CATEGORY 1: Micro Fundamentals
(Unit 1 & 2.1–2.3)
(Unit 1 & 2.1–2.3)
This term describes the next best alternative foregone when making an economic choice.
What is opportunity cost?
If a 10% rise in price causes a 20% fall in quantity demanded, this is the value of PED.
this is the value of PED.What is −2 (or 2 in absolute terms)?
A negative externality of production causes the MSC curve to lie in this position relative to MPC.
What is above MPC?
This is the most common method of measuring national output — it counts total spending in the economy, and its formula.
What is the expenditure approach (C + I + G + NX)?
Lowering interest rates to stimulate spending is an example of this type of macroeconomic policy.
What is expansionary monetary policy?
This trade theory states that countries should specialise in producing goods with the lowest opportunity cost.
What is the Law of Comparative Advantage?
A demand curve shifts RIGHT when this happens to consumer income (for a normal good).
What is income increases?
A specific tax shifts the supply curve in this direction.
What is upward/left (decrease in supply)?
These two characteristics define a public good.
What are non-excludable and non-rival?
Demand-pull inflation is caused when this macroeconomic curve shifts to the right past full employment.
What is Aggregate Demand (AD)?
A government running a budget deficit means its expenditure is doing this relative to tax revenue.
What is exceeding tax revenue (spending > revenue)?
This trade protection tool places a physical limit on the quantity of a good that can be imported.
What is a quota?
This is the name for the point where quantity demanded equals quantity supplied, clearing the market.
What is equilibrium?
A price floor set below equilibrium is described as this — it has no effect on the market.
What is non-binding?
This market failure occurs when one party in a transaction has more information than the other.
What is asymmetric information?
The Gini coefficient measures this economic concept, ranging from 0 (perfect equality) to 1 (perfect inequality).
What is income inequality?
This automatic stabiliser increases government spending in a recession without any new legislation.
What is unemployment benefits (cyclical transfer payments)?
When the domestic currency loses value against foreign currencies, exports become this and imports become this.
What are cheaper; more expensive?
When the price of a substitute good rises, demand for the original good does this.
What is increase (shifts right)?
The formula for calculating price elasticity of demand.
What is % change in Qd ÷ % change in Price?
The welfare loss resulting from a negative externality is shown on a diagram as this shape.
What is a triangle (deadweight welfare loss)?
This type of unemployment arises from a mismatch between workers' skills and available jobs.
What is structural unemployment?
Monetarists argue that expansionary fiscal policy leads to this — where private investment is reduced by rising interest rates.
What is crowding out?
The current account of the balance of payments records these four components.
What are trade in goods, trade in services, primary income, and secondary income?
The four factors of production, in full.
What are land, labour, capital, and entrepreneurship?
When a subsidy is granted to producers, consumer surplus does this, while government expenditure does this.
What is increases; increases?
A carbon tax is an example of this type of government policy to correct a negative externality.
What is a Pigouvian tax (or indirect tax)?
The formula for calculating GDP using the expenditure method.
What is GDP = C + I + G + (X − M)?
Supply-side policies aim to shift this curve to the right in order to achieve non-inflationary growth.
What is the Long-Run Aggregate Supply (LRAS) curve?
This development index combines GNI per capita, life expectancy, and education to rank countries.
What is the Human Development Index (HDI)?