The Problem Of Scarcity

2.1. (a) What are economic resources (b) Explain the meaning of (1) land, (2) capital, and (3) labor as used in economics. (a) Economic resources consist of land (natural resources), capital (human-made resources), and labor (human resources). These resources are not free they command a price because they are scarce and are essential to the production of goods and services. (b) (1) Land consists of an economy's natural resources, gifts of nature such as minerals, forests, rivers, and...

The Balance Of Payments

23.11. (a) What is a nation's balance of payments What is its purpose (b) What are the three main accounts in the balance of payments What does each measure (c) How are credits and debits entered into the current and capital accounts (a) A nation's balance of payments is a summary record of all the transactions of a nation with the rest of the world during a calendar year. Its main purpose is to inform government authorities of the nation's international position and to help them formulate...

International Trade and Finance

Most nations are open economies in the sense that they are connected to the rest of the world through a network of trade and financial relationships. Even though trade is generally more important to small countries than to large countries, the welfare of both is greatly dependent on trade. 2. Each nation can gain from trade by specializing in the production of the commodity in which it has a comparative advantage and trading some of this for the commodity of its comparative disadvantage. The...

Solved Problems

EXPLICIT COSTS, IMPLICIT COSTS, AND ECONOMIC PROFIT 16.1. (a) Why do we study a firm's costs of production (b) Distinguish among opportunity costs, explicit costs, and implicit costs. (a) We study a firm's costs of production to learn more about the firm's supply curve. It is by adding individual firms' supply curves for a commodity that we get the market supply curve of the commodity. This, together with the market demand curve, determines the equilibrium price and quantity of the commodity in...

Scarcity And The Market System

What are the distinguishing characteristics of a capitalist market economy 7 In a capitalist market economy also referred to as a free-enterprise or laissez-faire system , most economic resources are owned directly or indirectly by individuals rather than by the government. 2 Individuals are free to rent out the resources they own for the highest price they can obtain. Individuals are also free to spend their income to buy goods and services that maximize their satisfaction. Entrepreneurs...

The Methodology Of Economics

1.3. a How are economic models and theories developed What is their function b What are some of the difficulties associated with the study of economics a Economic models and theories are abstractions and generalizations of reality. They seek to cut through the many details surrounding an economic event to arrive at and isolate a few of its most important causes or determinants. For example, there are many causes of inflation, but if we can identify a few of the most important ones we may be...

The Subject Matter Of Economics

1.1. a Explain the statement Economics is a social science. b Why is the study of economics important a The social sciences study how society is organized and functions. Economics, sociology, anthropology, psychology, and political science are all social sciences. Each studies the organization and functioning of society from a particular point of view. Economics studies how individuals and organizations in society engage in the production, distribution, and consumption of goods and services. b...

The Federal Reserve System

Describe the Federal Reserve System. The Federal Reserve System consists of a Board of Governors, a Federal Open Market Committee, and 12 district Federal Reserve Banks with 24 branches throughout the United States. The seven-member Board of Governors, appointed by the President of the United States with the consent of the Senate , oversees the various central-bank supervisory functions. The 12-member Federal Open Market Committee, which includes the Board of Governors, is responsible for...

Multiple Choice Questions

Money as a measure of value provides a its holder with perfect liquidity, ,b a common denominator for measuring value, c a mechanism for allocating resources and distributing output, .d a medium for exchanging final output. 2. In the United States, paper currency issued by the Federal Reserve a is backed by gold but is not convertible into gold, b has no intrinsic value but is backed by gold, 3. In the United States, the M1 money supply consists of b paper currency, coins, and check-writing...

The Functions Of Money

9.1. a How does the use of money promote efficient production and help allocate good and services b Explain the importance of money's standard of value function to an economy. a Producers use money rather than commodities to pay for the services of economic resources. Owners of economic resources are thereby free to seek employment that maximizes their money income rather than employment that provides payment in specific commodities. This promotes the efficient use of limited economic...