Economics1

Economics Review For Test
  
Created Feb 16, 2012
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studygirl1
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Side ASide B
The word that comes from the Greek word “one who manages a household” 
economy
Resources are
scarce for households and scarce for economics
1.      The principle that “trade can make everyone better off”...
a.       Families b.      States within...
Who wrote the Wealth of Nations?
Adam Smith
Wealth of Nations and the Declaration of Independence shares the point of view that ___.
individuals are best left to their own devices without the government guiding their actions
An example of externality
 impact of pollution from a factory on the health of people in the vicinity of the factory
In a market economy, who makes the decisions that guide most economic activity?
Households and firms
the principle that "people face trade offs" applies to
individuals, families, societies
economists study
the management of scare resources
Most economists believe that an increase in the quantity of money results is:
a.       An increase in the demand for goods and services b.     ...
The business cycle 
irregular fluctuations in economic activity
A circular flow diagram is a model that
a.       Helps to explain how participants in the economy interact...
In the circular flow diagram the factors of production
labor, land, capital
What arrow represents the flow of goods and services?
The inside arrow starting from Markets for goods and Services ending/pointing to households
What arrow represents the flow of spending by households?
The outside arrow starting from households and pointing to markets for goods and services
The production possibilities frontier is a graph that shows the various combinations of output...
can produce
Production possibilities frontiers says 
an economy can produce at any point on or inside the production possibilities frontier, but...
A production possibilities frontier shifts outward when
the economy experiences economic growth
A demand curve shows the relationship
between price and quantity demanded
What you give up to obtain an item is called your
opportunity cost
What statement exemplifies a principle of individual decision making? a) Trade can make everyone...
the cost of something is what you give up to get it; c 
Trade between the United States and Indiaa) benefits both the United States and Indiab) is...
benefits both the United States and India
Trade between countries tend to: a) reduce both competition and specializationb)reduce competition...
increase both competition and specialization
The economy of the former Soviet Union is best described as a: a) primitive economy b)market...
Centrally-planned economy
One advantage market economies have over centrally-planned economies is that market economies:...
are more efficient 
Prior to the collapse of communism, communist countries worked on the premise that economic...
the actions of government central planners
The invisible hand works to promote general well-being in the economy primarily through: a)...
people's pursuit of self-interest 
In a market economy, who makes the decisions that guide most economic activity? a. firms b.households...
firms and households
One reason we need government, even in a market economy, is that
the invisible hand is not perfect
a direct or positive relationship between a country's: a. productivity and its standard of...
productivity and its standard of living 
To raise productivity, policymakers could: a) increase spending on education b) provide tax...
increase spending on education, provide tax credits to firms for capital improvements, and...
with respect to how economists, study the economy, what is the best following statement that...
economists devise theories, collect data, and analyze the data to test the theories
If this economy devotes one-half of its available resources to the production of baseballs...
150 bananas and 100 baseballs
The field of economists is traditionally divided into two broad subfields, a) national...
microeconomics and macroeconomics
Normative statements are a)  prescriptive, whereas positive statements are descriptive...
prescriptive, whereas positive statements are descriptive
Prices rise when the quantity of money rises rapidly is an example of __.
 positive economic statement
The council of economic advisers a) was created in 1946 b)advises the president of the United...
was created in 1946,  advises the president of the United States on economic policy matters, writes...
Economists at the Department of the Treasury a)design U.S. currency and coins b)provide congress...
provide advice on tax policy to the President
When two variables have a positive correlation, a)when the x-variable increases, the y-variable...
when the x-variable increases, the y-variable increases 
When two variables have a negative correlation, a)tend to move in opposite directionsb)they...
tend to move in opposite directions
When an economists points out that you and millions of other people are interdependent, he...
rely upon one another for the goods and services we consume
Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative...
the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the...
Imports are 
1.       goods produced abroad and sold domestically
Exports are 
1.       goods produced domestically and sold abroad
Trade can make everyone better off because it: a)increases cooperation among nations b) allows...
allows people to specialize according to comparative advantage 
In a market economy, supply and demand determine 
both the quantity of each good produced and the price at which it is sold
Economists generally support: a)trade restrictions b)government management of trade...
free international trade
The gains from trade are: a) evident in economic models, but seldom observed in the real world...
a result of more efficient resource allocation than would be observed in the absence of trade
In a market economy: a) supply determines demand and demand, in turn, determines prices b)demand...
demand determines supply and supply, in turn, determines price
What are the characteristics of a perfectly competitive market?
a.       Different sellers sell identical products b.     ...
A competitive market is one in which
 there are so many buyers and so many sellers that each has a negligible impact on the...
A monopoly is a market 
with one seller, and that seller sets the price
Other things equal, when the price of a good rises, the quantity demanded of the good falls,...
applies to most goods in the economy, is represented by a downward-sloping demand curve, is...
At the equilibrium price,
the quantity of the good that buyers are willing and able to buy exactly equals the quantity...
The line that relates the price of a good and the quantity demanded of that good is called...
demand curve, and it usually slopes downward
A increase in quantity demand: a)results in a movement downward and to the right along a fixed...
results in a movement downward and to the right along a fixed demand curve
If, at the equilibrium price, there is a surplus of a good, then
sellers are producing more than buyers wish to buy
An early frost in the vineyards of Napa Valley would cause a)an increase in demand for wine,...
a decrease in the supply of wine, increasing price
Elasticity is 
1.      a measure of how much buyers and sellers respond to changes...
How does the concept of elasticity allow us to improve upon our understand of supply and demand?...
Elasticity allows us to analyze supply and demand with greater precision that would be the case...
What is the correct statement that describes price elasticity of demand? a) the price...
the price elasticity of demand for a good measures the willingness of buyers of the good to...
Demand is said to be unit elastic
if quantity demanded changes by the same percent as the price
If the price elasticity of demand for a good is 0.4, then a 10 percent increase in...
4 percent decrease in quantity demanded
An increase in price causes and increase in total revenue when 
demand is inelastic
The price elasticity of supply measures how much
the quantity supplied responds to changes in input prices
if a 25% change in price results in 40% change in quantity supplied, then the price elasticity of...
1.60 and supply is elastic
If a 40% change in price results in a 25% change in quantity supplied, then the price...
0.63 and supply is inelastic
1.       WTO(World Trade Organization)
an organization that overseas GATT
1.      Quota
a limit on imports to protect domestic manufacturers; limits on total imports
1.      Tariff
Tax on imports
Euro
common currency used throughout much of Europe
1.      GATT
General Agreement on Trade and Tariff which has reduced trade barriers; a worldwide trade agreement...
Real
takes inflation into consideration; adjusted for inflation
Nominal
stated value, does not take inflation into consideration
1.      Adam Smith
Wrote The World of Nations
1.      GDP
measure total output of goods and services in a country in a given time; gross domestic product
1.      European Union
an organization European Nations that has reduced trade barriers within Europe


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