Economics Chp 4 Study Guide Q's

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Economics Chp 4 Study Guide Q's
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2011-03-28 23:12:15
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Economics Chp 4 Study Guide Q's
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  1. There are aprox. 114 million (businesses,households)________ in the united states. they play a dual role in the economy because they (sell,buy) ____ their resources and _____most of the total output of the economy.
    households,sell,buy
  2. data on the functional distribution of household income shows that the largest single source in the united states is (rents,wage and salaries)_____and the smallest is _______
    wages and salaries,rents
  3. data on the personal distribution of household income in the united states show that about 3 percent of the household income is recieved by the (poorest,richest) _____ 20 percent of households,and about 50 percent of household income is recieved by the _____ 20 percent of households.
    poorest,richest
  4. the total sum of households is disposed of in 3 ways: personal ____,personal______,and personal_____
    consumption,savings,taxes
  5. if a product has an expected life of 3 yrs or more it is a (durable.nondurable)____good whereas if it has an expected life of less than 3 yrs then its a ____good
    durable,nondurable
  6. there are millions of business (firms,industries)_____in the united states. the legal form of the great majority of them is the (sole proprietorship,partnership,corportation)____,but the legal form that produces about 84 percent of the sales of the US economy is the _____
    firms,sole pro.,corporation
  7. shares of ownership of corportations are called (stocks,bonds)_____,and promises by corporations to repay a loan, usually at a fixed rate of interest are _____. the liabilities of coporations are (limited,unlimited)_____,and the lifespan for a corporation is ______
    stocks,bonds,unlimited,limited
  8. the separation of ownership and control in a corportation may create a (free-rider,principal-agent)_____problem.in this case stockholders would be the (riders,principals, agents)_____and mangers would be the _____
    principal-agent,princpal,agent
  9. List the 5 economic functions of government
    • a. provide legal foundation
    • b. maintain competition
    • c. redistribute income
    • d. reallocate sources
    • e. stabalize the economy
  10. to control monopoly, the US gov has created comissions to (tax,regulate)____natural monopolies,and in cases at the local level,government has become an (agent,owner)____. Government has also enacted (trust,antitrust)____laws to maintain competition
    regulate,owner,antitrust
  11. the market system,because of it is an impersonal mechanism, results in an (equal,Unequal) ______ distribution of income. to redistribute income from the upper-to the lower-income groups, the gov has provided (transfer,tax)_____payments, engaged in (military,market)_____intervention, and used the (income,sales)______tax to raise much of its revenues.
    uequal,transfer,market,income
  12. Governments frequently reallocate resources when it finds instances of (market,public)_____ failure. the two major cases of such failure occur when a competitive market system either...
    • market;
    • (a) produces the "wrong" amounts of a certain goods and services
    • OR
    • (b)fails to allocate any resources to the production of certain goods and services whose production is economically justified
  13. there is an externality whenever some of the cost of producing a product accrue to people other than the (seller,buyer)____or some of the benefits of the benefits from consuming a product accrue to people other than the ____. competitive markets bring about an efficient allocation of resources only if there are no (private,external)_____cost or benefits in the consumption and production of a good and service.
    seller,buyer,external
  14. what two things can a government do to make the market reflect external cost?
    • (1) enact legislation
    • (2)pass special taxes
  15. What three things can a gov do to make the market reflect external benefits?
    • (1) subsidize consumers
    • (2) subsidize suppliers
    • (3) gov financing or production of the product
  16. one characteristic of a public good is (rivalry,nonrivalry)______and the other characteristics of a public good is (excludability,nonexcludability)______.a private firm will not find it profitable to produce a publc good because there is a (free-rider,principal-agent)_____problem.
    nonrivalry,nonexcludabilty,free rider
  17. to reallocate resources fromt the production of private goods to the production of publics good and quasi public goods, gov reduces the demand for private goods by (taxing,subsidizing)____consumers and then use the (profits,tax revenue)_____buy public or quasi-public goods.
    taxing,tax revenue
  18. to stabilize the economy with less than full employment, gov may increase total spending by (increasing,decreasing)______its expenditures for public goods and services, or by (Increasing,Decreasing)____taxes. when there are inflationary pressures,the nations central bank may decrease total spending by (raising,lowering)_____interest rates and when there is high unemployment,it may cause total spending by ______interest rates.
    increasing,decreasing,raising,lowering
  19. an examination of gov finance reveals that since 1960 gov purchases of goods and services as a percentage of domestic output have (increased,decreased)______. Government purchases of goods and services are (exaustive,nonexaustive)____because they absorb resources,and gov transfer payments are (exaustive,nonexaustive)_____because they do not absorb resources or create output.
    decreased,increased,exaustive,nonexaustive
  20. the most important source of revenue for the federal gov is the (personal income,payroll)_____tax;next in importance is the _______tax.the largest catagory of federal expenditures is for (national defense,pensions and income security)____.
    personal income,payroll,pensions and income security
  21. fed income tax rates are progressive which mean that people with (lower,higher)______ incomes pay a larger percentage of that income as taxes than do persons with ______incomes.the tax rate paid on an additional unit of income is the (average,marginal)______tax rate,while the total tax paid divided by the total taxable income is the _____tax rate.
    higher,lower,marginal,average
  22. many state govs rely primarily on the (property,sales)_____tax and many local govs rely primarily on the ______tax. The largest catagory of spending for both state and local govs is (education,public safety)________
    sales,property,education

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