test III: nature of economics

Question 1

economics

Answer 1

study of choices made by individuals and businesses
coordinated by markets and influenced by governments
most efficient ways to use scarce resources

Question 2

macroeconomics

Answer 2

global view/ economy as a whole

impacts of choices on main economic indicators

Question 3

microeconomics

Answer 3

how individuals and businesses make decisions (what influences choices) in a world of scarcity
supply and demand (bottom-up approach)

Question 4

scarcity

Answer 4

wants exceed limited resources - need to make choices

Question 5

choices

Answer 5

deciding to have more of something means to have less of something else

Question 6

incentives

Answer 6

financial
social
moral

Question 7

opportunity cost

Answer 7

we have to give up something (trade-offs)/ cost of decisions

Question 8

production possibilities curve

Answer 8

represents all possible production combinations (choices) of two goods that can be produced + opportunity cost

• cash, time, labour, factory, equipment, transport and materials
• line represents scarcity
• economic growth when the line moves up

Question 9

capitalist economy

Answer 9

free market, private ownership, self-interest, supply and demand, competition

Question 10

command economy

Answer 10

planned economy, public ownership, production and price regulated by the state

Question 11

supply and demand

Answer 11

law of demand: P up, Qd down
law of supply: P up, Qs up
E: Qd = Qs

Question 12

non-price determinants of demand

Answer 12

price related goods
expectations
population
income (normal or inferior goods)
tastes and preferences

Question 13

non-price determinants of supply

Answer 13

price expectations 
input costs 
nb of firms in the industry
technology and productivity 
subsidies and taxes

Question 14

simultaneous shifts: both supply and demand shift the same way

Answer 14

change in Eq is indeterminate, Ep is unambiguously

increase: increase in Q
decrease: decrease in Q

Question 15

simultaneous shifts: supply and demand shift in different ways

Answer 15

Ep increase or decrease, change in Eq is uncertain
supply increases and demand decreases: increase in P
supply decreases and demand increases: decrease in P

Question 16

gdp (gross domestic product)

Answer 16

total value of all goods and services produced in a country (economic growth)
GDP = Consumption + Investments + Government spending + (eXports - iMports)

Question 17

unemployment

Answer 17

people available to work and seeking for work, but are currently unemployed (6.7%)

Question 18

inflation (cpi)

Answer 18

upward movement in the average level of prices
diminishing purchasing power
targeted between 1-3% (4.7%)

Question 19

pandemic recession

Answer 19

decline in activity/ two consecutive quarter decline in GDP

demand vs supply shocks, small vs wide shock, concentrated vs widespread

Question 20

consumer’s choice

Answer 20

how needs, perceptions and info shape consumer choices
maximize utility
influenced by incentives

Question 21

consumer’s confidence

Answer 21

how consumer expectations for the future influence spending, saving, investments and labour participation

Question 22

producer behaviour

Answer 22

actions of firms in hiring and combining productive inputs to supply commodities at appropriate prices

Question 23

cost minimization

Answer 23

a necessary condition for profit maximization

Question 24

business confidence

Answer 24

how producer’s expectations for the future influence hiring, capital investment and supply