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EC 202 > Exam 1 - Practice Problems & Notes > Flashcards

Exam 1 - Practice Problems & Notes Flashcards

1
Q

Which of the following exemplifies a microeconomic question?

A

Will a new type of electronic reader or tablet increase the number of buyers?

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2
Q

Which of the following do economists consider to be capital?

A

A construction crane

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3
Q

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea of

A

scarcity and opportunity costs

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4
Q

From and economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the

A

marginal cost of waiting is greater than the marginal benefit of being served

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5
Q

Which of the following is consistent with the law of demand?

A

An increase in the price of hamburgers causes buyers to buy fewer hamburgers

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6
Q

Which of the following would most likely increase the demand for gasoline?

A

The expectation by consumers that gasoline prices will be higher in the future

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7
Q

Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an

A

increase in the quantity of A demanded and a decrease in the demand for B

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8
Q

If a subsidy is provided for the production of good X, this will shift the:

A

supply curve for X to the right

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9
Q

Farmers withholding some of their current corn harvest from the market because they anticipate a higher price of corn in the near future would cause a

A

leftward shift in the current supply of corn

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10
Q

Which one of the following would not affect the position of the supply curve for cranberries?

A

Popularity of cranberry drinks

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11
Q

An increase in demand for oil along with a simultaneous increase in supply of oil will

A

increase quantity, but whether it increases price depends on how much each curve shifts

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12
Q

The two reasons why bankruptcy is a false concern about the public debt are

A

refinancing and taxation

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13
Q

Which one of the following is not an example of final goods in national income accounting?

A

lumber and steel beams purchased by a construction company

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14
Q

A business buys $5,000 worth of inputs from other firms in order to produce a product. The business makes 100 units of the product and each of them sells for $65. The value added by the business to these products is

A

1,500

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15
Q

Which of the following is included in GDP?

A

Fees received by stockbrokers

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16
Q

In November 2009, Econland Motors produced an automobile that was delivered to a local dealership in December 2009. The auto was then sold to Sharon Smith for personal use in February of 2010. Following national income accounting practices, this auto would be counted as part of

A

investment in 2009 and negative investment in 2010

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17
Q

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($35), exports ($22), personal consumption expenditures ($2,460), and government purchases ($470). What is GDP in this economy?

A

$3,237 billion

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18
Q

A large underground economy results in an

A

understated GDP

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19
Q

Economic growth in the U.S. since 1950 has been characterized by an

A

average growth rate in real GDP that is faster than the growth rate of the population

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20
Q

Use the list below to answer the next question.
1. Improvements in technology.
2. Increases in the supply (stock) of capital goods.
3. Purchases of expanding output.
4. Obtaining the optimal combination of goods, each at least-cost production.
5. Increases in the quantity and quality of natural resources.
6. Increases in the quantity and quality of human resources.
Which set of items in the list would shift an economy’s production possibilities curve outward?

A

1, 2, 5, and 6.

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21
Q

Suppose there are two economies, Alpha and Beta, that have the same production possibilities curves. If Beta devotes more resources to produce capital goods than consumer goods as compared to Alpha, then in the future

A

Beta will experience greater economic growth than Alpha.

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22
Q

A nation’s real GDP was $250 billion in 2013 and $265 billion in 2014. Its population was 120 million in 2013 and 125 million in 2014. What is its real GDP growth rate in 2014?

A

6.0%

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23
Q

A nation’s average annual real GDP growth rate is 3%. Based on the “rule of 72,” the approximate number of years that it would take for this nation’s real GDP to double is

A

24 years

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24
Q

The study of decision making at its core.

A

Economics

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25
Q

Looking at the economy on a small scale level.

A

Microeconomics

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26
Q

Looking at the economy on a large scale level.

A

Macroeconomics

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27
Q

The foundation of all productive activity.

A

Resources

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28
Q

Any item whether it is a gift of nature, results of production, or results of human effort that is used to produce goods and services.

A

Factors of Production

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29
Q

Resources (4)

A

Land
Labor
Capital
Entrepreneurial Ability

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30
Q

Any natural resource used in production.

A

Land

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31
Q

Any physical or mental activity used to produce goods or services.

A

Labor

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32
Q

Any tool, machine, infrastructure, or knowledge used to produce goods and services.

A

Capital

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33
Q

Any tangible item that can increase productivity.

A

Physical Capital

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34
Q

The knowledge and the skills that people acquire in order to increase their productivity

A

Human Capital

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35
Q

The talent or ability to combine land, labor, and capital to produce goods and services.

A

Entrepreneurial Ability

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36
Q

Having unlimited wants and having limited resources.

A

Scarcity

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37
Q

The value of your next best forgone alternative.

A

Opportunity Cost

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38
Q

Assumptions for Decision Making

A

Self-Interest
Marginal Decision Making
Optimization (Getting the most benefit)

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39
Q

Shown in a production frontier
Straight line production
Tradeoff is the same

A

Constant Opportunity Cost

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40
Q

The advantage to produce a good or service at a lower relative opportunity cost than another producer.

A

Comparative Advantage

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41
Q

A model that describes how goods, services, resources, and money flow back and forth in an economy.

A

Circular Flow Model

42
Q

Land, Labor, Capital, and Entrepreneurial Ability is bought and sold

A

Resource Market

43
Q

Brings together buyers and sellers for goods and services

A

Product Market

44
Q

Any place where or any mechanism by which buyers and sellers will interact to trade any goods, services or resources.

A

Market

45
Q

___ sets the price

A

The market

46
Q

A prince in economics which states that as the price of a good, service, or resource rises, the quantity demanded will decrease, and vice versa, all else held constant.

A

The law of demand

47
Q

3 factors of law of demand

A

Marginal benefit
Purchasing Power
Substitutes

48
Q

Increased preference for the good or service

A

Taste and Preferences

49
Q

A good for which there is a direct relationship for the demand for the good and income

A

Normal Good

50
Q

A good for which there is an inverse relationship for the demand for the good and income

A

Inferior Good

51
Q

If there is an increase in the number of buyers, it will shift the demand curve to the right and vice versa

A

Market size

52
Q

If you expect prices to go up in the future, demand now will increase

A

Expectations

53
Q

A good, service, or resource that is viewed as a replacement for one another

A

Substitutes

54
Q

A good, service, or resource that is used or consumed together

A

Complements

55
Q

A principle in economics that states that as the price of a good, service, or resource rises, the quantity supplied will increase, and vice versa, all else held constant

A

The law of supply

56
Q

A payment by businesses or firms to the government

A

Tax

57
Q

A payment by the government that the business doesn’t have to pay anything in return

A

Subsidy

58
Q

A minimum legal price at which a good, service, or resource can be sold

A

Price floor

59
Q

Taxes on quantities

A

Excise Tax

60
Q

A situation in which a government receives more revenue than it spends in a given fiscal year

A

Budget Surplus

61
Q

A situation in which a government receives less revenue than it spends in a given fiscal year

A

Budget Deficit

62
Q

A situation in which the government spends exactly what it collects in revenue in a given fiscal year

A

Balanced Budget

63
Q

Accumulation of all budget deficits and surpluses by a government

A

National Debt

64
Q

The market value of all final goods and services produced in an economy in a fixed period of time

A

Gross Domestic Product (GDP)

65
Q

The GDP measure in which quantities produced are valued at current year prices

A

Nominal Gross Domestic Product

66
Q

Any good or service that are sold to the end user and not used to produce something else for subsequent sale

A

Final Goods and Services

67
Q

Goods that are used to make or build another product that are subsequently sold

A

Intermediate Good

68
Q

GDP Formula

A

Consumption + Gross Investment + Government Purchases + Net Exports

69
Q

All expenditures made by households on goods and services, like clothing, food, electronics and recreation, during a given time period

A

Consumption

70
Q

Goods that have an average useful life of 3 years or more

A

Consumer Durables

71
Q

Goods that have an average useful life of less than 3 years

A

Consumer Nondurables

72
Q

Output often intangible of direct activities of another person

A

Services

73
Q

All final goods purchased by federal, state, and local governments during a given time period, as well as all final services purchased from labor resources

A

Government Purchases

74
Q

The dollar value of all new capital purchased (as investment) and the expansion of inventories in an economy during a fixed time period

A

Gross Investment

75
Q

Purchases by firms of new capital goods

A

Business Fixed Investments

76
Q

The purchases of new homes

A

Residential Investment

77
Q

Changes in inventories from one year to the next

A

Inventory Investment

78
Q

Inventory Investment

Postive if..
Negative if..

A

Positive if firms produce more than they sell

Negative if firms sell more than they produce

79
Q

The consumption of physical capital, or the value of capital that wears out, is used up, or becomes obsolete during a year

A

Depreciation

80
Q

The dollar value of all new capital purchased during a given time period.

A

Gross Investment

81
Q

Net investment =

A

Gross investment - Depreciation

82
Q

The difference between exports (goods made domestically and purchased by foreign consumers) and imports (goods made in other countries and purchased domestically).

A

Net Exports

83
Q

A positive net exports value:

A negative net exports value:

A

Exports are greater than imports

Imports are greater than exports

84
Q

An approach to measuring GDP that measures the value of all final goods and services in an economy during a time period using income generated

A

Income Approach

85
Q

Using the income approach you calculate GDP by including:

A

Indirect business taxes
Depreciation
Net foreign factor income
National income

86
Q

Total payments to owners of resources plus profits and losses; the sum of rent, wages, interest, and profits and losses to sole proprietors and firms

A

National Income

87
Q

The difference between payments received from resources owned in foreign countries and income earned by people in foreign countries from resources own domestically

A

Net Foreign Factor Income

88
Q

The consumption of physical capital, or the value of capital that wears out, is used up, or becomes obsolete during a year

A

Depreciation

89
Q

Taxes paid by businesses, such as property taxes, sales taxes, excise taxes, license fees, and tariffs

A

Indirect Business Taxes

90
Q

A general increase in prices of goods and services

A

Inflation

91
Q

A metric that we use to keep prices constant and compare prices over time

A

Real GDP

92
Q

How do you calculate real prices?

A

Use the prices from year one with the year two quantities to be able to compare real production changes

93
Q

The profits and losses earned by individual proprietors

A

Proprietors Income

94
Q

Profits and losses of corporations

A

Corporate Income

95
Q

A price index based on all the goods and services that are counted as part of GDP

A

GDP Price Index

96
Q

Calculate GDP price index?

A

(Nominal GDP 1 / Real GDP 1)

x 100

97
Q

Problems with GDP

A 
Home production
Underground economy
Intangibles
Resource Depletion
Externalities
98
Q

The level of overall well-being enjoyed by an average individual, group, or society

A

Standard of Living

99
Q

An increase in real GDP or an increase in real GDP per capita

A

Economic Growth

100
Q

Economic Growth can occur if:

A

We obtain additional resources

We invent new technologies

Existing resources become more productive

101
Q

The rate of change of a variable over a specific period of time; usually expressed as a percentage change

A

Growth Rate

102
Q

Growth rate formula

A

(GDP2-GDP1)/GDP1

x 100

EC 202 (4 decks)

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