Neoclassical Economics Overview
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Questions and Answers

What primarily determines the allocation of resources in neoclassical economics?

  • Cultural values
  • Costs of production and utility (correct)
  • Historical precedents
  • Government intervention

    • What is described by the Law of Diminishing Marginal Utility?

  • A concept where consumption does not affect utility
  • A decrease in satisfaction from each additional unit consumed (correct)
  • The idea that utility remains constant as more is consumed
  • The increase in total utility as consumption increases

    • Which economist is credited with introducing the concept of general economic equilibrium?

  • Alfred Marshall
  • Leon Walras (correct)
  • Karl Marx
  • John Maynard Keynes

    • What does the term 'ceteris paribus' signify in economic analysis?

    <p>All things remain equal</p> Signup and view all the answers

    Which of the following accurately describes opportunity cost?

    <p>The value of the best alternative forgone</p> Signup and view all the answers

    What economic principle is exemplified by diminishing returns in production?

    <p>Increasing output with fixed inputs results in lower marginal returns</p> Signup and view all the answers

    Which of the following best describes the scope of neoclassical economics?

    <p>It emphasizes the importance of supply and demand in determining prices.</p> Signup and view all the answers

    Whose economic theory primarily discusses the destabilizing effects of tariffs on trade?

    <p>John Maynard Keynes</p> Signup and view all the answers

    What does the law of demand indicate about quantity demanded and price?

    <p>Quantity demanded increases as price decreases.</p> Signup and view all the answers

    Which economic system is characterized by central planning and classless society?

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

    In a perfectly competitive market, what are buyers and sellers said to be?

    <p>Price takers</p> Signup and view all the answers

    What is an example of the opportunity cost concept?

    <p>Spending time studying versus going out with friends.</p> Signup and view all the answers

    Which determinant of demand states that an increase in the number of buyers results in an increase in quantity demanded?

    <p>Number of buyers</p> Signup and view all the answers

    What typically happens to quantity demanded when the price of a substitute good increases?

    <p>Quantity demanded for the original good increases.</p> Signup and view all the answers

    What is one characteristic feature of capitalism?

    <p>Private ownership and free enterprise.</p> Signup and view all the answers

    In economics, what does the term 'scarcity' refer to?

    <p>Unlimited wants and limited resources.</p> Signup and view all the answers

    Which of the following is a response to the prospect of reward according to economic incentives?

    <p>People increase their buying when prices drop.</p> Signup and view all the answers

    What does the Law of Supply indicate about the relationship between quantity supplied and price?

    <p>Quantity supplied is directly proportional to price</p> Signup and view all the answers

    Which factor is NOT a determinant of supply as mentioned in the context?

    <p>Consumer income</p> Signup and view all the answers

    What does a perfectly elastic demand graph look like?

    <p>A horizontal line</p> Signup and view all the answers

    What type of elasticity describes a situation where quantity demanded changes proportionally with price changes?

    <p>Unitary elastic</p> Signup and view all the answers

    Which concept explains that trade can benefit all parties involved by specializing in production?

    <p>Comparative advantage</p> Signup and view all the answers

    What does the term 'comparative advantage' refer to in economic theory?

    <p>The ability to produce a good at a lower opportunity cost.</p> Signup and view all the answers

    Which of the following is a monetary policy instrument used to manage the economy?

    <p>Interest rate adjustments</p> Signup and view all the answers

    How do tariffs impact trade between countries?

    <p>They can lead to higher prices for imported goods.</p> Signup and view all the answers

    Factor Proportions Theory suggests that countries will export goods that use their abundant factors of production. What does this imply?

    <p>Countries with low labor costs will export labor-intensive goods.</p> Signup and view all the answers

    What is a primary assumption of Neo-classical Trade Theory?

    <p>Countries benefit from specializing in production based on comparative advantages.</p> Signup and view all the answers

    Which economic concept links population growth to resource availability?

    <p>Malthusian Theory</p> Signup and view all the answers

    What distinguishes macroeconomics from microeconomics?

    <p>Macro studies economies as a whole compared to micro's individual focus.</p> Signup and view all the answers

    What is a key characteristic of positive economics?

    <p>It is concerned with objective analysis and factual information.</p> Signup and view all the answers

    Which of the following statements defines Economic Models?

    <p>Simplify reality to better understand economic activities.</p> Signup and view all the answers

    What is the main contribution of David Ricardo in economic theory?

    <p>He expanded the labor theory of value and introduced the idea of comparative advantage.</p> Signup and view all the answers

    Which theory states that a country should export a commodity with a lower opportunity cost compared to another country?

    <p>Neo-classical Theory of Trade</p> Signup and view all the answers

    What is the effect of increasing the reserve requirement by the central bank?

    <p>Contracts the money supply</p> Signup and view all the answers

    In Factor Proportions Theory, what should a country do if it has a large amount of labor input?

    <p>Export labor-intensive commodities</p> Signup and view all the answers

    What is the primary purpose of tariffs on imported goods?

    <p>To provide revenue for the government</p> Signup and view all the answers

    What negative effect can too much money in households and firms lead to?

    <p>Overspending and inflation</p> Signup and view all the answers

    What does the rediscount rate influence in monetary policy?

    <p>The amount of money for lending</p> Signup and view all the answers

    Under the Hecksher-Ohlin Theory, which commodity should a country with cheaper inputs export?

    <p>Commodities that it has a comparative advantage in</p> Signup and view all the answers

    In the context of monetary policy, what is the result of open market operations when government securities are sold?

    <p>Decreased money supply</p> Signup and view all the answers

    What does the Neo-classical Theory of Trade emphasize in relation to output between countries?

    <p>Varying levels of output in two commodities</p> Signup and view all the answers

    What does increasing the amount of funds for lending generally lead to?

    <p>Lower interest rates</p> Signup and view all the answers

    What economic principle explains the relationship between the additional unit of consumption and its decrease in added satisfaction?

    <p>Law of Diminishing Marginal Utility</p> Signup and view all the answers

    Which of the following does not represent a key economic goal?

    <p>Maximization of profit</p> Signup and view all the answers

    In the context of neoclassical economics, what does a negative slope on the Production Possibility Frontier (PPF) indicate?

    <p>Opportunity cost of resource allocation</p> Signup and view all the answers

    Which economist is recognized as the father of macroeconomics and proposed theories related to employment and interest?

    <p>John Maynard Keynes</p> Signup and view all the answers

    What does the term 'marginality' refer to in economic analysis?

    <p>The additional benefit from an increment</p> Signup and view all the answers

    Which characteristic best describes the nature of a socialist economy?

    <p>Central planning and equal distribution of wealth</p> Signup and view all the answers

    What does the concept of opportunity cost emphasize in economic decision-making?

    <p>The value of the next best alternative that is forgone</p> Signup and view all the answers

    Which economic approach combines elements of neoclassical and Keynesian economics?

    <p>Post-Keynesian/mainstream economics</p> Signup and view all the answers

    What is indicated by the law of supply in relation to price and quantity supplied?

    <p>Quantity supplied increases as price increases</p> Signup and view all the answers

    Which factor most significantly affects market equilibrium price and quantity?

    <p>Market supply and demand</p> Signup and view all the answers

    Which economic principle explains the responsiveness of quantity demanded to a change in price?

    <p>Elasticity of demand</p> Signup and view all the answers

    What outcome is often associated with an increase in money supply in the economy?

    <p>Higher inflation rates</p> Signup and view all the answers

    In the circular-flow diagram, what flows from households to firms?

    <p>Labor and resources</p> Signup and view all the answers

    What concept describes the limited nature of society’s resources?

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

    Which economic ideology emphasizes private ownership and minimal governmental control?

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

    What is the relationship between price and quantity demanded known as?

    <p>Law of demand</p> Signup and view all the answers

    Which determinant of demand would likely cause quantity demanded to increase when the number of consumers rises?

    <p>Number of buyers</p> Signup and view all the answers

    In microeconomics, how are firms and households viewed in a perfectly competitive market?

    <p>Price takers</p> Signup and view all the answers

    What is an example of a good that might experience an increase in quantity demanded due to a rise in consumer income, categorized as a normal good?

    <p>Luxury watches</p> Signup and view all the answers

    What does the demand schedule illustrate?

    <p>The relationship between price and quantity demanded</p> Signup and view all the answers

    Which of the following best represents a situation where consumers react to the price of related goods?

    <p>Increase in quantity demanded of a good when its price falls</p> Signup and view all the answers

    How does the concept of trade-offs relate to economic efficiency and equality?

    <p>Trade-offs often involve a balance between efficiency and equality</p> Signup and view all the answers

    What is the primary consequence of an increase in the price of a complement good?

    <p>Decreased demand for the original good</p> Signup and view all the answers

    What primarily differentiates microeconomics from macroeconomics?

    <p>Microeconomics analyzes individual firms while macroeconomics focuses on national economic trends.</p> Signup and view all the answers

    Which of the following best describes the role of positive economics?

    <p>It offers a descriptive analysis of economic behavior and outcomes.</p> Signup and view all the answers

    What does the Production Possibilities Frontier (PPF) illustrate?

    <p>The trade-off between two different goods or services given limited resources.</p> Signup and view all the answers

    Which economic thinker is known for the labor theory of value?

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

    What is the main focus of agricultural economics as a field of study?

    <p>The analysis of how economic principles apply to agricultural activities.</p> Signup and view all the answers

    What is the primary outcome when a market achieves equilibrium?

    <p>There is no incentive for prices to change.</p> Signup and view all the answers

    Which of the following elements is a characteristic of classical economics?

    <p>The market reaches equilibrium with full employment.</p> Signup and view all the answers

    What can be inferred from the concept of comparative advantage in international trade?

    <p>Trade can benefit all parties if they specialize based on lower opportunity costs.</p> Signup and view all the answers

    Which term is used to describe the analysis of how limited resources are allocated in economic systems?

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

    Which of the following is NOT a feature of macroeconomic analysis?

    <p>Study of individual market behaviors.</p> Signup and view all the answers

    What is a consequence of having too much money in circulation within households and firms?

    <p>Overspending leading to inflation</p> Signup and view all the answers

    According to the Factor Proportions Theory, what should a country with abundant labor inputs export?

    <p>Commodities that require large amounts of labor input</p> Signup and view all the answers

    What is the effect of increasing the reserve requirement for banks by the central bank?

    <p>Reduction in available funds for lending</p> Signup and view all the answers

    Under the Hecksher-Ohlin Theory, what commodity should a country with scarce inputs import?

    <p>Commodities that use cheap resources</p> Signup and view all the answers

    What monetary policy tool involves the central bank purchasing or selling government securities?

    <p>Open Market Operations</p> Signup and view all the answers

    What happens when the rediscount rate is decreased by the central bank?

    <p>Encouragement of borrowing and increase in money supply</p> Signup and view all the answers

    What is the primary premise of Neo-classical Trade Theory?

    <p>Countries should specialize in goods with lower opportunity costs</p> Signup and view all the answers

    What typically results from a decrease in the money supply through monetary instruments?

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

    What role do tariffs play in international trade?

    <p>They serve primarily as a barrier to imports</p> Signup and view all the answers

    How can a country determine which commodity to export based on comparative advantage?

    <p>By evaluating the opportunity cost of production compared to another country</p> Signup and view all the answers

    What economic principle is indicated by a negative slope on the Production Possibility Frontier (PPF)?

    <p>Opportunity cost</p> Signup and view all the answers

    Which economist introduced the idea of diminishing marginal utility?

    <p>Alfred Marshall</p> Signup and view all the answers

    What does the term 'scarce economic resource' imply?

    <p>Resources have a non-zero price</p> Signup and view all the answers

    Which of the following economic objectives primarily focuses on minimizing opportunity cost?

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

    In macroeconomics, which theory is primarily associated with John Maynard Keynes?

    <p>Theory of Employment, Interest &amp; Money</p> Signup and view all the answers

    What aspect characterizes Post-Keynesian economics?

    <p>A blend of neoclassical and Keynesian principles</p> Signup and view all the answers

    What is the primary focus of microeconomics compared to macroeconomics?

    <p>Individual consumer behavior and firm decisions</p> Signup and view all the answers

    Which of the following is NOT considered a basic economic problem?

    <p>How to allocate resources effectively?</p> Signup and view all the answers

    How does the number of sellers in a market affect the quantity supplied?

    <p>An increase in sellers typically increases the quantity supplied.</p> Signup and view all the answers

    What describes the relationship between price and quantity supplied according to the Law of Supply?

    <p>As price decreases, quantity supplied decreases.</p> Signup and view all the answers

    What impact does inflation typically have on prices in an economy?

    <p>Inflation is associated with a rise in prices.</p> Signup and view all the answers

    In the context of elasticity, what does a value of |Ƹ| > 1 indicate about demand?

    <p>Demand is elastic.</p> Signup and view all the answers

    What does the circular-flow diagram illustrate in an economy?

    <p>The interaction between producers and consumers through the flow of dollars.</p> Signup and view all the answers

    Which of the following best distinguishes microeconomics from macroeconomics?

    <p>Microeconomics deals with individual households and firms, while macroeconomics examines the economy as a whole.</p> Signup and view all the answers

    Which economic theory suggests that unrestricted markets lead to optimal resource allocation?

    <p>Laissez faire</p> Signup and view all the answers

    What does the production possibilities frontier (PPF) illustrate?

    <p>The potential output combinations of two goods given a fixed amount of resources.</p> Signup and view all the answers

    Which of the following statements accurately describes positive economics?

    <p>It is unbiased and based on empirical observations about economic behavior.</p> Signup and view all the answers

    Which economist is noted for his correlation of economic problems with population growth?

    <p>Thomas Malthus</p> Signup and view all the answers

    Normative economics differs from positive economics in that it is primarily concerned with which of the following?

    <p>Opinions and values regarding economic policies.</p> Signup and view all the answers

    What is the primary focus of agricultural economics referred to in the content?

    <p>The management of farms and agribusiness operations.</p> Signup and view all the answers

    Which economic theory emphasizes the role of demand in driving economic cycles?

    <p>Keynesian economics</p> Signup and view all the answers

    According to the content, what is the labor theory of value associated with?

    <p>David Ricardo's evaluation of trade benefits.</p> Signup and view all the answers

    Which of the following statements about economic models is true?

    <p>They simplify reality to predict economic behavior.</p> Signup and view all the answers

    In the Neo-classical Theory of Trade, which scenario represents the correct comparative advantage for two countries?

    <p>The first country exports the commodity it has the lowest opportunity cost for.</p> Signup and view all the answers

    What happens when a country decreases its reserve requirement in monetary policy?

    <p>It increases liquidity and expands the money supply.</p> Signup and view all the answers

    According to Factor Proportions Theory, what should a country with abundant labor do regarding trade?

    <p>Export commodities that require a large amount of labor input.</p> Signup and view all the answers

    What is one of the main outcomes of overspending due to too much money in households and firms?

    <p>A shortage of goods in the market.</p> Signup and view all the answers

    Which monetary instrument influences borrowing by changing interest rates directly?

    <p>Rediscount Rate</p> Signup and view all the answers

    Under the Heckscher-Ohlin Theory, what should a country do if it has access to cheaper inputs?

    <p>Export commodities that require those cheaper inputs.</p> Signup and view all the answers

    How do tariffs primarily affect imported goods according to standard economic principles?

    <p>They enhance the competitiveness of local industries.</p> Signup and view all the answers

    What is the likely consequence of an increase in the rediscount rate on lending behaviors?

    <p>It will lead to a contraction in the money supply.</p> Signup and view all the answers

    What characterizes a country's monetary policy aimed at controlling inflation?

    <p>Reducing excess liquidity in the financial system.</p> Signup and view all the answers

    What is a key premise of the Opportunity Cost Theory as proposed by Haberler?

    <p>Countries benefit from specializing in goods with lower opportunity costs.</p> Signup and view all the answers

    Which of the following best defines the concept of demand in economics?

    <p>The willingness and ability to purchase a good at various prices.</p> Signup and view all the answers

    What does the law of demand imply about the relationship between price and quantity demanded?

    <p>As price decreases, quantity demanded increases.</p> Signup and view all the answers

    Which economic ideology involves a system with no central planning and free enterprise?

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

    In a perfectly competitive market, what role do buyers and sellers play?

    <p>Price takers</p> Signup and view all the answers

    Which determinant of demand states that the quantity demanded changes when consumer income changes?

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

    What is the term for a situation where an increase in the price of a substitute good results in an increase in the quantity demanded of another good?

    <p>Substitute effect</p> Signup and view all the answers

    What does the principle of scarcity imply in economic terms?

    <p>Society must manage limited resources to meet unlimited wants.</p> Signup and view all the answers

    In microeconomics, what does the term 'market demand' represent?

    <p>The aggregate quantity demanded of a good by all consumers in the market.</p> Signup and view all the answers

    Which of the following best characterizes the economic environment where firms decide how much to produce?

    <p>Microeconomic structures</p> Signup and view all the answers

    In economics, opportunity cost refers to what?

    <p>The benefit lost from the next best alternative not taken.</p> Signup and view all the answers

    Which factor does NOT influence the supply curve according to supply determinants?

    <p>Consumer preferences</p> Signup and view all the answers

    What is the likely outcome of a competitive market experiencing an increase in the number of sellers?

    <p>Increased quantity supplied as firms compete for customers</p> Signup and view all the answers

    During periods of high inflation, which of the following scenarios is most likely to occur?

    <p>Higher nominal prices with uncertain impacts on employment</p> Signup and view all the answers

    How does the concept of elasticity relate to the responsiveness of quantity demanded to price changes?

    <p>For perfectly inelastic demand, quantity demanded is unaffected by price changes.</p> Signup and view all the answers

    In the context of international trade, which principle suggests that countries benefit from specializing in the production of goods where they have a comparative advantage?

    <p>Comparative advantage principle</p> Signup and view all the answers

    What economic goal is primarily focused on minimizing the value of forgone alternatives?

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

    Which of the following best describes the role of marginality in economic decision-making?

    <p>It considers the additional benefit of the next unit.</p> Signup and view all the answers

    What does the Law of Diminishing Marginal Product state about production?

    <p>Beyond a certain point, additional resources yield lower product output.</p> Signup and view all the answers

    In Keynesian economics, which factor is often cited as a determinant of economic stability?

    <p>Aggregate demand levels</p> Signup and view all the answers

    Who of the following economists is known for their critique of capitalist systems leading to social instability?

    <p>Karl Marx</p> Signup and view all the answers

    What does the Post-Keynesian economic theory primarily combine?

    <p>Neoclassical and Keynesian economics</p> Signup and view all the answers

    Which of the following is NOT a basic economic problem under traditional economic theories?

    <p>What is the profit margin?</p> Signup and view all the answers

    In the context of international trade, what does the concept of comparative advantage imply?

    <p>Countries should specialize in goods with lower opportunity costs.</p> Signup and view all the answers

    What is the primary role of demand determinants in microeconomics?

    <p>To influence how consumers react to price changes</p> Signup and view all the answers

    Which economic ideology emphasizes private ownership and minimal government intervention?

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

    How do firms typically respond to increased consumer demand in a perfectly competitive market?

    <p>By increasing production to meet the demand</p> Signup and view all the answers

    What concept describes the relationship between quantity demanded and the price of related goods?

    <p>Substitutes and complements</p> Signup and view all the answers

    Which principle of economics asserts that people face trade-offs in their decision-making?

    <p>Opportunity cost principle</p> Signup and view all the answers

    What is the effect of an increased number of buyers on market demand?

    <p>Increased quantity demanded</p> Signup and view all the answers

    Which aspect of economics focuses on individual household and firm decision-making?

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

    How does income affect the demand for normal goods?

    <p>Income increases lead to increased quantity demanded</p> Signup and view all the answers

    What is a defining characteristic of a market with price takers?

    <p>Firms accept the market price as given</p> Signup and view all the answers

    What does the term 'scarcity' refer to in economic terms?

    <p>The limited availability of resources relative to wants</p> Signup and view all the answers

    Which aspect distinguishes macroeconomics from microeconomics?

    <p>Macroeconomics analyzes whole economies and their large-scale phenomena.</p> Signup and view all the answers

    What is a primary focus of agricultural economics as established in the early 20th century?

    <p>Analyzing market competition in the agricultural sector.</p> Signup and view all the answers

    Which economist is known for the labor theory of value and provided insights into international trade?

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

    Which economic principle is illustrated by the Production Possibilities Frontier (PPF)?

    <p>Scarcity and trade-offs in resource allocation.</p> Signup and view all the answers

    Which of the following theories corresponds with the idea that a country should export products with the lowest opportunity cost?

    <p>Comparative Advantage Theory</p> Signup and view all the answers

    What is a fundamental assumption in microeconomics regarding consumer behavior?

    <p>Consumers seek to maximize their utility with given resources.</p> Signup and view all the answers

    Which economic concept correlates population growth with available resources?

    <p>Malthusian Theory</p> Signup and view all the answers

    Which of the following best describes positive economics?

    <p>It aims to explain economic phenomena through facts and causality.</p> Signup and view all the answers

    What does an increase in demand typically lead to in a competitive market?

    <p>An increase in equilibrium price.</p> Signup and view all the answers

    Which economic model is primarily used to describe the interactions between households and firms?

    <p>Circular Flow Model</p> Signup and view all the answers

    In Neo-classical Theory of Trade, what must the first country do in terms of exports and imports?

    <p>Export commodities of greater advantage and import those of lesser advantage.</p> Signup and view all the answers

    What is the primary effect of increasing the reserve requirement in monetary policy?

    <p>It contracts the money supply and reduces funds for lending.</p> Signup and view all the answers

    According to Factor Proportions Theory, a country with large amounts of labor input should export which type of commodity?

    <p>Commodities requiring large amounts of labor input.</p> Signup and view all the answers

    Which of the following best describes the impact of tariffs on imported goods?

    <p>They protect local industries by raising the cost of foreign goods.</p> Signup and view all the answers

    What is the consequence of having too much money circulating in households and firms?

    <p>Overspending leading to inflation.</p> Signup and view all the answers

    What is the effect of decreasing the rediscount rate in monetary policy?

    <p>It encourages borrowing by making funds cheaper.</p> Signup and view all the answers

    In Modern Theory of Trade, a country should export a commodity with what types of inputs?

    <p>Available but cheaper inputs.</p> Signup and view all the answers

    What does the phrase 'contract money supply' refer to in the context of monetary policy?

    <p>Reducing excess liquidity to combat inflation.</p> Signup and view all the answers

    Under which circumstances should a country use open market operations to sell government securities?

    <p>To stabilize the economy and prevent inflation.</p> Signup and view all the answers

    What does the Neo-classical Theory of Trade suggest regarding countries with varying levels of output in two commodities?

    <p>They should specialize in the commodity where they have a comparative advantage.</p> Signup and view all the answers

    How does productivity affect a country's stature in the global economy?

    <p>Increased productivity enhances economic growth and competitiveness.</p> Signup and view all the answers

    Which of the following factors negatively correlates with unemployment in the short run?

    <p>Inflation rates affecting consumer pricing.</p> Signup and view all the answers

    What is a primary characteristic of a competitive market?

    <p>Many buyers and sellers exist without affecting the price.</p> Signup and view all the answers

    What effect does an increase in the number of sellers have on the quantity supplied?

    <p>It increases quantity supplied due to greater competition.</p> Signup and view all the answers

    Which type of elasticity indicates that quantity demand changes very little with price changes?

    <p>Perfectly inelastic demand.</p> Signup and view all the answers

    What is the essence of microeconomics?

    <p>The study of how households and firms make decisions.</p> Signup and view all the answers

    Which ideology emphasizes a command economy with central planning?

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

    How does an increase in the number of buyers typically affect quantity demanded?

    <p>It increases quantity demanded.</p> Signup and view all the answers

    Which factor does NOT affect demand according to demand determinants?

    <p>Consumer expectations</p> Signup and view all the answers

    What does the law of demand state about the relationship between quantity demanded and price?

    <p>Quantity demanded increases as price decreases.</p> Signup and view all the answers

    In a perfectly competitive market, how are price takers defined?

    <p>They accept the market price as given.</p> Signup and view all the answers

    Which economic principle involves the tradeoff between efficiency and equality?

    <p>Trade-offs</p> Signup and view all the answers

    How does an increase in income typically affect the quantity demanded for a normal good?

    <p>Quantity demanded increases.</p> Signup and view all the answers

    Which economic system allows private ownership with some degree of government oversight?

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

    Which of the following best describes market demand?

    <p>The collective demand from individual consumers in the market.</p> Signup and view all the answers

    What should a country with lower opportunity cost in a commodity do according to the Theory of Comparative Advantage?

    <p>Export that commodity</p> Signup and view all the answers

    What is the effect of increasing the reserve requirement in monetary policy?

    <p>It contracts the money supply</p> Signup and view all the answers

    According to the Heckscher-Ohlin Theory, what should a country with abundant labor inputs export?

    <p>Commodities with large amounts of labor input</p> Signup and view all the answers

    What monetary policy action is typically taken to combat inflation?

    <p>Increase the reserve requirement</p> Signup and view all the answers

    What role do tariffs play in commercial policy?

    <p>They serve as a source of revenue for the government</p> Signup and view all the answers

    Which of the following monetary instruments can be adjusted to influence money supply?

    <p>Interest rates</p> Signup and view all the answers

    How does a decrease in the rediscount rate affect the economy?

    <p>It encourages borrowing</p> Signup and view all the answers

    In the context of international trade, how should the first country respond to its absolute advantage?

    <p>Export the commodity of greater absolute advantage</p> Signup and view all the answers

    What happens to overall spending when too much money circulates in the economy?

    <p>It causes inflation</p> Signup and view all the answers

    What is the main premise of the Opportunity Cost Theory?

    <p>Countries will benefit from specializing in commodities they can produce at the lowest opportunity cost</p> Signup and view all the answers

    What aspect of resource use is indicated when production occurs inside the Production Possibility Frontier (PPF)?

    <p>Inefficient resource use</p> Signup and view all the answers

    What does the concept of diminishing returns imply in production?

    <p>Additional output decreases as more resources are added</p> Signup and view all the answers

    What economic goal focuses on the fair distribution of wealth within a society?

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

    Which of the following best describes macroeconomics?

    <p>The examination of economy-wide phenomena including inflation and unemployment</p> Signup and view all the answers

    Which economist is known for emphasizing that price and quantity are determined by supply and demand?

    <p>Alfred Marshall</p> Signup and view all the answers

    What does 'ceteris paribus' mean in economic analysis?

    <p>All things must remain constant.</p> Signup and view all the answers

    In the context of macroeconomics, what does the theory of employment, interest, and money predominantly address?

    <p>The short-term fluctuations and employment levels</p> Signup and view all the answers

    Which economic principle is highlighted by the relationship between incremental consumption and its corresponding satisfaction?

    <p>Law of marginal utility</p> Signup and view all the answers

    What does microeconomics primarily focus on?

    <p>Individual households and firms</p> Signup and view all the answers

    Which theory is associated with the concept of laissez-faire economics?

    <p>Classical economics</p> Signup and view all the answers

    What primarily distinguishes macroeconomics from microeconomics?

    <p>Analysis of entire economies</p> Signup and view all the answers

    Which economic model correlates population growth with potential resource scarcity?

    <p>Malthusian theory</p> Signup and view all the answers

    In the context of international trade, which concept suggests that countries benefit from specializing in goods where they have a lower opportunity cost?

    <p>Comparative advantage</p> Signup and view all the answers

    Which economist is known for his contributions related to labor value and international trade?

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

    What does the Production Possibilities Frontier (PPF) illustrate?

    <p>The maximum production capabilities of an economy</p> Signup and view all the answers

    Which aspect of economic theory focuses on the collective behavior of industries rather than individual firms?

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

    Which economic theory emphasizes minimal government intervention in economic affairs?

    <p>Classical economics</p> Signup and view all the answers

    Positive economics is characterized by what type of statements?

    <p>Objective and factual</p> Signup and view all the answers

    What principle emphasizes the value of the best alternative forgone in decision-making?

    <p>Opportunity Cost</p> Signup and view all the answers

    In the context of neoclassical economics, what does the Production Possibility Frontier (PPF) indicate about points inside the curve?