ECON - MOD 1

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1.capitol: refers to manufactured goods used to make other goods and services.
2.command economy: industry is publicly owned and a central authority makes production and consumption
decisions.
3.Define the term resources, and list the four categories of resources. What characteristic of
resources results in the need to make choices?: Resources are anything that can be used to produce
something else. The four categories of resources are labor, land, capital and entrepreneurship. Scarcity
results in the need to make choices.
4.economic aggregates: are economic measures that summarize data across many different markets.
5.economics: the study of scarcity and choice.
6.economy: a system for coordinating a society's productive and consumptive activities.
7.entrepreneurship: describes the efforts of entrepreneurs in organizing resources for production, taking
risks to create new enterprises, and innovating to develop new products and production processes.
8.Identify each of the following statements as positive or normative, and explain your answer.
a. Society should take measures to prevent people from
engaging in dangerous personal behavior.
b. People who engage in dangerous personal behavior impose higher costs on society through
higher medical costs.: A) normative statement-this is some kind of good idea, suggestion or advice.
B) positive statement-this is real fact
9.incentives: rewards or punishments that motivate particular choices.
10.individual choice: decisions by individuals about what to do, which necessarily involve decisions about
what not to do.
11.In what type of economic analysis do questions have a "right" or "wrong" answer? In what type of
economic analysis do questions not necessarily have a "right" answer? On what type of
economic analysis do econo- mists tend to disagree most frequently? Why might economists
disagree? Explain.: In positive economics, questions have a "right" or "wrong" answer however in
normative economic analysis, questions do not necessarily have a "right" and "wrong" answer.
Economists most frequently disagree on normative economic analysis as these are often times value
decisions and economists are all individuals with personal opinions. Also, it is possible for economists to
disagree as a result of the way the economic analysis was conducted. Economic models are formed
based on simplifications about reality. Economists sometimes differ on what aspects should be simplified
and which ones are appropriate.
12.labor: the effort of workers
13.land: refers to all resources that come from nature, such as minerals, timber, and petroleum.
14.macroeconomics: concerned with the overall ups and downs of the economy.
15.marginal analysis: the study of the costs and benefits of doing a little bit more of an activity versus a little
bit less.
16.market economy: the decisions of individual producers and consumers largely determine what, how, and
for whom to produce, with little government involvement in the decisions.
17.microeconomics: the study of how individuals, households, and firms make decisions and how those
decisions interact.
18.normative economics: makes prescriptions about the way the economy should work.
19.opportunity cost: what you must give up in order to get it.
20.positive economics: the branch of economic analysis that describes the way the economy actually works.
21.property rights: establish ownership and grant individuals the right to trade goods and services with each
other.
22.Provide an example of a resource from each of the four categories of resources.: -Land-water, sea
etc.
-Labor-power of workers.
-Capital-buildings, cars etc.
-Enterpreneurship-risk
23.resource: anything that can be used to produce something else.
24.scarce: resource is not available in sufficient quantities to satisfy all the various ways a society wants to
use it.
25.Suppose that you prefer reading a book you already own to watching TV and that you prefer
watching TV to listening to music. If these are your only three choices, what is the opportunity
cost of reading?

a. watching TV and listening to music

b. watching TV
c. listening to music
d. sleeping
e. the price of the book: a
26.What type of resource is each of the following?
a. time spent flipping hamburgers at a restaurant
b. a bulldozer
c. a river: A) labor
B) capital
C) land
27.Which of the following is an example of a resource? I. petroleum
II. a factory III. a cheeseburger dinner

a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III: d

28.Which of the following is not an example of resource scarcity?

a. There is a finite amount of petroleum in the world.

b. Farming communities are experiencing droughts.
c. There are not enough physicians to satisfy all desires
for health care in the United States.
d. Cassette tapes are no longer being produced.
e. Teachers would like to have more instructional tech-
nology in their classrooms.: d
29.Which of the following questions is studied in microeconomics?

a. Should I go to college or get a job after I graduate?

b. What government policies should be adopted to promote employment in the economy?
c. How many people are employed in the economy this year?
 d. Has the overall level of prices in the economy increased or decreased this year?
e. What determines the overall salary levels paid to workers in a given year?: a
30.Which of the following statements is/are normative? I. The price of gasoline is rising.
II. The price of gasoline is too high. III. Gas prices are expected to fall in the near future.

a. I only
b. II only
c. III only
d. I and III only
e. I, II, and III: b
31.You make $45,000 per year at your current job with Whiz Kids Consultants. You are considering a
job offer from Brainiacs, Inc., which would pay you $50,000 per year. Is each of the following
elements an oppor- tunity cost of accepting the new job at Brainiac, Inc.?

Answer yes or no, and explain your answer.

a. the increased time spent commuting to your new job
b. the $45,000 salary from your old job
c. the more spacious office at your new job: 1) yes, because if I accept second offer my commuting
time will increase, difference between old and new commuting times will be opportunity cost
2) yes, opportunity cost will be 45000 dollar because in order to work for Brainiacs, I have to quit from
Whiz Kids, also I have to refuse 45000 salary which is opportunity cost.
3) Spacious office is not an opportunity cost, it is additional utility.

ECON - MOD 2
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1.aggregate output: the economy's total production of goods and services for a given time period.
2.business cycle: the alternation between economic downturns, known as recessions, and economic
upturns, known as expansions.
3.Define an expansion and economic growth, and explain the difference between the two
concepts.: Expansion is part of the business cycle which occurs when output increases before downturn.
Economic growth is phenomenon when economic's production possibility increases in long term period.
Difference between this two terms is that expansion is long term process, it lasts until downturn, but
economic growth is long term process.
4.Define inflation, and explain why an increase in the price of donuts does not indicate that inflation
has occurred.: Inflation is an increase in overall prices. An increase in the price of donuts does not
indicate that inflation has occurred as this is just one industry. There would have to be an overall increase
in the prices of goods and services in the economy (and not just one or a few) for it to be considered as
inflation.
5.deflation: A falling overall price level
6.depression: a very deep and prolonged downturn.
7.Describe two types of models used by economists.: we talk about business cycles for the economy as
a whole, because everything in country's economic system is connected. For example manufacturing and
retailing sectors and so on. Expansion and recession affects all the sectors in economy, also such
economical indicators as aggregate demand, aggregate supply, inflation and unemployment rate.
8.Describe who gets hurt in a recession and how they are hurt.: When output falls it is bad almost for
everybody, for example firms workers and so on. During recession people lose their jobs and they do not
 have income to buy products. Also firms reduce production due to less demand. Recession is bad for
whole country and economic system because real GDP falls and poverty increases
9.During the recession phase of a business cycle, which of the following is likely to increase?

a. the unemployment rate

b. the price level
c. economic growth rates
d. the labor force
e. wages: a
10.economic growth: an increase in the maximum amount of goods and services an economy can produce.
11.employment: the number of people who are currently working for pay in the economy.
12.expansions: or recoveries, are periods of economic upturns when output and employment are rising.
13.inflation: A rising overall price level
14.labor force: equal to the sum of employment and unemployment.
15.The labor force is made up of everyone who is

a. employed.
b. old enough to work.
c. actively seeking work.
d. employed or unemployed.
e. employed or capable of working.: d
16.model: a simplified representation used to better understand a real-life situation.
17.other things equal assumption: means that all other relevant factors remain unchanged. This is also
known as the ceteris paribus assumption.
18.The other things equal assumption allows economists to

a. avoid making assumptions about reality.

b. focus on the effects of only one change at a time.
c. oversimplify.
d. allow nothing to change in their model.
e. reflect all aspects of the real world in their model.: b
19.output: the quantity of goods and services produced.
20.price stability: when the overall price level is changing only slowly if at all.
21.recessions: are periods of economic downturns when output and employment are falling.
22.unemployment: the number of people who are actively looking for work but aren't currently employed.
23.unemployment rate: is the percentage of the labor force that is unemployed.
24.Which of the following is the most likely result of inflation?

a. falling employment
b. a dollar will buy more than it did before
c. people are discouraged from holding cash
d. price stability
e. low aggregate output per capita: c
25.Which of the following provides a long-term increase in the productive capacity of an economy?

a. an expansion
b. a recovery
c. a recession
 d. a depression
e. economic growth: e

ECON - Mod 5
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1.change in demand: a shift of the demand curve, which changes the quantity demanded at any given price.
2.competitive market: a market in which there are many buyers and sellers of the same good or service,
none of whom can influence the price at which the good or service is sold.
3.complements: if a rise in the price of one of the goods leads to a decrease in the demand for the other
good.
4.Create a table with two hypothetical prices for a good and two corresponding quantities demanded.
Choose the prices and quantities so that they illustrate the law of demand. Using your data, draw
a correctly labeled graph showing the demand curve for the good. Using the same graph,
illustrate an increase in demand for the good: see pic
5.A decrease in the price of butter would most likely decrease the demand for

a. margarine.
b. bagels.
c. jelly.
d. milk.
e. syrup.: A) A decrease in the price of butter would most likely decrease the demand for margarine
because they are substitutes
6.demand curve: a graphical representation of the demand schedule. It shows the relationship between
quantity demanded and price.
7.demand schedule: shows how much of a good or service consumers will be willing and able to buy at
different prices.
8.Draw a correctly labeled graph showing the demand for apples. On your graph, illustrate what
happens to the demand for apples if a new report from the Surgeon General finds that an apple a
day really does keep the doctor away.: see pic
9.Explain whether each of the following events represents (i) a change in demand (a shift of the
demand curve) or (ii) a movement along the demand curve (a change in the quantity demanded).

a. A store owner finds that customers are willing to pay more for umbrellas on rainy days.
b. When XYZ Telecom, a long-distance telephone service provider, offered reduced rates on
weekends, its volume of weekend calling increased sharply.
c. People buy more long-stem roses the week of Valentine's Day, even though the prices are
higher than at other times during the year.
d. A sharp rise in the price of gasoline leads many commuters to join carpools in order to reduce
their gasoline purchases.: A) In this case demand curve shifts rightward because people want to buy
more umbrellas at any given price on rainy days B) In this case we have movement along the demand
curve because when price falls quantity of demand rises C) In this case demand curve shifts rightward
because demand on roses increase during valentine's day D) In this case we have movement along the
demand curve because when gasoline price rises demand falls
10.If an increase in income leads to a decrease in demand, the good is

a. a complement.
b. a substitute.
 c. inferior.
d. abnormal.
e. normal: C
11.individual demand curve: illustrates the relationship between quantity demanded and price for an
individual consumer.
12.inferior good: When a rise in income decreases the demand for a good,
13.law of demand: says that a higher price for a good or service, all other things being equal, leads people to
demand a smaller quantity of that good or service.
14.movement along the demand curve: s a change in the quantity demanded of a good that is the result of
a change in that good's price.
15.normal good: When a rise in income increases the demand for a good—the normal case
16.quantity demanded: the actual amount of a good or service consumers are willing and able to buy at
some specific price.
17.substitutes: a rise in the price of one of the goods leads to an increase in the demand for the other good.
18.supply and demand model: a model of how a competitive market works.
19.Which of the following will increase the demand for disposable diapers?

a. a new "baby boom"

b. concern over the environmental effect of landfills
c. a decrease in the price of cloth diapers
d. a move toward earlier potty training of children
e. a decrease in the price of disposable diapers: A
20.Which of the following will occur if consumers expect the price of a good to fall in the coming
months?

a. The quantity demanded will rise today.

b. The quantity demanded will remain the same today.
c. Demand will increase today.
d. Demand will decrease today.
e. No change will occur today.: D
21.Which of the following would increase demand for a normal good? A decrease in

a. price
b. income
c. the price of a substitute
d. consumer taste for a good
e. the price of a complement: E) Price falling of a complement will rise demand on a normal product

Econ test (mod 1-4) multiple choice

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1.During the recession phase of a business cycle, which of the followingislikelytoincrease?
a. the unemployment rate
b. the price level
c. economic growth rates
d. the labor force
e. wages: A. The unemployment rate
2.For country A, the opportunity cost of a bushel of wheat is

a. 1 ⁄2 units of textiles
b. 2 ⁄3 units of textiles
c. 1 1 ⁄3 units of textiles
d. 1 1 ⁄2 units of textiles
e. 2 units of textiles: A. 1/2 units of textiles
3.For this economy, an increase in the quantity of capital goods produced without a corresponding
decrease in the quantity of consumer goods produced
a. cannot happen because there is always an opportunity cost.
b. is represented by a movement from point E to point A.
c. is represented by a movement from point C to point B.
d. is represented by a movement from point E to point B.
e. is only possible with an increase in resources or technology.: D. Is represented by a movement
from point E to point B
4.If the two countries specialize and trade, which of the choices below describes the countries'
imports?: D. Country B (wheat) Country A (textiles)
5.An increase in unemployment could be represented by a movement from point

a. D to point C.
b. B to point A.
c. C to point F.
d. B to point E.
e. E to point B.: D. B to point E
6.The labor force is made up of everyone who is

a. employed.
b. old enough to work.
c. actively seeking work.
d. employed or unemployed.
e. employed or capable of working.: D. Employed or unemployed
7.The other things equal assumption allows economists to

a. avoidmakingassumptionsaboutreality.
b. focusontheeffectsofonlyonechangeatatime.
c. oversimplify.
d. allownothingtochangeintheirmodel.
e. reflectallaspectsoftherealworldintheirmodel.: B. Focus in the effects of only one change at a time
8.Suppose that you prefer reading a book you already own to watching TV and that you prefer
watching TV to listening to music. If these are your only three choices, what is the opportunity
cost of reading?

a. watching TV and listening to music

b. watching TV
c. listening to music
d. sleeping
e. the price of the book: B. Watching TV
9.A sustained increase in aggregate output over several decades represents
a. an expansion.
b. a recovery
c. a recession.
d. a depression.
e. economic growth..: E. Economic growth
10.This production possibilities curve shows the trade-off between consumer goods and capital
goods. Since capital goods are a resource, an increase in the production of capital goods today
will increase the economy's production possibilities in the future. Therefore, all other things equal
(ceteris paribus), producing at which point today will result in the largest outward shift of the PPC
in the future?

a. A
b. B
c. C
d. D
e. E: A. A
11.Use the graph to determine which country has a comparative advantage in producing each
good.: A. Country A (wheat) Country B (textiles)
12.Use the graph to determine which country has an absolute advantage in producing each good.: A.
Country A (wheat) Country B (textiles)
13.Which of the following is an example of a resource? I. petroleum II. a factory III. a cheeseburger
dinner

a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III: D. I and II only
14.Which of the following is the most likely result of inflation?

a. falling employment
b. a dollar will buy more than it did before
c. people are discouraged from holding cash
d. price stability
e. low aggregate output per capita: C. People are discouraged from holding cash

15.Which of the following might allow this economy to move from point B to point F?

a. more workers
b. discovery of new resources
c. building new factories
d. technological advances
e. all of the above: E. All of the above
16.Which of the following questions is studied in microeconomics?

a. Should I go to college or get a job after I graduate?

b. What government policies should be adopted to promote employment in the economy?
 c. How many people are employed in the economy this year?
d. Has the overall level of prices in the economy increased or decreased this year?
e. What determines the overall salary levels paid to workers in a given year?: A. Should I go to
college or get a job after I graduate?
17.Which of the following situations represent(s) resource scarcity?
I. Rapidly growing economies experience increasing levels of water pollution.
II. There is a finite amount of petroleum in the physical environment.
III. Cassette tapes are no longer being produced.

a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III: D. I and II only
18.Which of the following statements is/are normative?
I. The price of gasoline is rising.
II. The price of gasoline is too high.
III.Gas prices are expected to fall in the near future.

a. I only
b. II only
c. III only
d. I and III only
e. I, II, and III: B. II only
19.Which point(s) on the graph represent efficiency in production?

a. BandC
b. AandD
c. A,B,C,andD
d. A,B,C,D,andE
e. A,B,C,D,E,andF: C. A,B,C and D

Week 2 Quiz: Basic Economic Concepts (part 2)

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1.Determinants of demand: Amount that consumers are willing to buy at a given price.

2.Determinants of supply: Amount that producers are willing to supply at a given price.

3.Differencebetween changes in quantity demanded and change in demand: A change in quantity

demanded is a change in how much of a product/service consumers are willing to buy at a given price. A
change in demand is a change in the willingness/ability of consumers to purchase a good at all given
prices.

4.Difference between changes in quantity supplied and change in supply: A change in quantity supplied
is a change in how much of a product/service that producers are willing to provide at a given price. A
change in supply is a change in the willingness or ability of sellers to produce and sell a good at all given
prices.
5.Equilibrium: When no individual would be better off doing something different, and quantity demanded of a
good is equal to the quantity supplied of that good.

6.Equilibrium effect: Supply curve doesn't change, Demand curve shifts left: Quantity decreases, price
decreases

7.Equilibrium effect: Supply curve doesn't change, Demand Curve shifts right: Quantity increases, price
increases

8.Equilibrium effect: Supply curve shifts left, Demand curve doesn't change: Quantity decreases, price
increases

9.Equilibriumeffect: Supply curve shifts left, Demand curve shifts left: Quantity decreases, price
indeterminate

10.Equilibrium effect: Supply curve shifts left, Demand Curve shifts right: Quantity indeterminate, price
increases

11.Equilibrium effect: Supply curve shifts right, Demand curve doesn't change: Quantity increases,
price decreases

12.Equilibrium effect: Supply curve shifts right, Demand curve shifts left: Quantity indeterminate, price
decreases

13.Equilibriumeffect: Supply curve shifts right, Demand curve shifts right: Quantity increases, price
indeterminate

14.How does change in expected future income affect the demand curve?: If consumers expect a future
drop in income, demand will decrease (left shift). If consumers expect a future increase in income,
demand will increase (right shift).

15.How does change in expected future price affect the demand curve?: If consumers expect a future
drop in price, demand will decrease for today (left shift). If consumers expect a future increase in price,
demand will increase for today (right shift).

16.How does change in expected future price affect the supply curve?: If suppliers expect the future
price of a good to increase, their supply will decrease for today (left shift). If suppliers expect the future
price of a good to decrease, their supply will increase for today (right shift).

17.How does change in income affect the demand curve?: If the good is an inferior good, increased
income will decrease demand (left shift) and decreased income will increase demand (right shift).
If the good is a normal good, increased income will increase demand (right shift) and decreased income
will decrease demand (left shift).

18.How does change in input prices affect the supply curve?: Increased input price increases overall
production cost, making producers less willing to supply, and leading to a decrease in supply (left shift).
Decreased input price decreases overall production cost, making producers more willing to supply, and
leading to an increase in supply (right shift).

19.How does change in number of consumers affect the demand curve?: Increased number of
consumers increases demand (right shift). Decreased number of consumers decreases demand (left
shift).
20.How does change in number of producers affect the supply curve?: Increased number of producers
leads to a greater supply (right shift). Decreased number of producers leads to a lower supply (left shift).

21.How does change in production complement prices affect the supply curve?: Increased price of a
complement good/service will cause producers to increase their production of the main good (right shift).
Decreased price of a complement good/service will cause producers to decrease their production of the
main good (left shift).

22.How does change in production substitute prices affect the supply curve?: Increased price of
substitute good/service will cause producers to decrease their production of the main good (left shift).
Decreased price of a substitute good/service will cause producers to increase their production of the main
good (right shift).

23.How does change in taste affect demand curve?: If a new fad or belief is against the good/service,
demand will decrease (left shift). If a new fad or belief is in favor of the good/service, demand will increase
(right shift).

24.How does improvement in technology affect the supply curve?: Better technology enables producers
to make more of a good/service at a lower cost, leading to an increase in supply (right shift).

25.How does the price of a complement good affect the demand curve?: If the price of a complement
increases, demand decreases (left shift). If the price of a complement decreases, demand increases (right
shift)

26.How does the price of a substitute good affect the demand curve?: If the price of a substitute
increases, demand increases (right shift). If the price of a substitute decreases, demand decreases (left
shift)

27.Ifa point on the supply and demand graph is above equilibrium, what results?: A surplus results
because the supply exceeds the demand at that price, forcing prices to drop.

28.Ifa point on the supply and demand graph is below equilibrium, what results?: A scarcity results
because the demand exceeds the quantity available at that price, forces prices to rise.

29.Law of demand: Other things being equal, a higher price for a good or service leads people to demand a
smaller quantity of that good or service.

30.Law of supply: Other things being equal, price and quantity supplied of a good are positively related.

31.What factors cause the demand curve to shift?: 

1. Change in price of related goods/services

2. Change in consumer income
3. Change in taste
4. Change in expectations
5. Change in number of consumers

32.What factors cause the supply curve to shift?: 

1. Change in price of related production goods/services

2. Change in input prices
3. Change in technology
 4. Change in expectations
5. Change in number of producers

33.When does a point on the demand curve move?: When how much of a good consumers are willing to
buy at one given price changes, or if the supply curve shifts.

34.When does a point on the supply curve move?: When the amount of goods consumers are willing to
buy at a one given price changes, or if the demand curve shifts.

35.When does the demand curve shift?: When the willingness or ability of consumers to purchase a good
changes.

36.When does the supply curve shift?: When the willingness or ability of sellers to produce and sell a good
changes.

Macroeconomics: Chapter 6
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1.Americans have become able to afford many more material goods over time thanks to...: Americans
have been able to afford many more material goods over time thanks to long-run economic growth

2.Another word for expansions: Recoveries

3.Another word for recessions: Contractions

4.Business Cycle: The short-run alternation between recessions and expansions

5.Business-cycle peak: The point at which the economy switches from an expansion to a recession

6.Business-cycle trough: The point at which the economy switches from a recession into an expansion

7.Canproduction and trade be illustrated through the circular-flow diagram?: Yes, production and trade
may indeed be illustrated through the circular-flow diagram.

8.Countries with high investment relative to savings run...: Trade Deficit

9.Countries with low investment, relative to savings run...: Trade surplus

10.Deflation: A falling of the overall level of prices

11.Do trade deficits and trade surpluses indicate the success of the company?: No, trade surpluses and
trade deficits do not indicate the success of the country's economy because of how one may think that
being in a trade deficit is bad, but, the United States' economy is certainly more sound than that of Saudi
Arabia's. The United States is running a trade deficit (importing more than exporting) because of how that
fits with the economy at the moment. The nation's GDP is doing just fine, and when looking around, it is
clear that the nation's economy is doing well. This does not mean that having a trade surplus (exporting
more than importing) is bad by any means

12.Economic output: Goods and services which a national economy produces

13.Economics is about....: Choices! Decisions!

14.Expansions: Periods of economic upturn when output and employment rates are rising
15.Fastfood measure of economy: McDonald's sold hamburgers for how much in 1954, and how
much I'm 2013? What happened to overall consumer prices?: 1954 - hamburgers were sold for .15
cents each
2013 - hamburgers were sold for 1 dollar (6.5x higher) each
Overall consumer prices rose even faster than this increase (8.5x)

16.Fiscal Policy: Uses changes in the government spending and taxes to affect overall spending

17.GDP stands for: Gross Domestic Product

18.GNP stands for: Gross National Product

19.Hayekvs Keynesian (major difference): Hayek supported a self regulating economy, one that fixes its
economic slumps through the use of the invisible hand, NO government intervention

Keynesian economics - consumers play a large role in the economy's success, and government
intervention should be available to mitigate economic simple

20.How does the circular flow diagram work? - draw it out on a sheet of paper: Draw it

21.How has the GDP been since the 1950s?: The GDP, since 1950, has shown long run economic growth
(a sustained upward trend in economic output over time)

22.How has the unemployment rate been since 2007: The unemployment rate increased dramatically from
2007 to 2009 because of the Great Recession, but since then, it has been decreasing over a long period
of time.

23.Inflation: A rising overall level of prices

24.Inflation: How the cost of goods and services increases over time

25.Internationaltrade: Trade that occurs between nations and involves the trading of goods, services, and
raw materials

26.Inthe short-run, movements of inflation are closely related to the...: Business cycle

When the economy is depressed, inflation tends to decrease, but if the economy is booming, inflation
tends to rise

27.Is
GDP or Real GDP used more often: Real GDP is used more often than GDP because of how it
provides more accurate statistics on the nation's success

28.Is
it true that macroeconomics is a highly practical discipline because of how it deals with
principles that impact every part of life?: Yes, macroeconomics is a highly practical discipline

29.Is
the European Union still being affected by the Great Recession?: Definitely, especially the country
of Greece, whose GDP has been decreasing continuously over the last several years

30.Keynesian economics definition: Keynesian economics is an ideology that explains that economic

slumps are caused by the consumers' inadequate spending. Keynesian economics also supports
government intervention, and says that it is crucial for economic success
These economic slumps can be mitigated by government intervention

31.Keynesian Economics - who developed it: John Maynard Keynes (British Economist) developed
Keynesian economics
32.Labelwhether question is microeconomic or macro:
Should I go to business school or take a job right now?
What determines the cost to a university or college of offering a new course?
What determines the overall level of prices in the economy as a whole?
What determines whether Citibank opens a new office in shanghai
How many people are employed in the economy as a whole this year?: Microeconomics
Microeconomics
Macroeconomics
Microeconomics
Macroeconomics

33.Long-run economic growth (definition and is it a relatively new phenomenon?): The sustained

upward trend of economic output over time
Yes, long-run economic growth is a relatively new phenomenon

34.Macroeconomics definition: The study of the economy as a whole rather than individual markets

35.Macroeconomics focuses on...: Macroeconomics focuses o the economy as a whole

36.Macroeconomists study things like:: Inflation

Deflation
Unemployment Rates
Government Policies
Trade Deficits and Surpluses
And so on

37.Monetary Policy: Monetary Policy uses changes in the quantity of money to alter interest rates and affect
overall spending

38.Montgomery Ward - what happened?: Montgomery Ward during the Great Depression, had cut back on
spending and saved money, which allowed them to survive. After WWII, the company did this yet again,
which caused them to lose out on investments, and ultimately make them lose their success (Sears took
over)

39.National income: Analyses the wealth a nation generates

40.National
Net Income definition: The sum of income taken from household incomes, business incomes,
and government in ones

41.Open Economy: An economy that trades goods and services with other countries

42.Paradox of thrift: This paradox of thrift explains the people's reactions toward deflation and inflation.
When there is a deflation, consumers will resist themselves from purchasing goods and services because
of how they believe that the prices will continue to go down. This lack of investment will negatively affect
the economy's success. When there is an inflation, many people will no longer be able to afford certain
products, which will no longer allow them to invest into the economy's well-being.

Basically, when families are worried about economic hard times, they cut back on spending, which hurts
the economy even more!

43.Price Stability - is it wanted by all economists?: The economy has price stability when the overall level
of prices hardly changes, or does not change at all
44.Recessions: Periods of economic downturn when output and employment rates are falling

45.The rest is details:: What should the economy look like? How should the economy be fixed?

46.Self-regulating
economy: Problems such as unemployment are resolved without the intervention of the
government. The economic problems are solved through the working of the invosible hand

47.Thisyear the value of a country's imports is equal to $1.2 billion, and the value of its exports is
equal to $1.3 billion. This country is running a:
Trade Deficit
Trade Surplus: This country is running a trade surplus

48.Tradedeficit: A country runs a trade deficit when the value of goods and services bought from other
countries is more than the value of goods and services it sells to them (the country imports more than it
exports)

49.Trade Surplus: A country runs a trade surplus when the value of goods and services bought is less than
the value of goods and services being sold to the other countries (the country exports more than it
imports)

50.Was the 2001 recession milder than the 2007-2009 recession?: Yes, the 2001 recession was milder
than the 2007-2009 recession

51.Whatare three countries that are running trade surpluses: Germany

China
Saudi Arabia

52.What are two policies that the government may enact to help the economy: Monetary Policy
Fiscal Policy

53.What do economists try to do to the business cycle and have they been successful?: Economists try
to smooth out the business cycle, but sadly, they haven't been too successful at doing so : multiple
recessions and the Great recession

54.What do policy makers seek to do to business cycles: Policy makers seek to diminish the severity of
business cycles

55.Whatfour aspects are part of the business cycle: Recessions

Expansions
Peaks
Troughs

56.What happened to Canada and Argentina during the 20th century?: Argentina and Canada began the
20th Century looking like twins but ever since, Canadas standard of living is 3x higher than Argentina's.
Canada is on par with the US's standard of living b/c of how Argentina dealt with high inflation and
political instability

57.Whatis a Depression?: The worst form of a recession

Recession - my next door neighbor was fired from work yesterday
Depression - my next door neighbor and I were fired yesterday

58.What is a good indicator of a country's success?: The GDP - Gross Domestic Product

59.What is an example of a country that is running a trade deficit: The United States

60.What is a quarter?: A quarter signifies three months in one year

61.What is the current unemployment rate: The current unemployment rate is hovering around 4.3 or 4.4
percent - which is amazing, considering how in 2009, it had been 10 percent

62.What is the definition of macroeconomics -slide: Macroeconomics is the study of large scale economic
issues such as those which affect the entire economy

63.What is the difference between GDP and Real GDP: GDP includes inflation rates while Real GDP
excludes the inflation rates from its totals

64.Whatis the GDP: The gross domestic product is the total value of goods and services produced within the
country over a certain period of time (this certain period of time is typically one year in length)

65.What is the overall level of prices determined by in the long run: In the long run, the overall level of
prices is determined by the changes in money supply

66.What's the difference between GNP and GDP: GDP - total value of goods and services produced by the
country within a certain period of time

GNP - total value of goods and services produced by a country, plus, the value of the goods and services
produced by the companies but are located in other countries.

67.What study of economics came first, Macro or Micro?: Microeconomics came first because of how it
had already been developed and a well studied branch by the Great Depression in the 1930s.
Macroeconomics came soon after the Great Depression as people wanted to know why economic slumps
occurred, and how to fix them

68.What two things does macroeconomics do?: Macroeconomics does really just two things;
It measures the economy
Fixes it when it's broken

69.What type of unemployment rate is always tried by economists to be avoided: Cyclical

unemployment rate should be tried to always be kept at 0% - this unemployment rate is caused and
increased due to recessions

70.What was different between the Great Recession and the Great Depression: While the Great
Recession and Great Depression were both horrible, the major difference between the two was that the
recession lasted for far less time than the Great Depression. Not only was there more government
involvement, but the study of Macroeconomics has developed drastically since the Great Depression,
allowing us to deal with recessions much more efficiently

71.When did Spain give up the Peseta for the Euro and what happened: Spain gave up the Peseta for
the Euro in 1999 and at first, the surplus caused a decrease in GDP, but over years, the GDP began to
rise and stabilize itself one more (long-run economic growth)

72.When do economists officially label an economic situation a recession or an expansion: If the

economic situation portrays economic recession or expansion factors/indications for three months in a
row (a quarter)

73.When was Keynesian economics developed: Keynesian economics was developed in 1936

74.Who supported a self regulating economy?: Hayek

75.Why are inflation and deflation problematic: These are problematic because deflation will cause people
to save money, because of how money ultimately gains value over time. This can deepen a recession.

On the other hand, inflation causes people to spend all of their money, because of how the value of
money decreases over time, and in the worst cases, people stop using cash all together.

76.Why does the economy have an impact on almost every part of people's lives:: The economy has an
impact on almost every part of people's lives because of how the nation's economic well-being affects its
employment, healthcare, consumer confidence, and so forth

77.Willthe employment rate ever be at 0%: The unemployment rate will never be at 0%, simply because of
different factors. A person may quit the job because of difficulties, or an individual may be fired for doing
poorly. But, there is indeed a type of unemployment rate that should be avoided.

P Macro Unit 3 objectives

Study online at quizlet.com/_1qvodz
1.The determinants of investment spending: the interest rate, the expected future level of real GDP, and
the current level of production capacity.

2.How expected future income and aggregate wealth affect consumer spending: when either expected
future income or aggregate wealth increase consumer spending increases, and the aggregate
consumption function shifts up. the reverse is also true.

3.How the aggregate demand curve illustrates the relationship between the aggregate price level and
the quantity of aggregate output demanded in the economy: downward slope, as price rises the
quantity of aggregate output demanded in the economy lessens

4.How the aggregate supply curve illustrates the relationship between the aggregate price level and
the quantity of aggregate output supplied in the economy: As price level increases, supply level
increases b/c firms are more willing and able to produce goods

5.How the wealth effect and interest rate effect explain the aggregate demand curve's negative
slope: Wealth-a decrease in purchasing power leads to consumers scaling back consumption- when
aggregate price rises people buy less things b/c their money is less valuable so GDP falls. Interest- B/c
money has less purchasing power the public tries to increase their money pool through borrowing, or
selling assets such as bonds, as a result peeps who work in flow of money have less available and
interest rates go up. People make less loans and borrow less, and therefore spend less.

6.The meaning of the aggregate consumption function: C = A + MPC × YD, aggregate consumer
spending= the amount of consumer spending when YD equals zero.+ mpc +aggregate current disposable
income

7.The nature of the multiplier: 1/(1-(The change in consumer spending/the change in disposable income.) )

8.What factors can shift the aggregate demand curve: changes in expectations, changes in wealth, and
the size of the existing stock of physical capital. In addition, both fiscal and monetary policy can shift
the aggregate demand curve.

9.What factors can shift the aggregate supply curve: input prices (production costs), productivity,
legislation
10.Whyinvestment spending is considered a leading indicator of the future state of the
economy: Swings in investment spending are much more dramatic than those in consumer spending. In
addition, economists believe, due to the multiplier process, that declines in consumer spending are
usually the result of a process that begins with a slump in investment spending. Sales that are less than
had been forecast slowing economy. Sales are greater than forecast a growing economy.

11.Whythe aggregate supply curve is different in the short run from in the long run: long run shows the
possibility, srs shows now