Economics Basics

Question 1

What is Economics?

Answer 1

Economics is a study that focuses on production, distribution and consumption of goods and services. It analyses the choices the individuals, businesses, governments and nations make to allocate scarce resources.

Question 2

What is the economic problem? 2 points

Answer 2

The economic problem is how to make the best use of limited or scarce resources. The problem exists because the needs and wants of people are endless but the resources available to satisfy needs and wants are limited.

Question 3

How is government economic performance measured? 5 points

Answer 3

1. Real GDP
2. Inflation
3. Unemployment
4. Current account
5. Well being index

Question 4

What is construction economics?

Answer 4

The application of economics to the study of the construction firm, processes and industry.

Question 5

What are the characteristics of the construction industry? 3 points

Answer 5

1. Unique
2. Complex
3. Fragmented

Question 6

What is macroeconomics? 8 points (2 + 6)

Answer 6

A study of how the aggregate economy behaves as a whole, areas examined include:
1. Inflation
2. Price levels
3. Rate of growth
4. National income
5. GDP
6. Changes in unemployment

Considers national economic growth and how to prevent and or reduce negative impact of recessions.

Question 7

What is meant by aggregate?

Answer 7

Formed by adding together several things.

Question 8

What is microeconomics? 3 points

Answer 8

Economic study focused on the behaviour and decisions of individuals and individual firms and how it influences the supply and demand of goods and services. Mainly utilised by investors in decision making.

Question 9

What are the key macroeconomic policy objectives? 5 points

Answer 9

1. Steady economic growth of around 3% per year.
2. Keep inflation to within 2-3% per year to provide price stability.
3. Zero cyclical unemployment to achieve full employment for everybody that wants to work.
4. Fair distribution of income, without losing incentives to work.
5. Efficient use of resources.

Question 10

How are micro and macro economics related? 6 points

Answer 10

Micro and macro economics are interdependent because they influence each other directly and indirectly through:
1. Supply and demand of goods and services.
2. Labour.
3. Production costs.
4. Commodity prices.
5. Policies (regulations/laws)