WGU D089 PRINCIPLES OF ECONOMICS UPDATED EXAMS
TEST PAPER QUESTIONS AND ANSWERS SURE A+
✔✔Concentration Ration - ✔✔An early tool to measure the degree of monopoly power
in an industry, which measures the share of the total sales in the industry that are
accounted for by the largest firms, typically the top four to eight firms
✔✔Four-firm concentration ratio - ✔✔The percentage of the total sales in the industry
that are accounted for by the largest four firms
✔✔Herfindahl-Hirschman Index (HHI) - ✔✔An approach to measuring the market
concentration by adding the square of the market share of each firm in the industry.
✔✔Gross domestic product (GDP) - ✔✔Measures the value of economic activity within
a country. Strictly defined, GDP is the sum of the market values, or prices, of all final
goods and services produced in an economy during a period of time.
✔✔Unemployment - ✔✔A social and economic situation in which people who are able
to work are not able to find a job
✔✔Inflation - ✔✔A quantitative measure of the rate at which the average price level of a
basket of selected goods and services in an economy increases over a period of time.
Often expressed as a percentage, inflation indicates a decrease in the purchasing
power of a nation's currency
✔✔The goods and services market - ✔✔Market where households purchase
consumable items and businesses sell their wares. The market includes stores, the
internet, and any other place where consumer goods and services are exchanged.
✔✔The factors market - ✔✔A market in which companies buy the factors of production
or the resources they need to produce their goods and services
✔✔Financial market - ✔✔A market in which people trade financial securities and
derivatives at low transaction costs
✔✔Aggregate demand - ✔✔An economic measurement of the total amount of demand
for all finished goods and services produced in an economy
✔✔Consumer spending (consumption) - ✔✔The acquisition of goods and services by
individuals or families
✔✔Expenditures - ✔✔A payment with either cash or credit to purchase goods or
services. An expenditure is recorded at a single point in time (the time of purchase)
,✔✔Disposable income - ✔✔The amount of money that households have available for
spending and saving after income taxes have been accounted for
✔✔Investment (business spending) - ✔✔Investment refers tot he purchase of new
capital goods: new commercial real estate and equipment, residential housing
construction, and inventories
✔✔Government Spending - ✔✔All government consumption, investment, and transfer
payments
✔✔Deficit - ✔✔An excess of expenditure or liabilities over income or assets in a given
period.
✔✔Surplus - ✔✔Occurs when income earned exceeds expenses paid
✔✔Net exports - ✔✔The difference between the monetary value of exports and imports
✔✔Imports - ✔✔A commodity, article, or service brought in from abroad for sale
✔✔GDP formula - ✔✔Y = C + I + G + NX (GDP = Consumption + Investment +
Government + Net Exports)
✔✔Intermediate Goods - ✔✔A product used to produce a final good or finished product
✔✔Nominal GDP - ✔✔The value of all goods taking price changes into account
✔✔Real GDP - ✔✔The value of all goods produced in a given year
✔✔Depression - ✔✔An especially lengthy and deep decline in output
✔✔Peak - ✔✔During the business cycle, the highest point of output before a recession
begins
✔✔Trough - ✔✔During the business cycle, the lowest point of output in a recession
before a recovery begins
✔✔Business Cycle - ✔✔The economy's relatively short-term movement in and out of
recession
✔✔Standard of living - ✔✔All elements that affect people's happiness, whether people
buy or sell these elements in the market.
✔✔Employed - ✔✔Those who are currently working for pay
, ✔✔Out of the labor force - ✔✔Those who are not working and not looking for work -
whether they want employment of not; also termed :not in the labor force"
✔✔Unemployment rate formula - ✔✔Unemployed/labor force x 100
✔✔Underemployed - ✔✔Employed in a job that offers fewer work hours than desired
✔✔Hidden unemployment - ✔✔People who are jobless, but official unemployment
figures do not include them
✔✔Discouraged workers - ✔✔Those who have stopped looking for employment due to
the lack of suitable positions available
✔✔Labor force participation rate formula - ✔✔Labor force/adult population x 100
✔✔Frictional unemployment - ✔✔Unemployment that occurs as workers move between
jobs
✔✔Structural Unemployment - ✔✔Unemployment that occurs because individuals lack
skills valued by employers
✔✔Cyclical unemployment - ✔✔Unemployment that results when the overall demand
for goods and services in an economy cannot support full employment. It occurs during
periods of slow economic growth or during periods of economic contraction
✔✔Natural rate of unemployment - ✔✔The unemployment rate that would exist in a
growing and healthy economy from the combination of economic, social, and political
factors that exist at a given time.
✔✔Basket of goods and services - ✔✔A fixed set of consumer products and services
valued on an annual basis
✔✔Consumer price index (CPI) - ✔✔A measure of inflation that U.S. government
statisticians calculate based on the price level from a fixed basket of goods and services
that represents the average consumer's purchases
✔✔What are the eight major categories in the CPI? - ✔✔1. Food and beverages
2. Housing
3. Apparel
4. Transportation
5. Medical Care
6. Recreation
7. Education and communication
8. Other goods and services
TEST PAPER QUESTIONS AND ANSWERS SURE A+
✔✔Concentration Ration - ✔✔An early tool to measure the degree of monopoly power
in an industry, which measures the share of the total sales in the industry that are
accounted for by the largest firms, typically the top four to eight firms
✔✔Four-firm concentration ratio - ✔✔The percentage of the total sales in the industry
that are accounted for by the largest four firms
✔✔Herfindahl-Hirschman Index (HHI) - ✔✔An approach to measuring the market
concentration by adding the square of the market share of each firm in the industry.
✔✔Gross domestic product (GDP) - ✔✔Measures the value of economic activity within
a country. Strictly defined, GDP is the sum of the market values, or prices, of all final
goods and services produced in an economy during a period of time.
✔✔Unemployment - ✔✔A social and economic situation in which people who are able
to work are not able to find a job
✔✔Inflation - ✔✔A quantitative measure of the rate at which the average price level of a
basket of selected goods and services in an economy increases over a period of time.
Often expressed as a percentage, inflation indicates a decrease in the purchasing
power of a nation's currency
✔✔The goods and services market - ✔✔Market where households purchase
consumable items and businesses sell their wares. The market includes stores, the
internet, and any other place where consumer goods and services are exchanged.
✔✔The factors market - ✔✔A market in which companies buy the factors of production
or the resources they need to produce their goods and services
✔✔Financial market - ✔✔A market in which people trade financial securities and
derivatives at low transaction costs
✔✔Aggregate demand - ✔✔An economic measurement of the total amount of demand
for all finished goods and services produced in an economy
✔✔Consumer spending (consumption) - ✔✔The acquisition of goods and services by
individuals or families
✔✔Expenditures - ✔✔A payment with either cash or credit to purchase goods or
services. An expenditure is recorded at a single point in time (the time of purchase)
,✔✔Disposable income - ✔✔The amount of money that households have available for
spending and saving after income taxes have been accounted for
✔✔Investment (business spending) - ✔✔Investment refers tot he purchase of new
capital goods: new commercial real estate and equipment, residential housing
construction, and inventories
✔✔Government Spending - ✔✔All government consumption, investment, and transfer
payments
✔✔Deficit - ✔✔An excess of expenditure or liabilities over income or assets in a given
period.
✔✔Surplus - ✔✔Occurs when income earned exceeds expenses paid
✔✔Net exports - ✔✔The difference between the monetary value of exports and imports
✔✔Imports - ✔✔A commodity, article, or service brought in from abroad for sale
✔✔GDP formula - ✔✔Y = C + I + G + NX (GDP = Consumption + Investment +
Government + Net Exports)
✔✔Intermediate Goods - ✔✔A product used to produce a final good or finished product
✔✔Nominal GDP - ✔✔The value of all goods taking price changes into account
✔✔Real GDP - ✔✔The value of all goods produced in a given year
✔✔Depression - ✔✔An especially lengthy and deep decline in output
✔✔Peak - ✔✔During the business cycle, the highest point of output before a recession
begins
✔✔Trough - ✔✔During the business cycle, the lowest point of output in a recession
before a recovery begins
✔✔Business Cycle - ✔✔The economy's relatively short-term movement in and out of
recession
✔✔Standard of living - ✔✔All elements that affect people's happiness, whether people
buy or sell these elements in the market.
✔✔Employed - ✔✔Those who are currently working for pay
, ✔✔Out of the labor force - ✔✔Those who are not working and not looking for work -
whether they want employment of not; also termed :not in the labor force"
✔✔Unemployment rate formula - ✔✔Unemployed/labor force x 100
✔✔Underemployed - ✔✔Employed in a job that offers fewer work hours than desired
✔✔Hidden unemployment - ✔✔People who are jobless, but official unemployment
figures do not include them
✔✔Discouraged workers - ✔✔Those who have stopped looking for employment due to
the lack of suitable positions available
✔✔Labor force participation rate formula - ✔✔Labor force/adult population x 100
✔✔Frictional unemployment - ✔✔Unemployment that occurs as workers move between
jobs
✔✔Structural Unemployment - ✔✔Unemployment that occurs because individuals lack
skills valued by employers
✔✔Cyclical unemployment - ✔✔Unemployment that results when the overall demand
for goods and services in an economy cannot support full employment. It occurs during
periods of slow economic growth or during periods of economic contraction
✔✔Natural rate of unemployment - ✔✔The unemployment rate that would exist in a
growing and healthy economy from the combination of economic, social, and political
factors that exist at a given time.
✔✔Basket of goods and services - ✔✔A fixed set of consumer products and services
valued on an annual basis
✔✔Consumer price index (CPI) - ✔✔A measure of inflation that U.S. government
statisticians calculate based on the price level from a fixed basket of goods and services
that represents the average consumer's purchases
✔✔What are the eight major categories in the CPI? - ✔✔1. Food and beverages
2. Housing
3. Apparel
4. Transportation
5. Medical Care
6. Recreation
7. Education and communication
8. Other goods and services
