanded, what has been imposed?
a price floor
If the government sets a maximum exchange price below market equilibrium, resulting in a quantity demanded in excess of quantity supplied, what has been imposed?
a price ceiling
What effect does a price floor set below the equilibrium price have on market?
none
prices go up on demidec CDROM software, and overall revenue stays the same. this means that demand is=n this price range is…
unit elastic
the price of one good goes up. as a result, the demand for another good decreases. what is the relationship of the two goods?
the two goods are complements
if demeand for a good is relatively inelastic, then an increase in price will
have little effect on quantity demanded
if price elasticity is less than one, then demand is
inelastic
demand increases and supply decreases. what happens to equilibrium price
increases
what are substitute goods?
goods that can replace one another or that are made with essentially the same resources
what are complementary goods
goods that are purchased together sch that the demand for one can directly affect the demand for the other. the classic exanple: hot dogs and hot dog buns
demand decreases. what happens to equilibrium quantity & price
decreases
demand increases and supply increases. what happens to equilibrium price
the change is indeterminate
the number of remote control producers shrinks. the supply of remote controls…
decreases
remote control producers learn that due to government intervention, the price of remote controls will increase in four weeks. short term supply….
decreases
what is the difference between a superior good and a normal good?
nothing- they are the same
explain the budget constraint
consumers are forced to sacrifice some wants for others because of limited income
what is a durable good
a good for which consumers have more elastic demand. if income changes or prices rise, consumers can reasonably hold off on buying durable goods, such as yachts, houses cars
after competition, what happens to demand for flashcards?
it decreases
when a person’s income goes up, he buys more tomatoes. tomatoes are what kind of good?
normal or superior goods
in which type of economic system are consumers free to buy anything they can afford?
a pure market system
what type of incentive is an individuals right to private property
positive and non monetary
prior to 1978 what type of of economic system was in place in china?
a mostly command system
what is market power?
a firms ability to raise prices without losing customers
in which type of economic system are sellers free to produce and sell anything they expect to be profitable
a pure market system
in a command economy, who or what answers the question of “who will receive the benefits of production?”
a central authority
in a mixed market economy, how is the question “what to produce” answered?
by a combination of central authority and market forces
what type of economic system was in place in the former soviet union?
a centrally-planned system
what are the three main types of economic systems?
traditional, planned/command, and mixed market systems
since 1978 what has been the general nature of the changes in chinas economic system?
the government has begun to relinquish some of its strict control and allow an increasing amount of market-oriented economic activity
what kind of of industry is most likely to be a target of economic regulation?
any industry in which a monopoly seems possible or desireable
what is a concentrated industry?
an industry in which only a few firms are responsible for the majority of sales
(Absolute/Comparative) advantages depend on relative costs.
comparative (Economics by Paul Samuelson, p835)
In a market economy, who or what answers the question of “who will receive the benefits of production”?
market forces
What type of economic system is in place in North Korea?
a mostly command system
What are the three basic economic questions that every system must answer?
What to produce (and in what quantity)? For whom to produce? How to produce?
What is the most competitive kind of pure economic system?
a market system
In a command ecnomy, how is the question of “what to produce” answered?
by a central authority
In which type of economic system are all resources owned by the public?
a command/planned system
In a market economy, what is a firm’s incentive to eliminate competition?
to increase market power
In which type of economic system do individuals have government protection for their rights to private property?
a mixed market system
In a mixed market economy, who or what answers the question of “who will receive the benefits of production”?
either by a central authority or by market forces
What is the least competitive kind of our economic system?
a command/planned economic system
What type of economic system is in place in India?
a mixed market system, largely based on tradition
what is the intended consqeuence of a decision?
the desired result of a decision; the reason the decision is made
what is the unintended consequence of a decision?
the unwanted and inexpected result of a decision
what would cause an economic decision to be difficult to make?
if there were only a small difference between the benefits and the costs of the alternatives
what is the present consequence of a decision?
the result that happens when the decision us made or soon afterwards
what type of consequences would a president facing reelection MOST be concerned with in regards to his actions?
the present consequences
what two factors of production are non human resources?
land and capital
what is a trade off
a decision to give up something in order to have something else
what is the basic economic problem
scarcity
in a market economy who or what answers the question of how to produce
either by a central authority or by market force
in a command economy who or what answers the question of how to produce
a central authority
do economists think people act out of self interest
yes
many production possibilties frontiers compare the production of capital and ……. goods
consumer
true or false- self interest is the same as selfishness
false
self interest is a result of the value of (public/private) property
private
when a nation moves from one point on its production possibilities curve
not all resources are being used efficiently the economy could produce more but it is not doing so
describe the shape of a production possibility curve for two goods that use the same productive inputs
a straight line
why does the production possibility curve have a downward slope
any increase in the production of one good decreases the production of the other
the trade off between guns and ….. is often used to refer to the choice between military and civilian goods
butter
how does the law of increasing opportunity cost affect the shape of a typical production possibilities curve
it causes it to bow outward
a graph that shows all the combinations of guns and butter that a nation can produce is an example of what type of curve
a production possibility curve
typically, a nation’s production possibility curve is bowed (inward/outward)
outward
the production possibility curve us bowed outward due to the law of (increasing/decreasing) opportunity costs
increasing
if the production possibilities of two goods can be represented graphically as a straight line what can we infer about the relationship between the two?
the two goods use the exact same combination and amount of productive inputs
the supply curve shiftsto the left. is there more or less produced at any given price?
less
true or false- a change in the price of substitute goods changes demand for a good
true
the slope of the demand curve is
negative
what is a non durable good?
a good for which the consumers have mainly inelastic demand. although income may change or prices may rise, consumers cannot sacrifice many non-durable goods
the prices of substitutes and complementary goods affect the (supply/demand) for a good
demand
cost of production affect (supply/demand) in the market for a good
supply
true or false- a change in consumer incomes changes demand for a good
true
the demand curve is the graphic representation of the demand…..
schedule
the price of the product A increases by 10% as a result the quantity demanded of a product B increases by 5%. what is the coefficient of cross-price elasticity between these two products?
.5
if demand is unit-elastic then the price elasticity of demand is equal to
one
true or false a change in the number of consumers changes demand for a good
true
ticket prices go up at lakers games and overall ticket revenue decreases at the staples center this meeands that demand in this price range is
elastic
goods and services that are purchased together are called
complements
true or false a change in consumer tastes and preferances changed demand
true
elasticity of demand is generally highly (objective/negative)
subjective
substitutes have a (positive/negative) cross price elastiticity
positive
the price of a producte changes 10% as a result the quanitity demand changes by 25% what is the price elasticity of demand?
2.5
if demand is inelastic, what does this mean for the price elasticity of demand
the price elasticity of demand is less than one
goods and services that satisfy the same want are called
subsititutes
what is marginal costs
the cost of the next unit of production
what is the term of the restriction that income places on quanitity demanded
the budget constraint
elasticity is the relationship between the change in and the change in quantity demand or supplied
price
what is the measure of the responsiveness f demand to consumer income
income elasticity of demand
in a graph of supply and demand, what does the horizontal axis represent
quanitity
What does price elasticity of demand tell us?
Price elasticity of demand tells us how much quantity demanded will be affected by a change in price.
If the price of one good rises, what happens to the demand for its complementary good?
Demand for a complement will increase.
Pens and pencils are substitutes. The price of pens decreases? what happens to the equilibrium price of pencils?
decreases, because demand for pencils decreases
Demand decreases and supply increases. What happens to equilibrium quantity?
the change is indeterminate.
Demand decreases and supply decreases. What happens to equilibrium quantity?
decreases
Demand decreases and supply decreases. What happens to equilibrium price?
The change is indeterminate.
Supply decreases. What happens to equilibrium quantity?
increases
Supply increases. What happens to equilibrium price?
decreases
Name some factors that can change supply.
changes in technology, change in the number of suppliers, change in the cost of inputs, and change in expectations of future price changes
Technology for producing remote controls improves. The supply of remote controls (increases/decreases/stays the same).
increases
Investment represents about __% of GDP in the United States.
15
How much was U.S. per capita GDP in 1998?
$31,487
Randy decides to leave his job in New York and travel to Morocco, then back to California, where he is looking for a new job. What kind of unemployment is this?
frictional
Define the labor force.
Every civilian age 16 or older who has a job or is seeking one. Military personnel and convicts do not count
What is the Labor Force Participation rate?
The percentage of the civilian population i the labor force out of everyone who could be in the labor force.
What government agency keeps track of unemployment data?
the Bureau of Labor Statistics
The Employment Act of 1946 most targeted what kind of unemployment?
cyclical unemployment
When did the Employment Act of 1946 expire?
2000
About what percentage of workers earning the federal minimum wage are 20 or older?
75%
How many times more likely is someone who has not gone to college to earn the minimum wage than someone who has graduated from college?
twice as likely
What government agency measures the Consumer Price Index?
the Bureau of Labor Statistics
What was the average inflation rate in 2004?
2.68%
True or false: full employment is 0% unemployment.
False– for instance, there is always a certain degree of frictional unemployment.
What is bullion?
precious metal
What are three common types of unemployment?
frictional, structural, and cyclical
How are the fundamental economic questions answered in a traditional economic system?
with tradition and history
At what percent unemployment is an economy said to be at “full employment”?
4%
What is a “discouraged worker”?
someone who has given up looking for work
For an individual to be considered unemployed, does he have to be trying to find a job?
yes
Who wrote The Communist Manifesto?
Karl Marx
What is structural unemployment?
unemployment that occurs when the economy (usually due to technology) changes in such a way as to decrease demand for certain skills
What is cyclical unemployment?
unemployment associated with fluctuations in the business cycle
What is the labor force?
all civilians 16 and over who have a job or are seeking one and capable of holding one–thus, for instance, not mentally disabled are part of the labor force
What is underemployment?
Being employed at a lower level than education and training suggest would be optimal – for instance, an engineer working to sell ice cream because of a decline in the availability of engineering jobs
Advertising to give your product name recognition and a unique reputation is known as _______.
branding
investment is sometimes called___ formation
capital
education and training are examples of investments in ___ capital
human
workers are what type of capital
human capital
what term refers to a wage rate based on worker output
productivity adjusted wage
give an example of investment in human capital
training, education, hiring new labor, increasing wages and health benefits technology that helps workers improve effiency
net investments is the value of the total investment minus
depreciation
true or false, the largest and most steady increase in real wages occurred after the industrial revolution
true
beginning with he peak, list the four major phrases of the business cycle
peak, precession, trough, expansion
why does aggregate demand increase if more income is distributed to lower income families and less income to higher income families
lower income families spend a great percentage of their incomes on consumption
did the median income of households in 1999 increase in every racial group
yes
new orders odor capital goods are ____ economic indicator
leading
government spendings represents about __% of GDP in the US
20
what is an intermediate good
a good that is made rom a resource for use in the production of a final good
in which range is the aggregate supply curve nearly vertical
classical
in which range is the shape of the aggregate supply curve similar to that of the supply curve of a single good
intermediate
list three fundamental economic questions
- What to produce (and in what quantity)?
- How to produce?
- Who will receive the benefits of production?
what is a transfer payment from the government
a transfer of funds in which an individual might gain wealth, but nothing has been produced
labor cost per unit of output is a (leading/concurrent/lagging) economic indicator
lagging
what is the measure of the output of a nation’s permanent residents, regardless of where they produce
gross national product
what is real gross domestic product
nominal GDP, adjusted for inflation
which racial group made the lowest median household income in the us in 1999
blacks
barbara eckler and amy brown and american citizens who live and own a smoothie bar in mexico city. is their income part of US gap? how about gnp?
no, yes
the length of the average work week is a (leading/concurrent/lagging) economic indicator
leading
which actor is on the demand side of the product market in the circular flow model
the household sector
are used car sales included in gap measurement
no
the equation mv=pq is known as the equation of
exchange
what does m stand for in the equation of exchange
money supply
what does v stand for in the equation of exchange
velocity of money
to increase the money supply in the economy, the federal reserve can (sell or buy) government bonds
buy
what is the discount rate
the interest rate the federal reserve charges banks to borrow money
what is the federal funds rate
the rate banks charge one another on loans
who is represented on the federal advisory council
member banks elect one representative per district
how long does each member of the federal advisory council hold office
each one is elected to a one year term and convention has it that each serves three consecutive one year terms
open market operations are the buying and selling of
government bonds
the reserve ratio is fifty percent what is the simple money multiplier
2
the reserve ratio is ten percent how much money is created from fifty dollars
500 dollars
how often and where does the federal advisory council meet
four times each year in washington dc
the higher the reserve ratio, the (higher/lower) the money multipler
lower
banking that employs a reserve ratio is known as _ banking
fractional reserve
the reserve ratio is 25% what is the simple money multiplier
4
what is the reserve ratio
the percentage of deposits that banks must hold on reserve
who sets the reserve ratio
the federal reserve
how does the reserve ratio relate to money multiplication
money in excess of required reserves can be loaned out to individual and then spent, deposited, and loaned out again
what does the phrase you cant push on a string mean with regard to monetary policy
it is east to slow down the economy through monetary policy, but harder to speed it up since for example high interest rates definitely discourage borrowing but low interest rates may not interest depressed consumers
what is the marginal propensity to consume
the percentage of each additional dollar an individual receives that he or she spends
what is an automatic stabilizer
an automatic stabilizer is a feedback mechanism that adjusts automatically offset a decrease or increase in aggregate demand. For instance unemployment insurance helps keep demand up during a recession by providing the unemployed with spending money
what is moral suasion with regard to the federal reserve
moral suasion occurs when the federal reserve pressures banks to act in a certain way
what is the margin requirement with regard to stock purchases
if you buy 100$ share of stock with 10$ of your own money and 90$ borrowed from your stockbroker you are buying stock on the margin the federal reserve can control how much you need to put in cash
what does regulation q allow the federal reserve to do
it allows the federal reserve to set the top interest rate that can be paid out by a bank to consumers
TRRUE OR FALSE; IN PERFECTLY COMPETITIVE MARKETS, SELLERS HAVE A POSITIVE INCENTIVE TO SELL BELOW THE PRICE OF THEIR COMPETITORS
FALSE
IN A MONOPOLISTIC COMPETITIVE MARKET PRICES FALL WITHIN A (WIDE/NARROW) RANGE
NARROW
WHAT DOES PERFECT INFORMATION MEAN
ALL CONSUMERS AND PRODUCERS HAVE ACCESS TO ALL INFORMATION ABOUT PRICE AND AVAILABILITY OF THE PRODUCT AND ABOUT ONE ANOTHER
ADVERTISING ISAN IMPORTANT STRATEGY IN WHICH TWO MARKET STRUCTURES
MONOPOLISTIC COMPETITION AND OLIGOPOLY
WHAT FACTOR IN A MARKET AFFECT THE LEVEL OF COMPETITION
NUMBER OF BUYERS AND SELLERS, NO BARRIERS TO ENTRY OR EXIT, HOMOGENEOUS PRODUCT, PERECT INFORMATION
IS PROFIT GUARANTEED TO A REGULATED MONOPOLY
NO
A MARKET IN WHICH ONLY ONE FIRM PROVIEDS THE GOOD OR SERVICE IS A…
MONOPOLY
WHAT ARE THE CHARACTERISTICS OF AN OLIGOPOLY
A FEW LARGE SCALE SELLERS, HOMOGENEOUS OR SLIGHTLY DIFFERENTIATED PRODUCTS, MUTUAL INTERDEPENDENCE, STEEP BARRIERS TO ENTRY
IS A MONOPOLY A PRICE TAKER
NO A MONOPOLY IS A PRICE SEARCHER SEEKING OUT THE PRICE AT WHICH IT CAN EARN THE MOST PROFIT
SPECIFICALLY CHARACTERIZE THE STRUCTURE OF THE MARKET FOR PUBLIC UTILITIES
NATURAL MONOPOLY
IF ONE FIRM DECIDES TO CHARGE MORE IN PERFECT COMPETITION WHAT HAPPENS
CONSUMERS BUY FROM OTHER PRODUCERS AND THE FIRM’S SALES PLUMMET TO ZERO
WHAT TERM REFERS TO WHAT HAPPENS WHEN A MONOPOLY FIRM WITHHOLDS GOODS FROM CONSUMERS IN ORDER TO RAISE THE PRICE
CONTRIVED SCARCITY
WHY ARE MONOPOLIES CRITICIZED
THEY CAN CHARGE MORE FOR THEIR PRODUCTS, THEY CAN AFFORD TO BE LESS RESPONSIVE TO CONSUMER DESIRE, THEY BLOCK COMPETITORS FROM ENTERING THE MARKET
A MONOPOLY HAS…. SELLERS
ONE
MARKETS WITH (HIGH/LOW) BARRIERS TO ENTRY OFTEN RESULT IN MONOPOLIES
HIGH
WHAT TYPE OF MARKET STRUCTURE HAS ONLY ONE SUPPLIER
MONOPOLY
WHAT DO YOU CALL THE EXCLUSIVE LEGAL RIGHT TO CONTROL INTELLECTUAL PROPERTY
A COPYRIGHT
WHAT IS THE DIFFERENCE BETWEEN A PRICE TAKER AND A PRICE SEARCHER
PRICE TAKERS SELL AT THE MARKET PRICE, WHATEVER IT HAPPENS TO BE; PRICE SEARCHERS SELL AT THE POINT OF PROFIT MAXIMIZATION
what does it mean for products in perfect competition to be homogeneous
the goods provided by different producers are essentially identical
can a patent or copyright create a natural monopoly
yes
what do you call the exclusive legal right to make or sell an invention for a given period of time
a patent
is dynamic efficiency a positive or negative result of monopolies
dynamic efficiency is generally considered positive. firms have more resources available with which to develop technology and improve resources
if one firm in an oligopoly raises its prices, other firms tend to (ignore/match) this increase
ignore
true or false. in perfectly competitive markets, all sellers are price takers
true
are new car sales included in GDP measurement?
yes
how much was the median household income of asians and pacific islanders in 1999?
$51,205
in the circular flow model, what is the real flow?
resources, goods, and services
define “recession”
a recession is in effect when output falls at least two consecutive quarters
exports are (leaks from/injections into) the money flow
injections into
short-run growth of output is cyclical, but long-run growth general (increases/decreases).
increases
government is one answer to which basic economic question?
who will receive the benefits of production
the money supply is a (leading/concurrent/lagging) economic indicator
leading
if you mow your parents lawn for free, is it included in GDP measurement?
no
what is the difference between the real flow and the money flow?
the real flow is the direction of resources, goods, and services moving from the household sector to the business sector and back again. the money flow is the direction of money (opposite the direction of real flow) as it is used to acquire resources, goods, and services
are social security payments directly included in GDP measurement?
no
according to classical economics, for how long can the business cycle persist?
indefinitely
income is (leading/concurrent/lagging) economic indicator
concurrent
whose economic law favors supply-side economic thinking?
say’s law
is the sale of stocks included in GDP measurement?
no
a change in price level causes the aggregate supply to (increase/decrease/stay the same)
stay the same
how does the government enter the circular flow of an economy?
money leaks from the circular flow to the government in the form of taxes; the government injects money into the real flow through transfer payments and direct spending
which racial group earned the highest median household income in the U.S. in 1999?
asians and pacific islanders
are black market transections included in GDP measurement?
no
t at higher price levels, people demand a (smaller/greater) quantity of output from the economy?
smaller
employment is a (leading/concurrent/lagging) economic indicator
concurrent
true or false: if firms expect they will have greater income in the future, they will invest more now, decreasing aggregate demand
true
at what point do the aggregate supply and aggregate demand curves intersect?
at the equilibrium price level
is the resale of homes included in GDP measurement?
no
imports are (leaks from/injections into) the real flow
injections into
true or false: a monopoly’s marginal revenue curve is equal to its demand curve
false
describe the characteristics of monopolistic competition
a large number of sellers, product differentiation, few barriers to entry or exit
a producer may become a if it obtains exclusive ownership of a resource
monopoly
describe the shape of the demand curve in an oligopoly
kinked
which market structure has a large number of sellers offering differentiated products with few barriers to entry
monopolistic competition
in a perfectly competitive market the demand curve for individual producers is completely
elastic
the u.s. constitution guarantees that people will not be deprived of their private property without __ of law
due process
what is a patent
an exclusive right to make or sell an invention over a fixed period
what is the term for laws that prohibit agreements requiring employers to hire only union members
right to work or open shop law
what is the term for an employer that only hires union labor
closed shop
collective bargaining is a tool used by what institution to increase workers wages
labor union
what is the difference between saving and investing
saving is abstinence from present consumption. investment is the use of resources for future production
what is a copyright
a right to exclusively control intellectual property
the market structure of a union
monopoly
labor unions often try to increase wages by __ the supply labor
decreasing
commons is another name for what type of good
public good
what is the term for the price paid for borrowing money for a period of time
interest rate
name some methods that labor unions use to raise wages
restricting the supply of labor, collective bargaining, increasing the demand for labor
the tragedy of the commons occurs when this type of good is abused
public good
money earned today can be spent months or years from now. during that time, money is serving which functions
a store of value
what are the three functions of money
a medium of exchange, a unit of account, and a store of value
money that is used in a transaction is serving which function
a medium of exchange
what does it mean for money to be a unit of account
it serves as a measure of value; goods and services can be compared based on how much money it takes to purchase them
the value of money is
instrumental
what physical properties must currency have for it to be an effective form of money
it must be durable; easy to transport, handle, and distinguish from other types of money; and difficult to counterfeit
about _ percent of the money used for daily transactions is in the forms of coins and currency
25
Describe characteristics of a monopoly
one firm, no close substitutes, high barriers to entry
What are some examples of artificial barriers to entry?
government regulation, import quotas and tariffs, patents, others
What is the structure of the market for automobiles?
oligopoly
In a perfect competitive market, demand is perfectly (elastic/inelastic).
elastic
True or False: In a monopoly, there are high barriers to entry.
True
The auto industry is generally considered to be which type of market structure?
oligopoly
What type of market structure has only one buyer?
monopsony
A monopolistic competitive market has (one/few/many) sellers.
many
How are backpacks an example of monopolistic competition?
There are many producers of backpacks - Osprey, Gregory, Jansport, Eastpak, Lowe Alpine, REI, Arcteryx, among others - each trying to convince users that its products are different from the others.
Monopolies have an incentive to maximize profit by restricting (prices/output).
output
Why is advertising important in monopolistic competition?
In a monopolistic competitive market, firms compete by differentiating their products.
What is contrived scarcity?
Contrived scarcity occurs when a monopoly withholds goods from consumers in order to raise the price.
Which market structure has a large number of sellers offering identical products with no barriers to entry?
perfect competition
Competition among sellers tends to result in (higher/lower) prices.
lower
If there are no barriers to entry or exit, what does it mean for any individual firm?
It can enter or leave the market at any time.
As prices increase in a perfectly competitive market, what happens to the number of sellers?
The number of sellers increases because new producers have an incentive to enter the market.
Local telephone, electricity, and gas utilities generally have what type of market structure?
monopoly
What are two legal grants of exclusive ownership?
patents and copyrights
As prices increase in a perfectly competitive market, what happens to the number of buyers?
The number of buyers decreases because some buyers will seek substitutes.
If one firm in an oligopoly lowers its prices, other firms tend to (ignore/match) this increase.
match
What is the structure of the market for airline travel?
oligopoly
Competition among sellers tends to result in (better/worse) quality of goods and services/
better
What is a price taker?
a firm that must “take” (accept) the market price
A perfectly competitive market has (one/few/many) sellers.
many
What is the structure of the market for wheat?
perfect competition
Competition among buyers tends to result in (higher/lower) prices.
higher
An oligopoly has (one/few/many) sellers.
few
the new deal provided a test of whose economic theory
john maynard keynes
what does it mean for some of the national debt to be externally held?
external debt is owed to foreign individuals firms banks and govts
which economist wrote the general theory of employment, interest, and money?
john maynard keynes
if the marginal propensity to consume (MPC) is .8, what is the govt expenditure multiplier
5
what might have caused an almost tenfold increase in the national debt between 1935 and 1945?
the new deal’s income security and govt spending programs, as well as spending on ww2
currently, the national debt is about how much per person in the us?
about 20,000$ perperson
what does it mean for some of the national debt to be internally held?
internal debt is owed to parties within the us
if a govt spends more than it receives in revenue during a given year, it is running _____
a deficit
if a govt spends less than it receives in revenue during a given year, it is running _____
a surplus
the national debt increased from under one trillion dollars in 1980 to about how many trillion dollars in 1990?
three
what is contractionary fiscal policy?
govt intervention to slow rising inflation
what are the two most important tools for the govt in implementing fiscal policy?
govt spending and taxes; either can be increased or decreased
increased taxes result in (lower/higher) GPD
lower
what does “loose money” mean with regard to the federal reserves?
it means the fed reserve is undertaking policies that encourage the growth of the money supply
how does the marginal propensity to consume relate to the multiplier effect?
the MPC indecates the amount of each dollar pumped into the economy that will be re-spent
what is expansionary fiscal policy?
govt intervention to increase GDP and decrease unemployment
what prompted the creation of the fed reserve
the money panic of 1907
which banks must belong to the fed reserve system,?
national banks (banks operating in more that one state)
explain the difference between debt and deficit
a budget deficit is the amount by which govt spending exceeds tax revenue in a given year. The natl debt is the total outstanding securities and interest obligations of the fed govt
how does the fed reserve manipulate the money supply?
the fed buys and and sells us securities and raises and lowers interest rates in order to stimulate or stifle growth as it deems necessary
into how many districts is the fed reserve divided?
12
what are the 6 powers granted to the fed reserve by congress?
conduct monetary policy, supervise financial institutions, lend money to financial institutions, serve as a bank for the government, issuer currency,provide services to financial institutions
How does the government generally aim to achieve monetary targets?
through manipulation of interest rates via the Federal Reserve
What does the Federal Reserve do to help achieve the economic goals stated in the Full Employment and Balanced Growth Act of 1978?
The Fred manipulates the money supply.
when economists refer to “the money supply” to which category of money are they normally referring
m1
you take out a loan in the amount of $25,000 and end up paying $50,000 over the course of 30 years. what is the principal
$25,000
about how much cash is there in circulation per citizen in the us economy
$1,500
what does inflation do to the value of money
inflation devalues money
prices in kosovo are measured in kumquats. kumquats are being used as a (medium of exchange/ unit of account/ store of value)
unit of account
according to the phillips curve, low inflation corresponds to _____ unemployment
high
if inflation is at 4%, what nominal interest rate must a lender charge to earn a real interest rate of 5%
9%
what is disinflation
a decrease in the inflation
high employment + high inflation =
stagflation
an unanticipated decrease in the rate of inflation benefits (credits/debtors/ neither)
creditors
what is a time deposit
money that must be held in a deposit for a certain length of time, usually in exchange for additional interest
m3 consists of what elements
m2 plus eurodollars, time deposits of over $100,000 and certain money market funds which take a long time to return money to investors
what are some important characteristics of money if it is to fulfill its roles
portability, recognizability, durability, difficulty of duplication
if nomal gdp is $300 billion, and the gdp deflator is 200, what is real gdp
$150 billion
what is the prime rate
the interest rate that banks charge their most credit-worthy customers for short term loans
define stagflation
a period of high unemployment in a time of high inflation
define “Cost-push inflation”
cost-push inflation is the result of rising production costs, which force producers to raise the selling prices of their goods
define deflation
a decrease in general price levels
mortgage rates have general (increased/decreased) since the early 1980sw
decreased
how are the different categories of money, such as m1 and m2, divided
according to liquidity
according to the phillips curvre, high inflation corresponds to ____ unemployment
low
what is deflation
a general decrease in price levels
at higher interest rates, individuals borrow (less/more) money
less
l consists of what elements
m3 plus savings bonds, government securities, commercial paper and other obscure financial instruments
what is the wealth effect as related to inflatoin
if the price level decreases, people have more money to spend on more things; its as though they are wealthier
what curve graphically represents an inverse relationship of inflation and unemployment
the phillips curve
what are the two primary markets in the circular flow model of an economy?
product and resource markets
using the income approach how id GDP calculated?
GDP= Consumption + investment + government spending + net exports
what is the index of leading economic indicators?
a weighted index of twelve economic measurements that can indicate the general direction in which economic growth is moving
why is an import leak from the money flow
money leaves our country in exchange for product from another country
which sector is on the demand side of the factor markets n the circular flow model
the business sector
in a nation of subsistence farmers is GDP per capita an accurate measure of quality of life?
probably not
explain how consumer sovereignty works
consumers have needs for resources, good, or services, and their demand gets the circular flow model going
the decision between guns and butter is a classic example of which basic economic question
what to produce
what do firms pay for the factors of production
wages, rents, salaries
hw much was the US nominal GDP in 1990
over $5.74 trillion
the business cycle is graphed as a measure of changes in _____ over time
GDP
how much was the median household income of white household in the IS in 1999
$42,504
name the three types of economic indicators
lading indicators, lagging indicators, and concurrent indicators
the choice between mass-production and small-scale production is an example of which basic economic question?
how to produce
the rate and magnitude of the circular flow can be equated to ____
GDP
aggregate demand measures the relationship of ______
rice level to quantity of output in an entire economy
the number of new housing permits issued is a (leading/concurrent/lagging) economic indicator
leading
if real flow runs counter-clockqise in the circular flow model, in which direction does money flow?
clockwise
on a graph of aggregate demand, what does the vertical axis represent?
gross domestic product
what is the most meaningful measure of economic growth?
per capita GDP
True or false: if people think price levels are going to fall in the future, they spend less now, bringing down aggregate demand
true=in fact, this actually helps lower the price level !!!!!!!!
what does it mean for aggregate supply to be in the classical range?
it means that an increase in aggregate demand will result in an equilibruim of higher prices but no greater quantity of economic output
between 1990 and 1998 by what percent did real gross domestic product grow in the US
23.1%
What provides the “grease” that helps the economy run smoother by making exchanges easier?
money
Most day-to-day transactions take place with what form of money?
demand deposits
Interest rates are the cost of (consumption or investment)
investment
Derived demands are demands for what
factors of production
The demand for labor is an example of a ______ demand
derived
A farmer buys farmland solely for the purpose of growing wheat. The demand for the (farmland or wheat) is a derived demand
farmland
What term refers to the demand for an input?
derived demand
The term derived demand refers to (consumer or producer) demand
producer
The economic term “rent” refers to the price of a factor of production whose supply is perfectly (elastic or inelastic)
inelastic
Explain the difference between the terms “rent” or “rental”
“Rent” is the payment for a factor with a fixed supply, such as land. “Rental” is the price paid for any good or service over a period of time
Rent is the price paid for which factor of production
land
What economic term refers to payments for labor?
wages
What does a producer pay for the use of labor?
wages
What does the producer pay for the use of a capital resource?
interest
What is the reward for entrepreneurship?
profit
What does the producer pay for the use of natural resource?
rent
The degree of income inequality in the United States has (increased or decreased) since the beginning of the 20th century
decreased
What is a productivity-adjusted wage?
a wage rate based on the number of units produced
What does the Lorenz curve measure?
inequality among income classes
What is the measurement of output per unit of input?
productivity
If a firm improves its productivity, are prices likely to fall?
yes
If input remains the same, but output increases, does productivity increase, decrease or stay the same?
it increases
What is human capital?
education, skills, and training of laborers
Labor productivity is defined as
output per unit of labor input
When input increases but output stays constant
productivity decreases
What is the term for higher wages paid to workers unpleasant jobs?
compensating wage differentials
The length of life and the consumption of food, clothing, and housing are measurements used to gauge a person’s _____ ______ _______
standard of living
Investment is spending on which factor of production?
capital
What term refer to the extent to which capital has been used up or lost its value
depreciation
what is the difference between a depression and a recession?
in a recession output is diminishing for at least two quarters . a depression is a rapid fall in output over a longer period of time, but there is no cutoff point between the two.
true or false a change in foreign income shifts aggregate demand
true
aggregate demand demonstrates (a direct/ an inverse) relationship between price level and total spending in the economy.
an inverse- people spend more at lower price levels
consumption represents about ….% of GDP in the united states
60
how much was u.s. nominal GDP in 1998
over $8.51 trillion
what is a final good?
a good that is sold in an economy and will not be sold later as any part if another good, nor used to produce another good for sale
consumer debt relatice to income is a (leading/concurrernt/lagging) economic indicator
lagging
is homemaking included in gdp measurement
no
sales are a (leading/concurrent/lagging) economic indicator
concurrent
are servers tips included in gdp measurement
reported tips are included in gdp measurement. tips that are unclaimed, however. are not included in gdp even though they are a part of a servers income
is homemaking included in GDP measurement?
no
changed in inventories are a (leading/concurrent/lagging) economic indictator.
leading
what is the index of consumer confidence
based on datat obtained by the conference board, the index of consumer confidence is a measure of consumers expectations for their economic futures
what is the nomial gross domestic product
GDP expressed in current dollar values
what was the us real median income of households in 1999?
40,816
in a free market system how is the for whom question of economics resolved?
goods and services go to the people who are willing to pay the market price for them
the choice between hand made production and production by machine is an example of which basic economic question?
how to produce
production output is a(leading/concurrent/lagging) economic indicator
concurrent
if your neighbor mows your parents lawn for 20 each week, and reports that income to the IRS, is it included in GDP
yes
stock prices are a (leading/concurrent/lagging) economic indicator
leading
in which range is the aggregate supply Curve nearly horizontal
keynesian
the median household income of this racial group in the us was 30,735 in 1999
hispanics
what are the two sectors in the circular flow model
the househol sector and the business sector
name three ranges of the aggregate supply Curve
keynesian, intermediate, classical
are transfer paymens included in GDP measurement
no
how do we determine per capita gross domestic product
dividing GDP by total population
when a person’s income goes up, he buys fewer cans of generic tomato juice. generic tomato juice is therefore what kind of good?
inferior
price of hot dogs increases. what happens to demand for hot dog buns?
decreases, because hot dog buns are a complementary good
price of salsa decreases. What happens to the demand for tortilla chips?
increases
when summer comes, what happens to the demand for lemonade?
increases
T or F- a change in the quantity supplied of a good changes demand that good
false
T or F- change in the season can change demand
true
the price of cottage cheese goes up. what happens to the demand for its substitute, yogurt?
demand for yogurt increases
movement of the demand curve represents a change in (demand/quantity demanded)
demand
T or F- a change in the price of a good changes demand for that good
false
T or F- change in the price of complementary goods changes demand for a good
true
define exchange rate
the price of a nation’s currency, expressed in terms of the value of another
the law of supply states that quantity supplied is (directly/inversely) related to price.
directly
the slope of the supply curve is usually _________
positive
what is X-inefficiency?
inefficiency that results when a monoply stops searching for ways to keep costs down; services, efficiency, and productivity, may not improve because there is no incentive.
who regulates monopolies in the US?
federal trade commission
what is the structure of the markets for breakfast cereal
oligopoly
natural monopoly occurs in markets where the demand curve intersects the average cost curve at a quantity where average costs are (rising/falling)
falling
in a perfectly competitive market, should a firm advertise
no, the product is completely homogeneous
in monopolistic competitive market, there are (few/many) barriers to entry
few
what markets in the real world are the closest to perfect competition
the markets for commodities such as wheat
welfare loss due to monopoly is also known as________ loss
dead weight
price, marginal revenue and marginal cost are equal for a profit-maximizing firm in which market structure
perfect competition
T or F- a monopoly experiences a downward sloping demand curve
true
what is the term for a market controlled by just a few firms?
oligopoly
monopolies occur in markets where production involves economics of ________
scale
which organization replaced GATT in 1995?
the world trade organization
most of the governing rules used by the world trade organization come from which round of gatt negotiations
the uruguay round
economics analysis of tariffs shows that the gain in tax revenue and the increase in profits by domestic producers is (more/less) than the economic loss to consumers
less
what is a trade sanction
a trade penalty imposed by one nation or another
how does a country pay for a trade deficit
it must either run down its assets or owe money
by conention, the president of the world bank is always
european
when was gatt founded
1947
if a developing country seeks support for building a hydroelectric dam, it is more likely to turn to the.. for a loan of funds
world bank
in what year was the uruguay round of gatt talks completed
1993
what free trade organization is headquartered in geneva, switzerland
world trade organization
by convention, managing director of the imf is always
european
what was the goal of gatt
for member countries to meet regularly to discuss trade and reduce barriers to trade
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
At present, fifty Canadian dollars are worth (less/more) than fifty American dollars.
less
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe money
the united states emerged from world war 1 as a new _ nation
creditor
an attorney who is also the fastest typist in town might still hire a typist instead of typing her own notes. why would this be to her advantage
they typist might have a comparative advantage in typing. even though the attorney is a better typist, she gains more by spending her time on legal work and hiring someone else to type
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor country B can produce either two shirts or 10 apples. which country has the absolute advantage in shirts
country b
how are exchange rates determined
supply and demand for both currencies naturally sets an equilibrium price
how does a country pay for a trade deficit
it must either run down its assets or owe moneysdudiudc
what is a quota
a limit on the quantity of a good that can be imported or exported
what types of behaviors might a trade sanction be intended to punish or stop
terrorism, narcotics trafficking, human rights violations, and proliferation of weapons of mass destruction
what does gatt stand for
general agreement on trades and tariffs
what is a tariff
a tax on an import
protectionalist policies, such as tariffs and quotas, (increase/decrease) the real wages of domestic workers
decrease
what do we call the unintended benefits or consequences of a good or activity whose cost is not paid by the producer or consumer
externalities
what term is used to describe private investment in and ownership of resources
capitalism
in which country was the first joint stock trading company formed
england
from what source other than bankers could monarchs borrow money
wealthy merchants
according to bullionism what commodities are most important to a nations economic strength
precious metals
the blast furnace was designed to reduce iron ore into what type of iron
cast or pig iron
when was the first joint stock trading company created
1550s
People have (predictable/unpredictable) reactions to incentives.
predictable
Global interdependence has (increased/decreased) in the last several decades.
increased
What are the four factors critical economic growth?
natural resources, human resources, capital resources, and social values/legal framework
What is the term for a good that can be provided to everybody (in a town or nation) at no more cost than the cost required to provide it to one person?
a public good
As of 1997, how many developing countries were there?
66
A nation’s endowment of natural resources helps it to answer which basic economic question?
what to produce
Classify the development status of a country with a per capita GDP of $2,500.
less developed
What does per capita GDP overlook?
issues related to the distribution of wealth within a country
Do economists think people are rational?
yes
Canada, the U.S., and Japan are examples of (developed/developing) nations.
developed
What constitutes a developing country?
a country with a per capita GDP between $3,000 and $10,000
The populations of a less-developed countries tend to be (older/younger) than in developed countries.
younger
Rwanda, Nigeria, and El Salvador are examples of (developing/less-developed) countries.
less-developed
Developed countries are home to (more/less) than 30 percent of the world’s population.
less (19.8% in 1998)
What three categories do economists often use to classify nations?
developed economics, developing economics, and less-developed economies
People sometime donate their used vehicles to charity. What is one incentive for doing so?
Answers may vary: a tax deduction, the unutterable joy of getting rid of an old lemon, the pride of giving
A nation with a per capita GDP of $2200 would be classified as having a (developed/developing/less-developed) economy.
less-developed
People sometimes donate their used vehicles to charity. What is one incentive for doing so?
Answer may vary: a tax deduction. the unutterable joy of getting rid of an old lemon, the pride of giving
A nation with a per capita GDP of $2200 would be classified as having a (developed / developing/ less-developed) economy.
less-developed
Why can per capita GDP be misleading?
Many nations have a majority of people with very low incomes and a small number of people with very high incomes that bring the average up.
LDC stands for ______.
less-developed
What is the most common economic incentive in a free market economy?
the profit motive
At present, fifty Euro are worth (less/more) than fifty American dollars?
more
At present, fifty British Pounds are worth (less/more) than fifty American dollars?
more
Which is the most significant country in Western Europe not to join the EU or use the Euro?
Great Britain
the humphrey hawkins act defines full employment as ___% unemployment
4
The Employment Act of ____ gave the government the responsibility of creating and maintaining full employment
1946
what is another name for the full employment and balanced growth act of 1978
the humphrey-hawkins
what are the three major goals listed in the humphrey-hawkins act
full employment, price stability, and the growth of economic output
true or false: the federal reserve can change the prime rate directly
false
the federal reserve was founded in —–.
1913
what piece of legislation created the Federal Reserve?
the Federal Reserve Act of 1913
Between 1997 and 2000, the amount of interest paid on the federal debt (decreased/increased)
decreased
which federal reserve group controls the purchase and sale of government bonds
the fderal open market committee
how many members are on the federal open market committee
12
how are the members of the federal open market committee chosen
7 of the 12 members are the board of govenors and the other five are presidents of federal reserve district banks, with the New York district president always represented.
technically each federal reserve district bank is owned by
the banks that belong to the federal reserve system in that district
true or false the president of the new york district bank is always a member of the board of governors
false the president of the new york district bank is always a member of the federal open market committee but not necessarily the board of governors
what is the tool the federal reserve most frequently uses to adjust the money supply
open market operations the purchase and sale of government bonds
a checking account is also known as a_____ deposit.
demand
true or false no two members of the federal reserve board of governors can be from the same federal reserve district
true
how many smaller branch banks are there in the federal reserve
25
which group heads the federal reserve
the board of governors
how many members are there on the board of governors of the federal reserve
7
how does one member become a member of the board of governors
governors are appointed by the president
true or false the federal reserve handles check clearing
true
true or false state banks cannot join the federal reserve system
false they can choose to
true or false the majority of the nations bank belongs to the federal reserve system
false the figure commonly given is that 1/3 of us banks belong to the federal reserve system this number is probably climbing because of bank expansion and consolidation
the fed can indirectly affect the prime rate by changing the …. rate, the rate that member banks charge for overnight loans
discount
Young nations are usually (creditor/editor) nations.
debtor
Are trade patterns dictated by absolute or comparative advantage in producing a good if it ____
can produce that good at a lower opportunity cost / lower relative price
If Country A is more efficient than country B in the production of all goods, is it possible for country A to benefit trading with country B?
yes
A trade (surplus/deficit) occurs when the value of exports exceeds the value if imports.
surplus
With one hour of labor, country A can produce either one shirt or 4 apples. With the same amount of labor, country B can produce either two shirts or 10 apples. Which country has the comparative advantage in apples?
Country B
With one hour of labor, country A can produce either one shirt or 4 apples. With the same amount of labor, country B can produce either two shirts or 10 apples. Which country has the comparative advantage in shirts?
Country A
What is a balance of international payments?
an measure of the flow of products and capital resources between a country and the rest of the world
Define import.
a good or service produced in a foreign country and purchased by domestic consumers
A nation that produces a good with a low opportunity cost is using its absolute/comparative advantage
comparative
A trade (surplus/deficit) occurs when the value of imports exceeds the value of exports.
deficit
Mercantilist writers argued that trade deficits represented (a favorable/an unfavorable) balance of trade.
an unfavorable
In a balance of international payments, exports are listed as (credit/debit) items.
credit
The Paris Conference of 1867 set most of the world on ___ exchange rate system based on the ___ standard/
fixed, gold
True or false: Mercantilists thought that trade surpluses were good because they meant gold would flow into the home country.
True
Mercantilist writes argues that trade deficits represented (a favorable/an unfavorable) balance of trade.
an unfavorable
A trade (surplus/deficit) occurs when the value of imports exceeds the value of exports.
deficits
What law was passed in 1914 to clarify and strengthen the Sherman Act?
the Clayton Antitrust Act
Young nations are usually (creditor/editor) nations.
debtor
Are trade patterns dictated by absolute or comparative advantage in producing a good if it ____
can produce that good at a lower opportunity cost / lower relative price
If Country A is more efficient than country B in the production of all goods, is it possible for country A to benefit trading with country B?
yes
A trade (surplus/deficit) occurs when the value of exports exceeds the value if imports.
surplus
With one hour of labor, country A can produce either one shirt or 4 apples. With the same amount of labor, country B can produce either two shirts or 10 apples. Which country has the comparative advantage in apples?
Country B
With one hour of labor, country A can produce either one shirt or 4 apples. With the same amount of labor, country B can produce either two shirts or 10 apples. Which country has the comparative advantage in shirts?
Country A
What is a balance of international payments?
an measure of the flow of products and capital resources between a country and the rest of the world
Define import.
a good or service produced in a foreign country and purchased by domestic consumers
A nation that produces a good with a low opportunity cost is using its absolute/comparative advantage
comparative
At present, fifty Canadian dollars are worth (less/more) than fifty American dollars.
less
A trade (surplus/deficit) occurs when the value of imports exceeds the value of exports.
deficit
Mercantilist writers argued that trade deficits represented (a favorable/an unfavorable) balance of trade.
an unfavorable
In a balance of international payments, exports are listed as (credit/debit) items.
credit
The Paris Conference of 1867 set most of the world on ___ exchange rate system based on the ___ standard/
fixed, gold
True or false: Mercantilists thought that trade surpluses were good because they meant gold would flow into the home country.
True
Mercantilist writes argues that trade deficits represented (a favorable/an unfavorable) balance of trade.
an unfavorable
A trade (surplus/deficit) occurs when the value of imports exceeds the value of exports.
deficits
What law was passed in 1914 to clarify and strengthen the Sherman Act?
the Clayton Antitrust Act
If an item causes us to use up our stock of foreign currency, it counts as a (credit/debit) in our balance of international payments.
debit
if the money supply increases and the price level remains constant, what will happen to gdp
it will increase
true or false: milton friedman showed that the velocity of money was fairly stable from the 1940s to 1970
true
federal reserve policies are referred to as ____ policies
monetary
what does Q stand for in the equation of exchange
quantity of output
if the velocity of money increases and the price level is constant, what happens to gdp
gdp increases
if the velocity of money increases and the price level increases at the same rate, waht happens to gdp
gdp remains constant
the federal advisory council has how many members
12
what is the velocity of money
how quickly money circulates from the part to party in the economy; the higher the velocity, the more frequently money is spent
what does p stand for in the equation of exchange
price level
why is it sometimes difficult to attract foreign investment to less developed countries
political stability is lacking, and risk is high
what sorts of social values might be different in a less developed country than in the united states
there might be a different work ethic, or a different belief in the role of the free market, or in the right of women to work, or even in the idea of punctuality
states general spend the most money on
education
how do birth rates compare in developed versus developing countries
developing countries have much higher birth rates
specialization oand trade have (raised/allowed) standards of living in the world
raised
less developed countries generally have (higher/lower) birth rates and (higher/lower) literacy rates than developing and developed countries
higher, lower
tax revenues are usually intended to provide what type of good
public good
what type of goods must be provided by government if they are to exist at an adequate level
public goods
what are some examples of less developed countries
bhutan, afghanistan, rwanda, el salvador, bangladesh, nigeria
what do incentives cause people to do
risk their resources or manage their private properrty in a productive and or responsible way
classify the development status of a country with a per capita gdp of $7500
developing
what constitutes a developed country
a country with a per capita gdp of over $10,000
what is a less developed country
a country with a per capita gdp of under $3000
classify the development of a country with a per capita gdp of $3001
developing
which country has officially began measuring “gross national happiness”
bhutan
a natino with a per capita gdp of $7000 would be classified as having a (developed/developing/ less-developed) economy
developing
Investment represents about _% of GDP in the United States.
15
How much was the U.S> per capita GPD in 1998
$31,437
Randy decides to leave his job in New York and travel to Morocco, then back to California , where he is looking for a new job. What kind of unemployment data?
frictional
Defines the labor force
every ccillian age 16 or older who has a job or is seeking one. Millitary personal and convicts do not count.
What is the Labor Force Participation Rate?
The percentage of the iliasm population in the labor force out of everyone who could be in the labor force.
What government agency keeps track of unemployment data?
the Bureau of Labor Statistics
The EMployment Act of 1946 most targeted what kind of unemployment.
cyclical unemployment
When did the Employment act of 1946 expire?
2000
About what percentage of workers earning the federal; minimum wage are 20 years or older?
75%
How many times more likely is someone who has not gone to college to earn the minimum wage than someone who has graduated form college?
twice as likely
What government agency measures the Consumer PiceIndex
teh Bureau of Labor Statistics
is a trade deficit always bad
not necessarily
real wages increase/decrease as a result of trade
increase
a nation benefits by specializing in the goods in which it has a _ advantage
comparative
with one hour of labor, country A can produce either one shirt or 4 apples. with the same amount of labor, country B can produce either two shirts or 10 apples. if the two countries trade with each other which will export shirts
country A will export shirts to country B in exchange for apples
a nation that is more productive than another nation in a certain good has an absolute advantage/ a comparative advantage in that good
an absolute advantage
country A can produce a good at a lower cost than country B. should country A export this good it country B
not necessarily. country a has an absolute advantage in this good, but country B may have the comparative advantage
if an item provides us with more foreign currency, it counts as a credit/debit in our balance of international payments
credit
the relationship between the value of a nations exports and the value of it imports is called the trade_
balance
the U.S. is the largest _ of corn in the world
exporter
in a balance of international payments, imports are listed as _ items
debit
exchange rate
the price of a nations currency expressed in terms of the value of another
comparative advantage
the ability of one country to produce a good at lower opportunity cost with a greater efficiency relative to other goods than another country
export
a good or service produced domestically and sold to consumers in another country
if the american dollar appreciates versus the japanese yen, it will be worth_ compared to the yen
more
absolute advantage
the ability of one country to produce a good more efficiently at a lower cost than another country
if country A is less efficient than country B in the production of all goods, is it possible for country A to benefit by trading with country B
yes
true or false the wto has en enforcement system
true
the wto has about how many members
over 140
the united auto nation union opposed or supported the creation nafta
opposed
which countryies beling to mercosur
brazil argentina and paraguay and uruguay are full members. Chile and Bolvia are associates
Which two countries will join the EU in 2007?
Romania and Bulgaria
Name the original 15 countries in the EU
France, Germany, Belgium, Italy, Sweden, Denmark, Austria, United Kingdom, Ireland, Luxembourg, the Netherlands, Spain, Portugal, Greece, Finland
The major fear felt by opponents of NAFTA was that it eould result in
a loss of American jobs to less expensive mexican ones
The goals of GATT included (increasing or reducing) tarrifs
reducing
One goal of NAFTA was to eliminate all _____ among the US, Canada, and MExico over a period of ten to fifteen years
tarrifs
What is the current name of the organization formerly known as European Community?
the EU
Where is the World Bank headwuartered?
Washington D.C.
Many nations imposed trade ________ on South Africa when it was under apartheid system
sanctions
What round of GATT talks were completed in 1993?
The Uruguay round
Who is the current president of the World Bank (in 2005)?
Paul Wolfowitz
What ten european nations joined the EU in 2004?
Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithiuana, Malta, Poland, Slovakia, Slovenia
which part of the world trade organization settled trade disputes
the dispute settlement body
what is the main european trade association
the EU
what was the most signifacnt achievement to emerge from the urugay round
work toward the formation of the WTO
what is the term for when pnce ocuntry exports a large number of goods to another country at prices much lower than domestic prices
dumping
this is a south american free trade associaiton
mercosur
the united states was forced by the WTO to remove tariffs on what calss of goods
steel
what is a free trade assocation
a grop of countries that agreed to have free trade
if the contry is suffering a currency crisis to which organiation would they turn to for help
The IMF
what countireds belong to NAFTA
us, mexico, canada
why did the united autoworkers union oppose the creation of nafta
they feared that union workers would lose their jobs to mexico
trade sancitons are intended to (help or hurt) the ecnomies of the nations in which they are opposed
hurt
which agreement began the development of the andean
the careageana agreement of 1969
What federal agency was created to prohibit “unfair methods of competition”
the federal trade commission
if an item causes us to use up our stock of foreign currency, it counts as a (credit/debt) in our balance of international payments
debit
when was the federal trade commission established
1914
in a balance of international payments, exports are listed as (credit/debit) items
credit
if an item provides us with more foreign currency, it counts as a (credit/debit) in our balance of international payments
credit
the relationship between the value of a nation’s exports and the value of its imports is called the trade _____.
balance
a tred (surplus/deficit) occurs when the value of exports exceeds the value of imports
surplus
The United States emerged from WW1 as a new (creditor/debtor) nation.
creditor
in a balance of international payments, imports are listed as (credit/debit) items.
debit
define export
a good or service produce domestically and sold to consumers in another country
young nations are usualy (creditor/debtor) nations
debtor
what is a alance of international payments
an measure of the flow of products and capital resources between a country and the rest of the world
how does a country pay for a trade deficit
it mus either run down its assets or owe money
what law made it illegal to monopolize any pat of trae r commerce among the several states and outlawed any combination or conspiracy in restraint of trade
the sherman antitrust act of 1890
is a trade deficit always bad
not necessarily
T/F : Mercantilists thought that rtrade surpluses were good becase they meant gold would flow into the home country
true
what is a multilateral trade sanction
a trade restriction imposed by several allies against one or more nations
what did the maastricht treaty accomplish
it ended border controls a tariffs and began monetary coordination among members of the European Community
what is an embargo
a ban on the trade of a good, or ban on trade with a nation altogether
why do protectionists wish to assist infant industries by restricting trade
they believe that infant industries stand a better chance of surviving if established foreign competitors are not allowed to drive out of business
the United states has traditionally been a (high-tariff/low-tariff) nation
high-tariff
true or false: in the year 2000, the united states lifted some trade sanctions against Cuba on medical and agricultural god.
true
what is the official definition of unemployment?
A person is unemployed if he or she is not currently working and is either waiting for recall after being laid of or has actively looked for work in the last four weeks.
according to Okun’s law, if GDP falls 2% relative to potential GDP, by how much does the unemployment rate increase?
1%
What is branding?
Product differentiation; convincing the consumer that a particular firm has a “better” product even though the products in the market may all be quite similar.
What is frictional unemployment?
the unemployment of people who are between jobs.
What is inflation?
a rise in the general price level in an economy.
What is hyperinflation?
an extremely high rate of inflation.
when the prices of factors of production increase rapidly, what kind of inflation is likely to result?
cost-push inflation.
If you’re over your head in debt, do you like or dislike inflation?
Like it? you love it.
At higher interest rates, individual save money?
more
credit cards are part of which money supply definition?
None; a credit card transaction is like a short-term lone.
the measures the largest variety of price levels?
GDP deflator
which of the following is the most liquid: a checking account, a savings, or a government bond?
a checking account
Individuals are more likely to invest in stock if interest rates are?
low
A checking account is also know as a _____ deposit.
demand
Name two unemployment/ inflation combinations NOT shown in the phillips curve.
high unemployment and high inflation; low unemployment and low inflation
what constitutes m1?
currency, checking accounts and traveler’s checks
how do interest rates give individuals an incentive to save?
interest compensates individuals for putting money in savings.
if you keep all your money in cash, hidden under your bed, do you like or dislike inflation?
dislike
what do the CPI, the PPI, and the GDP deflator have in common?
all are measures of the current price level
interest can be seen as the (price/quantity) of money.
price- interest is the cost of borrowing money
true or false: the U.S. dollar is an example of fiat money.
true
what does inflation do to the price level of an economy?
it raises the pice level
Explain why Gresham’s law holds.
consumers hoard currency that is valuable rather than spending it. they spend currency that is less valuable. thus, a real gold coin that is stamped “25 cents” will be hoarded while a regular quarter is spent.
to what does liquidity refer?
the see with which money can be converted to cash.
Define “demand-pull inflation.”
Demand-pull inflation is the result of a shortage; demand in excess of supply causes consumers to bid the price level upward.
What is the Gresham’s law?
Bad money drives out good money.
