USAD - DemiDec - Basic - Economics

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What are the main economic activities of the government within the circular flow model?: regulation and taxation
What is "consumer sovereignty?": when the consumers drive the economy
What is Say's Law?: that supply creates its own demand
In the circular flow model, which sector is on the demand side of the product market?: households
In the circular flow model, which sector is on the demand side of the factor market?: businesses
Which sector in the circular flow model owns resources?: households
Which sector in the circular flow model is responsible for taxation and regulation?: government
In the circular flow model, when the real flow is clockwise, in what direction does money flow?: counter-clockwise
Supply-side economics suggests that the circular flow model starts in which sector?: business
What is national income?: the total income earned by all households and corporations in an economy within a given period of time
What does GDP stand for?: Gross Domestic Product
What is GDP?: the total value of all final goods and services produced within an economy over a specified period of time.
What does GDP measure?: a nation's productive output
Which GDP-calculating approach involves knowing the amount of consumption and invenstment?: expenditures approach
In the expenditures approach to calculating GDP, what does the C stand for?: consumption
In the expenditures approach to calculating GDP, what does the G stand for?: government spending
In the expenditures approach to calculating GDP, what does the I stand for?: investment spending
In the expenditures approach to calculating GDP, what does the X stand for?: net exports (all exports minus all imports)
In the US, what percentage of the GDP is based on consumption?: 65%
In the US, what percentage of the GDP is based on government spending?: 15%
In the US, what percentage of the GDP is based on investment spending?: 15%
In the US, what percentage of the GDP is based on net exports?: 5%
What is the difference between nominal GDP and real GDP?: nominal = GDP expressed in current-year dollars
real = GDP expressed after it's been adjusted for inflation
What do we call the price index used to convert nominal GDP to real GDP?: GDP deflator
What is the equation for real GDP?: real GDP = nominal GDP divided by GDP deflator

= (nominal GDP)/(GDP deflator)
How can changes in GDP be misleading?: doesn't account for changes in quality or inflation; some activities go unreported (aka illegal activities); transactions without money (home-making, subsistance farming) aren't included;
What is per capita GDP?: the total GDP divided by the total population
What does per capita GDP measure?: quality of life
How can the per capita GDP measure the quality of life inaccurately?: it doesn't include non-market activities (i.e. home-making); doesn't factor in the good stuff (second-hand goods), or the bad stuff (greenhouse emissions); as time goes on, developing nations appear further behind while industrialized nations appear farther ahead
GDP = _____ + _____ + _____ + _____: C (consumption); G (government spending); I (investment spending); X (net exports)
In the income approach to GDP, what two things must be subtracted from the subtotal?: subsidies and indirect taxes
What is considered the best measure of the quality of life in an economy?: GDP
What is "double-counting" as it pertains to GDP measurements?: when goods or services are included twice in the GDP measurement
Why is GDP per capita an inadequate measure for the quality of life?: GDP is a measure of productivity, but that's only one aspect of the quality of life in an economy; does reveal everything about quality of life in an economy;
How can GDP be distorted by price changes?: it's hard to tell whether a price increase is the result of an increase in quality
What is economic growth?: a sustained increase in an economy's capacity to produce goods and services
What do economists watch to determine whether economic growth is occurring in the US?: GDP
How long must GDP increase in order to be defined as a period of economic expansion in the business cycle?: at least two consecutive quarters (6 months)
How long must GDP decrease in order to be defined as a period of economic recession in the business cycle?: at least two consecutive quarters (6 months)
What is the lowest point (end) of a recession called?: trough
What is the highest point (end) of an expansion called?: peak
What can rise rapidly during expansionary periods?: inflation
What can rise rapidly during recessionary periods?: unemployment
True or false: A recession is a sustained decrease in business activity, lasting at least four consecutive quarters.: false; a recession is a sustained decrease in business activity, lasting at least TWO consecutive quarters
True or false: The business cycle is comprised of the natural fluctuations that occur in the level of business activity.: true
True or false: By definition, economic growth is a sustained increase in an economy's factors of production.: false; By definition, economic growth is a sustained increase in an economy's CAPACITY TO PRODUCE
True or false: To measure economic growth economists watch for increases in Gross Domestic Product.: true
True or false: The end of a recession is a trough in the business cycle.: true
True or false: The end of an expanstion is a peak in the business cycle.: true
What is a depression?: a severe contraction in economic growth, which lasts longer than one year
Expansion or recession: the years from 1933-1937: expansion
Expansion or recession: World War II: expansion
Expansion or recession: the years from 1945-1947: recession
Expansion or recession: the Korean War: expansion
Expansion or recession: the OPEC oil embargo of 1973: recession
Expansion or recession: the years from 1983-1989: expansion
Expansion or recession: the Gulf War: recession
Expansion or recession: the years from 1991-2001: expansion
What is aggregate output?: all the goods and services produced in an economy
How is aggregate output measured?: GDP
What is aggregate demand?: the relationship between the quantity demanded of aggregate output and the price level
What is price level?: the average price of all the goods and services produced in an economy
What does the aggregate demand curve show?: the relationship between the price level and the quantity demanded of real GDP
What is aggregate supply?: the relationship between the price level and the quantity of real GDP that producers are willing and able to supply
What does the aggregate supply curve show?: the relationship between price level and quantity supplied of real GDP
What is equilibrium?: the point where aggregate demand equals aggregate supply; the intersection of the aggregate demand curve and the aggregate supply curve;
What is stagflation?: a combination of economic stagnation and inflation; prices are rising but real GDP is not growing;
Who is included in the labor force?: any person who is at least 16 years of age, who works for pay either full-time or part-time, and anyone who is actively seeking a job
What is the definition of an unemployed person?: someone who does not currently have a job, but is making a serious, persistant effort to find one.
What makes up the labor force?: labor force = unemployed + employed
Micro or macro: How the Fed influences consumer spending the in US.: macro
Micro or macro: How a firm decides when to go out of business.: micro
Micro or macro: How debt affects the income gap among Americans.: macro
Micro or macro: How new parents decide whether to work or to stay home with their children: micro
In five or fewer words, what is economics?: a study of decision-making
What is the emphasis of microeconomics?: the economic decision-making of the individual
What is the emphasis of macroeconomics?: the economic behavior of an economy as a whole
Which of doesn't belong?: the circular flow of the economy; market structure; income elasticity of demand; price elasticity of demand;: the circular flow of the economy;

the circular flow is a "macro" issue, everything else is a "micro" issue
Which doesn't belong: gross domestic product; gross national product; price controls; monetary policy;: price controls

price controls are a macro issuebecause they affect individual markets or industries. All the others are "macro" issues.
Which doesn't belong: the policy tools of the Federal Reserve; the Humphrey-Hawkins Act; recession; barriers to market entry;: barriers to market entry

All are "macro isues, but the "barriers" refer to entry into an individual market. The Humphrey-Hawkins Act obligates congress to pursue economic prosperity. Even if you didn't know this, you could have guessed that any bit of legislation might result in a policy change, which means if would fall under "macro."
Which doesn't belong: National Income Accounts the natural rate of unemployment; characteristics of an oligopoly; the velocity of money: characteristics of an oligopoly

all are macro issues, but the "characteristics"refer to an individual market (which happens o be an oligopoly).
Scarcity forces people to make _____.: choices
There ain't no such thing as a free _____. (TANSTAAFL).: lunch
Economics is based on the assumption that people have unlimied _____ and limited _____.: wants; resources
The basic problem of economics is _____.: scarcity
If less of a resource is available to us than we like, then the resource is said to be _____.: scarce
The most common example of a free good is _____.: air
What is a trade-off?: a decision to have something and to do without something else
What is opportunity cost?: the value of the best alternative not chosen
What is economic cost?: the complete cost, which is a measure of its net economic impact (includes monetary and non-monetary values)
According to economics, why do people have to make choices?: because they deal with scarcity
Why do economists say "there ain't no such thing as a free lunch?": if you give it enough thought, everything has an economic cost
What is a free good?: a resource so abundantly available to everyone that it does not seem to be limited
What is the difference between accounting cost and economic cost?: economic cost includes the accounting cost as well as other qualitative costs
Why is it difficult to quantify the economic cost of a decision?: economic cost includes qualitative costs, which are difficult to quantify
The cost of a trade-off is called _____.: opportunity cost
What is the decision to have more of one thing and less of another?: trade-off
What is the scale of the study of microeconomics?: individual
What is equal to the value of the best alternative not taken?: opportunity cost
What is a measure of the economic impact of an action?: economic cost
What is the scale of the focus of macroeconomics?: aggregate
What is something called that is available in a sufficient quantity to anyone who wants it?: free good
What is the reason we study economics?: scarcity
Production at any point allong the PPF is _____ and _____.: attainable and efficient
Production at a point inside the PPF is _____ and _____.: attainable and inefficient
Production at a point outside the PPF is _____.: impossible/unattainable
As production approaches a point closer to either end of the PPF, the trade-offs become _____.: increasingly costly
What law causes the PPF to curve?: the law of increasing opportunity costs
Whay is it difficult to quantify the economic cost of a decision?: economic cost includes qualitative costs, which are difficult to quantify
Production at any point along the PPF is _____.: attainable and efficient
Production at any point inside the PPF is _____.: attainable and inefficient
Production at any point outside the PPF is _____.: currently unattainable; impossible
What causes the PPF to curve?: the law of increasing opportunity costs
As production approaches a point closer to either end of the frontier, the trade-offs become _____.: increasingly costly
What the PPF represents a nation's production possibilities, what do the two axes represent?: production of capital goods; production of consumer goods
True or false: Every point along the PPF is efficient.: true
True or false: On the PPF, as production approaches a point closer to either axis, the opportunity cost of a trade-off decreases.: false - On the PPF, as production approaches a point closer to eithe raxis, the opportunity cost of a trade-off INCREASES.
True or false: Without trade, a point above or to the right of the PPF is unattainable.: true
True or false: If the PPF is a straight line with a slope of -1, the two gods concerned are very different.: false - If the PPF is a straight line with a slope of -1, the two goods concerned are very SIMILAR.
True or false: We ease political pressure with goods and services.: false - We SATISFY WANTS with goods and services.
True or false: The PPF is often used to graphically represent the trade-off between the production of capital goods and the production of missiles.: false - The PPF is often used to graphically represent the trade-off between the production of capital goods and the production of CONSUMER GOODS.
True or false: A movement along the PPF represents a trade-off.: true
True or false: the law of increasing opportunity costs explains why the PPF is usually curved.: true
What law is demonstrated by the expression, "It's easy to make milk out of cows; it is more difficult to make nuclear missiles out of cows?": law of increasing opportunity costs
What are the four factors of production?: natural resources (land), human resources (labor), capital, entrepreneurial talent
What are "natural resources?": land and rraw goods in their natural environment
What are "capital resources?": the things we produce to help us produce other things
What are "human resources?": the human part of the production process; the mental and physical efforts of humans in the production process
What is "entreprenturial talent?": the resources we use to either improve the output of the production process or to create new output
How are natural resources paid for?: rent
How are capital resources paid for?: interest
How are human resources paid for?: wages
How is entreprenurial talent paid for?: profit
Which factor of production?: an oil reserve: natural resources
Which factor of production?: the initiative to combine water, lemons, and sugar to make lemonade for sale: entreprenurial talent
Which factor of production?: a rain forest: natural resources
Which factor of production?: buildings: capital resources
Which factor of production?: the knoeledge and training required to answer phones and schedule appointments for a dentist's office: human resources
Which factor of production?: machinery: capital resources
Which factor of production?: a laborer's training: human resources
Which factor of production?: the knowledge needed to design an advertising campaign: human resources
Which factor of production?: lumber: capital resources
Which factor of production?: the land on which a factory is built: natural resources
Which factor of production?: the ability to create and operate a new summer camp: entreprenurial talent
Which factor of production?: the ability to organize and train writers to produce exams, workbooks, flashcards, and other materials: entreprenturial talent
Which factor of production?: a printing press: capital resources
Which factor of production?: raw goods: natural resources
Which factor of production?: a mainframe computer: capital resources
True or false: As factors of production, education and training are considered capital resources.: False - As factors of production, education and training are considered HUMAN resources
True or false: The basic problem of economics is neo-conservatism.: False - The basic problem of economics is SCARCITY
True or false: The study of economics assumes humans have unlimited wants and limited resources with which to satisfy those wants.: True
True or false: The four factors of production are technology, strategy, savvy, and sapience.: False - The four factors of production are NATURAL RESOURCES, CAPITAL RESOURCES, HUMAN RESOURES, and ENTREPRENEURIAL TALENT.
True or false: An increase in a factor of production, ceteris paribus, will cause the PPF to expand outward.: True
True or false: In the language of economics, "entrepreneurship" is something that creates wealth.: False - In the language of economics, PRODUCTION is something that creates wealth.
True or false: TANSTAAFL stands for "Economists have a poor sense of humor.": False - "TANSTAAFL" means "THERE AIN'T NO SUCH THING AS A FREE LUNCH"
True or false: Natural resources include fossil fuels, trees, and coal mines.: True

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