Question

1. jim says \as the price of something increases, the quantity demanded decreases.\ jim is

a. correct, that is the law of demand
b. incorrect, he means demand instead of quantity demanded
c. incorrect, he means supply instead of quantity demanded
d. correct, that is the law of supply

1. steel beam inc. is looking to purchase a new steel - processing machine and factory. in the circular flow diagram, this transaction will take place in the

a. product market.
b. foreign exchange market.
c. resource market.
d. government controlled sector.

1. if the price of an item increases, demand for its substitutes

a. is unaffected
b. decreases
c. increases
d. there is no way to tell

1. which transaction below will take place in the product market on a circular flow diagram?

a. chris purchase of a new video game.
b. jennys posting of her resume on a website.
c. smithville farms purchase of 3 new tractors.
d. the pencil companys paying yearly taxes.
5.
product market
households businesses
a. taxes
b. stock market
c. goods and services
d. resource market

1. in the united states economy, the role of money is to

a. set prices on goods and services.
b. control inflation.
c. create jobs in the factor market.
d. facilitate exchange between buyers and sellers.

Explanation:

1. The law of demand states that as the price of a good or service increases, the quantity demanded decreases, ceteris paribus. So Jim is correct.
2. The purchase of a new steel - processing machine and factory is a resource (capital resource in this case) transaction, which occurs in the resource market.
3. When the price of an item increases, consumers will switch to its substitutes, so the demand for substitutes increases.
4. A purchase of a new video game by Chris is a transaction for a final product, which takes place in the product market.
5. In the circular - flow diagram, goods and services flow from businesses to households in the product market.
6. The main role of money in an economy is to facilitate exchange between buyers and sellers, acting as a medium of exchange.

Answer:

1. A. correct, that is the law of demand
2. C. resource market
3. C. increases
4. A. Chris' purchase of a new video game.
5. C. goods and services
6. D. facilitate exchange between buyers and sellers.