Unit 1
What is scarcity?
The idea that everyone has unlimited wants but limited resources.
What's GDP?
GDP is gross domestic product, essentially all products and services being produced by a country in any given year.
What is AD?
The total demand for good and services in a particular market.
Which is true for both stocks and bonds?
They are financial assets.
T/F: Fiscal policy only affects AD
True
What is diminishing marginal utility?
Over time, as you consume a good or service, every additional time you experience less utility.
What are the factors in the calculation of GDP?
Consumer goods, Investment spending, Government spending, and net exports (exp-imp). GDP = CIG+Xn
What is the quantity of long run AS?
Qfe
True or false: Bonds are more risky than investments
False: Bonds return all money that was lent.
What is recorded as a credit entry in the country’s current account?
Exports of consumer goods
If Honduras makes 50 bananas and Panama makes 100 bananas, who has the absolute advantage in banana production?
Panama
What is the equation for CPI calculation?
100 x (Market basket this year/Market basket last year)
What happens to LRAS during economic growth?
It shifts to the right.
Which of the following rankings lists these assets from the least liquid to the most liquid? [House, bonds, cash, savings account]
House, bonds, savings account, cash
Suppose that the exchange rate between the United States dollar ($) and the Thai currency, baht ฿(฿), is ฿฿1=$0.05. Leticia wants to buy a ฿฿600 souvenir from Thailand. What is the souvenir’s price in dollars?
$30
H makes 50 bananas and 100 carrots, P makes 75 bananas and 75 carrots. Who has comp. advantage in carrot production?
H has the comparative advantage. 100/50 > 75/75
What is the calculation for unemployment rate?
Unemployed/Labor force
Note* This doesn't include unemployed people OUT of the labor force.
Government spends $100B on people. MPC is .7496. Calculate maximum change in the economy after this policy is implemented.
1-.7496 = .2504
1/.2504 = 3.994
3.994 x $100B = $399.4B
Spencer took a 9 percent one-year fixed-rate loan to buy a new car. He expected to pay a real interest rate of 5 percent. If at the end of the year Spencer only paid a 3 percent real interest rate, which of the following is true? The actual inflation rate was 6% or 3%
The actual inflation rate was 6%
Assuming the government of a country imposes a tariff on its imports of foreign goods, what is the likely effect on the country’s currency in foreign exchange markets?
The supply of the currency will decrease and the currency will appreciate.
What does a price ceiling do AND what does a price floor do? AND, because you're getting 500 points, what is the word that describes the price level when a double shift occurs?
Ceiling: Prevents prices from exceeding a threshold
Floor: Keeps prices above a certain threshold
PL: Indeterminate
Name & define all 3 types of unemployment
Frictional: Unemployed caused by a transition or just leaving education, or if you're expecting a job in the near future.
Cyclical: Unemployment caused by a reduced aggregate demand.
Structural: Unemployment caused by an improvement in business, usually technology.
Name all shifters of AD.
AD: Consumer spending, business investment, real incomes, government spending, net exports (I think).
An increase in the price level will affect the money market and bond market in which way?
The nominal interest rate rises, and the price of previously issued bonds falls.
What will most likely cause an inflow of financial capital to Canada?
An increase in the Canadian federal budget deficit