Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

EC140 > MIDTERM > Flashcards

MIDTERM Flashcards

1
Q

economy

A

from the word “who manages a household”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

scarcity

A

limited nature of society’s resources

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what is economics`

A

the study of how society manages scarce resources

how ppl make decisions and interact

analyze trend affecting economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

efficiency vs equity

A

efficicency: society gets most out of resources

equity: resources distributed fairly among members

trade-off: if more effective, less equitable and v.v.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

opportunity cost

A

direct costs + indirect costs

what you give up in order to gain an item, can be intangible i.e. time spent making money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

rational people

A

systematically and purposefully do the best they can to achieve their objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

marginal changes

A

incremental adjustments to EXISTING PLAN of action

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

incentive

A

smth that induces a person to act

i.e. gasoline tax increases # electric cars

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

how does trade impact countries

A

allows countries to specialize in what they are best at, and diversify types of g/s

both countries are better off

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

market economy

A

economy that allocates resources through decisions of many firms and households

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

adam smith

A

wrote book that sound households and markets are guided by the invisible hand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

invisible hand

A

leads to desirable market outcomes naturally, thru prices adjustments by buyers and sellers

if the gov prevents price adjustments, it can impede the insivible hand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

productivity

A

amount of g/s produced from each hour of a worker’s time

standard of living is determined by how productive economy is

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

how does economics use the scientific method

A

uses observation, theory, more observation

cannot manipulate economy, therefore examines historical experiments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

assumptions

A

simply complex concepts and make easier to understand

i.e. assume society only makes 2 g/s

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

economic models

A

diagrams and equns to explain world, using assumptions to simply

focus on what is important

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

circular flow model

A

visual model of economy to show cash flow throughout

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

factors of productions

A

inputs from firms to make g/s

i.e. labour, land, capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

markets for goods/services

A

households are BUYERS

firms are SELLERS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

markets for FOP

A

households are SELLERS

firms are BUYERS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

production possibilities frontier

A

graph showing combos of output an economy can produce given available factors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

efficient vs inefficent

A

efficient: get most from resources available

inefficient: produce less than could, i.e. within production possibilities frontier

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

macro vs microeconomics

A

microeconomics - study of households and firms making decisions and interact

macroeconomics - study of economy-wide phenomena i.e. inflation, unemployment, economic growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

scientist vs policy adviser

A

economists are scientists when try to EXPLAIN world

policy advisers when try to IMPROVE world

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

positive vs normative statement

A

positive statement - descriptive, explain how world is

normative statement - prescriptive, explain how world should be

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

why aren’t economists always listened to

A

passing a law/policy is long and complicated process

sometimes public disagrees, or difficult to arrange w media

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

what do economists disagree on

A
  1. validity of the theories about the world works i.e. what is true
  2. have different values i.e. diff normative views
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

specialization and trade

A

by trading what you are most efficient at, you gain what you don’t have

increases consumption and leads to optimal on PPF

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

absolute vs comparative advantage

A

absolute - compare based on PRODUCTIVITY i.e. who makes the most or needs the least FOP

comparative - compare based on OPPORTUNITY COST i.e. who gives up least to produce a good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

can you have multiple advantages?

A

can have absolute advantage in more than one g/s

CANNOT have comparative advg in both g/s, because opportunity cost in one is high and the other low

i.e. comp advg when make 10 beef vs 1 chicken, but no advg when make 1 chicken vs 10 beef

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

how to benefit from specialization via trade

A

benefit when there is a COMPARATIVE advantage

gain g/s at a good price, lower than their opportunity cost of making it

the price must be b/w BOTH parties opportunity costs i.e. A has opp cost 2 and B has opp cost 4, price can be b/w 2-4

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

when should canada trade?

A

when another country has a comparative advantage, so Canada doesn’t lose opportunities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

gross domestic product (GDP)

A

market value of all g/s produced within a country in a given time

measures total income of a nation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

how does GDP measure income = expenditure

A

income - shows amount earned from households buying g/s

expenditure - shows amount spent by firms to pay wages, rent, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

how to calculate nominal GDP

A

price x quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

what doesn’t GDP include

A

intermediate goods - unfinished products for resale/processing

used or secondhand items - if car is resold

illegal or not marketed items

financial assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

when is GDP recorded

A

when a g/s is first produced

not included if sold much later

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

GDP equation

A

Y = C + I + G + NX

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

G

A

government expenditures

purchases by gov for local, territorial, provincial, federal gov

doesn’t include transfer payments i.e. pension, EI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

NX

A

net exports

|exports - imports|

exports contribute to GDP bcs final goods made in Canada

imports are recorded in ANOTHER COUNTRY because produced somewhere else, subtracted from GDP so no overestimation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

I

A

investment

spending on capital equip, new houses, inventories

inventories shown in GDP because they show production not yet sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

C

A

consumption

main part of GDP, 60%

spending by households on g/s, NOT new homes

43
Q

Y

A

GDP

44
Q

gross operating surplus

A

income of corps and gov businesses

45
Q

gross mixed income

A

income paid to unincorp businesses i.e. sole proprietorships

46
Q

taxes less subsidies

A

taxes are income to gov

subsidies are payments by gov to producer, therefore deducted from GDP

47
Q

statistical discrepancy

A

the difference b/w the 2 calculations of GDP (income vs expenditure approach)

48
Q

GNP

A

gross national product

GDP - foreign income paid to foreigners + foreign income received by Canadians

i.e. if Canadian works for US, income goes to GNP

49
Q

nominal vs real GDP

A

nominal GDP: production of g/s sold at current prices i.e. price changes year to year

real GDP: production of g/s at constant prices, reflects changes in amounts produced i.e. price stays at base year price, only quantities vary

50
Q

GDP deflator

A

price index that says how much prices rise in a year

is 100 in base year bcs no changes b/w nominal and real gdp

51
Q

inflation

A

economy’s overall price level is rising

52
Q

inflation rate

A

% change in GDP deflator b/w years

measures price differences

53
Q

does GDP show economic health?

A

ignores pop size, environ quality, income distribution

GDP can be high, but people may be suffering

does not represent economic health of QOL

54
Q

consumer price index

A

CPI

measures overall cost of g/s bought by a typical consumer, to measure cost of living over time

55
Q

what happens when CPI increases

A

we must spend more to achieve the same standard of living

56
Q

basket of goods and services

A

over 600 items

basket NEVER CHANGES

represents avg purchases of pop of min 30,000

57
Q

CPI inflation rate

A

difference in CPI between years, to measure changes

58
Q

core inflation

A

measure of the underlying trend in inflation

excludes fruits/veg, gas, oil, mortgage interest and CPI basket

59
Q

what causes inaccuracy in CPI

A
  • commodity substitution bias
  • introduction of new goods
  • unmeasured quality change
60
Q

introduction of new goods

A

increases variety for consumers, increases value of dollars

need FEWER dollars for standard living

inc in dollar value isn’t shown in CPI

61
Q

commodity substitution bias

A

rising prices causes substitute to cheaper items

not shown in CPI bcs items aren’t in basket of g/s

0.1% higher CPI

62
Q

unmeasured quality change

A

if a good’s quality dec, dollar value dec even if PRICE IS SAME

if quality up, dollar value up

price will be adjust if bcs of quality change, unrecorded if bcs of inflation
- don’t always realize change is bcs of quality

63
Q

GDP deflator vs CPI

A

GDP deflator - no imports, domestic g/s, no fixed basket

CPI - imports, ALL g/s bought by consumers, fixed basket

64
Q

indexation

A

automatic correction of a dollar amount for the effects of inflation by law

i.e. pension adjusted to inflation

65
Q

COLA

A

cost of living allowance

automatically raises wages when CPI increases

66
Q

nominal interest rate

A

interest rate is NOT corrected for inflation

market interest rate, what bank pays for savings deposit

includes inflation premium to cover loss of principal’s purchasing power

67
Q

real interest rate

A

interest rate corrected for inflation

tells the purchasing power of dollars

68
Q

financial system

A

group of institutes in economy that match a person’s savings to another’s investment

69
Q

financial markets

A

institutes where savers can DIRECTLY give funds to borrowers

i.e. bond market, stock market

70
Q

bond

A

certificate of indebtedness

term: interest rate depends on this, time until maturity

71
Q

credit risk

A

probability that you will NOT pay fully, increase interest rate if suspect so

72
Q

junk bonds

A

issued by financially unstable corps to raise money

high interest rates bcs less secure than gov bonds or other corps

73
Q

stock

A

ownership in a firm and claim to profits

74
Q

equity finance

A

the sale of a stock to raise money

price determined by supply and demand

75
Q

stock index

A

avg of a group of stock prices, used to indicate economic conditions

76
Q

financial intermediaries

A

institutes where savers can INDIRECTLY supply funds to borrowers

  • banks
  • mutual fund
77
Q

banks

A

take deposits from savers and use them to make loans to borrowers

78
Q

mutual funds

A

institute that sells shares to the public and uses the proceeds to buy stocks and bonds

shareholders benefit if value of portfolio inc

  • diversify bonds and stocks, decrease risk
  • give ppl access to skills of pro money managers (doesn’t necessarily gain bcs of salaries)
79
Q

national savings

A

S

total income in economy after paying for consumption and government purchases

80
Q

stocks vs bonds

A

stocks
- pay dividends
- never mature
- inc risk
- higher return

bonds
- pay interest
- fixed maturity

both
- subject to credit risk
- taxed returns

81
Q

market for loanable funds

A

market where savers SUPPLY funds to borrowers who DEMAND funds

82
Q

saving

A

source of supply for loanable funds

83
Q

investment

A

source of demand for loanable funds

84
Q

interest rate

A

price of a loan

  • return on savings
  • cost of borrowing
85
Q

supply of loanable funds

A

as interest rates inc, savings inc

more attractive rewards

POSITIVE relationship, as IR up, LF up

86
Q

how does supply of loanable funds shift

A

public savings increase supply by shifting right

gov deficits decrease supply, shift left

87
Q

demand for loanable funds

A

as interest rates inc, demand dec

more costly to have loanable funds

only will make investment if ROR is higher than borrowing cost, since make more profit

88
Q

equilibrium rate of interest R*

A

shortage of loanable funds:
- if IR lower than R*, less loans are given than demanded
- increases IR

surplus of loanable funds:
- if IR higher than R*, more supplied than demanded
- dec IR because all are competing for borrowers

89
Q

saving incentives

A

encourage saving i.e. lower tax on interest income

will save more if get higher returns on saving

consumption taxes i.e. HST discourage spending

90
Q

tax policies impact on supply (LF)

A

increase supply of saving at ANY interest rate, since encourage saving

shift right, causing R* to lower

91
Q

investment incentives

A

investment tax credit: gives tax advantages to firms building factories or buying equip (dec corp income tax)

cause demand to inc, shift right

92
Q

crowding out

A

decrease in investment because of gov borrowing

gov issues bonds when in deficit, competing with corps

93
Q

impacts of gov deficits

A
  • decreased supply (shift left)
  • increased interest rates (discourages investment)
  • lower growth rate and standard living
94
Q

vicious vs virtuous cycle

A

vicious cycle: deficits cause dec LF, inc IR, discourage investment and slow econ growth
- lead to more deficit

virtuous cycle: cause inc LF, dec IR, improve investment and lead to more surplus

95
Q

discouraged worker

A

NOT in labour force, stopped searching for a job

96
Q

not in labour force

A

retired, full-time student, discouraged worker, disability income

97
Q

cyclical unemployment

A

fluctuations around the natural rate of unemployment

cause real GDP to fall below potential GDP

98
Q

frictional unemployment

A

result of the time it takes to search for a job that suits skills and needs

will ALWAYS be frictional unemployment because of sectoral shifts: laid off due to changes in corp structure

99
Q

structural unemployment

A

result of fewer jobs available than demanded

happens when wages are set ABOVE equilibrium

100
Q

labour supply curve

A

as wage rates inc, labour inc because more ppl are willing to supply hours of labour

101
Q

labour market equilibrium

A

when at equilibrium, some people are unemployed because they don’t want to work at the equilibrium wage

they are OUTSIDE LF because choose to not work

102
Q

minimum wage laws

A

if min wage above equil, dec demand for labour and excess supply

results in structural unemployment

103
Q

union

A

worker association that bargains w employer over working conditions

30% canadians, earn 10-20% more

collective bargaining: unions and firms agree on terms of employment

104
Q

efficiency wages

A

above equilibrium wages to inc productivity, result in structural unemployment

can dec labour turnover, improve labour health, etc.

EC140 (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions