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Economics > Major Exam 1 > Flashcards

Major Exam 1 Flashcards

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
Q

Free rider

A

Reflects the inability to exclude an individual from the benefits of someone else’s purchase

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23
Q

Natural monopoly

A

And industry in which one can achieve economies of scale over the entire range of market supply

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24
Q

What is the purpose of taxation

A

To transfer command over resources (purchasing power) from the private sector to the public sector

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25
Q

Progressive tax

A

A tax system in which tax rates rise as incomes rise

Ex: federal income tax, personal income tax

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26
Q

Proportional tax

A

a tax that levies the same rate on every dollar of income

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27
Q

Regressive tax

A

Tax system in which tax rates fall as incomes rise

Ex: social security tax, state and local taxes

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28
Q

Transfer payments

A

Payment to individuals for which no current goods or services are exchanged, like Social Security, welfare, and unemployment benefits

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29
Q

National income accounting

A

The measurement of aggregate economic activity, particularly national income and it’s components

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30
Q

Nominal GDP

A

The value of final output produced in a given period, measured in the prices of that price (current prices)

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31
Q

Real GDP

A

Value of final output produced in a given period, adjusted for changing prices

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32
Q

GDP per capita

A

Total GDP divided by total population: average GDP

Commonly used as a measure of the country’s standard of living

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33
Q

NDP

A

GDP- depreciation

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34
Q

National income

A

Total income earned my current factors of production: NDP plus net foreign factor income

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35
Q

Personal income

A

Income received by households before payment of personal taxes

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36
Q

Disposable income

A

After-tax income of household; personal income - personal taxes

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37
Q

Saving

A

That part of disposable income not spent on current consumption; disposable income - consumption

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38
Q

Nominal GDP

A

GDP-

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39
Q

Nominal GDP formula

A

Real GDP x price index

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40
Q

Real GDP is more accurate than nominal GDP in making comparisons of output overtime because

A

Nominal GDP can increase simply because of price increases over time

41
Q

Unemployment

A

The inability of labor-force participants to find jobs

42
Q

Unemployment rate

A 
           Labor force
43
Q

Seasonal unemployment

A

Unemployment due to seasonal changes in employment of labor force

Ex: farmers

44
Q

Frictional unemployment

A

Brief periods of unemployment experience but between jobs Lord to the labor market

45
Q

Structural unemployment

A

Unemployment caused by mismatch between the skills (or location) of jobseekers and requirements (or location) of available jobs

46
Q

Cyclical unemployment

A

Unemployment attributable to the lack of job vacancies, that is, in adequate level of aggregate demand

47
Q

Underemployment

A

People seeking full-time paid employment who work only part-time or are employed at jobs below their capability

48
Q

Discouraged workers

A

And individual is not actively seeking employment but would look for or except the job if one were available

49
Q

Full-employment

A

The lowest rate of unemployment compatible with stability; variously estimated at between 4 and 6 percent unemployment

50
Q

What is a source of market failure

A

Market power

51
Q

What is a determinant of supply

A

The prices of the factors of production

52
Q

At the equilibrium price, there are

A

No shortages or surpluses

53
Q

The term opportunity cost refers to the

A

Value of the best alternative given up when a good or service is produced

54
Q

Any imperfection in the market mechanism that prevents optimal outcomes is known as

A

Market failure

55
Q

The term transfer payments refers to

A

Payments to individuals that are not in exchange for current goods and services being produced

56
Q

If bagels and donuts are substitutes, then a decrease in the price of donuts will result in

A

A decrease in the demand for bagels

57
Q

A natural monopoly is

A

And industry in which one firm can achieve economies of scale over the entire range of market supply

58
Q

Most of the direct spending on the state government level is on

A

Education

59
Q

Economic growth would be best represented by a

A

Shift outward the production possibilities curve

60
Q

The fundamental problem of economics is

A

The scarcity of resources relative to human wants

61
Q

Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, right now there should be

A

A decrease in the demand for airline tickets

62
Q

The law of supply implies that

A

Supply curves are upward sloping to the right

63
Q

Which of the following justifies the federal government role in antitrust enforcement

A

Market power

64
Q

A change in demand means there has been a shift in the demand curve, and a change in quantity demanded

A

Means that price has changed and there is movement along the demand curve

65
Q

A consequence of the economic problems of scarcity is that

A

Choices have to be made about how resources are used

66
Q

Government intervention may be appropriate to correct market outcomes because of

A

Externalities

67
Q

According to the law of increasing opportunity costs

A

In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods

68
Q

A buyer is said to have a demand for a good only when

A

The buyer is willing and able to purchase the good at alternative prices

69
Q

A private good

A

Is consumed by one person and excludes consumption by others

Ex: cars

70
Q

According to the law of demand, during a given period of time, the quantity of a good demanded

A

Increases as price falls

72
Q

The production possibilities curve illustrates which two of the following essential principles

A

Scarce resources and opportunity cost

73
Q

The point on a production possibilities curve show

A

Potential output

74
Q

Resources are directed from one industry to another by

A

Changes in market prices

75
Q

Air pollution best illustrates

A

And externality

76
Q

A shift in supply is defined as a change in

A

Supply because of a change in a non-price determined

77
Q

Which of the following would generally cause an increase in the demand curve for new automobiles

A

An increase in consumers income

78
Q

Price ceilings are intended to address the problem of

A

Inequity in the distribution of goods and services

79
Q

Which of the following is a merit good

A

Health care

80
Q

And unemployed worker who wants a job that has given up in the search for a new job is referred to as a

A

Discouraged worker

81
Q

Disposable income is equal to

A

Consumption + saving

82
Q

A nations GDP is

A

C + I + G + (X - M)

83
Q

Goods and services purchased from international forces are

A

Imports

84
Q

National income accounts assist

A

Economic policy makers in formulating policies and evaluating performance

85
Q

During an economic downturn consumers been considerably less on the goods and services. This results in layoffs that are classified as

A

Structural

86
Q

Outsourcing is the

A

Relocation of production from domestic companies to foreign countries

87
Q

Someone 18 years old was not employed and is not actively seeking work is considered

A

Not in the labor force

88
Q

A federal governments role in providing aid to the poor and the aged is justified because of concerns about

A

Inequity

89
Q

The market

A

On its own may not always provide the optimal mix of goods and services

90
Q

The natural rate of unemployment includes

A

Frictional and structural unemployment only

91
Q

The type of unemployment that economists generally associated with normal growth of the labor force and expanding job opportunities in a dynamic economy is

A

Frictional unemployment

92
Q

The value of final output produced in a given period, measured in current prices, is

A

Nominal GDP

93
Q

The wearing out of plants and equipment is known as

A

Depreciation

94
Q

To be officially counted as unemployed one must be

A

Actively seeking employment and currently not working

95
Q

Transfer payments are part of personal income but not national income because

A

They are a payment for which no goods or services are exchanged

96
Q

When an economy enters a recession, the

A

Duration of unemployment rises

97
Q

Which of the following is directly included in the calculation of GDP

A

The final sale of a brand-new Cadillac

98
Q

Which of the following is not a final good or service

A

Paper purchased by a textbook company

99
Q

Which of the following items is definitely part of the underground economy

A

Unreported income

100
Q

Which of the following produces external benefits

A

The inoculation of college students against the flu

101
Q

Which of the following unemployment categories is most clearly related to the rate of growth in real GDP

A

Cyclical

102
Q

Which of the following with a stated goal of the Humphrey-Hawkins Act

A

4% unemployment rate

103
Q

Why has structural employment in the United States increased over the last 20 years

A

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
Q

The goal of the consumer in a market economy is to use his or her limited income to buy

A

The set of goods and services that maximizes the consumers total utility

Economics (1 decks)

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