Economics mixed.

Question 1

Multiplier Equation

Answer 1

1/1-MPC

Question 2

When the Gini coefficient=0

Answer 2

There is perfect equality.

Question 3

When the Gini coefficient=1

Answer 3

There is perfect inequality.

Question 4

How do you work out the Gini coefficient using the the area Above and Beneath the Lorenz curve?

Answer 4

A/A+B

Question 5

If the price is above the market equilibrium there will be…

Answer 5

Excess supply.

Question 6

If the price is below the market equilibrium there will be…

Answer 6

Excess demand.

Question 7

Give an example of joint demand.

Answer 7

Cars and fuel or fish and chips.

Question 8

Give an example of joint supply.

Answer 8

Beef and leather.

Question 9

Give an example of composite demand.

Answer 9

Land can be used for building houses or shopping centres.

Question 10

Give an example of derived demand.

Answer 10

The demand for pilots is derived from the demand for long-distance travel for holidays and business trips.

Question 11

MPC=

Answer 11

Marginal propensity to consume. MPC of 1 means that all of any additional income is spent.

Question 12

What is Accelerator theory?

Answer 12

Increases or decreases in the rate of growth of national income will lead to even larger increases or decreases in the level of investment. This is because firms will need a higher productive capacity to meet the higher level of spending.

Question 13

List 5 things that affect AD.

Answer 13

Interest rates. 
Consumer confidence.
Taxation.
Wealth.
Unemployment.
Investment.

Question 14

Why do higher interest rates reduce AD? (3 points)

Answer 14

Those who have variable-rate mortgages now have less money to spend.
Puts people off purchasing things on credit.
Higher interest rates increase the reward to save which reduces MPC.

Question 15

Why does poor consumer confidence reduce AD?

Answer 15

If people feel that their income is likely to fall or that their jobs are insecure then they are likely to reduce their consumption.

Question 16

Why does increased taxation reduce AD?

Answer 16

Reduces disposable income.

Question 17

What are the 5 main determinants of investment?

Answer 17

Interest rates.
Business confidence.
Tax
Technology.
Accelerator Theory.

Question 18

What are the 4 main government objectives?

Answer 18

Stable prices (low inflation)
Steady and sustained economic growth
Low unemployment or full employment
A balanced balance of payments

Question 19

Name 4 determinants of SRAS.

Answer 19

Wage rates.
Changes in the cost of raw materials.
Business taxation.
Productivity.
Exchange rate changes.

Question 20

Name 4 determinants of LRAS.

Answer 20

Technology.
Productivity.
Factor mobility.
Enterprise.
Economic incentives and attitudes.

Question 21

PED=

Answer 21

% change in Q demanded/% change in price

Question 22

What does an inelastic demand curve look like?

Answer 22

Steep.

Question 23

What does an elastic demand curve look like?

Answer 23

Flat.

Question 24

% change=

Answer 24

(change/original) x 100

Question 25

What does PED= when the good is inelastic?

Answer 25

Between 0 and 1.

Question 26

What does PED= when the good is elastic?

Answer 26

Greater than 1 (ignoring the - sign).

Question 27

What does PED= when the good is unitary elastic?

Answer 27

1.

Question 28

What does PED= when the good is perfectly inelastic?

Answer 28

0. A change in price won't change the quantity demanded,

Question 29

List 4 determinants of PED.

Answer 29

``` Availability of close substitutes. % of income spent on the product. Nature of the product. (luxury or necessity) Time period. Broad or specific market definition. ```

Question 30

Income elasticity of demand (YED)=

Answer 30

% change in Q demanded/% change in real income.

Question 31

What does YED= when the good is elastic? And what is a good like this called?

Answer 31

More than +1. A luxury good.

Question 32

What does YED= when the good is inelastic? And what is a good like this called?

Answer 32

Between 0 and +1. A basic good or a necessity.

Question 33

What does YED= when the good is negatively income elastic?And what is a good like this called?

Answer 33

Less than 0. An inferior good.

Question 34

Cross elasticity of demand (XED)=

Answer 34

% change in Q demanded of product A/% change in price of product B

Question 35

What does a positive XED mean?

Answer 35

The goods are substitutes.

Question 36

What does a negative XED mean?

Answer 36

The goods are compliments.