ECON topic1-EXAM#1

Question 1

economics is about people as decision makers

Answer 1

time is a scarce resource

Question 2

what are the 4 main categories of people (decision makers) in the economy

Answer 2

consumers, firms, government, and the rest of the world.

Question 3

C+I+G+(EXP-IMP)=

Answer 3

AE- aggregate expenditure

Question 4

Aggregate expenditure is

Answer 4

reps the demand side of the economy which is a strong predictor of production and unemployment

Question 5

what is the heart of economics

Answer 5

decision making

Question 6

people make decisions because

Answer 6

resources are scarce

Question 7

resources are scarce because

Answer 7

people want more than they need (unlimited wants)

Question 8

scarcity

Answer 8

refers to the limited nature of societies resources

Question 9

all decisions involve what

Answer 9

trade-offs

Question 10

the cost of something is everything you give up to get it

Answer 10

opportunity cost

Question 11

scarcity pushes people to make choices,

Answer 11

each choice involves a trade-off (opp. cost)

Question 12

people respond to what

Answer 12

incentives

Question 13

incentive

Answer 13

something that determines a person to act, i.e. to prospect of a reward or punishment

Question 14

market

Answer 14

a group of buyers and sellers

Question 15

free market

Answer 15

many decision makers

Question 16

command economy

Answer 16

one decision maker with no incentives

Question 17

markets are usually a good way to

Answer 17

organize economic activity

Question 18

organize economic activity

Answer 18

what, how, how much, who

Question 19

are signals that guide the allocation of resources in a market economy

Answer 19

prices

Question 20

• tend to go to extremes
• mkt power (monopoly)
• public goods (highway)

Answer 20

markets are not perfect, the government can improve them with economic policies

Question 21

roles of government (2)

Answer 21

1. enforce property rights and rule of law

2. provide public goods

Question 22

exernalities

Answer 22

taken to produce a benefit, but comes with side effects

ex: second hand smoke

Question 23

government may alter market outcome to promote efficiency by correcting what

Answer 23

market failures

Question 24

causes of market failure (2)

Answer 24

1. exernalities, when the production or consumption of a good affects bystandards (pollution)
2. market power, a single buyer or seller has substantial influence on the market price (monopoly)

Question 25

macroeconomics refers to

Answer 25

policy making in economics

Question 26

a country`s standard of living depends on

Answer 26

its ability to produce goods and services

Question 27

the most important determinant of living standards is

Answer 27

productivity, the amount of goods and services produced per unit of labor

Question 28

production depends on what (4)

Answer 28

education, skills, technology, and equipment (capital) available to workers

Question 29

what is the most important economic process?

Answer 29

production

Question 30

production is the process that transforms scarce resources into

Answer 30

useful goods and services

Question 31

this is the outputs of the production process

Answer 31

goods and services

Question 32

resources or factors of production are the what into the production process?

Answer 32

inputs

Question 33

inputs=factors of production=resources

Answer 33

anything provided by nature and previous generations that can be used in production (to satisfy human needs)

Question 34

what are the 4 types of resources?

Answer 34

1. labor 2. capital 3. land 4. entrepreneurship

Question 35

the physical and mental potential that people contribute in the production of goods and services

Answer 35

labor

Question 36

goods that are themselves produced and used in the future production of other goods and services

Answer 36

capital

Question 37

is the physical space in which production takes place, as well as the natural resources found under it or on it, such as oil, iron, coal, and lumber

Answer 37

land

Question 38

the special skill of organizing labor, land, and capital, for production. start a new business, develop new production techs, and introduce new products

Answer 38

entrepreneurship

Question 39

what is the only way of producing new capital

Answer 39

investment

Question 40

investment

Answer 40

the process of using resources to produce new capital

Question 41

the opportunity cost of investment in new capital is the

Answer 41

forgone consumption

Question 42

the economy behaves differently in the

Answer 42

SR than in the LR

Question 43

in the SR, the major objective is (2)

Answer 43

production and unemployment

Question 44

in the LR, the major objective is (1)

Answer 44

economic growth

Question 45

unemployment

Answer 45

the group of people, in the labor force, that do not have a job despite their efforts to find one

Question 46

economic growth

Answer 46

the speed or rate at which production increases

Question 47

main sources of economic growth (3)

Answer 47

1. better education- human capital accumulation 2. technological innovations (thru research and development) 3. physical capital accumulation (via investment)

Question 48

what can make everyone better off

Answer 48

trade

Question 49

produce what your best in one good or service and exchange it for other goods and services

Answer 49

specialization

Question 50

why do countries benefit from trade and specialization (2)

Answer 50

1. get a better price abroad for goods and services | 2. buy goods that cannot be produced domestically

Question 51

what are the 3 basic economic questions any society has to answer because of scarcity

Answer 51

1. what gets produced? 2. how is it produced? (labor, capital) 3. who gets what is produced?

Question 52

a production arrangement that transforms society`s scarce resources into useful goods and services

Answer 52

economic system

Question 53

two economic visions

Answer 53

- the capitalistic vision | - the socialist vision

Question 54

what is core mechanism in capitalistic vision

Answer 54

price system

Question 55

what are the 3 main benefits of government intervention? (mixed system)

Answer 55

1. minimize market inefficiencies 2. provide public goods 3. stabilize the economy thru economic policies

Question 56

what is a normal inflation rate?

Answer 56

3%

Question 57

income inequality

Answer 57

min wage

Question 58

SR benefits and LR consequences

Answer 58

entry to work force will be lowered and the solution is in the LR

Question 59

crisis are opportunities to

Answer 59

learn and innovate