Supply and Demand
What happens when supply increases?
Prices fall, quantity demanded increases
Which unemployments make up natural unemployments
structural and frictional.
What is expansionary policy's effect on GDP in the short run?
It increases
What is the relationship between Marginal Revenue, Demand, Average Revenue, and Price in a perfectly competitive firm?
They are all equal (MR = D = AR = P)
What is this called: As price increases, quantity demanded decreases
Law of Demand
What is the relationship between two goods if the cross price elasticity is negative
they are complements
Which unemployment is when new technology leads to a loss in jobs
structural unemployment
What are the three ways the Fed controls interest rates?
1. Discount Rate
2. Reserve rate
3. Open Market Operations (Buying and selling bonds)
Which cost curve creates the supply curve?
Marginal Cost above AVC
What is this called: When prices go up, more of a product is made
Law of supply
A 5% decrease in price leads to a 3% increase in quantity demanded. What is the elasticity
inelastic
The total population is 500,000.
300,000 people are in the working-age population.
Of those, 220,000 are employed.
30,000 are unemployed but actively seeking work.
What is the unemployment rate?
12%
What is ample reserve banking?
When banks keep more money than required in the Federal bank
When does a perfect competition occur?
Low barrier to entry, and all firms are creating identical goods
It would shift it right
The price of a product increases from $2 to $4, and the quantity demanded falls from 100 to 50. Calculate the price elasticity of demand.
1
When in an inflationary gap, what is greater, natural rate of unemployment or current rate of unemployment?
Natural rate is greater
What happens to interest rates during expansionary fiscal policy
Increase
What happens when the demand decreases for a good in perfect competition? Include short and long run
Short: Firms turn a negative profit (loss)
Long: Firms leave
What makes a price floor binding?
When the value of the floor is less than the market price.
What happens to total revenue if price decreases and the good is elastic
total revenue increases
What is someone who is of working age and able to work, but without a job and is not looking for a job called?
Discouraged Worker
During expansionary fiscal policy combined with expansionary monetary policy, what happens to interest rates?
Indeterminate
When does a firm shut down?
When P<AVC