Principles of Macroeconomics TEST 1 Questions with Answers

Principles of Macroeconomics: TEST 1 Questions with Answers REAL GROSS DOMESTIC PRODUCT - Correct Answers: Gross domestic product that has been adjusted to eliminate the impact of changes in the price level. A MACROECONOMIC MEASURE OF THE VALUE OF OUTPUT ECONOMY ADJUSTED FOR CHANGES. (LIKE INFLATION) RESEARCH AND DEVELOPMENT - Correct Answers: generating and experimenting with ideas related to new products, services, or processes MARKET SHARE - Correct Answers: a company's percentage of the total industry sales for a specific product type MACROECONOMICS - Correct Answers: the study of economy-wide phenomena, including inflation, unemployment, and economic growth. The overall working of a national economy - performance structure, behavior, and decision making. STANDARD OF LIVING - Correct Answers: a measure of quality of life based on the amounts and kinds of goods and services a person can buy MICROECONOMICS - Correct Answers: the branch of economics that studies the economy of consumers or households or individual firms CATERIS PARIBUS - Correct Answers: "all else equal" a device used to analyze the relationship between two variables while the values of other variables are held unchanged HUMAN CAPITAL - Correct Answers: the knowledge and skills that workers acquire through education, training and experience OPPORTUNITY COST - Correct Answers: the cost of the next best use of time and money when choosing to do one thing or another. It is the sacrifice related to the second best choice available to someone or group. SCARCITY - Correct Answers: limited quantities of resources to meet unlimited wants. Fundamental economic problem of having humans who have wants and needs in a world of limited resources. INCENTIVE - Correct Answers: a positive motivational influence. Incentives aim to provide value for money and contribute to organizational success. POLLUTION - Correct Answers: undesirable state of the natural environment being contaminated with harmful substances as a consequence of human activities FISCAL POLICY - Correct Answers: The federal government efforts to keep the economy stable by increasing or decreasing taxes or government spending MARKET FAILURE - Correct Answers: a situation in which a market left on its own fails to allocate resources efficiently. PRODUCTIVITY - Correct Answers: the quantity of goods and services produced from each unit of labor input AGGREGATE SUPPLY - Correct Answers: the total amount of goods and services in the economy available at all possible price levels ECONOMIC HISTORY - Correct Answers: the study of economic events and the collection of economic observations from the past. Analysis in Economic history is undertaken using a combination of historical methods. economics- short - Correct Answers: the study of how people seek to satisfy their needs and wants by making choices. PEOPLE MAKING RATIONAL DECISIONS. ECONOMICS- long version - Correct Answers: a social science that studies the allocation of resources to the production of goods and services used to satisfy the consumers unlimited wants needs. POLICY - Correct Answers: a line of argument rationalizing the course of action of a government. A principle or rule to guide decisions and achieve rational outcomes. RECESSION - Correct Answers: the state of the economy declines PROGRESSIVE TAX SYSTEM - Correct Answers: a tax whose average tax rate increases as the taxpayer's income increases and decreases as the taxpayer's income decreases. THE MORE YOU MAKE THE MORE YOU PAY! JOHN KAY - Correct Answers: Correalation does not imply causation EFFICIENCY - Correct Answers: using resources in such a way as to maximize the production of goods and services. - HOW WELL RESOURCES ARE USED AND ALLOCATED! EQUITY - Correct Answers: a condition in which people receive from a relationship in proportion to what they give to it. PHILLIPS CURVE - Correct Answers: A graph showing the relationship between inflation and unemployment . The theory states that unemployment can be reduced in the short run by increasing price level (inflation) at a faster rate. Conversely, inflation can be lowered at the cost of possibly increased unemployment and slower economic growth BAR CHART - Correct Answers: a chart with bars whose lengths are proportional to quantities INFLATION - Correct Answers: a general and progressive increase in prices ALLOCATIVE EFFICIENCY - Correct Answers: A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it ENTREPRENEUR - Correct Answers: a person who organizes, manages, and takes on the risks of a business FULL EMPLOYMENT - Correct Answers: the economic condition when everyone who wishes to work at the going wage-rate for their type of labor is employed OPPORTUNITY COST - Correct Answers: The most desirable alternative given up as the result of a decision ECONOMIC GROWTH - Correct Answers: steady growth in the productive capacity of the economy (and so a growth of national income) FEDERATION - Correct Answers: the act of constituting a political unity out of a number of separate states or colonies or provinces so that each member retains the management of its internal affairs TECHNOLOGICAL CHANGE - Correct Answers: a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs 3 BASIC ECONOMIC QUESTIONS A COUTRY MUST MAKE? - Correct Answers: What goods and services are to be produced? How are they produced? Who will receive these goods and services? what to produce? - Correct Answers: depends on what goods and services an economy wants . what do Prices communicate? - Correct Answers: they communicate information in the system and consumers decide how to use their resources and put their technology to use. how does competition help? - Correct Answers: Leads to highly efficient production of goods and services main role of governments - Correct Answers: Protect property rights Enforce contracts between private parties provide public goods like national defense establish and ensure adequate operative environment for competitive markets. Planned economies - Correct Answers: Socialist and communist - systems where most of the productive resources are opened by the state and mst decisions made by central governments. Socialist countries - Correct Answers: these countries have a high degree of freedom with a big role for government services paid by high taxes, and highly regulated private business PPF - Correct Answers: PRODUCTION POSSIBILITIES FRONTIER Shows the combinations of two goods that are possible for a society to reduce at full employment. inside and outside PPF? - Correct Answers: Points inside PPF are feasible or can be accomplished. Those outside of the frontier are unattainable. full employment - Correct Answers: all the points along the PPF represent points of max output of our economy, where all resources are being used absolute advantage - Correct Answers: one country can produce more of a good than another country. one country has a comparative advantage over another if its opportunity cost to produce that good is lower than that of the other country. THE GAINS FROM TRADE - Correct Answers: Even with absolute advantage, both countries still benefit from trading with one another. As two economies become more equal in side, the benefits of their comparative advantages grow. Limits on Trade and Globalization - Correct Answers: Every transaction involves cost. Transportation, communication. 3: SUPPLY AND DEMAND ANALYSIS - Correct Answers: To build a hoouse you need a foundation. Economic theory is based on this basic foundation. what questions are answered by Supply and Demand? - Correct Answers: why product sales rise and fall? what direction prices move in? how many goods will be offered for sale when certain events happen in the market place? how personal income is distributed? what is market ? - Correct Answers: an institution that allows buyers and sellers to interact and transact with one another the price system - Correct Answers: when buyers and sellers exchange money for goods and services, accepting some offers and rejecting others . Demand - Correct Answers: the wants and desires people are willing and able to buy during a certain period of time at various prices, holding all other factors constant. LAW OD DEMAND - Correct Answers: buyers will demand more products when they can buy them at lower prices. Demand curve slopes down to the right. CAPITALIST MARKET ECONOMIES - Correct Answers: Private individuals and firms own most of the resources competition between buyers and sellers leads to - Correct Answers: highly efficient production of goods and services ENTREPRENEURIAL ABILITY - Correct Answers: the human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risks. PRODUCTION EFFICIENCY - Correct Answers: manufacture of the desired output with the minimum amount of effort, account of the costs and benefits associated with a particular choice of what outputs to produce and what inputs to use in producing them. PRODUCTION POSSIBILITIES - Correct Answers: The alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology PRODUCTION POSSIBILITIES FRONTIER - Correct Answers: a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology THE PPG MODEL INDICATES.. - Correct Answers: Economic growth can come from an expansion in resources or ents in technology. An outward shift in the PPF curve DETERMINANTS OF DEMAND - Correct Answers: Anything other than price of the current item that influences consumer buying decisions, including income, tastes and preferences, price of related items (substitutes and complements), number of consumers in the market, and expected future price. CHANGES IN DEMAND - Correct Answers: A new equilibrium point. Supply rises or lowers, demand rises or lowers. Rises goes right, lowers goes left. SUPPLY - Correct Answers: the amount of goods and services that producers are able and willing to sell at various prices during a specified time period LAW OF SUPPLY - Correct Answers: the principle that suppliers will normally offer more for sale at higher prices and less at lower prices SUPPLY CURVE - Correct Answers: a curve that shows the relationship between the price of a product and the quantity of the product supplied. CHANGE TO RIGHT > ≡ INCREASE IN SUPPLY CHAGE TO THE LEFT < ≡ DECREASE IN SUPPLY MARKET EQULIBRIUM - Correct Answers: a situation in which the quantity of a product demanded equals the quantity supplied SURPLUS - Correct Answers: A situation in which quantity supplied is greater than quantity demanded CHANGES IN SUPPLY - Correct Answers: a shift in an entire supply curve such that the quantity supplied changes even though price customers are willing to pay remains constant. An increase in supply is represented by a rightward shift of the supply curve; a decrease in supply is illustrated by a leftward shift of the supply curve. CHANGES IN DEMAND - Correct Answers: Shifts of the demand curve due to changes in the determinants of demand, which change the relationship between price and quantity demanded PRICE CEILINGS - Correct Answers: Are maximum prices set by the government for particular goods and services that they believe are being sold at too high of a price and thus consumers need some help purchasing them. PRICE FLOOR - Correct Answers: a legally determined minimum price above the equilibrium price PRICE FLOORS AND PRICE CEILINGS - Correct Answers: They are used to intervene in markets. PRICE CEILING - if set below equilibrium price results in shortages PRICE FLOORS - ,in price that can be changed for a product- when set above equilibrium prices, it causes shortages. JOHN MCMILLAN 5 MAJOR REQUIREMENTS IN MARKETS - Correct Answers: Information must be widely available Property rights are protected Contracts are enforced Externalities are minimized Competition Prevails CONSUMER SURPLUS - Correct Answers: The difference between the maximum amount a person is willing to pay for a good and its current market price. PUBLIC GOOD - Correct Answers: a good that (1) may be enjoyed by anyone if it is provided and (2) may not be denied to anyone once it has been provided PRIVATE GOODS - Correct Answers: Goods that are both excludable and rival in consumption COMMON RESOURCE - Correct Answers: Resource that people normally are free to use; each user can deplete or degrade the available supply. Most are renewable and owned by no one. Examples are clean air, fish in parts of the ocean not under the control of a coastal country, migratory birds, gases of the lower atmosphere, and the ozone content of the upper atmosphere (stratosphere). See tragedy of the commons. 1929 - Correct Answers: UNEMPLOYMENT AT 2.99% 1933 - Correct Answers: Unemployment at 25% markets grew much faster than GDP the great depression 1400 markets closed their doors GDP - Correct Answers: Gross Domestic Product- the total market value of all final goods and services produced annually in an economy 1945 - Correct Answers: WWII wars help depression presidents have blank checks to win the war America came out of depression because of the war - Correct Answers: Unemployment and inflation both rise STAGFLATION