Economy

Question 1

What is Macroeconomics?

Answer 1

Macroeconomics is the study of an entire economy of a country (or other form of spending government)

Question 2

What does GDP stand for?

Answer 2

Gross Domestic Product

Question 3

What is GDP?

Answer 3

GDP is the value in money of all of the goods produced and traded annually

Question 4

What type of production doesn’t count on GDP?

Answer 4

things not included in GDP is:
~producing for oneself
~ Illegal production
~ trading of already accounted for items

Question 5

Why is GDP measured in the money value of the product?

Answer 5

to avoid confusing a country that produces as much low value items being as wealthy as a country that produces the same amount of high value items

Question 6

What is directly correlated to the fall of unemployment

Answer 6

when GDP is raising, unemployment is falling

Question 7

The formulae for unemployment rate is?

Answer 7

100(U/L) = unemployment rate
U= unemployed people*
L = employed people

Question 8

What kind of people that don’t have jobs don’t count towards negative unemployment?

Answer 8

~frictional unemployed people

~structional unemployed people

~People who refuse to work

~People who can’t work (old people, children)

Question 9

What type of unemployment is threatening?

Answer 9

~Cyclical: due to recession

Question 10

What is the goal of economists when it comes to unemployment?

Answer 10

to keep cyclical unemployment as low as possible

Question 11

what is frictional unemployment?

Answer 11

unemployed people who are imbetween jobs

Question 12

What is structional unemployment?

Answer 12

people who are unemployed because their profession has been replaced by machines or became irrelevant.

Question 13

What is cynical unemployment?

Answer 13

unemployed people that are actively looking for a job but cannot get/find one

Question 14

What did Adam Smith conclude improve a nations wealth?

Answer 14

division of labor

Question 15

Who would Adam Smith provide we should create a pizza?

Answer 15

~One prepares ingredients
~another puts it in the oven
~another one puts it in the box.

This division makes each worker more productive, since each one is focused on a thing they do best and they don’t need to spend time switching between the tasks.

Question 16

What gets rid of self-sufficiency?

Answer 16

specializations:

the giving of much more specific tasks to one worker to produce more

Question 17

If you are good at producing one particular item, how would you get ahold of other items you would need for a finished product?

Answer 17

specialize at your craft and then trade with others.

if you make A’s for a company that make’s ABCD’s, you could also give A’ s to the company that makes ASDF’s

Question 18

What is a market?

Answer 18

Anyplace where buyers and sellers meet to exchange goods and services

Question 19

If too much of a product is being generated-

Answer 19

sellers will sell them off at a lower price, giving produce less

Question 20

If too little of a product is being generated-

Answer 20

sellers will sell them off at a higher price, giving producers incentive to produce more

Question 21

what are price signals?

Answer 21

the information that markets generate that guide the distribution of resorces

Question 22

what is the Y-axis in supply and demand?

Answer 22

price per product

Question 23

what is the X-axis in supply and demand?

Answer 23

amount of product

Question 24

supply curve slopes positively or negatively?

Answer 24

possitively

Question 25

demand curve slopes positively or negatively?

Answer 25

neggatively

Question 26

if the price is high-

Answer 26

-producers will produce more, buyers will buy less

Question 27

what is is called when the price is high so producers will produce more but buyers will buy less

Answer 27

a surplus

Question 28

if the price is low-

Answer 28

-buyers will buy more, producers will produce less

Question 29

what is it called when the price is low so buyers will buy more but producers will produce less

Answer 29

a shortage

Question 30

what is an equilibrium price?

Answer 30

the price that meets the amount buyers would be satisfied spending and producers would be satisfied earning

Question 31

quantity supplied=quantity demanded is?

Answer 31

equilibrium price

Question 32

equilibrium price is?

Answer 32

the price at which the quantity of a product offered is equal to the quantity of the product in demand

Question 33

equilibrium quantity is?

Answer 33

The quantity demanded or supplied at the equilibrium price

Question 34

What has to be calculated to not confuse a country with an other wise larger GDP than another country which is noticeably richer

Answer 34

calculate GDP Per Capita

so even if a country with a large population produces more, it is still poorer

Question 35

What is GDP Per Capita

Answer 35

GDP / population

Question 36

If inflation goes down:

Answer 36

• Everyone essentially gets a raise

- More things can be produced and traded

Question 37

If inflation goes up:

Answer 37

everyone essentially gets a cut in wages

-less things produced and traded

Question 38

What is inflation?

Answer 38

An increase in a currency supply relative to the number of people using it, resulting in rising prices of goods and services over time

Question 39

what are bubbles?

Answer 39

A market phenomenon characterized by surges in asset prices to levels significantly above the fundamental value of that asset

Question 40

When adjusting for inflation, economists pick out a list of:

Answer 40

goods representing what an average consumer buys in a year

called a CONSUMER BASKET

Question 41

How to adjust for inflation

Answer 41

create a consumer basket for this year and the next couple of years. Then take a base year (any year you want). Divide the basket cost of each year by the base year and times by a hundred.

creating a CONSUMER PRICE INDEX.

Question 42

What is a consumer price index?

Answer 42

A statistical estimate constructed using the pieces of a sample of representative items whose prices are collected periodically.

Question 43

What is Demand Pull Inflation?

Answer 43

Too much money chases too few goods.

There are many rich people trying to get the scarce amount of resources. The resulting competition makes opportunist rise in money as well as competitive bid in money

Question 44

What is Cost Push Inflation?

Answer 44

A decrese in availability of a very important product, causing to be worth more.

Anything generally associated or dependent on this product will now raise in cost as well.

Question 45

How did the bubble with the start of the internet go down?

Answer 45

People were amazed by the internet and mass amounts of people began investing billions into it until the stock market collapsed

Question 46

What is a recessionary gap?

Answer 46

a situation wherein the real GDP is lower than the potential GDP at the full employment level

so working factories and people are not in use

Question 47

What is an inflationary gap?

Answer 47

The amount by which the actual GDP exceeds potential GDP

So people are over employed and factories are working over time. this is not sustainable and could lead to inflation

Question 48

What is fiscal policy?

Answer 48

when the economy is going too slaw of too fast, the government can adjust spending levels and taxes to influence the economy

Question 49

What problems are there with contractionary fiscal policy?

Answer 49

raising taxes, taking the money and higher productivity away to solve inflationary or dept problems sounds anti-intuitive and is extremely hard to sell. It causes many arguments and costs jobs

Question 50

What is defecit spending?

Answer 50

Because spending less than tax money would ruin national production, the government needs tax money as well as dept money

Question 51

What is Austerity?

Answer 51

raising taxes and cutting government spending to reduce dept

Question 52

What is a deficit?

Answer 52

the amount by which a governments spending exceeds it’s income over a particular period of time

Question 53

what is dept?

Answer 53

the accumulation of a country spending more than they own

Question 54

What is default?

Answer 54

When a country goes into so much dept that it doesn’t pay properly that other countries may suspect they’ll never get payed back and thus stop funding the country.

the country loses all credibility in the end and falls into massive reccesion

Question 55

What is a debt ceiling?

Answer 55

Limit on the amount of national debt that can be issued by the US treasury