Explain the concept of the circular flow. What will be an ideal response? ANSWER The circular flow refers to the interrelationships between income and output. In every exchange the seller receives exactly what the buyer pays. This also means that someone’s receipt is someone else’s payment. Goods and services flow in one direction and […]
A discouraged worker is someone who A) is not in the labor force. B) is employed. C) has been fired. D) is unemployed. ANSWER A
Economic growth can be depicted as A) an outward shift on the production possibilities curve. B) a movement up on the production possibilities curve. C) a movement down on the production possibilities curve. D) an inward shift on the production possibilities curve. ANSWER A
Why must total income be identical to the dollar value of total output? What will be an ideal response? ANSWER Total income must be identical to the dollar value of total output because spending by one person is income for another. Further, the definition of profit is important. Profit is the amount left over […]
One criticism of the unemployment rate is that it A) is a stock measure. B) does not include people who are not working and are not looking for work. C) does not include the number of discouraged workers as unemployed. D) counts a new entrant that is actively seeking work as unemployed. ANSWER C
Economic growth can be defined as a percentage increase in A) per capita real GDP. B) nominal GDP. C) consumption by households. D) real GDP. ANSWER A
Where does profit enter in the circular flow? Why? What will be an ideal response? ANSWER Profit is a payment made to entrepreneurs just as wages are a payment made to labor. Entrepreneurs must be rewarded for providing their services, and profit is the reward. Hence, profit is a cost of production.
The unemployment rate will decrease when A) people get discouraged and quit looking for work. B) the age of the labor force increases. C) the average workweek falls from 40 to 39 hours. D) the duration of unemployment increases. ANSWER A
Which of the following statements is NOT true about economic growth? A) Growth is measured as the overall level of real GDP. B) Growth generally means that overall the members of the nation are better off materially. C) When growth occurs the production possibilities curve shifts outward. D) Growth represents an increase in a nation’s […]
The dollar value of total output in the United States A) equals the value of all physical goods sold in the United States. B) equals all the value of U.S. stocks on the world’s stock exchanges. C) equals the value of all resources that can be found in the United States. D) equals the market […]
