HINTS

Question 1

the study of how humans make choices under conditions of scarcity

Answer 1

economics

Question 2

the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance

Answer 2

macroeconomics

Question 3

the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms

Answer 3

microeconomics

Question 4

the trend in which buying and selling in markets have increasingly crossed national borders

Answer 4

globalization

Question 5

all possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent; the boundary of the opportunity set

Answer 5

budget constraint

Question 6

when a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production

Answer 6

comparative advantage

Question 7

measures cost by what we give up/forfeit in exchange; opportunity cost measures the value of the forgone alternative

Answer 7

opportunity cost

Question 8

when it is impossible to produce more of one good (or service) without decreasing the quantity produced of another good (or service)

Answer 8

productive efficiency

Question 9

the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant

Answer 9

law of demand

Question 10

the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all other variables are held constant

Answer 10

law of supply

Question 11

is the accumulated knowledge (from education and experience), skills, and expertise that the average worker in an economy possesses.

Answer 11

Human capital

Question 12

area of a country, usually with access to a port where, among other benefits, the government does not tax trade

Answer 12

special economic zone (SEZ)

Question 13

unemployment that occurs because individuals lack skills valued by employers

Answer 13

structural unemployment

Question 14

a general and ongoing rise in price levels in an economy

Answer 14

inflation

Question 15

an inflation rate calculated using a fixed basket of goods over time tends to overstate the true rise in the cost of living, because it does not take into account that the person can substitute away from goods whose prices rise considerably

Answer 15

substitution bias

Question 16

an economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand

Answer 16

market economy

Question 17

unemployment closely tied to the business cycle, like higher unemployment during a recession

Answer 17

cyclical unemployment

Question 18

a measure of inflation that U.S. government statisticians calculate based on the price level from a fixed basket of goods and services that represents the average consumer’s purchases

Answer 18

Consumer Price Index (CPI)

Question 19

the total accumulated amount the government has borrowed, over time, and not yet paid back

Answer 19

national debt

Question 20

economy of a country that has demonstrated the ability to catch up to the technology leaders by investing in both physical and human capital

Answer 20

converging economy

Question 21

a good that can replace another to some extent, so that greater consumption of one good can mean less of the other

Answer 21

substitute

Question 22

the extra benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept

Answer 22

producer surplus

Question 23

Factors That Affect Demand

Answer 23

1. Income
2. Changes in taste or preference
3. Changes in the composition of the population
4. Changes in Expectation about Future Prices or Other Factors that Affect Demand

Question 24

Components of Economic Growth

Answer 24

1. Human Capital
2. Physical Capital
3. Technology

Question 25

When countries with lower GDP levels per capita catch up to countries with higher GDP levels per capita, we call the process convergence.

Answer 25

Economic Convergence

Question 26

the value of what is produced per worker, or per hour worked (sometimes called worker productivity)

Answer 26

labor productivity

Question 27

policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing

Answer 27

monetary policy

Question 28

the tax that must be paid on all yearly income

Answer 28

marginal tax rates

Question 29

the extra benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid

Answer 29

consumer surplus