Macro Chapter 1 + Appendix A

Question 1

Name 3 kinds of graphs and briefly state when is most appropriate to use each type of graph

Answer 1

Bar graph: good for comparing quantities. Line graph: Illustrates a relationship between two variables. Pie graph: good for showing an overall group but can tricky when too many slices.

Question 2

What is slope on a line graph

Answer 2

Slope = Rise/run

Question 3

Why is a bar chart the best way to illustrate comparisons?

Answer 3

Because you can visually see the differences in sizes based on the heights of the bars.

Question 4

How does the appearance of positive slope differ from negative slope and from zero slope?

Answer 4

A positive slope starts low and increases when moving from left to right. A negative slope decreases when moving from left to right. A zero slope stays constant.

Question 5

What is scarcity? Can you think of two causes of scarcity?

Answer 5

Scarcity is when the human want/need for goods, services, and resources exceed what is available. Two causes are poor distribution of resources and an increase in supply/demand.

Question 6

Residents of the town of Smithfield like to consume hams, but each ham requires 10 people to produce it and takes a month. If the town has a total of 100 people, what is the maximum amount of ham the residents can consume in a month?

Answer 6

The max amount of ham that can be produced is 10.

Question 7

A consultant works for $200 per hour. She likes to eat vegetables, but is not very good at growing them. Why does it make more economic sense for her to spend her time at the consulting job and shop for her vegetables?

Answer 7

Because she specializes in consulting and makes more money than if she were to grow her own vegetables. She should be spending her time practicing her work for the greater good .

Question 8

A computer systems engineer could paint his house, but it makes more sense for him to hire a painter to do it. Explain why.

Answer 8

Because he specializes in computer systems and could hire someone who specializes in painting.

Question 9

What would be another example of a “system” in the real world that could serve as a metaphor for micro and macroeconomics

Answer 9

The study of planets (Micro) and the solar system (Macro)

Question 10

Suppose we extend the circular flow model to add imports and exports. Copy the circular flow diagram onto a sheet of paper and then add a foreign country as a third agent. Draw a rough sketch of the flows of imports, exports, and the payments for each on your diagram.

Answer 10

Draw a box outside the original circular flow to represent the foreign country. Draw an arrow from the foreign country to firms, to represents imports. Draw an arrow in the reverse direction representing payments for imports. Draw an arrow from firms to the foreign country to represent exports. Draw an arrow in the reverse direction to represent payments for imports.

Question 11

What is an example of a problem in the world today, not mentioned in the chapter, that has an economic dimension?

Answer 11

the AIDS epidemic. Why are so few AIDS patients in Africa and Southeast Asia treated with the same drugs that are effective in the United States and Europe? It is because neither those patients nor the countries in which they live have the resources to purchase the same drugs.

Question 12

The chapter defines private enterprise as a characteristic of market-oriented economics. What would public enterprise be?

Answer 12

Public enterprise is when factors of production are owned and operated by the government.

Question 13

Why might Belgium, France, Italy, and Sweden have a higher export to GDP ratio than the United States?

Answer 13

Because the US is a huge economic country, they have a less of a need to trade internationally.

Question 14

Give the three reasons that explain why the division of labor increases an economy’s level of production.

Answer 14

1. Specialization 2. People who specialize learn to produce wicker and with higher quality 3. economies of scale (ex. if you produce 100 cars, they will be more expensive. If you produce 1000 cars, you can charge less and sell more. )

Question 15

What are three reasons to study economics?

Answer 15

1. Solve major problems in the world today, understanding how economics works.
2. The important relationship between economics and good citizenship. Being able to vote intelligently on budgets, laws, and regulations
3. A basic understanding of economics will make you a well rounded thinker.

Question 16

What is the difference between microeconomics and macroeconomics?

Answer 16

Micro looks at specific roles within the economy while macro looks at the economy as a whole

Question 17

What are examples of individual economic agents?

Answer 17

Some example of individual economic agents are households, businesses, and workers.

Question 18

What are the three main goals of macroeconomics?

Answer 18

To create stable economic growth, to have full and low unemployment, and have stable prices

Question 19

How did John Maynard Keynes define economics?

Answer 19

Keynes define economics as how you go about hiking not what you think.

Question 20

Are households primarily buyers or sellers in the goods and services market? In the labor market

Answer 20

Households primarily are buyers

Question 21

Are firms primarily buyers or sellers in the goods and services market? In the labor market?

Answer 21

Firms are primarily sellers

Question 22

What are the three ways that societies can organize themselves economically

Answer 22

Command economy, market economy, traditional market economy.

Question 23

What is globalization? How do you think it might have affected the economy over the past decade?

Answer 23

Globalization is how open you are to other countries. The US imports more than we export which puts us in further debt.

Question 24

Command Economy

Answer 24

Government runs the show. People have no influence or input.

Question 25

Division of labor

Answer 25

Dividing up different parts of the one production to improve efficiency.

Question 26

Economics

Answer 26

Economics is the study of how humans make decisions in the face of scarcity

Question 27

Economies of Scale

Answer 27

a proportionate saving in costs gained by an increased level of production.

Question 28

“exports”

Answer 28

goods or services sent to another country

Question 29

fiscal policy

Answer 29

the means by which the government adjusts its spending levels and tax rates to monitor and influence a nations economy.

Question 30

goods and services market

Answer 30

households purchase consumable items and businesses sell their items.

Question 31

GDP

Answer 31

Gross Domestic Product

Question 32

Imports

Answer 32

Goods and services that a country pays to receive from another country

Question 33

Labor Market

Answer 33

the availability of labor and employment

Question 34

Macroeconomics

Answer 34

The part of economics that is concerned with large scale or general factors

Question 35

Market Economy

Answer 35

Market economy involves trade, heavy supply and demand, and heavy economic freedom.

Question 36

Traditional Economy

Answer 36

Relies on history and customs. Usually in rural and farm land areas. Not efficient.

Question 37

Underground Economy

Answer 37

The part of the economy that is untaxed and unregulated