ECON Test 1

Question 1

What is economics?

Answer 1

how society manages its scarce resources

Question 2

What are the three basic policy goals of most countries?

Answer 2

Full employment, Price Stability, Economic Growth

Question 3

What is the relationship between inflation, purchasing power, and the value of a dollar?

Answer 3

Inflation makes prices go up, making your purchasing power with the dollar decrease.

Question 4

What is the difference between normative and positive statements?

Answer 4

Positive are statements and normative are opinions.

Question 5

What is capital?

Answer 5

Plant and equipment. NOT MONEY

Question 6

What is the difference between micro and macroeconomics?

Answer 6

Micro-Households and Firms.

Macro- Country as a whole.

Question 7

What are the characteristics of command/communist countries?

Answer 7

The government controls everything.

Question 8

Know what it means to be producing inside, on, or outside the PPF

Answer 8

On the line is efficient

Inside the line is inefficient

Outside the line is impossible

Question 9

what causes a shift in the PPF

Answer 9

economic growth- increase in resources and/or technology

Question 10

What is the law of demand?

Answer 10

price of the product and the quantity demanded for that product.

Question 11

What is the law of supply?

Answer 11

price of the product and the quantity supplied for that product.

Question 12

what is the equillibrium

Answer 12

where the lines of the supply and demand graphs meet.

Question 13

surplus and shortages

Answer 13

surplus is above the equilibrium

shortages are below the equilibrium

Question 14

what are tariffs

Answer 14

tax on imported goods.

Question 15

what is a quota

Answer 15

quantative limit on imported goods.

Question 16

Arguments for restricting trade.

Answer 16

1. Destroys domestic jobs
2. National Security
   3.Infant Industries
3. Unfair competition

Question 17

Def of GDP

Answer 17

market value of all final goods and services produced within a country in a given time period

Question 18

Components of GDP

Answer 18

Consumption (C)
Investment(I)
Government Purchases(G)
Net Exports(NX)

Question 19

Nominal GDP Vs Real GDP

Answer 19

Nominal is not adjusted for inflation

Real is adjusted for inflation

Question 20

GDP deflator

Answer 20

nomial GDP/real GDP

Question 21

what is inflation

Answer 21

the rate at which goods and services rises

Question 22

what is CPI

Answer 22

measure of overall cost of a market basket of goods and services bought by a typical consumer

Question 23

Calculate CPI

Answer 23

cost of current basket/ base year cost basket.