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Final Flashcards

1
Q

The basic concern of economics

A

To study the choices people make

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2
Q

When were forced to make choices

A

scarcity

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3
Q

The concept of scarcity indicates

A

almost all goods have alternative uses

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4
Q

A free good is

A

a good with no opportunity cost

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5
Q

The fundamental economic questions every society must answer

A

What
How
For whom

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6
Q

Opportunity cost is

A

The highest valued alternative choice that could have been made

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7
Q

The economic way of thinking includes

A

emphasis on how choices are made at the margin

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8
Q

A statement of hypothesis or fact

A

positive

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9
Q

Statements that make value judgements

A

normative

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10
Q

Unemployment and inflation are

A

major topics in macroeconomics

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11
Q

Economic resources used on the production process

A

factors of production

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12
Q

Capital

A

a factor of production that has itself been produced

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13
Q

Increasing the level of education will

A

lead to workers possessing greater human capital

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14
Q

Human capital is

A

the set of acquired skills and abilities that workers bring to the production process

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15
Q

Technology

A

knowledge that can be applied to the production of goods and services

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16
Q

A person who seeks to earn profits by finding ways to organize factors of production and who bears the risk

A

an entrepreneur

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17
Q

The production possibilities curve represents the fact that

A

if all resources of an economy are being used, more of one good can only be produced if less of another good is produced

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18
Q

An economy is said to have a comparative advantage if it

A

has the lowest cost for producing a particular good

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19
Q

The concept of comparative advantage is based on

A

relative opportunity costs

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20
Q

The law of increasing opportunity costs is a result of the fact that

A

resources are not equally productive in all output categories

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21
Q

The law of increasing opportunity costs is associated with the slope of the

A

production possibilities curve

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22
Q

If all factors of production that are available for use under current market conditions are being utilized, then the economy has

A

full employment

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23
Q

When economists study the behavior of buyers, they are studying

A

demand

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24
Q

A decrease in the price of eggs will result in

A

a greater amount of eggs demanded

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25
A shift in the demand curve to the right, all other things unchanged, will
increase price and quantity
26
If income increases what happens to the market for steak
The equilibrium price falls, and the equilibrium quantity rises
27
If the price of oranges rises, what happens to the market for apples (a substitute for oranges)?
The equilibrium price and quantity rise
28
An example of a demand shifter
consumer preferences
29
If people demand more of product A when the price of B falls, then A and B are
compliments
30
If demand decreases
the demand curve shifts left
31
The slope and location of the demand curve depends on
of buyers tastes incomes
32
How a supply curve is sloped and located depends on
technology resource prices the number of producers or sellers
33
If the price of a good increases, one would expect
the quantity supplied to increase
34
A decrease in supply is caused by
An improvement in the technology for producing the good
35
The intersection of the supply and demand curves indicates that
The market is in equilibrium
36
If the quantity supplied in a market exceeds the quantity demanded, the price would be expected to
increase
37
In the personal computer industry, the reason for the fall of prices and the increase in quantity after 1980 was
primarily due to technological change and an increase in the number of sellers
38
A minimum price set above the equilibrium price
price floor
39
The value at current market prices of the final goods and services produced during a particular period
gross domestic product
40
A complete business cycle is defined as the passage from
one peak to the next peak
41
The point on a business cycle when real GDP stops falling and starts rising
trough
42
Inflation
increase in the average level of prices
43
When inflation is not anticipated
lenders will be hurt and borrowers benefit
44
According to the official unemployment rate, a person who is not working and not looking for work
not a member of the labor force
45
If the labor force totals 100million workers and 5 million are unemployed but actively seeking work, then the unemployment rate is
unemployment/labor force | 5million/100million = 5%
46
The rate of unemployment that exists when the economy is at full employment
The natural rate of unemployment
47
Unemployment that exists because it takes workers and employers time to find one another
frictional unemployment
48
The relationship between the total quantity of goods and services demanded and the price level, all other determinants of spending unchanged
aggregate demand
49
The level of output achieved when the economy achieves its natural level of employment is
potential output
50
The wealth effect suggests
A negative relationship between the price level and consumption spending
51
The interest rate effect is the tendency for changes in the price level to affect
The quantity of investment demanded, and therefore interest rates
52
Aggregate demand changes in response to a change in
All of the above (The total amount of consumer goods and services demanded at every price level The total amount of investment demanded by firms at each price level The value of net exports demanded at each price level)
53
Real GDP eventually moves to its potential output level because in the long run all
wages and prices are assumed to be flexible
54
The long-run aggregate supply curve is
vertical at potential output
55
The intersection of the economy's AD and LRAS curves
All of the above (Determines its equilibrium real GDP in both the long run and short run Determines its equilibrium price level in both the long run and the short run Occurs at the economy's potential output)
56
The short-run aggregate supply curve is
All of the above (A graphical representation of the relationship between production and the price level in the short run A result of stickiness or inflexibility of some prices and wages Drawn holding constant the capital stock, factor prices, and technology)
57
Changes in the short run aggregate supply can be caused by changes in
the price level
58
If the short-run aggregate supply curve and the demand curve intersect to the left of the long-run aggregate supply curve there will be
a recessionary gap
59
An inflationary gap occurs if
unemployment is less than the natural rate
60
Economic growth is most closely related to
long-term changes in the standard of living
61
Economic growth is defined in terms of
All of the above (An outward shift in the production possibilities curve A series of events that increase the economy's ability to produce goods and services A process that increases potential output)
62
Given an upward sloping supply curve for labor, an increase in the demand for labor will cause the long-run aggregate supply curve to
shift to the right
63
In the long run, economic growth can be expected to lead to
All of the above (increase in consumption increase in the capital stock outward shifts in the production possibilities curve)
64
The medium of exchange function means that money is used
to pay for goods and services
65
An economic system that lacks a medium of exchange is
a barter system
66
When a person makes price comparisons among products, money is being used as
A unit of account
67
Inflation of the general price level reduces the ability of money to serve as a
store of value
68
Money that has value apart from its use a money is
commodity money
69
The total quantity of money in the economy at any one time
the money supply
70
The ease with which an asset can be converted into money
liquidity
71
An institution that collects money from lenders and distributes these funds to borrowers is
a financial intermediary
72
A bank's reserves are
Assets banks hold that they can use against deposit liabilities
73
A bank's excess reserves
may equal zero
74
If a bank has 100,000 in checkable deposits and 30,000 in reserves, and the required reserve ratio is 20%, the bank can make loans equal to
$10,000 100,000 X .20 = 20,000 30,000-20,000 = 10,000
75
An increase in the reserve requirement would
have a contractionary effect on the economy
76
The cost to a member bank of borrowing from the federal reserve bank is measured by the
discount rate
77
The tool of monetary policy that involves the fed buying and selling government securities is
open market operations
78
The payment for the use of money
interest rate
79
The relationship between the quantity of money people want to hold and the factors that determine the quantity is the
demand for money
80
The money people hold for contingencies that they know might occur, but at an uncertain time and in an uncertain amount
precautionary demand
81
demand for labor is based on
derived demand for goods and services
82
individual supply of labor based on
reciprocal of demand or leisure
83
income effect: | substitution effect:
cause people to work less | cause people to work more
84
3 components of interest (discount) rates
inflation risk premium real rate
85
3 types of demand for money
precautionary transactional speculative

Macroeconomics (4 decks)

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