Economics

Chapter 1

• The term laissez-faire means

  • To allow individuals and firms to pursue their own self-interests

• Select the best definition of the production possibility frontier

  • A graph that shows the combinations of two goods that can be produced if all of society´s resources are used efficiently

• Which of the following is more closely associated with the term capital?

  • Goods used to produce other goods

• Which of the following concepts is best described by the negative slope of a production possibility frontier curve?

  • Scarcity

• When an individual weighs her/his options and makes a choice that maximizes her/his benefit at the minimum cost, economists after to this as a process of

  • Rational decision making

• When firms in an economy start producing more shoes and fewer cars, They are answering the ….. question.

  • what

• Economics is the study of

  • How individuals, firms, and governments make optimal choices from among a set of alternatives hen facing scarce resources

• Economics is a branch of

  • The social science

• Which of the following statements about market economies is false?

  • It does not need a rationing mechanism

• Which of the following is a type of capital?

  • Machine

• Any production point outside the production possibilities frontier

  • Is unattainable

• In economics, the benefit that an individual gets from an activity is called

  • Utility

• Ceteris paribus means

  • Assuming all else is held constant

• Along a straight line, the value of y is always equal to the value of x. The slope of the line is

  • 1

• Scarcity requires that people must

  • Make choices

• Macroeconomics is the branch of economics that studies

  • The economy as a whole

• Which of the following is NOT a factor of production?

  • The wages paid to workers

• The production possibilities frontier is

  • Downward sloping and reflects tradeoffs in choices

Production	Production of X	Production of Y
A	0	40
B	4	36
C	7	28
D	10	16
E	13	0

• The above table shows production combinations on a country´s production possibilities frontier. Which of the following is an example of a point that is unattainable?

  • 11 units of good X and 16 units of good Y

• The above table..... of point that is inefficient

  • 4 units of good X and 35 units of good Y.

• The above table ..... Which of the following points signifies efficient production?

  • 0 units of good X and 40 unit of good Y.

• The term used to emphasize that making choices in the face of scarcity involves a cost is

  • Opportunity cost

• Economic growth means

  • Both answers A and B are correct

Chapter 2

• In the circular flow model, households are responsible for .... while businesses are responsible for ....

  • Consumption, production

• The two primary players in the circular flow model are

  • Households and businesses

• In the circular flow diagram, aggregate expenditure includes the sum of

  • Consumption and investment

• What is the driving force behind the circular flow of the market economy?

  • Money

• The circular flow model shows that consumer goods and services produced by business firms are sold in the

  • Goods market

• What do businesses provide for the rest of the World?

  • Goods and services

• What are the technical terms for the two main parties in the circular flow?

  • Producers and consumers

• What are the resources employed to produce goods and services?

  • Factors of production

• The circular flow shows that the household sector earns its income by

  • Selling factors of production

• In the circular flow model, consumption expenditures are the spending by

  • Households in the goods market

• In goods markets

  • Firms sell to households. In factor market households tell to firms

• In the above figure, flow B represents

  • Household purchases of goods and services

• In the above figure, flow A represents....

  • Firms payments for labour services

• GDP is

  • Flow

• Being a human being who buys goods and services to satisfy unlimited wants and needs would put you in the

  • Household sector

• ...... economists believe that the economy is self-regulating and always at full employment.

  • Classical

• In the figure below, letter A represents

  • Domestic product markets

• Letter B

  • Domestic households

• C

  • Domestic firms

• E

  • Financial market

• F

  • Domestic factor markets

Chapter 3

• Which of the following fits the definition of GDP?

  • All of the above (the value of final goods and services produced within a given period, the market value of a country´s output, the value of output produced by factors of production located within a country.)

• What is value added?

  • Value added is the difference between the value of goods as they leave a stage of production and the cost of the goods as they entered that stage.

• Which of the following is counted in GDP?

  • The fee paid to a broker for selling a stock

• Which of the following categories are included in gross private domestic investment?

  • All of the above (residential investment, depreciation, non-residential investment, change in business inventories)

• Changes in business inventories are

  • Counted as a component of investment

• Fill in the blanks. Saving rates tend to ..... during recessionary periods and .... during boom times.

  • Rise, fall

• An increase of 10% in nominal GDP indicates that

  • Both real GDP and the price level could have contributed to that increase

• A feature of a stock variable and a flow variable is that

  • A stock is a quantity that exists at a pint in time and a flow is a quantity per unit of time

• The government´s budget deficit is the excess of government

  • Purchases of goods and services over its net taxes

Consumption	3900
Investment	700
Transfer payments	750
Government expenditures	800
Exports	850
Imports	550
Net foreign factor income	-30

• Calculate GDP using the table above

  • 5700 (3900+700+800+850-550)

• The largest component of personal consumption expenditure (C) is

  • Services