Exam 1: Limits, Alternatives, and Choices

"Economists are scientists and therefore should not become involved in making value judgments which policy formulation necessarily entails".Do you agree?

How do income changes affect the position of the budget line?

Distinguish between microeconomics and macroeconomics.

A production possibilities table for two products,corn and paper,is found below.Usual assumptions regarding production possibilities are implied.Corn is measured in tons,and paper is measured per unit.

Explain the relationship between full employment of resources and full production.

Explain how each event affects production possibilities. (a)The population becomes more educated over time as the number of high school dropouts falls and the number of college graduates rises. (b)The unemployment rate declines from 8 to 6 percent of the labour force. (c)Businesses and government are unable to solve a major computer problem,thus reducing economic efficiency and national output. (d)Advances in telecommunications and new technology significantly contribute to economic growth over time. (e)The Federal government decides to allocate more resources to national defence.

What four basic functions does the entrepreneur perform for the economy?

Describe the Greek Debt Crisis,and explain its relation to the Economic Problem?

"The relative scarcity of resources makes the operation of any economy a matter of choosing between alternatives".Explain.

What are the three interrelated features of the economic perspective?

What is meant by the "the individual's economic problem"?

What changes must occur for the potential total output of the economy to grow?

The distinguished economist Kenneth Boulding stated: "Theories without facts may be barren,but facts without theories are meaningless".Explain what he meant.

What do economists mean when they say that economic resources or factors of production are scarce or limited in supply?

"Economics cannot be scientific because it is based upon the value judgment that 'more (output)is better'".Do you agree?

Describe the adjustments in the production possibilities curves in each of the following situations for the Canadian economy. (a)the economy moves from full employment into a deep recession (b)the economy makes great strides in eliminating discrimination (c)the end of the Cold War leads to cuts in military spending (d)the government significantly increases spending for health and education

A production possibilities table for two products,grain and airplanes,is found below.Usual assumptions regarding production possibilities are implied.Grain is measured in tons and airplanes are measured in units of 1,000. (a)Using the below graph construct a production possibilities curve from this information placing grain on the vertical axis and airplanes on the horizontal axis.

The production possibilities curve suggests that a nation cannot live beyond its means or production potential.Explain why international trade would cause this statement to be modified.

Show graphically on the below graph the expected relationship between investment spending and interest rates.Put investment expenditures on the horizontal axis and the rate of interest on the vertical axis;connect the points and label the curve "Investment demand".Describe this relationship between the rate of interest and investment expenditures.Describe the slope of the investment curve.

An economy consists of five workers,who can produce either fish or fruit.The following table shows the daily output of each worker.