Key Concepts in Economics: A Comprehensive Review

Posted on Jan 5, 2025 in Economy

Key Concepts in Economics

Microeconomics

1. B. Productive resources are limited.
2. B. A comparison of marginal benefits and marginal costs in decision making.
3. B. If the marginal benefit of the movie exceeds its marginal cost.
4. A. Scarcity and opportunity costs.
5. C. The temperature is 92 degrees today.
6. D. That more output could be produced with the available resources.
7. This economy will experience unemployment (graph B. B).
8. Starting at point E (graph), bread production C. 1/8, 1/6.
9. D. A technological advance that allows farmers to produce more output from given units (GU).
10. C. The relationship will graph as an up-sloping line.
11. A. Canada.
12. A. The division of output is decided by central planning rather than by individual.
13. C. Competition.
14. D. Encourages innovation because successful innovators are rewarded with…
15. A. Goods and services that are profitable.
16. D. Through the profit potential that encourages the development of new technology.
17. B. Workers, managers, and entrepreneurs.
18. B. Land, labor, capital, and entrepreneurs.
19. C. Martha has a lower tolerance.
20. D. Tends to be done poorly because decision-makers are insulated.

Economic Growth

21. C. Growth of real GDP per capita.
22. C. 14 Years.
23. B. Modern economic growth is characterized by sustained…
24. D. Encourages growth by promoting the rapid spread…
25. A. An outward shift of the production.
26. A. Increase in productivity.
27. C. Labor productivity must be $0.50.
28. D. Technological advance.
29. D. The percentage of married women in the workforce.
30. C. An increase in the size of the labor force.

Supply and Demand

31. A. The price of the product itself.
32. A. Price.
33. D. A and B are complementary goods.
34. C. Consumer preferences have changed in favor of A.
35. C. Shift from D2 to D1.
36. C. Shift from S2 to S1.
37. A. Producers will offer more of a product at high prices.
38. D. Some firms leaving an industry.
39. A. $1.00 and $2.00.
40. C. If the amount producers want to sell is equal to the amount consumers want…

Additional Economic Concepts

Externalities and Public Goods

1. A. Negative externality.
2. D. Costs more to produce than it provides in benefits.
3. C. A consumer surplus of $9.
4. A. The areas of consumer and producer surplus are necessarily equal.
5. B. The maximum willingness to pay for the last unit of output.
6. A. A weather warning system.
7. B. Private firms cannot stop consumers who are unwilling to pay…
8. C. Marginal benefit equals marginal cost.
9. D. Compare the benefits and costs associated with any economic…
10. C. Markets can produce inefficient outcomes.

Macroeconomics

11. C. The economy as a whole.
12. D. Short-run fluctuations in output and employment.
13. B. Value of final goods and services produced within borders.
14. A. Nominal GDP uses current prices and thus may over…
15. B. A person cannot get a job but is willing to work.
16. A. An increase in the overall level of prices.
17. B. Rates of population growth virtually matched rates…
18. C. Current income exceeds current spending.
19. C. Promote economic growth by helping to direct household…
20. C. A dramatic increase in energy prices increases production…
21. C. GDP in 2010 is $500 billion.
22. C. In dollar amounts and percentage growth.
23. A. A haircut purchased by a father for his 12-year-old son.
24. B. Nick buys $5,000 worth of stock in Microsoft.
25. D. Total investment less the amount of investment goods used up…
26. D. Gross domestic investment exceeds depreciation.
27. C. Consumer durable goods, consumer non-durable goods, and services.
28. B. The purchase of a new house.
29. D. $210 billion.
30. B. $121.

Business Cycles

31. B. The long-term expansion or contraction of business…
32. A. Expansion.
33. B. $102 million.
34. C. Not in the labor force.
35. D. Employed.
36. A. The economy achieves its potential output.
37. C. Prices on average are rising, although some particular prices…
38. A. 8-9 years.
39. A. Occurs when total spending in the economy is excessive.
40. A. Is self-limiting.

Consumption and Investment

1. B. Change in income that is spent.
2. A. Consumption to the level of disposable income.
3. B. Consumption/income.
4. C. Greater than zero but less than one.
5. C. Consumption exceeds income.
6. B. The percentage increase in purchasing power that the lender…
7. D. More variable than real GDP.
8. A. Investment demand schedule.
9. A. The slope of the consumption schedule or line.
10. D. Specific level of total income that is consumed.

Aggregate Expenditures

11. A. Prices are fixed.
12. A. Actual investment.
13. A. At all levels of GDP.
14. C. Injections and leakages.
15. A. Sa+M+T=Ig+X+G.
16. A. The amount by which the full-employment GDP exceeds…
17. D. Is the price that the currencies of any two nations exchange…
18. B. 3,110.
19. B. Unplanned decreases in inventories of $10 billion.
20. C. Aggregate expenditures and real GDP are equal.

Aggregate Demand and Supply

21. C. Down-sloping because of the interest rate, real balances…
22. B. The foreign purchases effect.
23. C. Shows the various amounts of real output…
24. D. The aggregate demand and supply curves intersect.
25. C. Ratchet effect.
26. A. Neither economic growth nor unemployment responded…
27. B. Explain shifts in the aggregate demand curve.
28. A. A change in the price level.
29. C. Rightward by $50 billion at each price level.
30. D. Multiplier effect.

Fiscal Policy

31. B. Subtracting government tax revenues from government spending…
32. C. Budget surplus.
33. D. Fiscal policy swung from contradictory to expansionary in 2002.
34. B. Increases in government spending financed through borrowing will…
35. C. The federal government owes to holders of US securities.
36. A. The US public.
37. C. Crowding-out effect.
38. A. Bankruptcy of the federal government.
39. B. Deficits during recessions and surpluses during periods of…
40. C. Is aimed at reducing aggregate demand and thus achieving…