Quiz 1

Question 1

Bonds

Answer 1

A certificate of debt issued by a company or a government to an investor

Question 2

Budget Deficit

Answer 2

When a government spends more than it collects in tax revenues in a given year

Question 3

Business Cycle

Answer 3

A model showing the short-run periods of contraction and expansion in output experienced by an economy over time

Question 4

Capital

Answer 4

Human-made resources (machinery and equipment) used to produce goods and services; goods that do not directly satisfy human wants. Sometimes separated into human capital (education, know-how) and physical capital (tools you can touch and operate)

Question 5

Ceteris Paribus

Answer 5

“Other things being equal” used as a reminder that all variables other than the ones being studied are assumed to be constant

Question 6

Circular Flow Diagram

Answer 6

A model of the macroeconomy that shows interconnectedness of businesses, households, government, banks, and foreign sectors. Money flows in a circular direction, and goods, services, and resources flow in the opposite direction

Question 7

Comparative Advantage

Answer 7

When an individual, a firm or a nation is able to produce a particular product at a lower-opportunity cost than another individual, firm, or nation. Comparative advantage is the basis on which nations trade with one another.

Question 8

Consumption

Answer 8

A component of a nation’s aggregate demand; measures the total spending by domestic households on goods and services

Question 9

Economic Growth

Answer 9

An increase in the potential output of goods and services in a nation over time.

Question 10

Economic Resources

Answer 10

Land, Labor, capital, and entrepreneurial ability that are used in the production of goods and services. They are “economic” resources because they are scarce (limited supply and desired). Also known as “factors of production.”

Question 11

Human Capital

Answer 11

The value skills integrated into labor through education, training, knowledge, and health. An important determinant of aggregate supply and the level of economic growth in a nation

Question 12

Macroeconomics

Answer 12

The study of entire nations’ economies and interactions between households, firms, government, and foreigners.

Question 13

MIcroeconomics

Answer 13

The study of the interactions between consumers and producers in markets for individual products.

Question 14

Productivity

Answer 14

The output per unit of input of a resource. An important determinant of the level of aggregate supply in a nation.

Question 15

Scarcity

Answer 15

Something is scarce when it is both desired and limited in supply.

Question 16

Wealth

Answer 16

An important determinant of consumption. Wealth is the total value of a households assets minus all its liabilities.