Definitions
A deflationary gap
What is an equilibrium at a level of output (Y) that is less than the full-employment level of output (Yf)?
Four components that can cause AD to shift to the right
What are: C, G, I, X-M?
One determinant of PED
What is the number and closeness of substitutes?
Alternative: Necessity of a product, proportion of income spent, time period considered
The main disadvantage of becoming a member of a customs union
"What is trade diversion?"
Alternatively: What is loss of political sovereignty over tariffs?
Formula to calculate YED
What is the percentage change in quantity demanded divided by the percentage change in income?
Natural unemployment
What is seasonal unemployment + structural unemployment + frictional unemployment?
Or what is the level of unemployment at Yf
Three causes of a shift of SRAS to the left
What are: wage increases, rising cost of raw materials and rising costs of imports?
Alternative: Indirect taxes
One economic and one social/political barrier to development
"What are: informal markets and weak institutions?"
Other econ: inequality, lack if infrastructure/technology, low human capital, dependency on primary goods, lack of market access, capital flight, indebtedness.
Other social/political: gender inequality, lack of good governnace, political instability
Two advantages of a fixed exchange rate
"What are low exchange rate uncertainty and reduced currency speculation?"
Formula to calculate real interest rates
What is nominal interest rates minus inflation rate?
Three elements of the financial account
What are: direct investment, portfolio investment and reserve assets
Condition for tax burden to be larger for consumers than producers
What is PED < PES?
Three common characteristics of developing countries
What are: high dependency burdens, underemployment, and dependence on primary products?
Alternative: Low living standards, low productivity, high rates of population growth, imperfect information and market failures, vulnerability in int'l trade
Three challenges encountered when measuring inflation
"What are atypical households, geographical differences, quality of goods?"
Alternatively: Int'l comparisons, unsustained changes and CPI vs. producer prices
GNI - GDP
What is net property income from abroad?
Four elements of the current account
What are: balance in trade in goods and services, income and current transfers?
The amount of profit earned in monopolistic competition in the long-run
What is none?
Four cognitive biases
What are: availability bias, achoring bias, framing bias, and herd behaviour?
Alternatives: Status quo, loss aversion, hyperbolic discounting
Four gains of free trade
"What are lower prices, greater consumer choices, economies of scale, and efficient resource allocation?"
Alternatively: more competition, sources of foreign exchange, access to different resources
a + b + c + d + e + f
What is the fall in consumer surplus from implementing tariffs or quotas?
Reserve assets on the BoP
What are: Reserves of gold and foreign currencies at the central bank?
Five causes of a rise in demand for a floating currency
What are: rise in X-M, lower inflation than in other countries, rise in FDI, a rise in interest rates and government selling foreign currency?
Alternative: Speculation, higher income growth abroad
Five assumptions of perfect competition
"What are: very large number of firms, each firm is relatively small, identical products, free exit/entry and perfect information?"
Five costs of deflation
"What are: deferred consumption, drop in investment, costs to debtorsc, falling consumer confidence and policy ineffectiveness?"
Alternatively: Unemployment
Formula to calculate amount spent on VAT out of total spending
What is the amount spent * VAT rate / (VAT rate + 100%)?