Unit 1

Question 1

Which of the following are facts about the US economy? (Choose all that apply)

A. Most of the goods Americans buy are made in China

B. The United States is a relatively closed economy

C. Federal government jobs have grown rapidly over the past few decades

D. Chinese imports account for less than 20% of all imports into the United States

Answer 1

B, D

Question 2

A legislated maximum price is called a ___.

Answer 2

Price ceiling

Question 3

A(n) ___ refers to what certain resources could have been produced had they been used in “the best” alternative way

Answer 3

Opportunity Cost

Question 4

A ___ is a period of time during which the total output of the economy falls.

Answer 4

Recession

Question 5

A period of declining real GDP is known as a(n) ___.

Answer 5

Bust

Question 6

___ is a measure of the size of the economy - the total amount it produces in a year.

Answer 6

Gross Domestic Product (GDP)

Question 7

A legislated minimum price is called a ___.

Answer 7

Price floor

Question 8

As income increases, demand will decrease for ___ goods.

Answer 8

Inferior

Question 9

As income increases, demand will increase for ___ goods.

Answer 9

Normal

Question 10

A tax is ___ if the ratio of taxes to income rises as income rises.

Answer 10

Progressive

Question 11

An economy is considered relatively ___ if its exports and imports constitute a small share of GDP.

Answer 11

Closed

Question 12

When price controls (price ceilings or price floors) are imposed, what outcomes are likely to occur? (Choose all that apply)

A. Limits on the volumes of transactions

B. Efficient levels of investments across different industries

C. Misallocation of resources

D. Difficulties in enforcing price controls

Answer 12

A, C, D

Question 13

Which of the following are necessary conditions for specialization to occur? (Choose all that apply)

A. A system of exchange must be in place

B. Everyone must be equally productive at the same task

C. Individuals focus only on the tasks they prefer

Answer 13

A, B

Question 14

___ are the goods and services that consumers and others want to acquire.

Answer 14

Outputs

Question 15

___ are the labor, machinery, buildings, and natural resources used to make outputs.

Answer 15

Inputs or factors of production

Question 16

There are three bicycle shops in the city of Lafferville. Recently, one of the owners bought the other two shops. All three bicycle shops now coordinate their pricing and follow the same production process.

Most economists would agree that this scenario would likely lead to industrial ___.

Answer 16

Inefficiency

Question 17

Name the 4 determinants of supply. (Factors that, if changed, will cause a shift in the supply curve)

Answer 17

• Prices and availability of a related output (typically seen in a multiproduct industry)
• Prices of inputs

Technological progress

Size of the industry

Question 18

___ are sums of money that certain individuals receive as outright grants from the government rather than as payments for services rendered.

Answer 18

Transfer Payments

Question 19

True or False?

Economists today believe monetary and fiscal policy can help reduce the magnitude of fluctuations in real GDP.

Answer 19

True

Question 20

Which of the following are myths about the US economy? (Choose all that apply)

A. Business profits account for nearly one-third the price Americans pay for typical goods and services

B. More than 75% of what Americans buy is made in the United States

C. The standard of living in the United States (as measured by real GDP per person) is higher now than it was 50 years ago

D. Americans are among the most heavily taxed people in the world

Answer 20

A, D