30 terms

Midterm 1

Specialization in production is important primarily because it
results in greater total output
A normative statement is one that
is based in value judgements
Which of the following would be most lkely to shift the production possibilities curve to the irght
an improvement in the literacy level and general level of education
the invisible hand refers to the
notion that, under competition, decisions motivated by self-interest promote the social interest
two major virtues of the market system are that it
allocates resources effienctly and allows economic freedom
In terms of the circular flow diagram, businesses obtain revenue through the _______ market and make expenditures in the _______ market
product; resource
Markets explained on the basis of supply and demand
assume many buyers and many sellers of a standardized product
Graphically, the market demand curve is
the horizontal sum of individual demand curves
When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes
the income effect
The demand curve for a product might shift as the result of a change in
all of these
College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are
inferior goods
other things equal, which of the following might shift the demand curve for gasoline to the left?
the development of a low-cost electric automobile
Refer to the diagram on the right. An increase in quantity supplied is depicted by a
move from point y to point x
an increase in the price of product A will
increase the demand for substitute product B
The quantity demanded of a product increases as its price declines because the
demand curve is downsloping
an increase in the quantity demanded means that
price has declined and consumers therefore want to purchase more of the product
The largest functional share of the national income consists of
wages and salaries
As it relates to corporations, the principal agent problem is that:
the goals of corporate managers(the agents) may not match the goals of the corporate owbers (the principlas)
Real GDP is preferred to nominal GDP as a measure of economic performance because
nominal GDP uses current prices and thus may over or understate true changes in output
Why are economists concerned about inflation?
inflation lowers the standard of living for people whose income does not increase as fast as the price level
A nation's gross domestic product:
is the dollar value of all final output produced within the borders of the nation
GDP excludes
the market value of unpaid work in the home
Net exports are
exports less imports
Value added refers to
the difference between value of a firm's output and the value of the inputs it has purchased from others
Real GDP measures
current output at base year prices
Historically, real GDP has increased less rapidly than nominal GDP because
the general price level has increased
The fact that nominal GDP has risen faster than real GDP
suggests that the general price level has risen
Refer to the above data. If year 3 is chosen as the base year, the price index for year 1 is
Refer to the above dat. The nominal GDP for year 4 is:
Refer to the above data. Real GDP for year 5 is: