Econ Chapters 1 and 2 Flashcards
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Questions and Answers

Which of the following lies primarily within the realm of macroeconomics?

  • A study of how tax cuts stimulate aggregate production (correct)
  • An analysis of supply and demand conditions in the electricity market
  • A study of the impact of 'mad cow' disease on the price of beef worldwide
  • A study of the demand for gasoline
  • Marginal thinking is best demonstrated by:

  • Deciding to never purchase a coat made with animal skins or furs
  • Acquiring the information relevant to a choice before making that choice
  • Measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake
  • Choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. (correct)
  • Scarcity exists because of:

  • Unlimited wants and limited resources (correct)
  • Specialization and division of labor
  • The allocation of goods by prices
  • The market mechanism
  • Which of the following best characterizes the circular flow of income?

    <p>Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.</p> Signup and view all the answers

    The opportunity cost of an action:

    <p>Is a subjective valuation that can be determined only by the individual who chooses the action.</p> Signup and view all the answers

    Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change.

    <p>economy</p> Signup and view all the answers

    As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

    <p>the production possibilities frontier</p> Signup and view all the answers

    In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?

    <p>The macroeconomy</p> Signup and view all the answers

    In countries like _____________, the command economy predominates.

    <p>Cuba and North Korea</p> Signup and view all the answers

    In the circular flow diagram model:

    <p>Both (a) and (b) are correct.</p> Signup and view all the answers

    Specialization:

    <p>Can lead to an increase in overall production.</p> Signup and view all the answers

    Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

    <p>circular flow diagram</p> Signup and view all the answers

    Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

    <p>The benefit to his grades from studying for an hour.</p> Signup and view all the answers

    Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

    <p>Normative statements</p> Signup and view all the answers

    Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

    <p>Marginal analysis</p> Signup and view all the answers

    In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.

    <p>Utility</p> Signup and view all the answers

    Macroeconomics:

    <p>Is concerned with the expansion and contraction of the overall economy.</p> Signup and view all the answers

    Macroeconomic topics do not usually include:

    <p>The profit maximizing decisions of an individual manufacturer.</p> Signup and view all the answers

    Which of the following best denotes the reason for the existence of substantial black markets?

    <p>A command economy</p> Signup and view all the answers

    The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending.

    <p>government</p> Signup and view all the answers

    The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set.

    <p>budget constraint</p> Signup and view all the answers

    Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

    <p>Positive statements</p> Signup and view all the answers

    In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

    <p>Buyers and sellers.</p> Signup and view all the answers

    Study Notes

    Macroeconomics vs. Microeconomics

    • Macroeconomics studies large-scale economic factors, such as how tax cuts influence aggregate production.
    • Microeconomics focuses on individual markets, such as the demand for gasoline or the electricity market.

    Marginal Thinking

    • Marginal thinking involves making decisions based on the additional benefits of an action, like studying for one more hour to improve quiz scores.

    Concept of Scarcity

    • Scarcity arises due to unlimited wants juxtaposed against limited resources, necessitating choices and trade-offs.

    Circular Flow of Income

    • The circular flow model illustrates how businesses acquire resources from households, which in turn spend their income on goods and services produced by these businesses.

    Opportunity Cost

    • Opportunity cost is the subjective value of the benefit received from the next best alternative forgone by making a choice.

    Economic Models

    • Economic models, such as the circular flow diagram, use graphical representations to illustrate economic theories and patterns.

    Specialization

    • Specialization enhances overall production efficiency as workers focus on specific tasks, leading to skill development.

    Positive vs. Normative Statements

    • Positive statements objectively describe the current state of the economy, while normative statements express subjective views on how the economy should function.

    Macroeconomic Concerns

    • Macroeconomics addresses issues like economic growth, inflation, and unemployment, and is mainly concerned with the overall economy rather than individual manufacturer decisions.

    Black Markets

    • Substantial black markets often emerge in command economies due to government regulations and laws.

    Tools of Macroeconomic Policy

    • The two primary tools of macroeconomic policy are monetary policy and fiscal policy, with the latter involving government spending decisions.

    Budget Constraint

    • The budget constraint model depicts the choices available to individuals under conditions of scarcity, showing income limits in decision-making.

    Market Orientation

    • In a market-oriented economy, production decisions are influenced by the interactions of buyers and sellers, rather than government planning or controls.

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    Description

    Test your understanding of key concepts from Economics chapters 1 and 2. This quiz focuses on macroeconomic principles and marginal thinking, providing a great way to reinforce your learning. Perfect for students preparing for exams or anyone looking to refresh their knowledge.

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