Economics 1
Define scarcity
Limited resources, unlimited wants
Rational decision making in economics involves comparing an action’s:
marginal benefits and marginal costs
multiple opportunity costs
trade-offs
allocation of resources.
marginal benefits and marginal costs
Which statement describes the law of demand?
As prices rise, quantity demanded decreases.
As prices rise, demand decreases.
As prices fall, quantity demanded decreases.
As prices fall, demand decreases.
As prices rise, quantity demanded decreases
Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories?
Consumption, Investment, Government, Net Exports Consumption, Investment, Government, Business expenditures
Consumption, Interest Rates, Government, Net Exports Wages, Rent, Interest, Dividends
Consumption, Investment, Government, Net Exports
We measure economy growth with:
nominal GDP
nominal GDP per capita
real GDP
real GDP per capita.
Real GDP per capita
What is the difference between real and nominal values?
Real values are adjusted for inflation, while nominal values are not
Federal budget is a type of ___ policy
Fiscal
Name the four factors of production
Land, labor, capital, entrepreneurship
The consumer price index is an economic indicator of:
unemployment
inflation
productivity
sales
inflation
An example of structural unemployment in an economy is a person who is:
between jobs or entering the work force
unemployed due to a change in the business cycle
unemployed due to a seasonal downturn in business
without job skills that match the economy’s needs
Without job skills that match the economy’s needs
The combination of unlimited wants and limited resources is known as scarcity shortage surplus opportunity cost
What is scarcity?
What is the difference between opportunity cost and trade off?
The trade-off is the act of sacrificing an alternative choice, and opportunity cost is the value (cost) of that alternative choice
According to the Law of Supply, when the price of a good rises the:
supply of the good will decrease
supply of the good will increase
quantity supplied of the good will decrease
quantity supplied of the good will increase.
quantity supplied of the good will increase
To calculate the unemployment rate an economist would need the total number of unemployed people and which other number?
the inflation rate
the number of people in the labor force
the total number of discouraged workers
the total number of transactions in the resource market
the number of people in the labor force
Comparing real GDP between two consecutive years is MOST useful in determining which economic measurement?
economic growth
equity
exchange rates
equilibrium price
economic growth
What is commonly understood as the dual mandate for the Federal Reserve
Maximize employment, stable prices
Define GDP and give the full name
Gross Domestic Product, market value of all final goods and services made within a country's borders during a specific period
What are the 3 essential questions of economics?
What to produce, how to produce, for whom to produce
Aggregate supply and aggregate demand determine the:
price and quantity in an economy
inflation and unemployment in an economy
price level and real GDP in an economy
stage of the business cycle in the economy.
price level and real GDP in an economy
Subprime mortgages
How many consecutive quarters does it take to declare a recession and which agency in the US declares a recession?
2 consecutive quarters, National Bureau of Economic Research
State the law of diminishing returns
increasing a single factor of production while holding all other factors constant will eventually lead to a decrease in output
What are the two major players in the circular flow diagram?
Firms and households
What is comparative advantage?
When a country has the resources to produce something more efficiently than other countries
Name the four main types of economic systems
Traditional economy
Command/planned economy
Market economy
Mixed Market economy