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Economics > Major Exam 1 > Flashcards

Major Exam 1 Flashcards

(106 cards)

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0
Q

Economics can be defined as the study of

A

How scarce resources are allocated on a macro level to best meet society’s goals or on a micro level to best meet and individuals or firms goals

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1
Q

What are the three core economic issues

A

WHAT to produce with our limited resources
HOW to produce the goods and services we select
FOR WHOM should receive the goods and survives produced

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2
Q

What are the basic factors of production

A

Land
Labor
Capital
Entrepreneurship

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3
Q

Opportunity cost

A

The most desired goods or services that are for forgone in order to obtain something else

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4
Q

Macro economics

A

Study of aggregate economic behavior, of the economy as a whole

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5
Q

Micro economics

A

Study of individual behavior in the economy, of the components of the larger economy

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6
Q

Ceteris paribus

A

Assumption of nothing else changing

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7
Q

Market mechanism

A

Use of market prices and sales to signal desired outputs (or resource allocation)

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8
Q

Economic growth

A

An increase in output (real GDP); an expansion of production possibilities

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9
Q

Demand

A

The ability and willingness to buy specific quantities of a good alternative prices in a given time period

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10
Q

Demand determinants

A 
Tastes
income 
other goods 
expectations 
number of buyers
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11
Q

Law of demand

A

The quantity of a good demanded in a given time period increases as it’s price falls

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12
Q

Supply

A

The ability and willingness to sell or produce specific quantities of a good at alternative prices any given time period

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13
Q

Supply determinants

A 
Technology 
Factor costs
other goods 
taxes and subsidies 
expectations 
number of sellers
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14
Q

Law of supply

A

The quantity of a good supplied in a given time period increases as its price increases

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15
Q

When does a shortage or surplus occur

A

Whenever the market price is set above or below the equilibrium price

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15
Q

Market is said to be in equilibrium when

A

The quantity demanded equals the quantity supplied

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15
Q

What is the optimal mix output

A

The most desirable combination of output attainable with existing resources, technology, and social values

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16
Q

What is market failure

A

An imperfection in the market mechanism that prevents optimal outcomes. Implies that the forces of supply and demand have not led us to the best point on the production possibilities curve. Establishes a basis for government intervention

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17
Q

Examples of market failure

A

Public goods
Externalities
Market power
Equity

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18
Q

Public good

A

Good or service whose consumption by one person does not exclude that by other

Ex: flood control

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19
Q

Externalities

A

Costs or benefits of a market activity borne by a third party; the difference between the social and private costs of a market activity

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20
Q

Market power

A

Ability to alter the market price of a good or service

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21
Q

Equity

A

Fair distribution of goods and services generated by the marketplace

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22
Free rider
Reflects the inability to exclude an individual from the benefits of someone else's purchase
23
Natural monopoly
And industry in which one can achieve economies of scale over the entire range of market supply
24
What is the purpose of taxation
To transfer command over resources (purchasing power) from the private sector to the public sector
25
Progressive tax
A tax system in which tax rates rise as incomes rise Ex: federal income tax, personal income tax
26
Proportional tax
a tax that levies the same rate on every dollar of income
27
Regressive tax
Tax system in which tax rates fall as incomes rise Ex: social security tax, state and local taxes
28
Transfer payments
Payment to individuals for which no current goods or services are exchanged, like Social Security, welfare, and unemployment benefits
29
National income accounting
The measurement of aggregate economic activity, particularly national income and it's components
30
Nominal GDP
The value of final output produced in a given period, measured in the prices of that price (current prices)
31
Real GDP
Value of final output produced in a given period, adjusted for changing prices
32
GDP per capita
Total GDP divided by total population: average GDP Commonly used as a measure of the country's standard of living
33
NDP
GDP- depreciation
34
National income
Total income earned my current factors of production: NDP plus net foreign factor income
35
Personal income
Income received by households before payment of personal taxes
36
Disposable income
After-tax income of household; personal income - personal taxes
37
Saving
That part of disposable income not spent on current consumption; disposable income - consumption
38
Nominal GDP
GDP-
39
Nominal GDP formula
Real GDP x price index
40
Real GDP is more accurate than nominal GDP in making comparisons of output overtime because
Nominal GDP can increase simply because of price increases over time
41
Unemployment
The inability of labor-force participants to find jobs
42
Unemployment rate
Number of unemployed people ------------------------------------ Labor force
43
Seasonal unemployment
Unemployment due to seasonal changes in employment of labor force Ex: farmers
44
Frictional unemployment
Brief periods of unemployment experience but between jobs Lord to the labor market
45
Structural unemployment
Unemployment caused by mismatch between the skills (or location) of jobseekers and requirements (or location) of available jobs
46
Cyclical unemployment
Unemployment attributable to the lack of job vacancies, that is, in adequate level of aggregate demand
47
Underemployment
People seeking full-time paid employment who work only part-time or are employed at jobs below their capability
48
Discouraged workers
And individual is not actively seeking employment but would look for or except the job if one were available
49
Full-employment
The lowest rate of unemployment compatible with stability; variously estimated at between 4 and 6 percent unemployment
50
What is a source of market failure
Market power
51
What is a determinant of supply
The prices of the factors of production
52
At the equilibrium price, there are
No shortages or surpluses
53
The term opportunity cost refers to the
Value of the best alternative given up when a good or service is produced
54
Any imperfection in the market mechanism that prevents optimal outcomes is known as
Market failure
55
The term transfer payments refers to
Payments to individuals that are not in exchange for current goods and services being produced
56
If bagels and donuts are substitutes, then a decrease in the price of donuts will result in
A decrease in the demand for bagels
57
A natural monopoly is
And industry in which one firm can achieve economies of scale over the entire range of market supply
58
Most of the direct spending on the state government level is on
Education
59
Economic growth would be best represented by a
Shift outward the production possibilities curve
60
The fundamental problem of economics is
The scarcity of resources relative to human wants
61
Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, right now there should be
A decrease in the demand for airline tickets
62
The law of supply implies that
Supply curves are upward sloping to the right
63
Which of the following justifies the federal government role in antitrust enforcement
Market power
64
A change in demand means there has been a shift in the demand curve, and a change in quantity demanded
Means that price has changed and there is movement along the demand curve
65
A consequence of the economic problems of scarcity is that
Choices have to be made about how resources are used
66
Government intervention may be appropriate to correct market outcomes because of
Externalities
67
According to the law of increasing opportunity costs
In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods
68
A buyer is said to have a demand for a good only when
The buyer is willing and able to purchase the good at alternative prices
69
A private good
Is consumed by one person and excludes consumption by others Ex: cars
70
According to the law of demand, during a given period of time, the quantity of a good demanded
Increases as price falls
72
The production possibilities curve illustrates which two of the following essential principles
Scarce resources and opportunity cost
73
The point on a production possibilities curve show
Potential output
74
Resources are directed from one industry to another by
Changes in market prices
75
Air pollution best illustrates
And externality
76
A shift in supply is defined as a change in
Supply because of a change in a non-price determined
77
Which of the following would generally cause an increase in the demand curve for new automobiles
An increase in consumers income
78
Price ceilings are intended to address the problem of
Inequity in the distribution of goods and services
79
Which of the following is a merit good
Health care
80
And unemployed worker who wants a job that has given up in the search for a new job is referred to as a
Discouraged worker
81
Disposable income is equal to
Consumption + saving
82
A nations GDP is
C + I + G + (X - M)
83
Goods and services purchased from international forces are
Imports
84
National income accounts assist
Economic policy makers in formulating policies and evaluating performance
85
During an economic downturn consumers been considerably less on the goods and services. This results in layoffs that are classified as
Structural
86
Outsourcing is the
Relocation of production from domestic companies to foreign countries
87
Someone 18 years old was not employed and is not actively seeking work is considered
Not in the labor force
88
A federal governments role in providing aid to the poor and the aged is justified because of concerns about
Inequity
89
The market
On its own may not always provide the optimal mix of goods and services
90
The natural rate of unemployment includes
Frictional and structural unemployment only
91
The type of unemployment that economists generally associated with normal growth of the labor force and expanding job opportunities in a dynamic economy is
Frictional unemployment
92
The value of final output produced in a given period, measured in current prices, is
Nominal GDP
93
The wearing out of plants and equipment is known as
Depreciation
94
To be officially counted as unemployed one must be
Actively seeking employment and currently not working
95
Transfer payments are part of personal income but not national income because
They are a payment for which no goods or services are exchanged
96
When an economy enters a recession, the
Duration of unemployment rises
97
Which of the following is directly included in the calculation of GDP
The final sale of a brand-new Cadillac
98
Which of the following is not a final good or service
Paper purchased by a textbook company
99
Which of the following items is definitely part of the underground economy
Unreported income
100
Which of the following produces external benefits
The inoculation of college students against the flu
101
Which of the following unemployment categories is most clearly related to the rate of growth in real GDP
Cyclical
102
Which of the following with a stated goal of the Humphrey-Hawkins Act
4% unemployment rate
103
Why has structural employment in the United States increased over the last 20 years
Companies are increasingly outsourcing certain task to cheaper foreign markets Increased trade with other companies has shut down US factories competing with import industries Rapid technology changes have eliminated the need for certain skill sets
161
The goal of the consumer in a market economy is to use his or her limited income to buy
The set of goods and services that maximizes the consumers total utility

Economics (1 decks)

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