week 1

Question 1

What is economics

Answer 1

The study of the choices people and society make to attain their unlimited wants, given their limited resources.

Question 2

What is macroeconomics

Answer 2

The study of the economy as a whole. Includes: inflation, economic growth.

Question 3

What is microeconomics

Answer 3

The study of individual markets.
The study of how households and firms make choices, how they interact in the market and how governments influence their decisions.

Question 4

What is opportunity cost

Answer 4

The true cost of something is what you give up to get it.

Everything has an opportunity cost…. there is always something else that could of been done with that money.

Question 5

Who is Adam Smith

Answer 5

1. He is a classical economist.
2. Founder of the modern disciple of economics.
3. Published Wealth of nations (concepts: natural price, equilibrium, law of markets).

Question 6

What is the invisible hand

Answer 6

Metaphor created by Adam smith, for the unseen forces that move the free market economy.

Question 7

What are some of Adam Smiths theories

Answer 7

1. Invisible hand - the tendency for free market to regulate themselves.
2. Minimising the role of the government and taxation in free markets.
3. Division of labour and specialisation produces prosperity (specialise in what you do well and trade with others for everything else).

Question 8

Who is Alfred Marshall

Answer 8

1. Neo classical economist.
2. Published textbook : Principles of economics.
3. Famous for the supply and demand curve, elasticity, consumer surplus and the definition of econmics.

Question 9

What is the supply and demand curve

Answer 9

A graphical representation of how the interaction of producers of goods/services and consumers in a free market lead to an equilibrium price and quantity.

Question 10

Who is John Maynard Keynes

Answer 10

1. Founder of Keynesian economics.

2. Published in 1936: The general theory of employment, interest and money.

Question 11

What are Keynesian theories

Answer 11

1. Free markets do NOT provide a solution to unemployment.
2. Aggregated demands ( demand for final goods and services) is the most important driving force in an economy.
3. Government intervention to achieve full employment and stability.

Question 12

What is the Neo-classical/Neo-liberal consensus on economic policy.

Answer 12

1. Competitive markets - The freeing up of the markets to make them more competitive.
2. Macroeconomic stability - Is delivered by low inflation and low government debt.
3. Globalisation / Free Markets - The advantages of opening up to trade or globalisation.

Question 13

What is the difference between Keynesian policy and neo classical policy- in regards to what they focus on.

Answer 13

1. Keynesian-ism focuses on the ups and downs of a business cycle.
2. Neo-classical focuses on economic growth.

Question 14

What is the difference between Keynesian policy and Neo classical policy - in relation to there goals.

Answer 14

1. Keynesian-ism’s goals are full employment.

2. Neo classical goals are low and stable inflation and low government debt.

Question 15

What is the difference between Keynesian policy and Neo classical policy - in relation to “reliance”

Answer 15

1. Keynesian-ism relies on Government intervention.

2. Neo classical relies on the working of the market.

Question 16

What is the compound interest formula, used to calculate economic growth of a country and between countries.

Answer 16

An = Ao(1+r)n

Question 17

What is compound interest

Answer 17

Interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan.