Introduction to economy

1. Economics is the science, which concerns with analyzing and explaining human decisions about
the allocation of scarce resources. YES
2. The principle of rationality says that disposable resources should get the minimum of what is
possible. NO
3. Among factors of production (resources) only labor and capital are inputs used for producing
good or providing services. NO
4. If money is used to produce wealth, money will be treated as capital resources. YES
5. All points inside the production-possibilities curve are feasible and productively efficient. NO
6. Production possibilities frontier (PPF) or “transformation curve” shows the different quantities
of two goods that an economy could efficiently produce in a given time period with all available
resources and technology. YES
7. In the long term the company may make a change in the production process, that can affect the
shape and position of the production possibility frontier (PPF). YES
8. According to Law of Diminishing Marginal Productivity the marginal product of labor MPL
increases. NO
9. Opportunity cost is the smallest valued alternative that must be sacrificed to attain something
or otherwise satisfy a want. NO
10. Opportunity cost is always over zero. NO
11. Normative economics says what particular policy actions should be recommended to achieve a
desirable goal. YES
12. According to law of demand as price of a product rises, the quantity demanded falls. YES
13. Complementary goods are similar products or services which can be consumed or used in place
of each other in at least some of their common uses. NO
14. According to law of supply, the supply curve is sloped downwards from left to right. NO
15. An increase in sales or property taxes will increase costs and reduce supply. YES
16. Increase in resources prices will lower production costs and increase supply. NO
17. Surplus is an amount that is extra or more than you need. YES
18. Surplus is a situation where there is not enough of the people or things that are needed.NO
19. Marginal productivity of capital is the extra amount that can be produced as a result of injecting
additional capital. YES
20. When the price of a product rises then -> The quantity demanded changes – The quantity
produced changes
Fundamentals and economic equilibrium in short and long run
economy
1. Income from capital is called in economics “rent”. NO
2. Households are owners of the factors of production (inputs). YES
3. Disposable income is used to calculate consumption expenditures. NO
4. Private sector includes businesses, households and government. NO
5. Export is outflow (Leakage) in open economy. NO
6. Expenditures for motorway construction is called transfer payments. NO
7. When there is lack of forces inventories then there is the equilibrium level of national income.
YES
8. Savings are a leakage. YES
9. Transfer payments indicates all government expenditures. NO
 10. Deficit in the state budget means that budget revenues are smaller than budget expenditures.
YES
11. Transfer payments include social assistance benefits. YES
12. The external sector cannot influence the way national savings are used. NO
13. Balance in the economy occurs only when individual sectors of the economy, separately
recognized are in equilibrium. NO
14. When leakages=injections then the economy is unbalanced. NO
15. Short-term equilibrium means a simultaneous balance on the commodity, financial and labor
market. NO
16. Global demand (Aggregate demand( is the sum of expenditures of all entities to purchase goods
produced in a given economy. YES
17. A budget surplus might be spent to make a purchase, pay off debt or save for the future. YES
18. The balance of trade includes commodity and capital transactions. NO
19. When net export is<0, then domestic savings flow out
20. When Total leakages >Total injections -> the levels of income, output, expenditure and
employment will fall
The labor market and unemployment
1. Labor demand is identified by workers (individuals, households, the suppliers of labor services).
NO
2. Labor demand is the sum of the labor-hours demanded by all employers. YES
3. Firms are willing to buy labor up to the point where the marginal revenue product of labor is
equal to the market wage. YES
4. The level of economically active population is higher than the level of Working age population of
the country. NO
5. Unemployment rate shows the number of unemployed people divided by the number of people
in the labor force. YES
6. When there is labor market equilibrium, the unemployment level equals zero. NO
7. When the current employment in the economy is at the level of employment equilibrium, then
there is the so-called natural unemployment. YES
8. When the labor market is in equilibrium, there is cyclical unemployment. YES
9. Frictional unemployment is temporary unemployment. YES
10. Cyclical unemployment reflects a mismatch between the skills and other attributes of the labor
force and those demanded by employers. NO
11. Passive labor market policy focused on reducing the size of unemployment. NO
12. Passive labor market policy aims to mitigate the economic effects of unemployment. YES
13. Labor force consists of all employed and unemployed people. YES
14. Marginal product curve is also a function of the demand for labor. NO
15. The marginal revenue product of labor is the extra revenue a firm generates when it buys one
more unit of labor (extra employee).YES
16. When a marginal product of labor equals the real wages, companies minimize profits. NO
17. The unemployment rate is defined by people who are able to work but are not willing to work
although suitable work is available for them. NO
18. Involuntary unemployment occurs when a person is willing to work at the prevailing wage yet is
unemployed. YES
19. When the labor market in in equilibrium, the effect of an increase in real wage will be
involuntary unemployment. YES
20. When the labor market is in equilibrium -> There is natural unemployment