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econ-macro
exam 1
| Question | Answer |
|---|---|
| the mechanism of supply and demand is | a fundamental tool in both microeconomics and macroeconomics |
| when used in a professional or technical sense, the law of supply and demand refers to | the market forces that show how prices and quantities are determined |
| during the american revolution, the Pennsylvania legislature enacted price controls on essential commodities. The result of this legislation was | a severe shortage of those essential commodities |
| a demand schedule is a table showing how the _____ of some product during a specified period of time changes as ____ changes, holding all other determinants of quantity demanded constant. | quantity demanded, the price of that product |
| the slope of a demand curve is almost always | negative |
| why is the slope of a demand curve almost always negative? | because with everything else equal, the same people will buy more of a good hen its price is lower |
| in an attempt to forcast enrollment, a major university hired an economist to give a "head count". One variable which she would probably emphasize more than any other in trying to forecast this is... | tuition (the price of attending) |
| if the price rises, what happens to demand for a product? | it decreases |
| an important assumption that is made when constructing a demand schedule is that.... | all other determinants of demand are held constant |
| firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to quantity of money demanded if the interest rate increases? | the quantity of money decreases |
| what shifts the demand curve for milk? | change in the income of buyers of milk |
| sugarcane can be used for producing both sugar and ethanol. New regulations in certain countries now allow a higher level of ethanol in gasoline. An economist would expect sugarcane prices to____, and quantity sold to _____. | rise, rise |
| along a supply curve, | quantity supplied changes as price changes |
| an upward-sloping supply curve shows that | suppliers are willing to increase production of their goods if they can receive higher prices for them |
| if price rises, what happens to supply for a product? | it does not change |
| if price rises, what happens to quantity supplied for a product? | it increases |
| an important assumption that is made when constructing a supply schedule is... | all other determinants of supply are held constant |
| a shift in the supply curve of bicycles resulting from higher steel prices will lead to... | higher prices of bicycles |
| In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by... | the release of a medical study showing that ice cream consumption improves mental health |
| the demand for computers has risen dramatically at the same time that the unit cost of production has decreased. As a result, we can expect.. | an increase in output with no predictable change in price |
| a severe freeze has once again damaged the Flordia orange crop. The imact on the market for oranges will be a leftward shift in... | the supply curve |
| two studies published in the New England Journal of Medicine link the risk of breast cancer to alcohol consumption. Young women who have nine drinks per week were reportedly 150% more likely to develop breast cancer. Considering the market for alcohol, | down the supply curve as the demand curve shifts |
| if the supply curve for housing has the normal positive slope, rent controls will likely... | increase the demand for housing |
| to be effective, a price floor must be.. | above the equilibrium price |
| the united states typically experiences a large surplus of milk annually. This is caused by... | a price floor in the market |
| what is a production indifference map? | a graph whose axes show the quantities of two inputs that are used to produce some output |
| what is a decision is the value of the next best alternative that must be given up because of that decision? | opportunity cost |
| abstraction | means ignoring many details so as to focus on the most important elements of a problem |
| two variables are said to be correlated if they tend to.. | go up or down together. |
| what is an economic model? | a simplified, small-scale version of an aspect of the economy. |
| how are economic models often expressed? | in equations, by graphs, or in words |
| how can nations gain from trade? | by exploiting their comparative advantage |
| both parties gain in.. | a voluntary exchange |
| What do policy makers face in the short run? | a trade-off between inflation and unemployment. Policies that reduce one normally increase the other |
| In the long run, what is almost the only thing that matters for a society's material well-being? | productivity |
| invisible hand | a phrase used by Adam Smith to describe how, by pursuing their own self-interests, people in a market system are "led by an invisible hand" to promote the well being of the community |
| quantity demanded | a number of units of a good that consumers are willing and can afford to buy over a specified period of time |
| a demand schedule | a table showing how the quantity demanded of some product during a specified period of time changes as the price of that product changes, holding all other determinants of quantity demanded constant |
| a demand curve | a graphical depiction of a demand schedule. It shows how the quantity demanded of some product will change as the price of that product changes during a specified period of time, holding all other determinants of quantity demanded constant |
| shift in a demand curve | occurs when any relevant variable other than price changes. If consumers want to buy more at any and all given prices than they wanted previously, the demand curve shifts to the right (outward). If they desire less at any given price, the demand curve s |
| quantity supplied | the number of units that sellers want to sell over a specified period of time |
| supply schedule | a table showing how the quantity supplied of some product changes as the price of that product changes during a specified period of time, holding all other determinants of quantity supplied constant |
| supply curve | graphical depiction of a supply schedule. It shows how the quantity supplied of a product will change as the price of that product changes during a specified period of time, holding all other determinants constant |
| supply-demand diagram | graphs the supply and demand curves together. It also determines the equilibrium price and quantity |
| shortage | an excess of quantity demanded over quantity supplied. Buyers cannot purchase the quantities they desire at the current price |
| surplus | an excess of quantity supplied over quantity demanded. Sellers cannot sell the quantities they desire to supply at the current price |
| equilibrium | situation in which there are no inherent forces that produce change. Changes away from an equilibrium position will occur only as a result of "outside events" that disturb the status quo |
| the law of supply and demand | states that in a free market the forces of supply and demand generally push the price toward the level at which quantity supplied and quantity demanded are equal |
| price ceiling | maximum that the price charged for a commodity cannot legally exceed |
| price floor | legal minimum below which the price charged for a commodity is not permitted to fall |
| aggregated demand curve | shows the quantity of domestic product that is demanded at each possible value of the price level |
| aggregated supply curve | shows the quantity of domestic product that is supplied at each possible value of the price level |
| inflation | refers to a sustained increase in the general price level |
| recession | period of time during which the total output of the economy declines |
| GDP | gross domestic product |
| gross domestic product (GDP) -def- | the sum of the money values of all final goods and services produced in the domestic economy and sold on organized markets during a specified period of time, usually a year |
| nominal GDP | calculated by valuing all outputs at current prices |
| real GDP | calculated by valuing outputs of different years at common prices |
| what is a better measure of changes in total production? | real GDP |
| final goods and services | are those that are purchased by their ultimate users |
| intermediate good | a good purchased for resale or for use in producing another good |
| real GDP per capita | the ratio of real GDP divided by population |
| deflation | refers to a sustained decrease in the general price level |
| fiscal policy | is its plan for spending and taxation. It can be used to steer aggregate demand in the desired direction |
| stagflation | is inflation that occurs while the economy is growing slowly ("stagnating") or in a recession |
| monetary policy | refers to actions taken by the Federal Reserve to influence aggregate demand by changing interest rates |
| stabilization policy | the name given to government programs designed to prevent or shorten recessions and to counteract inflation (stabilize prices) |
Created by:
cbalaban