Download Review Questions and Answers What is the best definition of

Review Questions and Answers
What is the best definition of Economics?
A study that describes how individuals fulfill their unlimited wants by limited
resources.
What is the most fundamental economic problem?
Wants are unlimited but resources are limited.
What are the four categories into which resources are grouped?
The four categories are land, labor, capital, and entrepreneurship.
What is opportunity cost?
The highest-valued alternative forgone.
What is a resource?
A resource is something that is used to produce goods and services.
What is macroeconomics?
Macroeconomics is the study that talks about economics as a whole.
Provide few examples of macroeconomics.
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The quality of first food in Saudi Arabia
Total domestic products in Saudi Arabia
Average age of the students in macroeconomics class.
Women unemployment rate in the Kingdom of Saudi Arabia so high.
What are the name of the respective payments for the resources of
land, labor, capital, and entrepreneurship?
The name of the payments are rent, wages, interest, and profit respectively.
What is capital in economics?
Capital is a complete good that use to produce other goods or services.
What is the difference between a good and a service?
Goods can touch and feel (tangible) but services can’t touch but feel (intangible).
Why Goods and services are limited?
Goods and services are limited because they are produced using limited resources.
What is market?
Market is any arrangement that brings buyers and sellers together.
What is resource (factor) market and goods (product) market?.
 A resource market is a market in which households sell resources they owned
and firms buy.
 A goods market is a market in which firms sell goods and services they
produced and households, government, other firms, and rest of the world buy.
Who are the decision makers of macroeconomics?
There are four decision makers who run the whole economy. They are households,
firms, government, and rest of the world.
What are the types of market?
There are two types of market in an economy. These are resource (factor) market and
goods and services (products) market.
Explain the monetary flows in the resource (factor) market in
circular flow model.
 Firms costs (expenditures) through paying rent, wages, interest, and profit
flows to resource market
 Income (through earning rent, wages, interest, and profit) flows to households.
Explain the monetary flows in the Goods (product) market factor
market in circular flow model.
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Revenue (by selling goods and services) flows to firms and
Households consumption expenditures flows to goods (products) market.
Government expenditures flows to goods (products) market.
Other firms investment flows to goods (products) market.
Rest of the world’s (export and import) flows to goods (products) market.
Complete the circular flow model with correct information in the
flow direction.
Answer:
What are macroeconomic goals?
Macroeconomic goals are:
• Economic Growth
• Full Employment
• Economic Efficiency
• Price-Level Stability
• Economic Freedom
• Equitable Distribution
• Economic Security
• Balance of Trade
What is Economic Efficiency?
Economic efficiency refers to achieve maximum output by using limited available
resources.
What does mean by Price-Level Stability?
Price level stability states to void upswings and downswings in the general price
level.
What does mean by Full Employment?
Full employment means that all citizens who are willing and able to do work get jobs.
What are the two categories into which capital is divided?
Two categories of capital is Physical capital and Human capital.
Example of Physical Capital: factories, machines, tools, buildings, airports, highways
and other manufactured items employed to produce goods and services.
Example of Human Capital: Education, Training, Skills, Job experience etc.
What does mean by self-interest?
Individuals always try to achieve maximum benefit with a given cost or minimize the
cost of achieving a given benefit.
What are cost and benefit?
Cost is what you must give up to get something and benefit is what you gain from
something.
In an hour (60 minutes), KFC can produce 6 burger’s chicken or 30
salads. What is KFC's opportunity cost of producing 1 burger’s
chicken.
To produce 6 burger’s chickens, KFC sacrifices = 30 salad
To produce 1 burger’s chicken, KFC sacrifices = 30/6 = 5 salad.
So KFC’s opportunity cost of producing 1 burger’s chicken is 5 salad.
In 2 hour time, Khalid can do 2 homework or he can watch 1 movie.
Calculate Khalid’s opportunity cost of doing 1 homework.
If do 2 homework, must sacrifice watching = 1 movie
To do 1 homework, must sacrifice watching = ½ = 0.5 movies.
So, Khalid’s opportunity cost of doing 1 homework is 0.5 movies.