1

Question 0

THE rules of macro

Answer 0

1. If MB is more than marginal cost, DO more

2. If there =, keep smooth riding, ghost rider

Question 1

Law of increasing cost

Answer 1

The more of a good produced the greater the opportunity cost

Question 2

Inferior vs normal

Answer 2

Normal: a higher income decreases demand

Inferior: higher income decreases demand. Ex: ramen. Rich people don’t wanna eat that crap

Question 3

Elasticity formula

Answer 3

|E| = demand % of good

% change in price of good

Question 4

Price elastic, price in elastic, perfectly I elastic, and perfectly elastic.

Answer 4

Price elastic. E>1

Price inelastic, the necessary items, E<1

E=1, unit elastic, initial change equals the responsiveness of consumer

Perfectly inelastic= if you raise price, there is NO decrease in quantity demanded

Perfectly elastic: lower the price, the demand increases without limits!

Question 5

Cross price elasticity

Answer 5

Complementary and substitutes

0, when Honda rises, demand of doors increases

Question 6

Ceilings produce X

Price floors produce X

Answer 6

Price Ceilings produce shortages
Price Floor produces surplus

Note, on a graph. The ceiling is low, below equilibrium
Price floor is above the equilibrium, thus high on the graph

Question 7

Purpose and effect of excise taxes

Answer 7

Define: per unit tax on people to increase the cost of buying harmful things, while the govt increases revenue

Question 8

Dead weight loss

Answer 8

Society suffers, the efficiency loss, because of price ceilings and government regulation

Question 9

Utility

Answer 9

Amount of happiness from society

Important:
Consuming more of one good causes marginal utility to fall but total utility to rise

Question 10

Different market structures

Answer 10

Perfect competition
Monopolistic competition
Oligopoly
Monopoly

Question 11

Oligopoly

Answer 11

Few firms have a large market share and sell differentiates products.
Tend to have large economies of scale
Price wars occur

Question 12

GDP

Answer 12

All of the final products produced WITHIN the borders of a nation

Made of: C + Ig + G + Xn

Consumer spending, business investment, government purchases, net foreign purchases

Question 13

Nominal vs real measurement

Answer 13

Nominal is current dollars

While real reflects changes in inflation and deflation

Question 14

Def of recession

Answer 14

Six months of negative GDP growth

Question 15

Diff types of economic indicators

Answer 15

Leading, predict
Coincidental, happen at same time
Lagging, after the change

Question 16

Philips Curve, short run

Answer 16

The inverse relationship Unemployment and inflation

Question 17

Phillips curve long run

Answer 17

Vertical, equal to NRU

Question 18

Stagflation

Answer 18

Recession and inflation at the same time.

Question 19

Types of unemployment

Answer 19

Structural- mismatch of skills
Frictional- voluntary going between jobs
Cyclical**-due to decline in total spending