CIA4U Exam Flashcards
-Master Unit 3 and 4
Name ‘Limitation 1 of GDP’
The underground or ‘shadow’ economy is not included, reducing the accuracy
Name ‘Limitation 2 of GDP’
Does not measure leisure time with interests & enjoyment. (Two countries can have the same GDP, but one has more average leisure time )
Name ‘Limitation 3 of GDP’
Doesn’t measure quality of products
Name ‘Limitation 4 of GDP’, also define what GDP is
Does not differentiate between economic activities which are harmful to the environment (Factories making pollution increases GDP) . Also, GDP is the measure the value of total final output of goods and services produced by the economy in a certain period of time.
What is frictional unemployment?
Temporary transitions in worker’s lives, like when a worker moves to a new city and has the find a new job, or college students who just graduated.
What is cyclical unemployment?
the unemployment associated with recessions and expansions, closely related to the business cycle.
What is structural unemployment?
The percent of the total labor force that is involuntary unemployed due to mismatched skills, technological changes, business competition, or government policies.
What is seasonal unemployment?
When people temporarily lose their jobs because the employer requires fewer employees during a particular season
What is the labor force? How does it relate to unemployment?
The Labour force is the number of people looking for a job or have a job (unemployed & employed), not institutionalized, and not in the military. The unemployment rate is the number of unemployed persons expressed as a percentage of the labor force.
How do you calculate the participation rate?
(Labor force)/(civilian non-institutional population) x 100%
What is a peak in the business cycle?
This is the highest point between the end of an economic expansion and the start of a contraction in a business cycle, with low unemployment and peak prices
What is a trough in the business cycle?
Low turning point or local minimum of a business cycle. Unemployment rate is at its highest, and prices are falling.
What is a recession in a business cycle?
Economy moves from peak to trough. Level of business activity slows and GDP shrinks until it reaches a trough. Prices are falling and unemployment is rising
What is an expansion in the business cycle?
This is the phase of the business cycle when the economy moves from a trough to a peak. It is a period when the level of business activity surges and GDP expands until it reaches a peak. Prices are rising and unemployment falls
What happens during currency appreciation?
The country’s prices of goods and services increase. IMPORTS INCREASE and EXPORTS DECREASE
What happens during currency depreciation?
Importing foreign products becomes more expensive, but exporting products is now cheaper. Thus, EXPORTS INCREASE and IMPORTS DECREASE
What are the three functions of money?
Medium of exchange, Unit of Account, Store of Value
What are schedule 1 banks?
Schedule 1 Banks are domestic banks, authorized under the Bank Act,to accept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corp. (CDIC) 32 in all.
What are schedule 2 banks?
Subsidiaries of foreign banks that are allowed to do business in Canada , authorized under the Bank Act to accept deposits
What are the 4 functions of the Bank of Canada? (BBCM)
1.BANKER FOR THE GOVERNMENT: manages the Canadian government’s public debt programs and foreign exchange reserves
2.BANKER’s BANK:Promotes safe and efficient financial systems in Canada and internationally and banks deposit reserves in central bank
3.CURRENCY: Issues, designs, and distributes banknotes
4.MONETARY POLICY: Controls money supply
Define Monetary Policy?
Set of actions available to a nation’s central bank to achieve sustainable economic growth by adjusting the money supply
What is expansionary and contractionary monetary policy?
Expansionary Monetary Policy increases money supply, lowers interest rates, speeds up the economy. In contrast, Contractionary Monetary Policy decreases money supply, increases interest rates, and slows down the economy.
Briefly describe Keynesian Economics
Keynesian Economics believe that government spending is needed when there is a recession because the multiplier effect will mean more spending and more jobs.
What is the Multiplier Effect?
The Keynesian multiplier is a theory that states the economy will flourish the more the government spends, and the net effect is greater than the exact dollar amount spent.
What is an Oligopoly? What is an Example?
When a few firms have a large majority of market share (e.g Market for mobile devices is dominated by Apple and Android)
What are two characteristics of Oligopolies? (relating to price and competition)
1.High barriers to entry
- These firms have similarly priced products, so they often compete via ‘non-price’ competition, competing on style, quality, location, and service, advertising.
What is a Pure Monopoly? What is an example?
A market controlled by one seller with a good or service that has no close substitutes. For example, Microsoft originally held a monopoly on computer operating systems, in 2024, their share is now 73%.
What is a Natural Monopoly? What are examples?
When it is more cost-effective to have just one large producer rather than several smaller competing firms. Example, sometimes it is cheaper to have just one electric supplier
What are the characteristics of a pure monopoly?
- Price Setters
- Very high barriers to entry
- Such barriers include (Government regulations, monopoly has control of resources, high startup costs like with nuclear power plants)
What is a Perfect Competition?
Perfect competition is a theoretical market structure where many companies sell identical products, and buyers and sellers have perfect information.
What are the characteristics of Perfect Competition? What are some examples?
1.Super low barriers to entry
2.Price takers: Each firm must take the price set by the market
3. Buyers and sellers know the prices
4. Usually don’t advertise because all of their products are identical to competitors so it just increases costs
Exampes: (Tuna fisherman, grain producers)
What is a Monopolistic Competition? What are some examples?
Monopolistic competition is a market structure where many companies sell similar but distinct products. It is in between perfect competition and monopolies. Examples are coffee shops, grocery stores, hotels.
What are the characteristics of Monopolistic Competition?
- No one business has control of market prices, but some control over price
2.Many sellers and buyers
3.Price-makers: They can charge slightly higher prices, but not alot
4-They make profit in the short run, but not long run because when new firms enter, the demand falls, causing the equilibrium price to line up with the ATC, making no profit.
What is Sole Proprietorship
A sole proprietorship is an unincorporated business that is owned by one individual. All profits are yours to keep, and you are responsible for all debts and obligations of the business.
What is a partnership in business?
Non incorporated business that is created between two more people. In partnership, your financial resources are combined with those of your business partners, and put into the business. You and your partners would then share in the profits of the business according to any legal agreement you have drawn up.
What is a Corporation?
lBusiness is a egal entity that is seperate and distinct from the owners. Corporations enjoy most of the rights and responsibilities that an individual possesses, like they can; sue and be sued, hire employees, own assets and pay taxes.
What is a Private Limited Company?
Private Limited Company: Companies that do not issue publically traded shares in Canada and are a huge part of the economy. Many are subsidaries of multinationals, or are family owned.
What is a Plutocracy?
A government controlled exlusively by the wealthy, either directly or indirectly. A plutocracy effectively allows only the wealthy to rule.
What is Ceteris Paribus?
In economics, Ceteris Paribus considers the effect of one economic variable on another, with all other factors that may affect the second variable held constant. It is a Latin phrase that means “All else being equal”.
What is the Law of Demand?
A fundamental principle in economics that states that at a higher price consumers will demand a lower quantity of a good.
What is the Law of Supply?
All other factors being equal, as the price of a good or service increases, the quantity of goods that suppliers or services that suppliers offer will increase, and vice versa.
On the Production Possibility Curve:
A) What does a point on the curve represent?
B)What does a point inside the curve represent?
C)What does a point outside the curve represent
A) Maximum Output (All productive resources are fully employed)
B)A point inside the curve is inneficient
C)A point outside the graph is impossible
Name 5 factors that influence supply (TTPWN)
1.Change in taxation
2.Change in technology
3.Change in production and marketing costs
4.Changes in weather (Frost destroys crops)
5.Changes in the number of sellers (No one wants to sell home videos now)
Name 5 factors that influence demand (NICCP)
1.Number of buyers (Population increase, advertising)
2.Income -Demand for luxury items increases with income
3.Consumer preference (increasing preference nutrition and environment acts)
4.Consumer expectations about future (covid toilet)
5.Price of other goods and services
What is Elasticity? What is a characteristic?
If the price changes, the quantity demanded changes significantly. In other words, consumers are highly responsive to price changes. Many substitutes. (example: soft drink)
What is Inelasticity? What is a characteristic?
If the price changes, the quantity demanded changes very little or not at all. Consumers are not highly responsive to price changes. There are little to no substitutes and likely a ‘need’. (Example: drinking water).
What are the four types of Economic Resources?
Land: Natural resources that are used in the production of goods and services. Some examples of land are lumber, raw materials, fish, soil, minerals, and energy resources.
Labour: Work effort used in the production of goods and services. Some examples are the number of workers and number of hours worked.
Capital: Physical goods that are produced and used to produce other goods. Examples of capital would be machinery, technology, and tools such as computers; hammers; factories; robots; trucks, and trains used to transport goods; and other equipment employed in the production of a good or service.
Some other people say Entrepreneurship
Define ‘Normative Statement’
statements that describe opinions or how things ought to be
Define ‘Positive Statement’
statements of fact or description of how something actually is.
Describe Command Economies
A powerful central authority, usually the government, controls and regulates all economic activity. They control the price, distribution, and transactions of resources. The government owns all of the businesses and industries that provide goods and service to the citizens. These economies tend to be intertwined with socialism and communism.
Describe Market Economies
The government has no economic control. Instead, the production of goods and services is determined by ‘Supply and Demand’. Therefore, consumers determine both the price and demand of products. Moreover, this system is based on voluntary exchange (When buyers and sellers freely negotiate on prices). However, this system can result in successful people accumulating mass economic power and influence over others. Pure market economies don’t actually exist because the government always has at least a little bit of control.
Describe Traditional Economies
This system is the oldest and most basic. There is no government, as households often produce what they need themselves. (Hunt for food, search for water, ect). Additionally, people gather resources using a Bartering System (trading without using money). These economies produce resources through fishing, hunting, gathering, and agriculture/
Describe Mixed Economies
This system is a mix of market and command economies, as it combines elements of socialism and capitalism. Some prices are determined by supply and demand, while others are fixed prices, set by the government. Most industries are private, but the government puts regulations over them and fully controls some industries (mainly public service).
What is the Elasticity of Demand Equation? What are the other Equations?
Elasticity of Demand = (% Change in quantity demanded)/(% Change in price)
Also, % change in quantity demanded = (change in quantity demanded) / (average quantity)
And, % change in price = (change in price) / (average price)
What does it mean if the Elasticity of Demand is greater or than 1?
If the answer has an absolute value greater than 1, the demand is elastic. In other words, the quantity changes faster than the price.
If the value is less than 1, demand is inelastic. In other words, quantity changes slower than price.
If the number is equal to 1, elasticity of demand is unitary. In other words, quantity changes at the same rate as price.
If the demand is a perfectly vertical line on the graph, it is_______
Perfectly inelastic, which means that an increase in price has no effect on quantity demanded whatsoever.
If the demand is a perfectly horizontal line on the graph, is it______
Perfectly elastic, if the price changes at all , no one will buy whatsoever. -infinite
True or False: The steeper the demand curve, the more elastic it is
False: The steeper the demand curve, the more inelastic it is.
True or False: For Inelastic demand, when the equilibrium price goes up (supply shifts left), the total revenue goes up. If the price goes down, the total revenue goes down.
True –> This is why gas stations don’t have sales
For Elastic demand, what happens when the equilibrium price goes up or down?
When the price goes up, the total revenue box goes down. In contrast, when the price goes down, the total revenue box goes up.
If the price goes up, and the total revenue goes down, what is true:
A) It is Inelastic
B) It is elastic
C) It is perfectly Inelastic
B) It is Elastic
What is a Price Floor?
Minimum price companies are allowed to sell products
What is a Price Ceiling?
Maximum price companies are allowed to sell products
What is an Externality?
Externality: An impact, positive or negative, on any party not involved in a given economic transaction
Difference between Consumption and Production Externalities? -Provide two examples for each
Consumption Externality: Occur when a consumer’s consumption or production activities impact others (Second hand smoking, or getting a vaccine also helps others due to a reduced change of getting sick from you)
Production Externality: Occur when a producer’s production activities impact others (Residents suffer bad air quality due to a factories burning fossil fuels, or building a subway station indirectly helps the real estate market).
Define Franchises
Franchises: Is a type of license that a party (franchisee) acquires to allow them to access to a business’ (the franchisor) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business’ name.
Who is Thomas Malthus and what were his thoughts on income inequality?
English Economist. When there are too many people and not enough resources, the extra people will and should naturally die to balance the population and resources. Instead of preventing this death, we should facilitate it and make people live in poor living conditions to increase the death rate and balance the population. Additionally, People trying to help people’s health are bad because they are contributing to overpopulation.
What is a Patent?
Patents: the legal right to be the only person or company to make or sell a product for a particular number of years, or a document that gives you this right:.
What is Visible Trade?
Exchange of physically tangible goods between countries, involving the export, import, and re-export of goods at various stages of production.
What is Invisible Trade?
Export and import of physically intangible items such as services (financial services, customer service outsourcing, ect)
What is Progressive Tax?
As income rises, average Rate of Tax rises (E.g Canada’s income tax)
What is Proportional Tax (Flat Tax)?
As income rises, average Rate of Tax stays the same. Everyone is required to pay an equal proportion of their income in tax. (e.g 10% tax for everyone, heavier burden for low compared to high-income households).
What is Regressive Tax? What is an Example?
As income rises, average Rate of Tax falls . For instance, someone making $10,000/year gets charged a $1000 fuel duty, meaning the Average Rate of Tax is 10%. . In contrast, someone making $50,000/year gets charged the same $1000 fuel duty, meaning the Average Rate of Tax is only 2%.
Difference between Deficit and Debt?
Deficit: When government spending exceeds tax revenues
Debt:The accumulated effects of deficits over time
What are the 5 reasons behind why ‘Made in China’ is on so many products in Canada/Usa?
China has:
- Low Labor Costs: (Often lower minimum wages, also supply of workers exceeding demand leads to lower wages)
- Good Business Ecosystem: (Supply chain efficiency, government agencies, ect)
3.Lower Regulatory Requirements: (China does not have strict regulations on consumer protection, workplace safety, and labor laws)
4.Lower Taxes/Duties: (Exports are easier because they are not taxed as much)
- Depressed Chinese Currency (Encouraged foreign manufacturers to buy goods, meaning more exports)
Describe the economy of Pre-Contact Indigenous Communities
-They hade: Trade and Specialization, Mediums of Exchange, systems in place for the production of goods and services, had market economies. However, the Indian Act brought these economies down.
What would happen if Indigenous Peoples in Canada were given equal economic opportunity?
It would increase Canada’s GDP by an estimated $27.7 billion
What is Privatization?
Privatization: Occurs when a government-owned business, operation, or property becomes owned by a private, nongovernment party.
What is the Grey Market?
Product is bought & sold outside the manufacturers authorized trading chanels (e.g the unlicensed resale of well-known electronics, like mobile phones)
What is a Cooperative Business?
A cooperative business is a group of people who voluntarily come together to meet shared economic, social, or cultural goals. They jointly own and manage the business, share its benefits fairly, and make decisions democratically, with each member having an equal say.
What is a Not-for-Profit Business?
Not for Profit: Companies are organizations that provide products or services without making a profit. They are generally dedicated to activities that improve or benefit a community.
Define: Crown Corporation
Wholly owned federal or provincial organizations structured like a private or independant company. When the government decides to sell them, it is called privitization
Do the Opportunity Cost Thing, yes?
Yes
