ADE 1

Question 1

Competitive market

Answer 1

a market in which there are many sellers and buyers so that each has a negligible impact on the market price

Question 2

Consumption

Answer 2

spending by households on goods and services with the exception of purchases of new housing

Question 3

Economic growth

Answer 3

the increase in the amount of goods and services in an economy over a period of time

Question 4

discount rate

Answer 4

the interest rate at which the Federal Reserve lends on a short-term basis to the US banking sector

Question 5

Economy

Answer 5

a word to describe all the economy actvity(buying and selling or transactions) that take place in a country or region

Question 6

Efficiency

Answer 6

the property of a resources alllocation of maximizing the total surplus received by alll members of society

Question 7

direct tax

Answer 7

a tax that is levied directly on a person’s income

Question 8

Consumer prices index (CPI)

Answer 8

A measure of the overall prices of the goods and services bought by a typical consumer

Question 9

Crowding out

Answer 9

A decrease in investment that results from government borrowing

Question 10

demand curve

Answer 10

a graph of the relationship between the price of a good and the quantity demanded

Question 11

Depreciation

Answer 11

A decrease in the value of a currency as measured by the amount of foreign currency it can buy

Question 12

Constant returns to scale

Answer 12

the property whereby long-run average total cost stays the same as the quantity of output changes

Question 13

Equilibrium

Answer 13

a situation in which the price has reached the level where quantity supplied equals quantity demanded

Question 14

European Economic and Monetary Union (EMU)

Answer 14

The European currency union that has adopted the euro as its common currency

Question 15

Economic profit

Answer 15

total revenue minus total cost, including both explicit and implicit costs

Question 16

Consumer surplus

Answer 16

a buyer’s willingness to pay minus the amount the buyer actually pays

Question 17

Economics

Answer 17

the study of how society mananges its scare resources

Question 18

Customs union

Answer 18

a group of countries that agree not to impose any restrictions at all on trade between their own economies, but to impose the same restrictions as one another on goods imported from countries outside the group

Question 19

deadweight loss

Answer 19

the fall in total surplus that results from a market distortion, such as a tax

Question 20

Discrimination

Answer 20

the offering of different oppportunities to similar individuals who differ only by race, ethnic grup, sex, age or other personal characteristics

Question 21

Cost

Answer 21

The value of everything a seller must give up to produce a good

Question 22

European Central Bank (ECB)

Answer 22

the overall central bank of the 16 countries comprising the European Monetary Union

Question 23

Cyclical unemployment

Answer 23

the deviation of unemployment from its natural rate

Question 24

depression

Answer 24

a severe recession

Question 25

Efficiency wages

Answer 25

Above-equilibrium wages paid by firms in order to increase worker productivity

Question 26

Currency

Answer 26

the paper banknotes and coins in the hands of the public

Question 27

Crowding-out effect

Answer 27

the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending

Question 28

demand deposits

Answer 28

balances in bank accounts that depositors can access on demand by using a debit card or writting a cheque

Question 29

Elasticity

Answer 29

a measure of the resposiveness of quantity demanded or quantity supplied to one of its determinants