Economics Terms (correct answers)
Scarcity correct answers the limited nature of society's resources
Economics correct answers the study of how society manages its scarce resources
Efficiency correct answers the property of society getting the most it can from its scarce
resources
Equity correct answers the property of distributing economic prosperity fairly among the
members of society
Opportunity cost correct answers whatever must be given up to obtain some item
Market economy correct answers an economy that allocates resources through the
decentralized decisions of many firms and households as they interact in markets for
goods and services
Externality correct answers the impact of one person's actions on the well being of a
bystander
Inflation correct answers an increase in the overall level of prices in the economy
Phillips curve correct answers a curve that shows the short run tradeoff between
inflation and unemployment
Business cycle correct answers fluctuations in economic activity, such as employment
and production
Circular flow diagram correct answers a visual model of the economy that shows how
dollars flow through markets and firms
Production possibilities curve correct answers a graph that show the combinations of
output that the economy can possibly produce given the available factors of production
and the available production technology
Microeconomics correct answers the study of how households and firms make
decisions and how they interact in markets
Macroeconomics correct answers the study of economy wide phenomena, including
inflation, unemployment, and economic growth
Positive statements correct answers claims that attempt to describe the world as it is
Normative statements correct answers claims that attempt to prescribe how the world
should be
, Interdependence correct answers a reciprocal relation between interdependent entities
Specialization correct answers to focus on a particular area
Absolute advantage correct answers the comparison among producers of a good
according to their productivity
Comparative advantage correct answers the comparison among producers according to
their opportunity cost
Imports correct answers goods produced abroad and sold domestically
Exports correct answers goods produced domestically and sold abroad
Law of demand correct answers the claim that, other things equal, the quantity
demanded of a good falls when the price of the good rises
Normal good correct answers a good for which, other things equal, an increase in
income leads to an increase in demand
Inferior good correct answers a good for which, other things equal, an increase in
income leads to a decrease in demand
Substitutes correct answers two goods for which an increase in the price of one good
leads to an increase in the demand for the other good
Complements correct answers two goods for which an increase in the price of one good
leads to a decrease in the demand for the other good
Law of supply correct answers the claim that, other things equal, the quantity supplied
of a good rises when the price of the good rises
Equilibrium correct answers a situation in which the price has reached the level where
quantity demanded equals quantity supplied
Surplus correct answers a situation in which quantity supplied is greater than quantity
demanded
Shortage correct answers a situation in which quantity demanded is greater than
quantity supplied
Adam Smith correct answers Scottish political economist and moral philosopher. His
inquiry into the Nature and Causes of the Wealth of Nations was one of the earliest
attempts to study the historical development of industry and commerce in Europe. That
Scarcity correct answers the limited nature of society's resources
Economics correct answers the study of how society manages its scarce resources
Efficiency correct answers the property of society getting the most it can from its scarce
resources
Equity correct answers the property of distributing economic prosperity fairly among the
members of society
Opportunity cost correct answers whatever must be given up to obtain some item
Market economy correct answers an economy that allocates resources through the
decentralized decisions of many firms and households as they interact in markets for
goods and services
Externality correct answers the impact of one person's actions on the well being of a
bystander
Inflation correct answers an increase in the overall level of prices in the economy
Phillips curve correct answers a curve that shows the short run tradeoff between
inflation and unemployment
Business cycle correct answers fluctuations in economic activity, such as employment
and production
Circular flow diagram correct answers a visual model of the economy that shows how
dollars flow through markets and firms
Production possibilities curve correct answers a graph that show the combinations of
output that the economy can possibly produce given the available factors of production
and the available production technology
Microeconomics correct answers the study of how households and firms make
decisions and how they interact in markets
Macroeconomics correct answers the study of economy wide phenomena, including
inflation, unemployment, and economic growth
Positive statements correct answers claims that attempt to describe the world as it is
Normative statements correct answers claims that attempt to prescribe how the world
should be
, Interdependence correct answers a reciprocal relation between interdependent entities
Specialization correct answers to focus on a particular area
Absolute advantage correct answers the comparison among producers of a good
according to their productivity
Comparative advantage correct answers the comparison among producers according to
their opportunity cost
Imports correct answers goods produced abroad and sold domestically
Exports correct answers goods produced domestically and sold abroad
Law of demand correct answers the claim that, other things equal, the quantity
demanded of a good falls when the price of the good rises
Normal good correct answers a good for which, other things equal, an increase in
income leads to an increase in demand
Inferior good correct answers a good for which, other things equal, an increase in
income leads to a decrease in demand
Substitutes correct answers two goods for which an increase in the price of one good
leads to an increase in the demand for the other good
Complements correct answers two goods for which an increase in the price of one good
leads to a decrease in the demand for the other good
Law of supply correct answers the claim that, other things equal, the quantity supplied
of a good rises when the price of the good rises
Equilibrium correct answers a situation in which the price has reached the level where
quantity demanded equals quantity supplied
Surplus correct answers a situation in which quantity supplied is greater than quantity
demanded
Shortage correct answers a situation in which quantity demanded is greater than
quantity supplied
Adam Smith correct answers Scottish political economist and moral philosopher. His
inquiry into the Nature and Causes of the Wealth of Nations was one of the earliest
attempts to study the historical development of industry and commerce in Europe. That
