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Bell Ringer Grab Your Clickers Demand increases (curve shifts right) When: Income P sub P comp # buyers Consumers expect P soon Supply increases (curve shifts right) When profits When: Affects buyer!!! Input costs Productivity Technology Business taxes # sellers Gov’t regulations Affects seller!!! 1. Marginal cost of workers is $276. How many workers should be hired? A) 11 B) 12 C) 13 D) 14 E) 15 # Workers Total Revenue 10 $1150 11 $1450 12 $1700 13 $1865 14 $1950 15 $1998 A) If the price of iPods B) goes down, how will this affect the supply and/or Q supplied of C) iPods? D) A) If the price of B) pepperoni goes up, how will this affect the supply and/or Q C) supplied of pizza? D) A) If corporate tax rates B) increase, how will this affect the supply and/or Q supplied of C) products made by corp.’s? D) A) Two new companies start B) making flat screens. How will this affect the C) supply and/or Q supplied of flat D) screens? A) An advance in insecticide B) technology allows for greater cotton yields. How will this C) affect the supply and/or Q supplied of cotton? D) Economics Study Guide I. Fundamental Concepts Scarcity=unlimited wants but limited resources 4 Factors (LLCE), 3 Q’s (What, How, For Who?) Opportunity Cost: next best alternative Specialization = doing 1 thing Division of Labor = break big job up into small jobs Buyer & seller both gain from voluntary exchange. Productivity-relationship of outputs to inputs Add more as long as MR>MC. 1) What is the opportunity cost of 90 guns? A) 90 butter B) 50 guns C) 50 butter D) 90 guns 2) Which point represents resources that are available but are not being used? A) A B) B C) C D) D 3) Which point represents a level of production currently unattainable? A) A B) B C) C D) D 4) 5) Island scenario I. Fundamental Concepts Continued Freedom Security Equity Growth Efficiency Price Stability Employment Command Market _____]-------------------------------------------[________ Brazil U.S. France China N.Korea 6) Which economic system is better at the economic goal of security? A) Traditional B) Command C) Mixed D) Market 7) 8) Parking lot in command economy II. Microeconomic Concepts II. Microeconomic Concepts Continued 9) What do numbers 5 & 7 represent? A) Consumer Spending B) Goods & Services C) Income D) Land, Labor, Capital, Entrepreneurship 10) What do #’s 1 & 3 represent? A) Consumer Spending B) Goods & Services C) Income D) Land, Labor, Capital, Entrepreneurship 11) What do #’s 6 & 8 represent? A) Consumer Spending B) Goods & Services C) Income D) Land, Labor, Capital, Entrepreneurship II. Microeconomic Concepts Continued Demand increases (curve shifts right) When: Income P sub P comp # buyers Consumers expect P soon Supply increases (curve shifts right) When profits When: Affects buyer!!! Input costs Productivity Technology Business taxes # sellers Gov’t regulations Affects sellerer!!! II. Microeconomic Concepts Continued Roles of money: med.of exchange, store of value, unit of measure Supply & demand curves meet at equilibrium price & quantity Price floors cause surpluses Price ceilings cause shortages Elasticity is sensitivity to price changes Pet milk=elastic; Cigarettes=inelastic 12) 13) What is a surplus? A) when Q supplied > Q demanded B) when Q demanded > Q supplied 14) What will result if the seller charges $2? A) A surplus, because Qs will be > Qd. B) A shortage, because Qs will be > Qd. C) A surplus, because Qs will be < Qd. D) A shortage, because Qs will be < Qd. $3 15) Which best describes a price floor? A) Maximum price, causes shortage B) Minimum price, causes surplus C) Maximum price, causes shortage D) Minimum price, causes surplus 16) II. Microeconomic Concepts Continued Corporation-limited liability, double taxation Sole P. & Partnerships-unlimited (high) liability Monopoly-1 seller Oligopoly-Few sellers, price leadership, interdependence Perfect-Many, Identical, No barriers Monopolistic-Like perfect but product not identical The Prisoner’s Dilemna Dueling Gas Stations Soda Oligopoly 17) 18) It is easy to start a taxi-cab business, & there are a lot of them. Some use nicer cars than others. Some use hybrid cars. Fares vary somewhat between companies. What kind of market structure best describes the taxi-cab business? A) monopoly B) oligopoly C) monopolistic competition D) perfect competition III. Macroeconomic Concepts GDP=C+I+G+(X-M) (X-M) = Net Exports GDP: $ value of all final goods/ services CPI: measures INFLATION Stagflation: recession+inflation Structural, Cyclical, Frictional, Seasonal Biz Cycle: Recession (6 mo’s- peak to trough), Expansion Debt: TOTAL owed Federal deficit: expenditures > receipts in 1 yr 19) If U.S. citizens buy more Colombian coffee, & all other spending stays the same, then GDP… A) goes up B) goes down C) stays the same 20) Which letter best represents a recession? A) W B) X C) Y D) Z III. Macroeconomic Concepts Continued Monetary policy: using $ supply & interest rates to help economy Fed expands money supply with Bu.L.L.L.buying bonds (securities), lower reserve req, lower discount rate, lower federal funds rate. Fiscal policy: gov’t TAXING/SPENDING to help the economy Countries should specialize in making what they have a comparative advantage in, & trading. Tariff: tax on imports. Quota: limit on # of imports. 21) In an attempt to stimulate the economy, the government decides to spend more money on highway/road programs. This decision is a good example of: A) Easy monetary policy B) Tight monetary policy C) Fiscal Policy D) Contractionary Policy 22) 23) 24) 25) 26) 27) 28) IV. International Economics Absolute Advantage: I can produce more with same amount of resources. Comparative Advantage: I can produce at a lower opportunity cost than you. When we specialize in what we have a comparative advantage in, and trade, EVERYONE benefits. Exchange rates: strong dollar good for buyers of foreign goods, bad for U.S. sellers. A weak dollar means more exports & economic growth. Cell Phone/Microwave Activity V. Personal Finance Economics Spread: interest charged minus interest paid Low risk = low return Bonds are LOANS Mutual funds: corporations that buy stock in other corporations Inflation HELPS borrower, HURTS lender Progressive: higher income, higher rate (income tax) Proportional: flat rate (Medicare) Regressive: lower income, higher rate (sales tax) Credit Rating- based mostly on payment history 29) 30) 31) 32)