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Question 1

Aggregate

Answer 1

A collection of specific economic units treated as if they were one. For example, all prices of individual goods and services are combined into a price level, or all units of output are aggregated into gross domestic product.

Question 2

Budget Line

Answer 2

A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products’ prices

Question 3

Barter

Answer 3

The exchange of one good or service for another good or service

Question 4

Capital

Answer 4

Human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants.

Question 5

Circular Flow Diagram

Answer 5

An illustration following the flow of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and from households to firms.

Question 6

Consumer Sovereignty

Answer 6

Determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy; consumers’ direction of production through their dollar votes.

Question 7

Creative Destruction

Answer 7

The hypothesis that the creation of new products and production methods simultaneously destroys the market power of existing monopolies.

Question 8

Division of Labor

Answer 8

The separation of the work required to produce a product into a number of different tasks that are performed by different workers; specialization of workers.

Question 9

Dollar Votes

Answer 9

The “votes” that consumers and entrepreneurs cast for the production of consumer and capital goods, respectively, when they purchase those goods in product and resource markets.

Question 10

Economic Growth

Answer 10

An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; an increase of a real output (gross domestic product) or real output per capita.

Question 11

Economic Perspective

Answer 11

A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions.

Question 12

Economic Principle

Answer 12

A widely accepted generalization about the economic behavior of individuals or institutions.

Question 13

Economic Resources

Answer 13

The land, labor, capital, and entrepreneurial ability that are used in the production of goods and services; productive agents; factors of production

Question 14

Economics

Answer 14

The social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

Question 15

Economic System

Answer 15

A particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method of organizing in economy, of which the market system and the command system are the two general types.

Question 16

Entrepreneurial Ability

Answer 16

The human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risks.

Question 17

Factors of Production

Answer 17

Economic resources: land, capital, labor, and entrepreneurial ability.

Question 18

Freedom of Choice

Answer 18

The freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in a manner that they think is appropriate.

Question 19

Freedom of Enterprise

Answer 19

The freedom of firms to obtain economic resources, to use those resources to produce products of the firm’s own choosing, and to sell their products in markets of their choice.

Question 20

Investment

Answer 20

In economics, spending for the production and accumulation of capital and additions to inventories.

Question 21

Labor

Answer 21

Peoples physical and mental talents and efforts that are used to help produce goods and services.

Question 22

Land

Answer 22

natural resources used to make goods and services

Question 23

Macroeconomics

Answer 23

The part of economics concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors; and with measures of the total economy

Question 24

Marginal Analysis

Answer 24

The comparison of marginal (extra or additional) benefits and marginal costs, usually for decision making.

Question 25

Market

Answer 25

Any institution or mechanism that brings together buyers and sellers of a particular good or service

Question 26

Medium of Exchange

Answer 26

Any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter.

Question 27

Microeconomics

Answer 27

The part of economics concerned with decision making by individual units such as a household, firm, or an industry in with individual markets, specific goods and services, and product and resource prices.

Question 28

Money

Answer 28

Any item that is generally acceptable to sellers in exchange for goods and services

Question 29

Normative Economics

Answer 29

The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.

Question 30

Opportunity Cost

Answer 30

The amount of other products that must be forgone or sacrificed to produce a unit of a product

Question 31

Other-Things-Equal Assumption

Answer 31

the assumption that factors other than those being considered are held constant

Question 32

Positive Economics

Answer 32

the analysis of facts or data to establish scientific generalizations about economic behavior

Question 33

Private Property

Answer 33

The right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property

Question 34

Production of Possibilities Curve

Answer 34

A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed.

Question 35

Product Market

Answer 35

A market in which products are sold by firms and bought by households.

Question 36

Specialization

Answer 36

The use of resources of an individual, a firm, a region, or a nation to concentrate production on one or a small number of goods and services

Question 37

Utility

Answer 37

The want - satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service

Question 38

Command System

Answer 38

A method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities; command economy; communism.

Question 39

Competitive

Answer 39

The presence in a market of independent buyers and sellers competing with one another along with the freedom of buyers and sellers to enter and leave the market.

Question 40

Consumer Goods

Answer 40

Products and services that satisfy human wants directly.

Question 41

Invisible Hand

Answer 41

The tendency of firms and resource suppliers that seek to further their own self interests in competitive markets to also promote the interests of society

Question 42

Law of Increasing Opportunity Costs

Answer 42

the principle that as the production of a good increases, the opportunity cost of producing an additional unit rises

Question 43

Market System

Answer 43

All the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy’s scarce resources and to communicate and coordinate the decisions made by consumers, firms, and resource suppliers.

Question 44

Resource Market

Answer 44

a market in which households sell and firms buy resources or the services of resources

Question 45

Scientific Method

Answer 45

The procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws

Question 46

Self-Interest

Answer 46

That which each firm, property owner, worker, and consumer believes is best for itself and seeks to obtain.