Chapter 1 Short Answer
What is the US National Debt?
37 trillion
Adam Smith wrote that households and firms act as if they're led by...
a) An invisible string
b) An invisible hand
c) The natural laws of trade and competition
b) An invisible hand
The only thing that beats inflation is ____ ____.
scarce assets
Almost all economists agree that a large federal budget deficit _______.
a. implies we should restructure the welfare system
b. has an adverse effect on the economy
c. is highly desirable to keep an economy healthy
d. signals that we should increase subsidies to farmers
b. has an adverse effect on the economy
Trade off example
not going out with your friends and studying for your exam instead
Market Failure
a) when the market fails to allocate
society’s resources efficiently
b) When the stock market crashes and prices fall sharply
c) When businesses fail to make a profit
a) when the market fails to allocate
society’s resources efficiently
What is the rigged game?
go to school, get a job, retire
According to the circular-flow diagram, if Molly is an employee who delivers packages for Deliver Dynamite, she participates in the markets for _______.
a. goods and services exchanging packages for wages, rent, and profit
b. factors of production exchanging labor for income
c. factors of production exchanging packages for revenue
d. goods and services exchanging labor for income
b. factors of production exchanging labor for income
Define Opportunity Cost
What you sacrifice in order to do or get something else
Example of a broken market
a) stock market
b) healthcare market
c) clothing market
b) healthcare market
Factors of production: the resources the
economy uses to produce ____ & ____
goods and services
A survey of professional economists revealed that more than three-fourths of them agreed with a number of statements. Which of the following statement is NOT one of those propositions?
a. Flexible and floating exchange rates are not an effective international monetary arrangement.
b. A ceiling on rents reduces the quantity and quality of housing available.
c. Tariffs and import quotas usually reduce general economic welfare.
d. Fiscal policy has a significant stimulative impact on a less than fully employed economy.
a. Flexible and floating exchange rates are not an effective international monetary arrangement.
Markets consist of a group of ____ and _____
buyers ; sellers
What is the richest country per capita?
a) United States of America
b) Denmark
c) Singapore
c) Singapore
Production Possibilities Frontier
Which of the following steps does an economist not take when studying the economy?
a. Analyze data
b. Devise theories
c. Collect data
d. Create data in a laboratory
d. Create data in a laboratory
Who wrote the wealth of nations?
Adam Smith
Rational people make decisions by comparing
_____ and________.
a) marginal costs; marginal benefits
b) costs; benefits
c) opportunities; benefits
a) marginal costs; marginal benefits
The advice of economists is the only thing a policymaker has to consider when implementing a proposed policy.
True or False
False
Which of the following is an example of a positive, as opposed to normative, statement?
a. The world would be a better place without monopolies.
b. Everyone should receive free health care.
c. Inflation occurs when the government prints too much money.
d. Taxes are bad for the economy.
c. Inflation occurs when the government prints too much money