Economics Chp 4 Study Guide Q's
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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.
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
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.
the total sum of households is disposed of in 3 ways: personal ____,personal______,and personal_____
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
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 _____
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 ______
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 _____
List the 5 economic functions of government
- a. provide legal foundation
- b. maintain competition
- c. redistribute income
- d. reallocate sources
- e. stabalize the economy
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
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.
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...
- (a) produces the "wrong" amounts of a certain goods and services
- (b)fails to allocate any resources to the production of certain goods and services whose production is economically justified
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.
what two things can a government do to make the market reflect external cost?
- (1) enact legislation
- (2)pass special taxes
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
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.
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.
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.
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.
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
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.
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)________
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