Basic Economic Ideas and Resource Allocation
What term describes the problem of limited resources and unlimited wants?
Scarcity
What happens to quantity demanded when the price of a product falls?
It increases
What is the total value of goods and services produced in an economy?
GDP
What are the three main objectives of macroeconomic policy?
Economics Growth, Price Stability, Low Unemployment
What is the cost of the next best alternative forgone?
Opportunity cost
What measures the responsiveness of demand to changes in income?
Income elasticity of demand
What diagram shows the flow of goods, services, and money in an economy?
Circular flow of income
What policy changes government spending and taxation?
Fiscal policy
What are the four factors of production?
Land, labour, capital, enterprise
What is the point where quantity supplied equals quantity demanded?
Market equilibrium
What are the components of Aggregate Demand (AD)?
C, I, G, (X – M)
What is the primary tool used in monetary policy?
Interest rates
What is the primary difference between a market economy and a planned economy?
Decision-making
How does a perfectly inelastic supply curve appear?
Vertical
What type of unemployment arises due to changes in technology or skills mismatch?
Structural unemployment
What is the main goal of supply-side policies?
Increase productivity
What does an outward shift of the Production Possibility Curve indicate?
Economic growth
What happens to total revenue if price increases and demand is inelastic?
Increases
What is disinflation?
Slower inflation
What are examples of supply-side tools?
Infrastructure development, training, education