Principles of Economic
As the weather gets colder the Ustore does a clearance sale on all tank tops and shorts in hopes to sell out their summer clothing. This is an example of what theory?
People Respond to Incentives
How do you label the axis for a supply and demand graph?
Quantity on the x axis and price on the Y axis
How do we find Net Exports (NX)
Exports β Imports
What do you call a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond
A Bond
Tara has an extra $50 to spend this week. She is thinking about getting either a $50 Stanley or going out to dinner with the $50. This is an example of what theory?
People face Trade offs
What is the point where Demand and Supply Meet called?
Equilibrium
What is a trade deficient and a trade surplus?
When we have more imports than exports we have a trade deficient β NX is negative. When we have more exports than imports we have a trade surplus NX is positive.
The Reserve requirement ratio is 25%
What is the money multiplier?
4
Fill in the blank:
Society faces a ______ between unemployment and inflation
Trade off
What happens to Price and Quantity when supply decreases
Price increase Quantity decreases
Nominal uses current prices, real uses a base year for prices. Real GDP is adjusted for price changes over time
The Reserve requirement ratio is 10%
If John deposits $100 in the bank how much can the bank loan out?
$90
What principles of Economics explain how people interact?(3)
Trade can make everyone better off, Markets are usually a good way to organize an economy, Governments can sometimes improve market outcomes.
Peanut butter is on clearance, the prices dropped by more than half!! Assuming Peanut butter and Jelly are compliments, what happens to the Jelly market?
Jelly demand increases β when the price of a compliment falls the demand for it supplement increases
How do we calculate the inflation rate?
Inflation Rate = (πΆππ ππ’πππππ‘ π¦πππβπΆππΌ πππ π π¦πππ/πΆππΌ π΅ππ π π¦πππ) *100
List the maturities of a bond and their time frames (3)
short term (one to five years), medium term (six to
twelve years), and long term (greater than twelve years)
Typically, when the government increases the money supply, prices change. What happens to prices and what principle supports this claim?
Prices will increase.
Principle 9: Excess printing of money by the government increases prices
In august a hurricane hit Florida and caused a power outage throughout the state. What will happen to the market for generators (specifically price and quantity) ?
The demand for generators will increase (shift right) causing an increase in price and an increase in quantity
How do we calculate the CPI and what does it tell us ?
CPI= Cost of Basket in Current Year/ Cost of Basket in Base Year *100
CPI measures the change in prices paid by consumers for a basket of goods and services over time
What happens in the Economy when the FED increases the reserve requirements?
They will decrease the money supply, making credit more expensive (increase interest rate).