economics Flashcards

Question

A decrease in government spending will aggregate demand would increase or decrease and what direction the aggregate demand curve will move

Answer 1

Shift the aggregate demand curve to the left

Answer 2

Increase aggregate demand Shift curve to the right Cheaper for foreigners to buy canadian goods

Answer 3

Increase aggregate demand Shift to the right

Answer 4

Increase in consumption Decrease in taxes Decrease in savings Decrease in import spending Increase in investment Increase in government spending Increase in exports

Answer 5

Decrease in consumption Increase in taxes Increase in savings Increase in import spending Decrease in investment Decrease in government spending Decrease in exports

Answer 6

Problem: inflation Ficscal policy: contractionary Government action: increase taxes, decrease government spending

Answer 7

Problem: unemployment Ficsal policy: expansionary Government action: decrease taxes, increase government spending

Answer 8

Expansion: Business investments increase Interest rates go from low to high Consumer confidence increases Low unemployment Inflation may rise Contraction: Drop in business spending High unemployment (5 - 10% in recession) Interest rates go from high to low Consumer confidence - Saving for a raining day Deflation may occur

Answer 9

**A measure of a country’s output** EXPENDITURE APPROACH: A calculation of GDP that totals all that the economy spends on the final goods and services in one year. INCOME APPROACH: A calculation of GDP that totals all the incomes earned by the different factors of production in producing all final goods and services in one year. GDP Equation: GDP = C + I + G + (X-M) (consuption, investments, government spending, exports and imports

Answer 10

Deficit Budget: Spending more than they are receiving. Surplus Budget: It has money left over. Balanced Budget: Really rare The government spends an amount equal to what it has collected

Answer 11

Fills (Injections): increase levels of employment, income and output: 1. investments (I) 2. Government Spending (G) 3. Exports (X) Leaks (Leakages): decrease levels of employment, income and output means GDP. 1. Savings (S): 2. Taxation (T); 3. Imports (M):

Answer 12

Perfect competition Large number of firms but small in size Identical products in the market No control over price No barriers to market Amount of non-price competition: little (location sometimes) Examples: fruit basket, wheat Monopolistic competition Many firms, but not large in size Product differentiation in market in quality, packaging, marketing etc. Some control over price, a price influencer Some barriers to market Amount of non-price competition: some product quality advertising, packaging) Example: haircuts, clothing, restaurants Oligopoly Few firms but large in size Some product differentiation in market Significant control; informal collective pricing Many barriers to market Considerable non price competition (packing, advertising, brand name Examples: gas, tires, cell phone plans Monopoly One large firm Unique product in the market Total control: a price maker Almost total exclusion (ease with which a firm can enter the market) Not much non price competition (public relations, advertising needed when close substitutes exist Example: LCBO, Ontario hydro, via rail

Answer 13

Sole Proprietorship: Form of business ownership owned by just one person (both own and operate in the business). Most businesses in Canada are sole proprietorships Partnership Similar to a sole proprietorship, expect there are two or more owners Co-operative Is owned and controlled by members and each member has one share and one vote, more democratic. (if you own more of the shares then you make more decisions). Corporations: Big companies Private ownerships by shareholders Limited liability Unlimited life because ownership is transferable through the sale of shares

Answer 14

Individuals invest in human capital through: Investing in their own education in the hopes of making themselves more marketable in the future. They want to offer their services in a specific area of the labor market where the demand for labor is high and the supply of labor is low Firms invest in human capital through: On-the-job training, in-service training and supporting further formal education of employees Governments invest in human capital through: Subsidizing public education, some post-secondary education and numerous job-training

Answer 15

Involves changing anything but price (quality, best-built product, latest style, best warranty, timely service).

Answer 16

Marginal Cost = Marginal Revenue (profit maximization) Marginal Cost: the additional cost for a firm of producing one more unit of its product Total Costs are the fixes and the variable costs combined Fixed Cost: Rent or Property tax, they remain the same regardless of how much you're producing. You always have to pay your fixed cost. Variable cost, costs that change or vary with the level of output, such as labour and raw materials.

Answer 17

When the number of efficiently per output is at it's lowest Number of efficiency is total cost divided by quantity Choose the quantity produced which is aligned with the lowest number of efficiency

Answer 18

Small Businesses: Often between 1 and 49 employees (less than 49 is considered small business) Face intense competition from numerous other small firms (competing for the same clients, customers, etc) Maintain their competitive advantage by limiting their operations to one specialized field or process Big Businesses: Often more than 500 employees (over 500 is considered a bigger business) They have Economies of scale (total cost becomes so small because they’re producing so much). Can assume greater risk (they can use their capital to expand) and accumulate capital to initiate expensive and complex projects. Have limited competition (because other businesses can’t get the same cost).

Answer 19

Demand for Labor shift A change in the Demand for the Product of Labour 2. Change in the Price of Related Productive Resources Most products require inputs from land, labor and capital. Capital is usually considered a substitute for labor (come up with own example while studying) Example: the price of land inputs (raw materials) are complementary to labor. If the price of raw materials increases, production costs will go up and then the demand for labor will see a decrease 3. A Change in Worker Productivity As workers become more productive (they increase their marginal product of labour) the demand for labor will increase. Changes in labor supply The labour supply curve will shift as a result of the following factors: Changes in Income Tax Rates An increase in the income tax rate means the government takes away a greater proportion of wages earned. This will lead to a reduction in the supply of labour. 1. Changes in the Size and Composition of the Population As the population increases, the relative number of people available to offer their services at a given wage rate also increases Due to immigration and age distribution of population 3. Changes in the Price of Complementary Goods and Services Additional costs of working include: cost of childcare, household maintenance and transportation. Example: If the costs of child care increases, it will become more expensive to participate in the labour market and some people will leave the labour market, reducing the labour supply 4. Changes in Barriers to Entry Are costs or other obstacles that make it difficult to enter the market, such as licensing requirements 5. Changes in Attitudes about Roles Changing attitudes about roles in society, for example, an increase in women joining the workforce has increased the supply of labour

Answer 20

Number of substitutes (more = elastic) Necessity = inelastic Luxury = elastic definition of the market (broad = inelastic, vice versa) (Meat, steak) Time (shorter = inelastic, vice versa) % of consumer income (higher = elastic, vice versa)

Answer 21

Price Floor Minimum price that is set above equilibrium to ensure a higher price, such as minimum wage Will result in a surplus as the quantity supplied will be higher than the quantity that is demanded Price Ceiling Occurs when the government fixes a maximum (or ceiling) price on a good or service such as rent Will result in a shortage as more quantity will be demanded than suppliers are willing to produce

Answer 22

Factors affecting demand - Changing consumer income - Changing consumer tastes and preferences - Changing expectations for the future - Changes in population - Price of other goods; substitute goods or complementary goods Factors affecting supply - Changes in the number of producers - Changes in technology - The environment - Changing production costs

Answer 23

What can affect the price Quality Brand Labor costs Demand Supply Manufacturing Transportation costs Marketing What can affect the quantity Quantity is affected by price changes

Answer 24

Demand The quality of goods or services consumers are willing and able to purchase over a range of prices at a given point in time Exists when you want and can afford the item Supply The amount of a product that producers are willing to provide over a range of prices

Answer 25

Law of Supply When the price goes up, the quantity supplied also goes up, and vice versa. Law of Demand When the price goes up, the quantity demanded goes down, and vice versa

Answer 26

Goods that can be used in place of another Ex. hair instead of bench Goods that compliment another When you buy one you usually buy another one at the same time Ex. ketchup and hot dogs Ex. Ice cream and ice cream cones

Answer 27

Example, increased economic output and helping the environment, they conflict

Answer 28

What — Based on needs of family (what we have always produced) How — based on customs (same as we always have done it). Whom — for use by immediate family or trading (same amount they always received). Based on agriculture, fishing, hunting and those that grow and make their own goods to survive the challenges of each day.

Answer 29

A small group of political leaders with the power to enforce their decisions What — based on the best interests of the state the central planning authority determines what products and the quantities, it is usually capital goods How — using the state resources the central planning authority determines who will be working and their wage (own land=Gov) Whom — allocated on behalf of the state A system of rewards and punishments are used to promote productivity. People who contribute to the betterment of the state are rewarded with extra goods and sometimes privileges and those that are not penalized.

Answer 30

The actions of individuals buyers and sellers in the marketplace What — determined by consumer demand and producers produce these goods to generate profits. How — producers determine based on most profitable methods (efficient use of resources as this can help producers maximize profits) Whom — those willing and able to pay a favorable price, those with higher incomes can afford to buy more of the national output. Basic elements are private property, freedom of enterprise, profit maximization and competition. The government's role is only to provide law and order and to assist in economic development.

Answer 31

The economy of Canada Many elements of a market economy with some characteristics of command and market Government regulates and influences some industries (transportation, alcohol, CBC television) to provide essential services, to promote economic development and to support Canadian culture and identity.

Answer 32

NATURAL RESOURCES: CAPITAL RESOURCES: HUMAN RESOURCES: Examples: physical efforts of humans, mental efforts of humans. Production of goods ENTREPRENEURIAL RESOURCES: Examples: the ability to combine the other factors together in a better way, or to produce new results, the willingness to take risks.

Answer 33

is when there are unlimited wants and needs, but limited resources

Answer 34

POSITIVE: Economics is fact-based NORMATIVE: Economics are opinion-based