MODULE 1

Question 1

Bottom-Up Analysis that studies how people make decisions and how these decisions interact.

Answer 1

MICROECONOMICS

Question 2

Top-Down Analysis that studies how big economic statistics behave — growth, unemployment, interest rates, & inflation

Answer 2

MACROECONOMICS

Question 3

When the individual pursuit of self-interest makes society worse off

Answer 3

MARKET FAILURE

Question 4

The social science that’s studies how scarce resources are allocated between competing uses to satisfy human preferences

Answer 4

ECONOMICS

Question 5

a system for coordinating the productive activities of many people

Answer 5

ECONOMY

Question 6

Economy-wide interaction principle 1

Answer 6

One Person’s Spending Is Another Person’s Income

Question 7

Economy-wide Interaction principle 2

Answer 7

Overall Spending Sometimes Gets Out Of Line w/ the Economy’s Productive Capacity; When It Does, Government Policy Can Change

Question 8

Economy-wide Interaction principle 3

Answer 8

Increases in the Economy’s Potential Lead to Economic Growth over Time

Question 9

Good economic times when the economy grows

Answer 9

Recoveries

Question 10

Bad economic times when the economy shrinks

Answer 10

Recessions 

Answer 11

Macroeconomics emerged as a separate branch of economics in the 1930s in order to understand the Great Depression

Question 12

Why does inflation, a rise in prices throughout the economy, occur? 

Answer 12

Because when the amount that people want to buy outstrips the supply, producers can raise their prices, and still find willing customers. 

Question 13

What are the tools of macroeconomic policy?

Answer 13

Government spending, taxes, and control of money

Question 14

What accounts for growth in an economy over time?

Answer 14

It is due to the emergence of new technologies and increases in the resources available for production — land, labor, capital, knowledge, & entrepreneurship 

Question 15

What makes it possible for a country to increase its economic potential (the total amount of goods and services it can produce) which leads to higher living standards?

Answer 15

Possessing new technology, and the increased availability of the 5 resources of production

Question 16

Standard of Living

Answer 16

A measure of the array of goods and services produced, and available for purchase in an economy 

Question 17

Why does an increase in a country’s economic potential create winners and losers?

Answer 17

Because in the short term, the benefits are usually distributed unequally among a country’s citizens.

Question 18

In a dynamic market economy, why won’t losers always stay losers?

Answer 18

Because the cyclical nature of the overall economy, ensures good times alternating with bad times with it’s inexorable upward climb. Incentives and government policy can influence positive migration to improve society. 

Question 19

My choices affect your choices, and vice versa; a feature of most economic situations. The results of this interaction are often quite different from what the individuals intend.

Answer 19

INTERACTION

Question 20

Economics of interaction, Principle 1

Answer 20

There are Gains from Trade

Question 21

Economics of interaction, Principle 2

Answer 21

Markets Move Toward Equilibrium

Question 22

Economics of interaction, Principle 3

Answer 22

Resources Should Be Used Efficiently to Achieve Society’s Goals

Question 23

Economics of interaction, Principle 4

Answer 23

Markets Usually Lead to Efficiency, but When They Don’t, Govt Intervention Can Improve Society’s Welfare

Question 24

The practice in which individuals divide tasks among themselves, and each person provides a good or service that other people want in return for different goods and services that they want 

Answer 24

TRADE

Question 25

Why does an economy exist instead of many self-sufficient individuals?

Answer 25

Because there are gains from trade, resulting in people each getting more of what they want then they could get by being self-sufficient