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Economics 11 Exam 1

Economics is most importantly concerned with _______________.

studying how we allocate scarce resources to satisfy unlimited wants

The central question in economics is how to ___________________.

make the best use of scarce resources to satisfy our unlimited wants

The problem of scarcity _________________.

exists because resources are limited relative to wants

Which of the following statements most likely lies within the realm of macroeconomics?

Due to an economic recession, manufacturing firms began implementing layoffs of their workforces. Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook.

Macroeconomics topics do not generally include ____________.

the production decisions of individual firms

Measuring the rate of inflation is primarily a concern of ________________.

macroeconomics

Economists use the term "ceteris paribus" to indicate that ___________________.

other things are assumed to remain constant

Which of the following is a statement of positive economics?

If the overall unemployment rate is 6%, black unemployment rates will exceed 12%

Which of the following is not a factor of production?

cash

Entrepreneurship is ___________________.

the resource the organizes the other facts of production in order to produce good and/or servicces

Assume that Meat Farm sells Burger King one pound of meat for $5 and that BK sells the customers five hamburgers made from that one pound of meat for unit price of $6. In this case, the GDP that is computed by value-added method is:

$30

If GDP is $7,000 billion, consumption is $2,800 billion, net exports are $1,200 billion, government purchase is $700 billion, then investment is:

$2,300 billion

Economics may be defined as _____________________.

the study of the behavior of people and institutions in the production, distribution, and consumption of scarce resources

Macroeconomics is concerned with _______________.

the aggregate or total levels of income, employment, and output

The production possibility curve illustrates the basic principle ________________

if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced

Which of the following would be most likely to shift the production possibility curve to the left?

A decline in the side of the population and labor force

Which of the following problems would now be an example of a macroeconomics issue?

The marginal utility

Points which lie inside the production possibilities curve are _________________.

Attainable but inefficient

The amount of the other product that must be forgone to produce a unit of another product.

Opportunity cost

A point which lies outside of the production possibilities curve is said to be _____________.

Unattainable

Illustrates the different combinations of two foods that can be produced with the existing factors of production and the current state of technology.

Production possibilities curve

In the circular flow model, the factor market does not portray ________________.

A flow of monetary values that represents costs to the households but incomes to the firms

What are the four assumptions for a given production possibilities frontier?

Full employment, fixed resources, fixed technology, two goods

What is the law of increasing opportunity cost?

...

The dollar value of total annual output of final goods and services produced within the boundaries of the United States, whether by Americans or foreigners.

GDP (the sum of all the dollar value of output produced by American & Foreign firms in Domestic USA)

The dollar value of total annual output of final goods and services produced by Americans, whether they are located in the United States or abroad.

GNP (the sum all the dollar value of output produced by American Firms)

How is GDP computed?

Circular flow of GDP

Formula for Per Capita GDP

GDP divided by Population

What is absolute advantage?

...

What is comparative advantage?

The ability to produce output with lower opportunity cost

What is the formula for GDP?

C + I + G + NE

Consumption + Gross Investment + Government Purchases + Net Exports

What is the forumula for gross investment?

Gross investment = net investment + depreciation

What is the formula for Net Exports?

Net Exports = Exports - Imports

What is the formula for GNP?

GNP = GDP - Payments of factor income to the rest of the world + Receipts of factor income from the rest of the world

What is the formula for National Income?

National Income = GNP - Depreciation - Indirect Business Tax

What is the formula for Nominal GDP?

(Each unit price of good 1 x Output of good 1) + (Each unit price of good 2 x Output of good 2)

What is the formula for Real GDP?

Real GDP = Multiply base year prices to each years output

What is the formula for GDP deflator (GDP Price Index)?

(Nominal GDP / Real GDP) * 100

How do you find the % change of prices between 2 years?

1. Find the difference of the two years
2. (Difference / Starting value) * 100 = %

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