1)To correct for inflation, GDP numbers must be converted using the price level in a given year known as

the Answer Base year Real year Current year Constant year Inflation year 2) A production possibilities curve represents all of an economy’s combinations for production that are Answer Unattainable Possible and Efficient Attainable Inefficient Desirable Question 3 Which of the following is a technique used to determine the optimal level of an economic activity? Answer Cost/benefit analysis Production possibilities curve analysis GDP analysis Opportunity cost analysis Question 4 The bow shape of the production possibilities curve reflects Answer The opportunity cost concept The concept of increasing opportunity costs The concept of diminishing marginal returns The marginal social cost/marginal social benefit principle Question 5 Real per capita GDP is defined as Answer Population/real GDP GDP/population Real GDP/price index Real GDP/population Price index/GDP Question 6 Marginal social cost refers to the Answer Cost incurred due to an action undertaken by society Total expenditures by society on a good like a public park Cost borne by society when 1 more unit of a good is produced Cost to society of sub-standard production Cost to society when an additional unit of a social good is produced Question 7 If population in a country falls while GDP stays the same, the country’s Answer Real GDP falls Real GDP rises Per capita GDP rises Per capita GDP falls Welfare falls Question 8 With private property rights, the decision about how to use resources are made by Answer The government Private firms Individual resource owners Resource committees Question 9 The know-how and the means and methods of production available in an economy are known as Answer Technology Capital Human capital Labor Management Question 10 The purpose of a base year when constructing a price index is: Answer Showing how the output values rise from year to year Encourage inflation Providing a means to compare the economy’s output across different time periods To show why expenditures on government goods and services need to increase Indicate the progress in keeping prices low Question 11 Economic reasoning would not be necessary if Answer Our wants were limited Resources were expansive Scarcity were decreased We could have everything we wanted Politicians were better at running the economy Question 12 The fundamental economic problem involves Answer Overpopulation Inflation and unemployment Scarce resources and unlimited wants Cheap foreign labor Supply and demand Question 13 Labor resources include Answer The equipment workers use to complete their work Only non-management personnel Any efforts of a person to produce goods Only the physical efforts of an economy’s people Question 14 A country can shift out its production possibilities curve by Answer Improving its technology Shifting its production from one good to another Experiencing a population drop Using its farmland more productively Question 15 The means for satisfying wants are Answer Insatiable Unlimited Infinite Scarce Unavailable

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