Answer to Question 1
The economy is the social institution that ensures the maintenance of society through
the production, distribution, and consumption of goods and services. Goods are
tangible objects that are necessary (such as food, clothing, and shelter) or desired
(such as DVDs and electric toothbrushes). Services are intangible activities for which
people are willing to pay (such as dry cleaning, a movie, or medical care). In highincome
nations today, many of the goods and services we consume are information
goods. Examples include databases and surveys and the mass media, computer
software, and the Internet. Some goods and services are produced by human labor
(for example, the plumber who unstops your sink); others are primarily produced by
capital (such as Internet access available through an Internet service provider). Labor
refers to the group of people who contribute their physical and intellectual services to
the production process in return for wages that they are paid by firms. Capital is
wealth (money or property) owned or used in business by a person or corporation.
Obviously money, or financial capital, is needed to invest in the physical capital (such
as machinery, equipment, buildings, warehouses, and factories) used in production.
For example, a person who owns a thousand shares of Dell Inc. stock owns financial
capital, but these shares also represent an ownership interest in Dell's physical capital.
Answer to Question 2
False
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