Principles of Economic Growth and Resource Allocation Quiz

Money is not a factor of production; land, labor, capital, and entrepreneurship are.

GDP stands for Gross Domestic Product, representing the total value of goods and services produced in a country.

Opportunity cost is the value of the next best alternative that must be forgone when a decision is made.

In a command economy, the government centrally plans and controls economic activities.

The law of diminishing marginal returns states that adding more of a variable input to a fixed input will eventually result in decreasing additional output.

Monopolistic competition involves firms being price makers, not price takers.

Unemployment rate = (Number of unemployed / Labor force) × 100%

The Federal Reserve regulates monetary policy, influencing money supply, interest rates, and economic stability.

Comparative advantage is the ability of a country to produce a good or service at a lower opportunity cost than other nations.

Subsidies are financial aid provided by the government to correct market failures and encourage certain economic activities.

Perfect competition involves firms being price takers, not price makers.

Exports are not part of aggregate demand, which includes consumption, investment, government spending, and net exports.

Price elasticity of demand measures how quantity demanded changes in response to a change in price; it is calculated as the percentage change in quantity demanded divided by the percentage change in price.

The Lorenz curve is used to visually represent and measure income inequality within a population.

Income is not a determinant of supply; factors include price, input costs, technology, expectations, and number of sellers.