Economics Chapter 5

What is the primary concern of a society?

• How to balance the public budget

• How to sustain economic growth

• How to best achieve its economic goals

• How to acquire more economic resources

Which of the following does NOT immediately result from fluctuations between inflation and deflation?

• A "wait and see attitude prevails."

• Unemployment rates rise.

• People cannot make economic forecasts.

• Society's economic output slows.

Which of the following best qualifies as a period of intensive growth?

• Industrial Revolution

• Louisiana Purchase

• Westward Expansion

• European Colonialism

What is meant by the consumer goods/capital goods tradeoff?

• Nations should trade both consumer goods and capital goods internationally.

• The same business cannot produce both capital goods and consumer goods.

• Every business must sell its capital goods for consumer goods, and vice versa.

• Businesses that produce consumer goods cause the production of capital goods to decrease, and vice versa.

Which of the following is a consumer good?

• A tractor

• A welding machine

• An automobile

• A printing press

Which of the following is a capital good?

• Medicine

• A plow

• A book

• A house

What is the market solution to the output question?

• Each individual decides the consumer goods/capital goods tradeoff.

• Governmental leaders make only emergency decisions in the consumer goods/capital goods tradeoff.

• Governmental committees make all major decisions concerning the labor intensive/capital intensive ratio.

• Individual firms determine the labor intensive/capital intensive ratio.

What is the central function performed by the market interest rate?

• It allows financial markets to profit from economic downturns.

• It forces producers to give in to demand and consumers to profit from supply.

• It regulates the flow of money from households to businesses via financial markets.

• It reflects consumer confidence in the economy.

From what source do firms get the funds to purchase more real capital?

• Budget cuts

• Company profits

• Fundraisers

• Consumer savings

What is the command solution to the input question?

• The interest rate decides the consumer goods/capital goods tradeoff.

• Policymakers choose the labor/capital ratio.

• Individual firms choose the labor/capital ratio.

• Governmental leaders decide the consumer goods/capital goods tradeoff.