Econ Final List

Question 1

Determinants of price elasticity of supply

Answer 1

1. How much costs rise as output increases
2. Time period considered
3. Ability to store stock

Question 2

Why subsidies are issued in price control

Answer 2

1. Bolster production
2. Guarantee supply of necessity goods
3. Compete with foreign production

Question 3

Reasons for min price control

Answer 3

1. Generate revenue for producers

2. Minimum wage

Question 4

Reasons for max price control

Answer 4

1. Make necessity goods available

2. Make a market more competitive

Question 5

Market failure

Answer 5

1. Lack of public goods
2. Undersupply of merit goods
3. Oversupply of demerit goods

Question 6

Determinants of elasticity

Answer 6

1. Number of closeness of substitutes
2. Necessity and degree of definition (specific/non-specific)
3. Time period

Question 7

Levels of production

Answer 7

1. Primary (agriculture)
2. Secondary (manufacturing)
3. Tertiary (service)
4. Quarternary (informational tech/telecommunications)

Question 8

Economies of scale

Answer 8

1. Specialization
2. Divisions of labor
3. Bulk buying
4. Financial economies

Question 9

Determinants of aggregate demand

Answer 9

1. Consumption
2. Investment
3. Gov. Spending
4. Net exports

Question 10

Types of fiscal policy

Answer 10

Contractionary (raising taxes, cutting spending)

Expansionary (cutting taxes, increasing spending)

Question 11

Determinants of aggregate supply

Answer 11

1. Wage rates
2. Cost of raw materials
3. Price of imports
4. Change in taxes/subsidies

Question 12

Interventionist policies

Answer 12

1. Investment in human capital
2. Research and development
3. Provision of infrastructure
4. Direct support to industries

Question 13

Market - based policies

Answer 13

1. Reduction/elimination of income taxes
2. Reduction/elimination of corporate taxes
3. Labor market reforms
4. Deregulation
5. Privatization
6. Increase competition

Question 14

Costs of unemployment

Answer 14

1. Cost of individual
2. Cost to society
3. Cost to economy

Question 15

Costs of inflation

Answer 15

1. Loss of purchasing power
2. Effect on saving
3. Effect on interest rates
4. Effect on international trade
5. Uncertainty
6. Labor unrest

Question 16

Costs of deflation

Answer 16

1. Unemployment
2. Decrease in Investment
3. Cost to debtors

Question 17

Why countries trade

Answer 17

1. Lower prices
2. Greater choice
3. Differences in resources
4. Economies of scale
5. Increased competition
6. More efficient allocation of resources
7. Source of foreign exchange

Question 18

Arguments for protectionism

Answer 18

1. Domestic employment
2. Low-cost labor
3. Prevent dumping
4. Infant industries

Question 19

Arguments against protectionism

Answer 19

1. Higher prices
2. Less choice
3. Reduced competition and innovation
4. Hinders growth

Question 20

Forms of protectionism

Answer 20

Tariff
Quota
Subsidy

Question 21

Administrative barriers

Answer 21

1. “Red tape”
2. Health/safety
3. Embargoes
4. Nationalistic campaigns

Question 22

Advantage of high exchange rate

Answer 22

1. Downward pressure on inflation
2. More importation
3. Domestic efficiency

Question 23

Disadvantage of high exchange rate

Answer 23

Damage to export/import industries

Question 24

Adv. of low exchange rate

Answer 24

1. Greater employment in export/domestic industries

Question 25

Disadvantage of low exchange rate

Answer 25

Inflation

Question 26

Advantage of fixed exchange rate

Answer 26

1. Reduce uncertainty 2. Strict inflation policies 3. Reduce speculation

Question 27

Disadvantage of fixed exchange rate

Answer 27

1. Manipulation of interest rates 2. Maintain foreign reserves 3. Trade disputes

Question 28

Adv of floating exchange rate

Answer 28

1. Free use of interest rate as monetary tools 2. Self-adjusting 3. No need for foreign reserves

Question 29

Disadvantage of floating exchange rate

Answer 29

1. Uncertainty 2. Political motivations 3. Inflationary problems

Question 30

Economic integration levels

Answer 30

1. Preferential trading areas (Reduce protectionism) 2. Free trade agreement (NAFTA) eliminates protectionism 3. Customs Union (same trading policy) 4. Common market (European Union- free movement of capital and labor, all members have same health/safety/labor standards based off of production) 5. Economic/monetary union (Eurozone) 6. Political/economic union (fiscal policy)