Microeconomics
The law of demand states that as price rises, quantity demanded does what?
Decrease
GDP measures the total value of what within an economy?
Goods and services
What is the term for the tax imposed on imported goods?
Tariff
A market with only one seller is called what?
What type of policy involves government changing taxation and spending levels?
Fiscal policy
What is the term for when the percentage change in price is greater than the percentage change in quantity demanded?
Price inelastic demand
If inflation is too high, what is one monetary policy tool a central bank could use?
If a country can produce a good using fewer resources than another, it has what type of advantage?
Absolute advantage
What is the distinguishing feature of monopolistic competition compared to perfect competition?
Product differentiation
A subsidy is a form of government support given to whom?
producers (or consumers, depending on the context)
In the short run, what is the only factor of production that is considered fixed?
Capital
The type of unemployment that occurs when workers’ skills do not match available jobs is called what?
Structural
What is the difference between a trade deficit and a current account deficit?
a trade deficit refers only to goods and services, while a current account deficit includes trade plus income flows and transfers
What is meant by "barriers to entry"?
obstacles that make it difficult for new firms to enter a market
What is meant by "opportunity cost" in the context of government spending?
The value of the next best alternative forgone
When two goods are consumed together, such as bread and butter, they are known as what?
Complements
What part of the circular flow of income is represented by savings, taxes, and imports?
Leakages
What is the name of the system where exchange rates are determined purely by market forces of supply and demand?
Floating exchange rates
In an oligopoly, firms may collude to set prices. What is this known as?
Cartel
When governments try to reduce income inequality, what is one method they can use?
progressive taxation (or transfer payments)
What is the condition for profit maximisation in terms of marginal cost and marginal revenue?
MR=MC
Explain the difference between demand-pull and cost-push inflation.
Demand-pull caused by excess demand, and cost-push caused by rising production costs
What is the Marshall-Lerner condition in relation to exchange rates and balance of payments?
A depreciation will only improve the current account if the sum of demand elasticities for imports and exports is greater than 1
What does the kinked demand curve model suggest about prices in an oligopoly?
firms are unlikely to change prices because rivals will match price cuts but not price increases
What is crowding out in relation to government borrowing?
government borrowing raises interest rates and reduces private investment?