Economic decisions involve doing what with resources to produce goods and services for people to produce?
Economics is about the production of goods and services, which requires the allocation of what?
In an economic system, decisions need to be made about producing resources and which of the following?
Which of these government policies pursues the economic goal of equity?
Providing welfare benefits
Which of these government policies pursues the economic goal of growth?
Increasing the money supply
Which of these government policies pursues the economic goal of freedom?
Protecting consumers from fraud
What is the purpose of a free-market system?
To allow consumers and producers to make their own decisions. The free-market system leaves economic decisions up to the free choices of consumers and producers.
Which of these is one of the principles of a free-market system?
The government must prevent consumers from being coerced. A coerced choice is not a free choice.
Which of these is required to have a free-market system?
Laws against theft, fraud and coercion
Why do economists measure the gross domestic product?
To see how much economic activity there is in a particular country. The GDP is the total of all goods and services produced in an economy.
What does the inflation rate indicate?
How quickly prices are rising overtime
Which of these economic indicators is most likely to be high during a recession?
How does the assembly line benefit the economy?
It increases productivity.
How does use of cargo containers benefit the economy?
By keeping distribution costs low
How has the Internet benefited the economy?
By improving communication and allowing greater trade specialization
In a free-market system, consumers let producers know what they want to buy and how much they’re willing to pay through what?
In order to know what people want to buy and how much they’re willing to pay, producers pay attention to what?
Producers use market research in order to do what?
To find out what consumers want to buy
Utility is a measure of what?
The satisfaction that consumers get from their purchases is known as what?
Consumers use the cost-benefit analysis in order to maximize what?
The purpose of advertising is to do what?
Influence consumer behavior
A consumer who is reluctant to take chances has a high level of what?
The non-monetary considerations that affect consumers’ decisions are often based on what?
Values and beliefs
Match each type of market structure with an example of an industry that fits that type of competition
Pure Competition: fast food
Monopoly: cable television
Monopolistic Competition: online auctioning
Match each type of business with one of its features
Sole proprietorship: unlimited liability
General partnership: collective decision making
Public corporation: stockholder control
Government corporation: public regulation
According to the law of supply and demand, when supply increases what else happens?
Prices will decrease
Which of these is most likely to lead to a decrease in the price of a good?
Demand decreases and supply remains the same.
What happens when demand for a good increases but its supply decreases?
The price for the good increases.
Match each of the terms below with an example that fits the term
Fungibility: the production of potatoes
Elasticity: the demand for jewelry
Non-excludability: the provision of a public good
Substitution: the switch from white bread to wheat bread
Which of these is most likely to lead to an increase in wages?
The formation of a labor union
What is likely to happen if the size of the labor pool suddenly increases?
Wages will go down
A high level of what will most likely lead to a higher wage?
Put the phases of the business cycle in the correct order in which they follow a depression
Put the phases of the business cycle in the correct order in which they follow a recession
Put the phases of the business cycle in the correct order in which they follow a boom
Why is a fractional reserve banking system necessary?
To enable banks to loan out money to make a profit
What is the purpose of the required reserve ratio?
To make sure banks have enough money on hand to meet customers’ withdrawal requests. It protects banks against bank runs.
Under a fractional reserve banking system, the amount of money loaned out can only increase if what happens?
The required reserve ratio is lowered
Which is not a policy tool used by the Fed?
Making tax cuts
What is not a way that the Fed can generate an increase in the money supply?
Which of these is the Fed not able to do?
Prevent a budget deficit
Which of these is most likely to lead to an increase in the price of a company’s stock?
Its outstanding shares are sold
What is most likely to push the price of a company’s stock higher?
An increase in demand for the company’s stock
Which of these is most likely to lead to a decrease in the price of a company’s stock?
Its annual profits decrease
Why is it possible to make money in the currency exchange market?
Exchange rates are always fluctuating
Buying a bond is similar to what?
Giving a loan
What kind of goods are sold in the commodity market?
Raw, unprocessed goods
When a company goes public, it begins doing what?
Selling shares of stock
An initial public offering (IPO) is when a company does what?
Begins selling stock to the public
The purpose of an initial public offering (IPO) is to do what?
The government needs to provide public goods for what reason?
Because private companies cannot profit by providing them
Why are private companies unlikely to provide public goods?
The non-excludability of public goods makes it difficult to profit from them
Which of these prevents private companies from deciding to produce public goods?
The profit motive
Which of these promotes greater efficiency and lower prices by producing competition?
Antitrust laws promote greater efficiency and lower prices by protecting what?
Antitrust laws protect competition and bring about lower what?
Rationing is an attempt to limit shortages that naturally result from what?
In order to limit the shortages that naturally result from a price ceiling, the government can do what to certain goods?
The government sets a price floor in order to protect what?
A vulnerable industry
Which of these results from the mobility of production that characterizes the current global economy?
Companies use offshoring in order to do what?
Reduce labor costs
Low wages in the underdeveloped world give the U.S. an incentive to do what?
Why is renting an apartment usually cheaper than buying a house?
Buying a house involves paying off a loan and eventually owning the home, while renting is just giving money to a landlord
Why is buying a house a better investment than renting an apartment?
Mortgage payments increase the homeowner’s equity. You can also eventually own the home.
Which of these is a disadvantage of buying a house instead of renting an apartment?
Homeowners must pay all of the repairs themselves
What is the purpose of a budget?
To keep expenses below income
What is the goal of using a personal budget?
To save for your future financial goals
Why are student loans usually guaranteed by the government?
Banks don’t have any collateral for student loans
Which of these is a form of self-help financial aid?
What is one of the features of most student loans?
Students don’t have to begin repaying until they’re done with school. Banks know that students are more likely to be able to repay a loan once they’ve graduated and gotten a decent job.
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