Micro Equilibrium And Macro Indicators

Question 1

What’s economic efficiency

Answer 1

A situation where nothing can be improved as total utility has been maximised

Question 2

Whats Economic efficiency
What does it lead to

Answer 2

Where markets are working perfectly
Leads to perfect supply and demand curves and market state known as market equilibrium

Question 3

Assumptions to create perfectly competitive market. 6

Answer 3

Many sellers
Many buyers
Homogeneous products that are perfect substitutes
Perfect knowledge
Perfectly mobile factors of production
No externalities

Question 4

What’s an oligopoly

Answer 4

When small number of sellers dominate market

Question 5

What’s a cartel

Answer 5

When several suppliers work together to fix price rather than behaving competitively

Question 6

What are consumers known as in dominated markets

Answer 6

Price takers

Question 7

Outcomes of market failure. 8

Answer 7

Productive and allocative inefficiency
Abuse of power
Under provision of merit goods
Over provision of demerit goods
Missing markets
Poor decision making
Unstable prices
Unfair distribution of income

Question 8

What’s productive inefficiency

Answer 8

productive inputs physical capital and labor are underutilized so economy operating below ppf

Question 9

Allocative inefficiency

Answer 9

Where resources in the economy are not distributed optimally and therefore consumers cannot purchase the quantity of goods that they desire.

Question 10

What’s a monopsony

Answer 10

One buyer in market

Question 11

Ways gov can intervene to avoid market failure. 8

Answer 11

Taxation
Subsidies
Laws, regulations permits
Advertising
Nudges
Price control
Changes to property rights
General rights

Question 12

What’s nudges

Answer 12

Through lobbying consumers, can make it easier/harder to produce or consume goods

Question 13

What’s macroeconomics

Answer 13

The study of behaviour of whole (aggregate) economies

Question 14

What are 4 objectives seen as important in macroeconomics for achieving a prosperous society

Answer 14

Full employment
High, sustainable rate of economic growth
Price stability
Acceptable BoP

Question 15

How’s rate of economic growth measured

Answer 15

GDP, GNP

Question 16

Categories of unemployment. 3

Answer 16

Cyclical, frictional
Structural

Question 17

What’s frictional unemployment

Answer 17

reflecting the gap between someone voluntarily leaving a job and finding another as job search isn’t instant

Question 18

Structural unemployment

Answer 18

involuntary unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers

Question 19

Cyclical unemployment

Answer 19

is the number of people out of work as a result of a temporary setback in the economy, such as a recession or change in a business cycle

Question 20

3 methods for measuring gdp

Answer 20

Total value of goods and services produced (output)
Income
Expenditure

Question 21

Formula for measuring gdp by Total value of goods and services produced (output)

Answer 21

Durable goods + non durable goods + services + structures + change in inventories

Question 22

Formula for measuring gdp by income

Answer 22

Wages from labour + interest form capital + rent from land + profits from entrepreneurship

Question 23

Formula for measuring gdp by expenditure

Answer 23

Household spending+investment+gov spending+net exports

Question 24

Difference in gdp n gnp

Answer 24

GDP calculates output within specific location whereas gnp calculates output for specific nationality, even if elsewhere

Question 25

Real gdp formula

Answer 25

Nominal gdp div gdp deflator

Question 26

Rate of inflation measured as …

Answer 26

Percentage change between price levels over time

Question 27

How are price levels measured

Answer 27

By constructing hyperthetic basket of goods n services that represent typical set of consumer purchases

Question 28

What do high inflation levels imply compared to low

Answer 28

High levels suggests demand for goods n services higher than supply
Low suggest opposite

Question 29

Impact of inflation. 3

Answer 29

Unintended redistribution of purchasing power
Blurred price signals
Challenges to long term planning

Question 30

Why must BoP = 0

Answer 30

As there’s always a circular flow of transactions in economy

Question 31

What does current accounting in bop reflect

Answer 31

The purchase n sale of goods n services

Question 32

What’s capitsl n financial account in bop represent

Answer 32

Borrowing or lending of money

Question 33

When does allocative inefficiency occur

Answer 33

This occurs when the price is not equal to the marginal cost for firms and also the economy is operating on a point that does not lie on the PPF.