econ test chps 4, 5, 9, 15

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what are the major business sectors that make up the US economy?

households, businesses, the international sector, & the public sector

what is produced in the market system is determine ultimately by whom?

the consumers

the fast food business has changed dramatically since the 1950s, going from eat-in restaurants to drive-through outlets to home-delivery chains. the reason for this change is that...

since 1970, state and local spending has been growing more rapidly than federal spending

resources that were once used in a failing business will, according to the text...

be passed down by entrepreneur ability

according to the text, adam smith described the flow of resources in a market economy as an invisible hand that reaches out and....

produced the greatest social good

a partnership is...

a business owned by two or more partners who share both the profits of the business and responsibility for the firm's losses

a sole proprietorship is a business form in which...

the owner recieves all the profits and is responsible for all the debts incurred by the business

which of the following is not a multinational corporation?

one thats owned & operated in a foreign country

in the circular flow of income model, businesses...

have an additional market for the goods and services that they produce

a trade surplus occurs when...

exports exceed imports

anytime economists refer to the public sector, they are talking about....

the government

which of the following is true of the complete circular flow model?

household income, business revenue, government income, total exports

according to the text, the addition of government brings significant changes to the circular flow model. These changes include all of the following except...

government services, resources, taxes

in a market system, imperfect information,externalties, and public goods are often referred to as problms for the market because...

imperfect info is a problem because resources may not be used where they have the highest value, and so government must intervene to provide more info; externalties are a problem some must pay pay the costs or benefits from transactions that they are not directly involved in

what is the reason why a car purchased off the new car lot one day will have a significantly lower value the next day?

there is imperfect info- info the salesman shares is imperfect

in the US, the market price of driving understates the full cost of driving to society because...

we only pay for gasoline & car maintenance, but we reap the costs of air pollution, noise, and congestion that's associated with driving. if they had to pay for the costs, they would drive less frequently

fluctuation in economy are called...

business cycles

according to the text, people call on the government to protect them against periods of economic ill health and to minimize the damaging effects of business cycles. the results are all...

gov. agencies are est.'d to control the money supply & other important parts of the economy, and gov.-financed programs are implemented to offset some of the losses that result during bad economic times

according to public sector economists...

when the gov. gets involved, it is for self-seeking purpose (rent-seeking)

according to the text, which entity in the US controls the money supply and credit conditions?

monetary policy

according to the text, wwhich entity in the US prepares and analyzes the federal budget?

fiscal policy

according to the text, which entity in the US investigates unfair international trade practices?

the federal trade commission

macroeconomic policy

is the branch of economics that deals w/ the entire economy and issues that affect most of society incl. inflation, unemplyment, GDP, national income, interests rates, and exchange rates (monetary & fiscal policy)

the chairman of the Board of governors of the federal reserve system is appointed by...

by the president for a term of 4 years

the central bank of the US is the...

federal reserve

who formulates fiscal policy in the US?

usually the president who initiates policy changes

in a centrally planned system, we are more likely to see which of the following?

people that are not free to start a business, own property, a car, home or any personal belongings

if negative externalities are involved in the production or consumption of a good, _____ of the good is produced or consumed. The government should _____ encourage producers to produce _____ of the good.

more; tax; less

what is a major difference between AS&AD and supply& demand?

one big diff. is that there is no demand supplied at any given price

the aggregate supply curve...

is the total output of the economy at alternative price levels

the aggregate supply curve

represents the total spending in the economy at alternative price levels

other things equal, an increase in aggregate demand will result in...

demand-pull inflation

in terms of aggregate demand and supply, demand-pull inflation is caused by...

the increase in price level

cost-push inflation...

is caused by a decrease in aggregate supply- where the price level rises as a result of increased costs of production & the associated decrease in aggregate supply

which of the following occurs when the price level falls?

value of inflation is decreasing

lower investment spending is the result of...

higher interest rates

which of the following is not a nonprice determinant of demand?

substitutes, changes in tastes

the short-run AS curve is drawn under the assumption that...

the costs of production are held constant

why does the AS curve become steeper as real GDP increases?

each increase in output requires firms to hire more and more resources, until eventually capacity is reached in some areas of the economy, resources are fully employed, and some firms reach max. input; becomes increasingly steep as the economy approaches max output

why is the long-run aggregate supply curve vertical at potential real GDP?

the curve is vertical because resource costs adjust fully to price changes (inflation is going to even out at some degree)

consider the statement: "if the gov. attempts to raise employment through increased fiscal spending, all it will end up doing will be to drive up the price level." the person who makes this statement assumes that...

the supply curve is vertical at potential real GDP in which all you're doing is creating inflation

the short-run aggregate supply curve shifts to the left when....

any cost increase in input (labor) would cause a leftward shift

the long-run aggregate supply curve is...

going to be a vertical line

which of the following will increase investment?

expanding business ----> investment (capacity utilization- utilizing resources to full potential)

the phillips curve tradeoff between ...

unemployment rates & inflation

contrary to what believers in the phillips curve would say, US economic data from 1955 to 2000 show evidence of...

no particular relation between unemployment rate & inflation

most economists believe that the downward sloping phillips curve shifts so that in the long run, ....

the tradeoff between unemployment and inflation disappears

according to the phillips curve, a short-run decrease in inflation is associated with...

high employment rate

suppose the fed announced a low-money-growth policy to control inflation and workers sign low-wage contracts as a result. if the fed actually implemented a high-money-growth instead, which of the following would be false?

"unemployment will not change" <----false, because unemployment rose and so did

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