Economic Principles
Garry overslept. In his rush to make it to school, he forgot his lunch. Now, he is hungry and can't focus. Which principle of economic thinking is best represented in this example?
Future Consequences Count
The income of the Puerto Ricans declines after a hurricane hits the island. Which supply or demand shifter would be impacted by this situation? Which direction would supply or demand shift?
Demand would shift left due to a change in income
Congress recently passed a new law to increase corporate taxes. Which AD or SRAS shifter would be impacted by this situation? Which direction would AD or SRAS shift?
SRAR would shift left due to government action (taxes)
The Federal Reserve recently increased the interest rate on reserves to increase interest rates. Is this an example of fiscal or monetary policy?
Monetary Policy
On the whiteboard, graph the following situation on a correctly labeled supply and demand model. Write the impact the situation would have on quantity and price. Here is the situation:
Producers of jelly are worried that an increase in the price of peanut butter will impact them.
Demand will shift to the left due to an increase in the price of a complementary good.
Quantity decrease
Price decrease
Chrisanthony is at Disneyland. He wants to buy Mickey Mouse ears and a hoodie, but only has enough money to buy one. He chose the hoodie. Which principle of economic thinking is best represented in this example?
Scarcity Forces Tradeoffs
The government adds a new tax to oil production. Which supply or demand shifter would be impacted by this situation? Which direction would supply or demand shift?
Supply would shift left due to government policy (subsidies).
Congress recently passed a new law to provide new laptops to schools across the country. Which AD or SRAS shifter would be impacted by this situation? Which direction would AD or SRAS shift?
AD would shift right due to an increase in government spending
Congress recently passed a new law to raise income taxes. Is this an example of fiscal or monetary policy?
Fiscal Policy
On the whiteboard, graph the following situation on a correctly labeled supply and demand model. Write the impact the situation would have on quantity and price. Here is the situation:
A cell phone manufaturer expects there to be a future price increase for their product.
Supply will decrease due to a change in producer expectations.
Quantity decrease
Price increase
Toby's mom promised to take him to the Boardwalk this summer if he gets all A's. Toby has been working harder in school. Which principle of economic thinking is best represented in this example?
Incentives Matter
Jamaica is named one of the most beautiful islands in the world, and tourism to the island doubles. Which supply or demand shifter would be impacted by this situation? Which direction would supply or demand shift?
Demand shifts to the right due to a change in consumer tastes and preferences
Congress recently passed a new law to decrease energy subsidies. Which AD or SRAS shifter would be impacted by this situation? Which direction would AD or SRAS shift?
SRAS shifts left due to government action (subsidies)
The Federal Reserve recently decreased the discount rate to decrease interest rates. Is this an example of fiscal or monetary policy?
Monetary Policy
On the whiteboard, graph the following situation on a correctly labeled AD-AS model. Write the impact the situation would have on Real GDP, Price Level, and Unemployment. Here is the situation:
Congress recently passed a law to decrease SNAP (food assistance) benefits.
AD shifts left due to decreased consumer spending.
RGDP decrease
PL Decrease
Unemployment increase
Harold was called into the office and informed that he would not be allowed to attend prom if he got any more tardies this semester. Now, he has to make it to class on time. Which principle of economic thinking is best represented in this example?
Incentives Matter
The price of plastic, a major input in toy production, decreases. Which supply or demand shifter would be impacted by this situation? Which direction would supply or demand shift?
Supply would shift right due to a change in the cost of inputs (factor of production)
The Federal Reserve recently purchased bonds to decrease interest rates. Which AD or SRAS shifter would be impacted by this situation? Which direction would AD or SRAS shift?
AD shifts right due to an increase in consumer spending and investment
Congress passed a law to increase the federal minimum wage. Is this an example of fiscal or monetary policy?
Fiscal Policy
On the whiteboard, graph the following situation on a correctly labeled AD-AS model. Write the impact the situation would have on Real GDP, Price Level, and Unemployment. Here is the situation:
The Federal Reserve recently sold bonds to increase interest rates.
AD shifts left due to lower consumer spending and investment.
RGDP decrease
PL increase
Unemployment increase
Torn between buying a pair of shoes that she likes in green or red, Hellen decided to make a mental list of which she could wear with more of her outfits. Which principle of economic thinking is best represented in this example?
Cost v. Benefit
Many Americans begin to believe that they may lose their jobs in the near future. Which supply or demand shifter would be impacted by this situation? Which direction would supply or demand shift?
Demand will decrease due to a change in consumer expectations
Congress recently passed a new law to cut income taxes. Which AD or SRAS shifter would be impacted by this situation? Which direction would AD or SRAS shift?
AD shifts right due to increae consumer spending
Congress passed a law requiring manufacturers to meet additional safety regulations. Is this an example of fiscal or monetary policy?
Neither Fiscal nor Monetary Policy
On the whiteboard, graph the following situation on a correctly labeled AD-AS model. Write the impact the situation would have on Real GDP, Price Level, and Unemployment. Here is the situation:
Congress recently passed a new law to increase Social Security payments
AD shifts right due to increased consumer spending.
RGDP increase
PL increase
Unemployment decrease