Prices
Give the economic term that describes the amount of a good that producers are willing and able to sell at different prices.
What is supply?
The fundamental household budget identity is Y = C + S, where Y is net income, and C + S are the two components of household budget allocation. Name what C and S stand for.
What are consumption and saving?
Name the institution which prints money and mints coins in the United States.
What is the U.S. Department of the Treasury?
During the Great Depression in the United States, many banks failed, households reduced spending, and businesses cut production. Name the broad macroeconomic phenomenon which describes a sustained decline in overall economic activity.
What is a recession/depression?
Determine whether or not a country could benefit from importing a good if it could produce that good using fewer resources than its trading partner.
What is yes?
Suppose bread cost $1.80 per pound in 2025 in the United States. With year-over-year inflation of 5% between 2025 and 2026, name the price of a pound of bread in the United States in 2026.
Marginal Propensity to Consume (MPC) is the proportion of new income you spend over change in income (e.g., an MPC of 0.8 means I spent 80 cents of every additional dollar). Similarly, Marginal Propensity to Save (MPS) is the proportion of new income you save over change in income (e.g., an MPS of 0.8 means I save 80 cents of every additional dollar). Give the sum of the MPC and MPS for any given income.
What is 1?
Name the institution which conducts monetary policy in the U.S.
What is the Federal Reserve?
In 2022, the U.S. Federal Reserve raised interest rates to combat high inflation. Explain why higher interest rates reduce inflation, even though they do not directly lower the cost of producing goods.
What is: higher interest rates increase the cost of borrowing and consumption, so they disincentivize those activities.
What is: Demand is elastic; the percent change in quantity demanded is greater in magnitude than the percent change in price?
The demand for a product Qd is 100 - 2P, and the supply Qs is 20 + 2P, where P = price in dollars. Find the equilibrium price.
What is $20?
Assume you bought a concert ticket for $100. The night of the concert, you could have been working a shift for $100 instead. Assuming you cannot resell your ticket to the concert, give the opportunity cost of attending the concert.
What is $100?
Money has 3 functions in economics. The first is use as an accepted form of payment; the second is use in measuring prices and dictating economic value; the third is use as an asset which can be stored and retains value over time. Give the formal name for any one of the three functions of money.
What is a Medium of Exchange?
OR
What is a Unit of Account?
OR
What is a Store of Value?
In this country, prices doubled every 15.5 hours during the greatest period of hyperinflation in human history. Name the country which experienced the fastest hyperinflation ever.
What is Hungary?
Water is essential for human survival, yet it costs very little; diamonds are not at all essential for human survival, yet they cost a lot. Name the Scottish philosopher and economic thinker who introduced the diamond-water paradox.
Who is Adam Smith?
You are depositing $1,000 into a bank account. The nominal interest rate on your deposit is 9% compounded annually, and expected inflation for the next year is 3%. Give the real interest rate on your deposit over the next year.
What is 6%?
You are depositing $1,000 into a bank account with a fixed interest rate of 6% compounded annually. Estimate, to the nearest year, the amount of years needed for your $1,000 deposit to double. (Hint: you do not need to do much math.)
What is 12 years?
You can receive $1,000 today or exactly $1,000 one year from now. Assuming you can earn positive interest and there is no risk or other relevant difference, say which option is financially preferable.
What is $1,000 today?
In the 1970s, the United States experienced both high inflation and high unemployment.Give the term that describes this combination.
What is stagflation?
Most goods follow the law of demand: as price increases, quantity demanded decreases. However, some goods called Veblen goods do not obey this principle. Instead, these luxury goods get their value and demand exactly from their exclusivity and cost. Give the shape of the demand curve for a Veblen good.
What is upward-sloping?
A firm faces demand P = 100−2Q, where P is the price in dollars and Q is the quantity, and has a constant marginal cost MC=$20. Find the price the firm charges if it maximizes profit.
What is $60?
Assume an annual discount rate of 8%. Given the choice between receiving $1,100 a year from now or $1,000 today, state which option would be preferable.
What is $1,100 a year from now?
Some money has inherent value: the U.S. dollar, for example, used to be backed by gold. Nowadays, though, the U.S. dollar only has value because the government says so. Name the kind of money that has no intrinsic value, but rather derives its value from regulation and societal agreement.
What is fiat money?
During the 17th-century Dutch Republic, the a speculative bubble of human history occurred in a market for flowers over a few years. Forward contracts reached exorbitant prices in this time period. Give the name of this economic frenzy, peaking between 1634 and 1637.
What is Tulip Mania?
Some goods are known as inferior goods, meaning that consumers buy less of them as their income rises. Additionally, most goods follow the law of demand: as price increases, quantity demanded decreases. However, a subset of inferior goods known as Giffen goods defy that logic: as price increases, quantity demanded also increases. This 19th-century food staple in Ireland is a prime example of a Giffen good.
What are potatoes?