Lec/HW Pre Test 1 Flashcards
What are the three general requirements/institutions needed for economic growth?
- Rule of Law
- Private Property
- Political Stability
How many recessions have there been in the last 60 years?
11
Are recessions inevitable?
Yes
What is the generally accepted definition of a recession?
Two consecutive quarters of a downturn in GDP.
What is “utility?”
The satisfaction we receive from the consumption of a good or service.
Define “Marginal” with respect to economics.
Extra, additional, change
What is a budget deficient?
You spend more money than you receive.
When you have a national budget deficit over a large period of time you get ____.
Increasing national debt.
What are the three choices of economic system?
- Demand-driven (market)
- Command and control
- Mixed (1 and 2)
What are the six traits of a capitalistic system?
- Limited government involvement in the economy.
- Private property
- Systems of Markets and Prices
- Self Interest
- Competition
- Free enterprise
Larry Pays Simon Significant Compensation on Friday.
What is the stabilizing force in a capitalistic system?
The system of markets and prices.
Prices are a _____!
Signal
What is the driving force of economic growth in a capitalistic system?
Self-interest
What is the regulating force in a capitalistic system?
Competition
True or False
Physical capital is the same as economic capital.
True
True or False
Money is a resource.
Government is a resource
False
False
What is a parameter?
A value that ties or unites multiple variables.
What is a non-price determinant?
Something other than price that can alter supply or demand.
An example would be tastes and preferences (e.g. iPhone vs Samsung Galaxy)
What are the three laws of supply and demand?
- Law of Demand
- Law of supply
- Law of product equilibrium
What is the law of product equilibrium?
In a free enterprise, market forces will continually work via self-interest to direct price and quantity to the point where demand and supply intersect (equilibrium point).
True or False (Test Q)
A change in the quantity demanded does not mean that there is a change in demand.
True
True or False (Test Q)
A change in the quantity supplied does not equal a change in the supply.
True
Does a demand schedule tell you the market price?
No
A change in demand will result in a ____ of the demand curve.
Shift.
When the price is above the equilibrium price you will have a ______.
Surplus
When the price is below the equilibrium price you will have a _____.
Shortage
A change in a parameter results in a _____ of a given supply or demand curve.
Curve shift.
What are the non-price determinants of supply?
- Technology and productivity
- Regulation
- Price of resources/inputs
- Price of other goods and expectations on future prices.
- Taxes and subsidies
- Number of sellers/producers in the given market
Timothy Regularly Pays Petter Taxes Nightly
What are some examples of price ceilings?
- Rent control
2. Gas Prices
What are some examples of price floors?
- Minimum wage.
2. Cost of grain/corn/etc.
Whenever you have rent control you have a transfer of income from _____.
Landlord to the tenant.
Economics is
The study of how limited resources are allocated to satisfy unlimited wants.
Until 2008, the people of the fictitious nation of Dor relied mainly on private car companies to determine how many automobiles to produce. After 2008, the people of Dor have been relying on the Dor government to determine how many automobiles to produce. This represents a shift in the economic system of Dor from _____.
Market System to Central Planning.
Economists assume that an individual acts as if motivated by ______.
self-interest.
The ceteris paribus assumption means _____.
all other things being equal.
Factors of production include ___.
Land, labor, physical capital, human capital, and entrepreneurship.
Opportunity cost is _____.
Is the value of the next best alternative as a result of choosing some given alternative.
A production possibilities curve represents _____.
All possible combinations of output that could be produced assuming fixed productive resources and their efficient use.
A production possibilities curve that is bowed outward (from the origin) represents the concept that _______.
Production of additional units of one good requires that increasing quantities of the other good be given up.
True or False
The production possibilities curve will shift outward (upward, and or, to the right) when economic growth occurs.
True
The term “marginal utility” most closely aligns with which of the following phrases?
- Total Satisfaction
- Average cost
- Additional cost
- Additional satisfaction
Additional satisfaction
True or False
Per our lecture notes, the most common shape of the production possibilities curve is convex.
False
NOTE: The PPC is almost always drawn concave to the origin.
Which of the following economist suggested the concept of the invisible hand in regards to self-interest?
- Adam Smith
- Milton Friedman
- John Maynard Keynes
Adam Smith
Per the lecture notes, which of the following most closely defines economic capital?
- A manufactured aid to production
- A computer
- A manufacturing margin
- Storage capacity
A manufactured aid to production
Which of the following can be described as “human” resources?
- Entrepenurial Ability
- Labor
- Human Capital
- All of the above
All of the above
Which of the following is not characterized as a “resource”?
- Entrepenurial Ability
- Money
- Land
- All of the above
Money
Why do economists avoid making the distinction between wants and needs?
The term need is subjective making it difficult to distinguish between something someone wants and something they need.
When an individual proclaims the need for a new car, the person typically means:
- That without a new car, their life cannot go on.
- They want something they currently do not have.
- That having such a possession would be nirvana
- That their ability to get around will cease.
They want something they currently do not have.
Which of the following best demonstrates the concept of scarcity?
- A grocery store placing a limit on the number of items that can be bought.
- Michael has enough money to buy a book or a CD but not both.
- During WWII, meat was rationed.
- Before a blizzard, snow shovels sell out and more cannot be attained until after the store.
Michael has enough money to buy a CD, or a book, but not both.
Voluntary exchange ____.
Makes both parties to a trade better off.
True or False
Markets that are temporarily out of equilibrium will always return to equilibrium immediately.
False
Given the existence of relative scarcity, resources can be rationed by ____.
- Government Mandate
- A system of prices
- Queuing (standing in line)
True or False
Government-enforced prices such as price ceilings disrupt the rationing function performed by prices in a market system.
True
The city of New Haven has decided to impose rent controls on office buildings in the city. As a result of this, the new rent ceiling is _____ than equilibrium rent and there will be a ____ of rental offices.
lower
shortage
What is the main economic effect of price ceilings?
An effective price ceiling will lead to a shortage.
What is the economic effect of price floors?
Surpluses
