Exam 1: The Big Ideas

Suppose the United States government wants to encourage individuals to save more of their income. The easiest way for the government to realize this goal is to:

The theory of comparative advantage concludes that people can produce more by specializing than by doing everything themselves.

Using the thinking at the margin concept, explain a student's decision to wake up and attend an 8 AM class in the winter (the student is already registered for the class).

Which financing method for transporting prisoners from point A to B will result in the greatest number of prisoners surviving the trip? Assume there are 50 prisoners being transported.

Two major policies used by the government to affect economic conditions are:

The Federal Reserve acted quickly and appropriately to diffuse the Great Depression.

While economic growth does increase the quality of life, the trade-off is that life expectancy is now shorter than in the past.

Research spearheaded by Dr. Norman Borlaug in the 1950s and 1960s helped develop high-yield wheat that is now in use all over the world. It was so successful that some credit Borlaug with saving more than one billion people from dying of starvation. What quality do ideas have that makes this claim so credible?

Economies MUST experience both booms and busts. All economists can do is work to limit the extent of the economic fluctuations.

Entrepreneurial activity is encouraged by:

Economic wealth is uncorrelated with the level of women's rights and political liberty in a country.

Economists believe that people are self-interested all the time.

When two people voluntarily trade with each other:

Susan quits her administrative job, which pays $40,000 a year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $900 for books, and $2,500 for food. The opportunity cost of attending college for the year is:

Wherein lies the power of trade?

South Korea became much richer than North Korea as a result of:

Most economists believe that an increase in the supply of money results in:

A dependable legal system and competitive, open markets help to:

Many industrialized nations have been pumping trillions of dollars into their economies in the form of stimulus packages, tax rebates, and bailouts, in order to stimulate additional consumer spending and business investment, and to ward off global recession. If a large portion of these funds are obtained through the printing of new money, explain whether or not this will help or hurt these economies in the long run.

One of the drawbacks of inflation is that it creates a lot of uncertainty about prices.