principles 8 - 10

Question 1

what are the last 3 principles

Answer 1

1. a country’s standard of living depends on its ability to produce goods and services
2. prices rise when gov prints off too much money
3. society faces a short-run tradeoff between inflation and unemployment

Question 2

what do the last 3 principles relate to

Answer 2

how the economy works as a whole

Question 3

what is principle 8

Answer 3

a country’s standard of living depends on its ability to produce goods and services

Question 4

definition: productivity

Answer 4

the quantity of goods and services produced from each hour of a worker’s time

Question 5

what is the difference in countries standard’s of living

Answer 5

its productivity

Question 6

the growth rate of a nation’s productivity determines what

Answer 6

the growth rate of its average income

Question 7

relationship b/w productivity and living standards also has profound implications for what

Answer 7

public policy

- how it will affect our ability to produce goods and services

Question 8

in order to boost living standards, policy makers need to rise what

Answer 8

prodcutivity

• ensuring workers are well educated
• have the tools they need to produce goods and services
• access to best possible technology

Question 9

what is principle 9

Answer 9

prices rise when the gov. prints too much money

Question 10

definition: inflation

Answer 10

an increase in the overall level of prices in the economy

Question 11

is keeping the inflation low or high a goal of policymakers?

Answer 11

inflation low

Question 12

what causes inflation

Answer 12

when gov creates large quantities of money, the value of the money falls

Question 13

what is principle 10

Answer 13

society faces a short-run tradeoff between inflation and unemployment

Question 14

higher level of prices is, in the long run, the primary affect of what

Answer 14

increasing the quantity of money

Question 15

what is the short term effects of increasing the amount of money

Answer 15

1. stimulates the overall level of spending and thus the demand for goods and services
2. higher demand may, over time, cause firms to rise their prices, but in the meantime, it also encourages them to increase production and higher more employees, lowering unemployment

short run tradeoff between inflation and unemployment

Question 16

what does the short run trade off between inflation and unemployment play a key role in

Answer 16

the analysis of the business cycle

Question 17

definition: business cycle

Answer 17

fluctuations in economic activity, such as employment and production

Question 18

how do policy makers exploit the short run trade off between inflation and unemployment

Answer 18

using various policy instruments

- by changing the amount of money it prints, policymakers can influence the combination of inflation and unemployment