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69 terms

econ final

STUDY
PLAY
you decide to go to a movie
marginal benefit exceeds marginal cost
marginal cost exists because
wants are scarce relative to resources
if a tradeoff exists between goals A and B, this means that
greater fulfillment of A means lesser fulfillment of B
The concept of economic efficency is primarily concerned with
obtaining maximum output from obtaining maximum output from available resources
the fundamental problem of economics is
scarcity
an increase in efficency suggests that the economy:
is growing
Which of the following is real capital:
a construction crane
productive efficency is:
producing at minimal cost
production possibility curve illustrates the basis principle that
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
a nations production possibilities curve is bowed out because
resources are not perfectly shiftable between production of the two goods
Assume that a change in government policy results in the increased production of both consumer of investment goods, it can be concluded that:
RGDP goes up and taxes go down
allocative efficency involves determining
mix of output that will maximize society's satisfaction
in the resource market
households sell resources to businesses
an increase in the price of a product will reduce the amount of it purchased because
consumers will subsitute other products for the one whose price has risen
a bicycle company predicts that, other things equal, a rise in consumer spending will increase the demand for bicycles based on the assumption
bicycles are normal goods
if products A and B are complements and the price of B decreases
demand for A will increase and the amount of B will increase
Term "quantity demanded" refers to
the amount of a product that will be purchased at some specific price
improvement in production technology will
shift the supply curve to the right - decrease
surplus of a product will arise when price is
above equilibrium with the result that quantity supplied exceeds quantity and demand both increases
one can say with certainty that equilibrium price will decline when supply:
and demand will both increase
GDP may be defined as
the monetary value of all goods and services produced in a given year
which of the following is a final good or service
new economics textbook you are using
gross investment refers to:
net investment plus replacement investment
Transfer payments
a redistribution of income in market system - they do not absorb resources or create output
if depreciation exceeds gross investment
the economys stock of capital is shrinking
if depreciation exceeds gross investment
economy stock of capital is shrinking
The amount of after-tax income received by households is called:
disposable income
the team real GDP refers to
Nominal GDP adjusted for inflation
Price index
a normalized average of prices for a given class of goods
if the real GDP rises and the GDP price index has increased:
Nominal GDP must have increased
Suppose the rate of inflation for some specific year was 10%. If CPI for that year was 139.7, previous years CPI must have been:
127
Natural rate of unemployment is:
long term rate determined by structual forces in labor and product markets or rate of unemployment occurring when the economy is at its potiential output
labor force includes
employed workers and persons who are officially unemployed
stay at home mom and dads are
classified as "not in the labor force" potiential worker that is unemployed and not seeking work
according to classical economists
the view that the market system will ensure full employment
CIGXn
an aggregate expenditure model
a closed economy includes all except
Xn would be excluded due to closed economy
in aggregate expenditure model, most important determinant of consumption and saving is the
level of income
consumption schedule shows
direct relationship between aggregate consumption and aggregate income
Consumption schedule is drawn on the assumption that as income increases consumption
increases
Ben's MPC is .80, this means that he will:
spend 8/10 of an increase in his disposable income
Immediate determinants of investment spending are the:
expected rate of return on capital goods and real interest rate
the multiplier maybe calculated as
the change in real GDP by the initial change in spending 1/1-MPC
Net exports decrease from zero to some negative amount, aggregate expenditure schedule would shift:
shift downward
A recessionary gap is:
amount by which aggregate expenditures at full employment fall short of those required to achieve full-employment for 6 months or longer
Foreign purchases effect suggest that a decrease in US price level relative to other countries will:
Decrease in US imports Increase in US exports
Increase in aggregate expenditures resulting from a decrease in price level =
movement downward along a fixed aggregate demand curve
increase in aggregate demand in vertical range of AS curve
Increase in price level but not affect real output
discretionary fiscal policy refers to
changes in taxes and government expenditures made by Congress to stabilize the economy
A tax reduction of a specific amount will be more expansionary the:
larger is the economy's MPC
If the economy is encountering inflation, supply-side economist might recommend
wage and price control
if you place part of your summer earnings as cash in a safety deposit box, you are employing money primarily
a store of value
checkable deposits are classified as money because:
they can be readily used in purchasing goods and paying debts
the asset demand for money
varies inversely with the market rate of interest
primary purpose of the legal reserve requirement is to:
provide a means by which the monetary authorities can influence the lending ability of commercial banks
excess reserves refer to the:
difference between actual reserves and required reserves
when commercial banks use excess reserves to buy government securities
new money is created
if the required reserve ratio was lowered:
the size of the monetary multiplier would increase
the 3 main tools of monetary policy
the discount rate, reserve ratio, and the open market operations
which of the following will happen when the federal reserve buys bonds from the public
commercial bank reserves will increase
Discount rate is the interest
rate that the fed charges for loans to commercial/member banks
a change in legal reserve ratio affects the:
amount of excess reserves in the banking system
which of the following describes a tight money policy
a decrease in the money supply will raise the interest rate, decrease investment spending and decrease aggregate demand and GDP
if the Fed were to purchase government securities in the open market, we would anticipate:
lower interest rates, an expanded GDP, and depreciation of the dollar
A rightward shift on Phillips curve would suggest that:
Inflation would increase and unemployment rate would increase
Keynesian theory holds that a decline in AD will:
reduce output and employment but not the price level
Monetarists believe the private economy is inherently:
stable but the public sector should be small
If the wants to lower the fed funds rate, it should:
signal that it will implement an "easier" monetary policy; buy bonds
Assume France and England have floating exchange rates. Other things unchanged, if economic growth is more rapid in France than in Britain:
France will depreciate