The condition in which human wants for goods and services exceed the available supply is called scarcity.
Missing Word
scarcity
Scarcity is the central problem of economics: resources are limited while wants are not. It forces every person, business and society to make trade-offs.
Category: Scarcity and Choice
Question 2
The social science that studies how people make choices when resources are limited is called economics.
Missing Word
economics
Economics is the study of how humans make choices under scarcity. Those choices can be made by individuals, families, businesses or whole societies.
Category: Scarcity and Choice
Question 3
Because every person has exactly 24 hours in a day, time is a scarce resource that must be divided among work, leisure, and sleep.
Missing Word
time
Time is scarce for everyone, rich or poor, since no one can get more than 24 hours a day. Spending an hour on one activity means giving up the chance to spend it on another.
Category: Scarcity and Choice
Question 4
In its basic form, the circular flow diagram shows households and firms interacting in exactly 2 markets.
Missing Word
2
The basic circular flow diagram has 2 markets: the goods and services market, where households buy output from firms, and the labor market, where households sell labor to firms. Financial markets, government and foreign trade are left out to keep the picture simple.
Category: Theories and Models
Question 5
Adam Smith illustrated the division of labor with a factory in which ten workers, each doing a few steps, could make tens of thousands of pins in one day.
Missing Word
pins
Smith's pin factory is the classic example of the division of labor. By splitting pin making into separate operations, a small team produced vastly more than the same workers could each make alone.
Category: Specialization and Trade
Question 6
Adam Smith described the making of a single pin as divided into about 18 distinct operations performed by different workers.
Missing Word
18
Smith counted roughly 18 separate steps in pin making, from drawing out the wire to straightening, cutting and pointing it. Assigning these steps to different workers is the division of labor.
Category: Specialization and Trade
Question 7
Studying the choices of individual households, workers, and business firms is the focus of microeconomics.
Missing Word
microeconomics
Microeconomics examines individual decision makers, such as how a household spends its budget or how a firm decides how much to produce and what to charge.
Category: Micro and Macro
Question 8
Questions about national unemployment, the overall price level, and long-run growth belong to macroeconomics.
Missing Word
macroeconomics
Macroeconomics studies the economy as a whole. Its main concerns include growth in the standard of living, unemployment, inflation and the trade balance.
Category: Micro and Macro
Question 9
A sustained rise in the overall level of prices, which policymakers generally try to keep low, is called inflation.
Missing Word
inflation
Inflation is a general increase in prices across the economy, which reduces what a given amount of money can buy. Low inflation is one of the standard goals of a healthy macroeconomy.
Category: Micro and Macro
Question 10
Economists often use the two words interchangeably, but strictly speaking a theory is more abstract while a model is more applied.
Missing Word
theory
A theory is a simplified representation of how two or more variables interact. A model is the more applied or empirical version and is often used to test a theory.
Category: Theories and Models
Question 11
Policy that changes interest rates, the availability of credit, and the extent of borrowing is called monetary policy.
Missing Word
monetary
Monetary policy works through interest rates, credit and borrowing, and a nation's central bank conducts it; in the United States that is the Federal Reserve. Government decisions about spending and taxes are a separate tool, fiscal policy.
Category: Economic Policy
Question 12
In a market economy, resources and businesses are privately owned and operated rather than owned by the state.
Missing Word
privately
Private enterprise means individuals or groups, not the government, own and run the means of production. In a command economy, by contrast, the government owns the resources.
Category: Economic Systems
Question 13
Cheaper shipping and communication and new trade agreements have sped up globalization, the growing share of trade and financial investment that crosses national borders along with closer political and cultural ties.
Missing Word
globalization
Globalization describes growing ties among countries, and its economic side shows up as rising trade in goods and services and rising financial investment across borders. Lower shipping and communication costs and trade agreements have made those connections easier and faster.
Category: Globalization
Question 14
Goods and services that are produced in a country and then sold to buyers abroad are that country's exports.
Missing Word
exports
Exports are domestically made products sold to other countries. The ratio of exports to GDP shows what share of a country's production is sold abroad.
Category: Globalization
Question 15
Products made in foreign countries and then sold within a nation's borders are counted as that nation's imports.
Missing Word
imports
Imports are products made abroad and sold domestically. Together with exports, they measure how connected a country is to the global economy.
Category: Globalization