Areas To Work On For Final Exam Flashcards
Why does the SRAS curve shift to the left in the long run following an increase in aggregate supply
Workers and firms adjust their expectations and prices upward and they accept lower wages
Workers expect the inflation rate to fall from 5% to 2%
As a result this will shift the SRAS curve
To the right
An economic contraction begins with ___________ in spending by households and firms and a ______________ in spending on durable goods by households
Increase
Decrease
People who lost their jobs because of new technology are experiencing __________
Structural unemployment
The drawback to calculating real GDP using base year prices is that:
relative prices change over time and these are not reflected in base year prices, which distorts GDP.
________ is/are the payment for the factor of production of ________.
Profit; entrepreneurship
Economic decline (negative economic growth) is represented on a production possibility frontier model by the production possibility frontier ______________.
shifting inward
When there is a change in the quantity demanded it means that:
the quantity a consumer is willing to buy changes when the price changes.
Assuming that strawberries and cream are complementary goods. When the price of strawberries falls and the price of raw milk (used to make cream rises):
the equilibrium price of cream rises and the equilibrium quantity of cream might rise or fall.
According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at −0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?
There are few close substitutes for toothpaste.
If a firm lowered the price of the product it sells and found that total revenue did not change, then what is true about the demand for its product
It is unit-elastic.
Average fixed costs of production ___________.
fall as long as output is increased
After Suzie, owner of Suzie’s Sweet Shop, hires her eighth worker, the average product of labour declines. Which of the following statements must be true?
The marginal product of the eighth worker is less than the average product of labour before the eighth worker was hired.
The production possibility frontier model assumes what?
The economy produces only two products.
The demand by all the consumers of a given good or service is the ________ for the good or service.
market demand
The income effect of a price change refers to the impact of a change in:
the price of a good on a consumer’s purchasing power.
Because apples and oranges are substitutes, an increase in the price of oranges will cause the demand for apples to increase. This initial shift in demand for apples results in a higher price for apples; this higher price will cause the demand curve for apples to shift to the right. Which of the following correctly comments on this statement?
The statement is false because one cannot assume that apples and oranges are substitutes for all consumers.
Suppose the value of the price elasticity of demand is –3. What does this mean?
A 1 per cent increase in the price of the good causes quantity demanded to decrease by 3 per cent.
Which of the following characteristics is not common to monopolistic competition and perfect competition?
Entry barriers into the industry are low.
Producing a differentiated product occurs in which of the following industries?
Monopolistic competition and oligopoly.
Which of the following is important in determining the extent of competition in an industry?
The minimum efficient scale of production relative to market demand.
The prisoner’s dilemma illustrates:
why firms will not cooperate if they behave strategically.
Which of the following is a correct description of inflation?
Inflation is a sustained increase in the price level.
If Australia’s economic growth rate is slower relative to other countries’ economic growth rates, this will:
shift the aggregate demand curve to the right.
An increase in aggregate demand causes an increase in ________ only in the short run, but causes an increase in ________ in both the short run and the long run.
real GDP; the price level
The money demand curve is downward sloping because:
lower interest rates cause households and firms to switch from financial assets to money.
increasing the interest rate is the RBA _____ securities
selling
Seth is a competitive bodybuilder. He says he has to have his 12-gram package of protein powder to ‘feed his muscles’ each day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?
It is perfectly inelastic.
The basic activity of a firm is:
to set the prices of its products as high as possible.
The processes a firm uses to turn inputs into outputs of goods and services is called:
technology.
A firm that has the ability to control to some degree the price of the product it sells:
is also able to dictate the quantity purchased.
A monopolist faces:
a perfectly elastic demand curve.
Which of the following is a source of market failure
incomplete property rights or inability to enforce property rights.
What is a market failure?
It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.
An open-market purchase of government securities by the Reserve Bank of Australia causes the reserves of banks to rise. true or fALSE
TRUE
Open market operations refer to the buying and selling of ________ by the ________ to affect the level of liquidity in the economy.
government securities and private bonds; Reserve Bank of Australia
The main goal of monetary policy in Australia is full employment of the labour force. true or false
False. its main goal is steering the economy to a 2-3% inflation target
