Economic Principals

Question 1

Define the 4 reasources

Answer 1

1-Land: natural resources
2-Labor: Work force and skills of work force
3-Capital-manmade resources being used
4-Entreprenuership-skill of creating new businesses and ways of doing things.

Question 2

scaricity

Answer 2

Unlimited wants, limited demand

Question 3

opportunity cost

Answer 3

loss of loosing the next best option,How much is lost to get the current gain.

Question 4

Base year

Answer 4

price we back our price to so inflation doesn’t play in. Called real dollers, benchmark year.

Question 5

Shifts Agragate Demand ( AD) curve

Answer 5

1-real balance effect (increase P Decrease Q, decrease P Increase Q)
2-interest rate effect (i decrease D increase, i increase D decreases)
3-International Trade Effect (P increase C decrease, P decrease C increase)

Question 6

Shifts the Short Term Aggregate Supply ( SRAS) curve

Answer 6

wage rates
nonlabor input prices
productivity
supply shocks

Question 7

Define equilibrium

Answer 7

The price where every unit of quantity is sold

Question 8

Define GDP

Answer 8

Gross Domestic Product-total market revenue of all final goods & services produced within a countries borders
Does not count capital goods

Question 9

Define prince ceiling and include an example.

Answer 9

policy change that sets a maximum limit on price of a specific good
ex- rent control

Question 10

inflation/ deflation rate

Answer 10

increase or decrease in value between two years / months not using base year values.

Question 11

Define Shortage

Answer 11

Quanity demanded is more than quantity supplied

Question 12

Define Price Floor and give an example

Answer 12

policy change that sets a minimum price for a good or service
ex-minimum wage

Question 13

Equation for inflation/ deflation rate

Answer 13

( (CPI new- CPI old)/ CPI old )•100 =inflation/ deflation rate

Question 14

consumption

Answer 14

purchases by the housing sector

Question 15

Define effective price control

Answer 15

When a government regulated price control CHANGES the outcome on the economic market

Question 16

What shifts the PPF?

Answer 16

Change in resources or ability to produce final goods

Question 17

What does a vertical supply curve signify?

Answer 17

The amount supplied is the same regardless of the demand

ex- freeway space

Question 18

Define ineffective price control

Answer 18

A government control on price that doesn’t change economic status

Question 19

Where are efficient, inefficient and unattainable points on the PPF?

Answer 19

on PPF, inside PPF, outside PPF

Question 20

Define Labor Force and how it breaks down

Answer 20

All employable people in society that have or are searching for a job
employed and unemployed

Question 21

Describe the parts of the business cycle. What are the Y and X axis of the graph?

Answer 21

The peak is the highest point at the beginning of the business cycle. The Through is the lowest point of the buisness cycle. The time between the peak and trough is a contraction which can be a downturn, recession or depression. The time between the trough and the return to the peak.Epansion is the time from the end of the recovery to the peak.
the Y axis- RGDP The X axis- time

Question 22

What does GDP omit?

Answer 22

• Leisure
• government transfer payments
• non market goods and services
• underground and under the table activities
• financial transactions

Question 23

What happens to production and SRAS when price level remains constant while wage rate increases?

Answer 23

Production decreases and SRAS shifts leftward

Question 24

Peoples wants are ———— according to economics.

Answer 24

infiniate

Question 25

When demand decreases by a greater amount than supply equilibrium price ———and equilibrium quanity —————.

Answer 25

Price falls, Quantity falls

Question 26

What shifts Supply?

Answer 26

• price of related resources
• technology
• prices of other goods
• number of sellers
• expectations of future price
• taxes and subsidies
• government regulations

Question 27

Define Surplus

Answer 27

Quanity demanded is less than quantity supplied

Question 28

How do you compute GDP?

Answer 28

GDP= C+I+G+ (EX- IM)
C= durable goods,nondurable goods and services

Question 29

Define RGDP

Answer 29

GDP involving base year dollars. Discredits inflation.

Question 30

What shifts Demand?

Answer 30

• income
• preferences
• prices of related goods
• expectations of future goods
• number of buyers

Question 31

How do you get opportunity cost off a PPF?

Answer 31

See how many units of the other good have to be given up for the good. AKA find the slope.

Question 32

List the 4 types of unemployment

Answer 32

• Structural unemployment
• Frictional Unemployment
• Natural Unemployment
• Cyclical Unemployment

Question 33

Define Frictional Unemployment

Answer 33

resulting from temporary transitions made by workers and employers or from workers and employers having inconsistent or incomplete information.

Question 34

Define Cyclical unemployment

Answer 34

unemployment due to seasonal jobs

Question 35

Define Structural Unemployment

Answer 35

Suddenly the skills and labor for a specific job are no longer needed causing unemployment.

Question 36

Define Natural unemployment

Answer 36

unemployment caused by Frictional and structural unemployment factors in economy
Measured with Frictional unemployment rate+Structural unemployment rate