Unit 4 Review Sheet Flashcards
subsidy
A government payment that supports a business or market; causes the supply of a good to increase
monetary policy
Influencing the cost or amount of money provided to promote a healthy economy
fiscal policy
Using the government’s revenue to maintain a stable economy and/or to also do anything to influence the economy for the better
ceteris paribus
A Latin phrase that means “all things held under constraint” or “all equal”
disequilirbium
If the market price or quantity supplied is anywhere but at equilibrium, the market is said to be at disequilibrium.
marginal product of labor
The change in output from hiring one additional unit of labor or worker
increasing marginal returns
Occurs when marginal production levels increase with new investment
diminishing marginal returns
Occurs when marginal production levels decrease with new investment
equilibrium price
When supply and demand are both at an equal state
surplus
Causes a drop in prices as the supply for a good is greater than the demand for that good
shortage
Causes prices to rise as the demand for a good is greater than the supply of that good
GDP
Gross domestic product: the dollar value of all goods and services produced within a country in a given year; tells the overall health of the economy
nominal GDP
GDP is evaluated at the current market
real GDP
RGDP: a measure of a country’s total economic output that is adjusted for price changes
unemployment
Percentage of nation’s labor force that does not have a job and possibly in need of government assistance
inflation
The percentage change in prices over time
deflation
Decrease in the general price level of goods and services
What is the law of demand? Does it have an indirect or direct relationship with price?
The law of demand states that when a good’s price is lower, consumers will buy more of it. When the price is higher, consumers will buy less of it.
What is the law of supply? Does it have an indirect or direct relationship with price?
An increase in price results in an increase in quantity supplied. There is a direct relationship between price and quantity
How does price affect the demand of an elastic good?
Increasing prices results in a decrease in revenue because there’s less of a demand
How does price affect the demand of an inelastic good?
Decreasing prices results in a increase in revenue because there’s more of a demand
What is the difference between change in demand and change in quantity demanded?
The change in demand is the amount of demand on the whole curve while quantity demanded is the realistic amount of demand being provided
What causes a shift in the demand curve?
They’re caused by changes in income, consumer expectations, population, demographics, consumer tastes and advertising.
What is the difference between change in supply and change in quantity supply?
The amount of demand causes a shift in the supply curve to either change to left or right
