Economics Concepts Quiz
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Questions and Answers

What is the opportunity cost of 1 novel for Jordan?

  • 3 poems
  • 1/3 poem (correct)
  • 4 poems
  • 12 poems
  • Which of the following best describes human capital?

  • Knowledge and skills that workers acquire through education, training, and experience (correct)
  • Same thing as technological knowledge
  • Stock of equipment and structures that is used to produce goods and services
  • Total number of hours worked in an economy
  • If the nominal exchange rate changes from 120 yen per dollar to 100 yen per dollar, how does the real exchange rate change?

  • Depreciate, which would make U.S. net exports rise (correct)
  • Depreciate, which would make U.S. net exports fall
  • Appreciate, which would make U.S. net exports fall
  • Appreciate, which would make U.S. net exports rise
  • What type of money would an economy using gold represent?

    <p>Commodity money, but not fiat money</p> Signup and view all the answers

    If a government's expenditures exceed its receipts, which action is it most likely to take?

    <p>Sell bonds directly to the public</p> Signup and view all the answers

    What is the opportunity cost of 1 pound of potatoes for the farmer?

    <p>1/5 pound of meat</p> Signup and view all the answers

    Which of the following is an example of physical capital in a restaurant?

    <p>The tables and chairs in the restaurant</p> Signup and view all the answers

    What is likely to be the net effect on U.S. net exports if the real exchange rate appreciates?

    <p>Net exports will decrease as U.S. goods become more expensive abroad</p> Signup and view all the answers

    Who developed the principle of comparative advantage?

    <p>David Ricardo</p> Signup and view all the answers

    As the price level rises, what happens to the net exports?

    <p>The real exchange rate rises, so net exports fall.</p> Signup and view all the answers

    What must a central bank do to maintain stable prices?

    <p>Tightly control the money supply.</p> Signup and view all the answers

    In the Consumer Price Index (CPI), goods and services are weighted based on what criterion?

    <p>How much consumers buy of each good or service.</p> Signup and view all the answers

    What is the primary use of the Consumer Price Index?

    <p>To monitor changes in the cost of living over time.</p> Signup and view all the answers

    Given that a country's real output has increased, under which condition can we confirm an increase in productivity?

    <p>The total number of hours worked stayed the same.</p> Signup and view all the answers

    The theory of liquidity preference assumes that the nominal supply of money is influenced by which factors?

    <p>Level of real output and interest rate.</p> Signup and view all the answers

    If the money supply M is $3,000, the price level P is 2, and real output Y is $12,000, what is the velocity of money?

    <p>8</p> Signup and view all the answers

    Study Notes

    Opportunity Cost

    • Jordan has to give up 3 poems to gain 1 novel

    Human Capital

    • Human capital is the knowledge and skills that workers acquire through education, training, and experience

    Real Exchange Rate

    • If the nominal exchange rate is 120 yen per dollar, the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen
    • The real exchange rate depreciates which would make U.S. net exports rise.

    Commodity Money

    • Gold is considered commodity money because it acts as a medium of exchange, a unit of account, and a store of value

    Government Expenditures

    • If the government's expenditures exceed its receipts, it would likely sell bonds directly to the public

    Opportunity Cost

    • The opportunity cost of 1 pound of potatoes for the farmer is 1/5 pound of meat

    Physical Capital

    • An example of physical capital is the tables and chairs in the Peapod Restaurant.

    Comparative Advantage

    • David Ricardo developed the principle of comparative advantage.

    Real Exchange Rate

    • As the price level rises, the real exchange rate rises, so net exports fall

    Stable Prices and Central Bank

    • To maintain stable prices, a central bank must tightly control the money supply

    Consumer Price Index (CPI)

    • In the CPI, goods and services are weighted according to how much consumers buy of each good or service

    Consumer Price Index (CPI)

    • The CPI is used to monitor changes in the cost of living over time

    Productivity

    • When a country's real output has increased, and the total number of hours worked stayed the same or fell, the country's productivity also increased

    Liquidity Preference Theory

    • The theory of liquidity preference assumes that the nominal supply of money is determined by the Federal Reserve

    Velocity of Money

    • Velocity = (P x Y)/M
    • if M = 3,000, P = 2, and Y = 12,000, the velocity = 8

    Exchange Rates

    • If more British decide to vacation in the U.S. and purchase U.S. Treasury bonds, the demand for dollars will increase, leading to an appreciation of the U.S. dollar.

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    Description

    Test your knowledge on fundamental economics concepts such as opportunity cost, human capital, and real exchange rates. This quiz also explores the characteristics of commodity money and government expenditures. Challenge yourself and see how well you understand these essential economic principles!

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