Deck 19: Principles of Economic Behavior Microeconomics and Macroeconomics

Question 1

In a market economy, production decisions are made by consumers through a price system.

Answer 1

True

Question 2

The participants in an economic system are withdrawals and injections.

Answer 2

False

Question 3

Economists assume that households act as a unit, as if they were single individuals.

Answer 3

True

Question 4

All consumers are recipients to an equal extent of the goods and services produced by the economic system.

Question 5

People engage in economic exchanges because no one individual can produce all that is needed or wanted.

Question 6

When demand is elastic, it means that consumers are buying more of a product because its price has been cut.

Question 7

The doctrine of "laissez faire" underlies all command economies.

Question 8

In a market economy, those with inherited fortunes or special talents are at an advantage with respect to those who have neither.

Question 9

The government's purchasing power depends on people's donations to the political party of their choice.

Question 10

The American economy is shifting its work emphasis from production to service and information.

Question 11

The study of individual behavior in the economy is called macroeconomics.

Question 12

It is correct to say that the price system acts as a mechanism of social control.

Question 13

The central authorities, as participants in the economy, are defined as the unit that decides how to use labor, land, and capital.

Question 14

All public agencies, government bodies, and organization under the control of the various levels of government are called factor markets.

Question 15

The "invisible hand" that makes the economy work is what Karl Marx called human greed.

Question 16

The "circular flow" is how Adam Smith described the functioning of the market economy.

Question 17

Demand may be expressed as an individual consumer's willingness and ability to buy a specific product at a given price.

Question 18

Full employment is the first and predominant goal of the society and its economic system.

Question 19

The GNP and the GDP are measures of inflation.

Question 20

An economic growth rate of 4 percent is considered desirable.

Question 21

The quality of the labor force has nothing to do with economic growth.

Question 22

The competition between the public and the private sectors results in huge deficits, eventually increasing interest rates.

Question 23

When interest rates are high, businesses like to borrow for investment.

Question 24

In order to increase the GDP, it is necessary to raise productivity.

Question 25

How are decisions about production made in a market economy?

A) By a command system
B) According to tradition
C) Through a price system
D) By executive fiat

Question 26

Which of the following groups determine market transactions?

A) Households, firms, and central authorities
B) Producers, distributors, consumers
C) The executive, legislative, and judicial departments
D) none of the above
E) all of the above

Question 27

What forces prices down?

A) Large consumer purchasing power
B) Elastic demand
C) Inelastic demand
D) Inferior products

Question 28

The mechanism of the market system provides for:

A) the content and flow of goods and services to take place without any fixed plan
B) buyers and sellers not needing to know how the market works in order to act in it
C) the economy to function so that all participants derive some satisfaction
D) all of the above
E) none of the above

Question 29

What is meant by the public sector?

A) The goals of the society
B) Economic activities in which the government engages for the public good
C) Economic activities in which self interest makes for personal affluence
D) Economic activities open to the public

Question 30

The economic participant who decides how to use the factors of production, and for what purpose, is called a:

A) firm
B) household
C) market
D) product

Question 31

The price system is based on:

A) a government plan
B) tradition
C) consumer demand
D) the command of a ruler

Question 32

The participants in a market include:

A) households
B) firms
C) governments
D) none of the above
E) all of the above

Question 33

The circular nature of the economic process occurs from:

A) firm to firm
B) household to firm to consumer and back again
C) government to consumer
D) firm to consumer

Question 34

Taxes may be considered:

A) additions to the circular flow
B) withdrawals from the economic flow
C) injections into the economic flow
D) as not affecting the economic flow

Question 35

Some of the restrictions at work in a market include:

A) prices of goods and services
B) income for labor
C) prices of resources for firms
D) none of the above
E) all of the above

Question 36

The exchange system is based on:

A) supply and demand
B) government reaction
C) lack of labor
D) goods and services

Question 37

Aggregate demand is defined as:

A) one person's demand for goods and services
B) the lack of demand for goods and services
C) the total demand in a society or on a world level
For goods and services
D) none of the above

Question 38

When cars are offered at low prices but people still do not buy them, the situation is one in which:

A) demand is elastic
B) demand is inelastic
C) there is aggregate demand
D) exchange takes place

Question 39

Some of the advantages of a market economy include:

A) all participants get some satisfaction
B) scarce resources are put into goods that are in demand
C) economic output is distributed to those who can pay the price
D) none of the above
E) all of the above

Question 40

Public, governmental agencies are:

A) firms
B) households
C) markets
D) central authorities

Question 41

Demand and supply are:

A) market forces
B) key economic indicators
C) thesis and antithesis
D) causes of inflation

Question 42

When supply and demand are essentially equal, the economy is said to be in:

A) a recession
B) equilibrium
C) equivalence
D) abeyance

Question 43

A problem with laissez-faire economic policy is that there is:

A) no flexibility
B) no provision for public goods
C) no profit motive
D) responsiveness to demand

Question 44

Which is NOT a socioeconomic goal?

A) Full employment
B) High and equitably distributed income
C) Reasonable price stability
D) Low prime interest rate

Question 45

Adam Smith would approve of governmental support of:

A) full employment
B) protection of environment
C) care for sick and needy
D) none of the above
E) all of the above

Question 46

Liberals and conservatives would agree to some extent that economic goals should include:

A) full employment
B) price stability
C) adequate economic growth
D) none of the above
E) all of the above

Question 47

Inflation results when:

A) demand exceeds supply
B) supply exceeds demand
C) there is control of purchasing power
D) consumers have no purchasing power

Question 48

Adequate growth of the economy refers to the goals of:

A) maintaining current standards of living in spite of increasing population
B) increasing GNP per capita
C) approximately 4% growth rate per year
D) none of the above
E) all of the above

Question 49

The participants in a market economy cannot pursue their goals freely because they are affected by:

A) the ratio of gold to paper money
B) economic laws
C) prices and incomes
D) the religious institution

Question 50

Exceptions to the circular flow are:

A) incidentals
B) withdrawals
C) injections
D) b and c only

Question 51

Adam Smith's "invisible hand" is"

A) government
B) divine providence
C) greed and the pursuit of profit
D) the entrepreneur

Question 52

The behavior of an individual firm is part of:

A) macroeconomics
B) mesoeconomics
C) microeconomics
D) institutional economics

Question 53

.In microeconomics, the household is defined as

A) the nuclear family
B) the extended family
C) everyone who lives under one roof
D) all of the above
E) none of the above

Question 54

Income received by firms from sources other than households is called:

A) incrementals
B) windfalls
C) injections
D) incidentals

Question 55

Income received by households that is not returned to firms is called:

A) dissavings
B) withdrawals
C) incrementals
D) injections
E) inheritance

Question 56

Need and demand:

A) are unrelated concepts
B) amount to the same thing
C) are closely related to price
D) are closely related to supply

Question 57

Which of the following is NOT a predominant goal of American society?

A) a desirable mix of windfall profits
B) a leisure-based society
C) spectacular growth
D) all of the above are predominant goals
E) none of the above are predominant goals

Question 58

The Department of Health and Human Services has summarized the "correct" mix of goods and services through:

A) "market basket of goods"
B) the consumer price index
C) 165 social indicators
D) the externalities index

Question 59

The marginal productivity of labor:

A) concerns wage rates and labor supply
B) is a political as well as economic issue
C) is complicated by overlapping labor markets
D) all of the above
E) none of the above

Question 60

Without stabilized prices:

A) product market demand is problematic
B) resource market demand is problematic
C) the distribution of income becomes more inequitable
D) all of the above
E) none of the above

Question 61

The condition of an increase in prices NOT triggered by an increase in demand is called:

A) hyperinflation
B) the Pigou effect
C) inflation
D) restraint of trade

Question 62

Total planned OR desired spending in the economy as a whole within a given period is called:

A) pent-up demand
B) aggregate demand
C) elastic demand
D) excess demand
E) the multiplier

Question 63

NAFTA binds which three countries into a single commercial entity?

A) Mexico, Panama, Costa Rica
B) United States, Canada, Puerto Rico
C) United States, Canada, Mexico
D) United States, Cuba, Mexico

Question 64

Maintaining full employment, stabilizing the economy, and pursuing economic growth are issues analyzed in the context of:

A) supereconomics
B) microeconomics
C) macroeconomics
D) hypereconomics

Question 65

The more consumers are willing to pay for a product:

A) the more of the product will be produced
B) the less producers will manufacture, to raise the price still more
C) the more they go into debt, forcing them to stop buying
D) the more expensive the product becomes

Question 66

Firms sell their products in:

A) factor markets
B) resource markets
C) product markets
D) abstract markets

Question 67

The price system:

A) is equitable
B) rations products among consumers
C) allows wealthy consumers to obtain more products
D) none of the above
E) only b and c

Question 68

Participants in the market system:

A) are totally free to pursue their goals
B) are affected by prices and incomes
C) try to maximize their worth
D) try to maximize their labor

Question 69

Demand and supply curves:

A) simplify the analysis of market actions
B) are used by commodities brokers only
C) are useful only to economics professors
D) are useful mainly to advertisers

Question 70

When the supply and demand curves intersect, the final, lasting price is achieved. This is called:

A) clearance price
B) equilibrium price
C) pressure price
D) a buyer's market

Question 71

"Laissez-faire" is a policy that appeals to:

A) political liberals
B) political independents
C) political conservatives
D) political freethinkers

Question 72

Total "laissez-faire" is impossible because:

A) the market does not provide for satisfying public needs
B) the market is not equitable, favoring those with more resources
C) the market makes no provision for protecting smaller participants
D) all of the above
E) none of the above

Question 73

The public sector:

A) is bloated with a large bureaucracy
B) employs one of every four workers
C) is less efficient and effective than the private sector
D) none of the above
E) all of the above

Question 74

The Great Depression:

A) resulted from the greed of the robber barons
B) resulted from insufficient demand
C) was the worst case of massive unemployment
D) all of the above
E) only b and c

Question 75

Congestion, pollution, urban decay and similar side effects of the market system are termed:

A) negatives
B) externalities
C) internalities
D) tangentials

Question 76

In economic terms, incomes are distributed according to:

A) a person's marginal productivity
B) whom one knows
C) which skills one has
D) innate talent

Question 77

Income distribution according to productive contribution is:

A) efficient but inequitable
B) inefficient but equitable
C) efficient and equitable
D) a tenet of communism

Question 78

A way of calculating the total output of the economy regardless of where resources are located is:

A) the GDP
B) the NNP
C) the SPQR
D) the GNP

Question 79

A way of calculating the total output of the economy and all incomes earned within the United States, regardless of whether the resources are American or foreign is:

A) the GDP
B) the GNP
C) the NNP
D) the SPQR

Question 80

In order to raise the GNP and the GDP per capita, one must:

A) earn more money
B) increase productivity
C) increase absenteeism
D) decrease productivity