ANSWER: Inflation
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.010 - Analyze the relationship between money growth and inflation.
TOPICS: Price levels
Inflation
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 045.01 - SAE - MANK08
46. In the short run, an increase in the money supply is likely to lead to ______ inflation and ______ unemployment.
ANSWER: higher; lower
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.010 - Analyze the relationship between money growth and inflation.
TOPICS: Price levels
Inflation
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 046.01 - SAE - MANK08
47. Economists use the term ______ to refer to fluctuations in economic activity, such as employment and production.
ANSWER: business cycle
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.007 - Analyze the factors that affect a country's growth.
TOPICS: Business cycles
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 047.01 - SAE - MANK08
48. Consider two countries, Muria and Zenya. In Muria total annual output is worth $800 million and people work 40
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million hours. In Zenya total annual output is worth $900 million and people work 50 million hours. In which country is
productivity higher?
ANSWER: In Muria
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.007 - Analyze the factors that affect a country's growth.
TOPICS: Economic growth
Productivity
KEYWORDS: BLOOM'S: Analysis
CUSTOM ID: 048.01 - SAE - MANK08
49. Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total
annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher
standard of living?
ANSWER: In Germany. Almost all variation in the standard of living across countries is due to
differences in productivity.
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.007 - Analyze the factors that affect a country's growth.
TOPICS: Economic growth
Productivity
KEYWORDS: BLOOM'S: Analysis
CUSTOM ID: 049.01 - SAE - MANK08
50. What are the two short-run effects of increasing the quantity of nation’s money?
ANSWER: Higher inflation and lower unemployment
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.010 - Analyze the relationship between money growth and inflation.
TOPICS: Price levels
Inflation
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 050.01 - SAE - MANK08
51. How does the study of economics depend upon the phenomenon of scarcity?
ANSWER: Because economics is the study of how society allocates its scarce resources, if there were
no scarcity, there would be no need for economics. Everyone could have all the goods and
services they wanted. No one would have to make decisions based on tradeoffs, because
there would be no opportunity cost associated with the decision. (It is difficult to conceive
of a situation where time is not scarce, however).
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
TOPICS: Economic thinking
Scarcity
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 051.01 - SAE - MANK08
52. One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes
income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.
ANSWER: Efficiency is the property of society getting the most it can from its scarce resources.
Equality is defined as the property of distributing economic prosperity evenly among the
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members of society. Often, these two goals conflict. When the government redistributes
income from the rich to the poor, it reduces the reward for working hard. Fewer goods and
services are produced and the economic pie gets smaller. When the government tries to cut
the economic pie into more equal slices, the pie gets smaller. Policies aimed at achieving a
more equal distribution of economic well-being, such as the welfare system, try to help
those members of society who are most in need. The individual income tax asks the
financially successful to contribute more than others to support the government.
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
TOPICS: Economic thinking
Efficiency
KEYWORDS: BLOOM'S: Comprehension
CUSTOM ID: 052.01 - SAE - MANK08
53. Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of