Vocab Quiz 2

Question 1

Economics

Answer 1

Economics is the study of how to make the best possible use of scarce or limited resources to satisfy unlimited human needs and wants.

Question 2

Microeconomics

Answer 2

The study of the behaviour of individual consumers, firms, and markets and the determination of market prices and quantities of goods, services, and factors of production.

Question 3

Macroeconomics

Answer 3

The study of aggregate economic activity. It investigates how the economy as a whole works.

Question 4

Factors of production

Answer 4

Resources used in the production of goods and services; include land (natural resources), labour, capital and entrepreneurship.

Question 5

Land

Answer 5

One of the four factors of production that refers to the natural resources with which an economy is endowed; also referred to as “gifts of nature”.

Question 6

Labour

Answer 6

One of the four factors of production that refers to the physical and mental contribution of workers to the production process.

Question 7

Capital

Answer 7

Physical capital refers to means of production that include machines, tools, equipment and factories; the term may also refer to the infrastructure of a country. Human capital refers to the education, training, skills and experience embodied in the labour force of a country.

Question 8

Entrepreneur

Answer 8

Refers to the ability of certain individuals to organize the other factors of production (land, labour, capital) and their willingness to take risks.

Question 9

Rent

Answer 9

he income for the services of a piece of land collected by its owner

Question 10

Wages

Answer 10

Payment received by the factor of production labour, which is a certain amount per unit of time

Question 11

Interest rate

Answer 11

The cost of borrowing money or the reward for saving money over a period of time expressed as a percentage.

Question 12

Profit

Answer 12

The reward of entrepreneurship. They are defined as the difference between total revenues and total economic costs.

Question 13

Resources

Answer 13

A service or other asset used to produce goods and services that meet human needs and wants

Question 14

Scarcity

Answer 14

The limited availability of economic resources relative to society’s unlimited needs and wants of goods and services.

Question 15

Opportunity cost

Answer 15

The next best alternative foregone when an economic decision is made.

Question 16

Sustainability

Answer 16

Refers to the preserving the environment so that it can continue to satisfy needs and wants into the future.

Question 17

Free goods

Answer 17

Goods such as air or sea water that are not considered scarce and thus do not have an opportunity cost.

Question 18

Economic systems

Answer 18

Systems of production, resource allocation and distribution of goods and services within a society

Question 19

Planned Economy

Answer 19

An economy where the means of production (land and capital) are owned by the state. The state determines what/how much to produce, how to produce, and for whom to produce.

Question 20

Mixed economy

Answer 20

An economy that has elements of a planned economy and elements of a free market economy. In reality, all economies are mixed. What is different is the degree of the mix from country to country.

Question 21

Production possibility curve

Answer 21

A curve showing the maximum combinations of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and efficiently and the state of technology is fixed.

Question 22

Increasing Opportunity Cost

Answer 22

As you continue to increase production of one good, the opportunity cost of producing that next unit increases, resulting in a bow-shaped curve.

Question 23

Constant opportunity cost

Answer 23

When the opportunity cost stays the same as you increase your production of one good, resulting in a linear PPC

Question 24

Actual economic growth

Answer 24

Occurs when real output (real GDP) increases through time and is a result of greater or better use of existing resources.

Question 25

Circular flow of income model

Answer 25

A simplified illustration that shows the flows of income and expenditures in an economy.

Question 26

Leakages

Answer 26

Income not spent on domestic goods and services. It includes savings, taxes and import expenditure.

Question 27

Injections

Answer 27

Within the circular flow model these refer to spending on domestic output that does not originate from households and thus includes investment spending by firms, government expenditures and exports.

Question 28

Positive economics

Answer 28

Deals with areas of the subject that are capable of being falsified, or shown to be correct or not.

Question 29

Normative economics

Answer 29

Deals with areas of the subject that are open to personal opinion and belief, thus not subject to refutation.

Question 30

Refutation

Answer 30

A method used in the natural sciences and social sciences where any proposition must be subjected to an empirical test in order to see if it can be disproven or refuted. If it is disproven or refuted, then the proposition must be rejected.