Fundamentals of Economic Theory Quiz

Scarcity arises when unlimited wants exceed limited resources.

GDP represents the total monetary value of all goods and services produced within a country's borders in a specific time period.

Rational Choice Theory posits that individuals make decisions that maximize their own utility.

The law of demand states that there is an inverse relationship between price and quantity demanded.

Opportunity cost represents the value of the next best alternative forgone when a decision is made.

Inflation refers to the continuous increase in the general price level of goods and services.

The law of diminishing marginal utility states that as consumption of a good increases, the additional utility gained from each additional unit decreases.

Microeconomics studies individual markets and firms, while macroeconomics examines the economy as a whole.

Nominal GDP measures economic output at current market prices, while real GDP adjusts for inflation.

Technological progress is considered the primary driver of economic growth in classical economic theory.

Perfectly competitive markets feature many buyers and sellers without any single entity having control over prices.

The Phillips curve illustrates the trade-off between inflation and unemployment.

Progressive taxes impose higher rates on higher incomes, while regressive taxes impose higher rates on lower incomes.

Aggregate expenditure (AE) equals consumption (C) plus investment (I) plus government spending (G) plus net exports (NX).

Elasticity measures the sensitivity of quantity demanded to changes in price.

Monetary policy controls the money supply and interest rates, while fiscal policy manages government spending and taxation.