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KEY
TERMS
KEY
CONCEPTS
RANDOM
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- $100
Mention at least 3 factors that cause
a shift in consumer demand:
Changes in:
1. Taste and Preferences
2. Number of Consumers
3. Price of Related Goods
4. Income
5. Future Expectations
- $200
A Production Possibilities Curve (or
Frontier) illustrates trade offs facing an
economy that produces only two goods.
What are the Shifter of a PPC/PPF?
1. Changes in Resource (quantity/quality)
2. Change in Technology
3. Change in Trade
- $300
Determine if the point
shown on the PPC is
Unattainable,
Inefficient, or Efficient.
(A)Efficient
(B)Unattainable
(C)Inefficient
- $400
Supply and Demand Curve
State what each
letter represents.
A)Equilibrium
B)Shortage
C)Surplus
- $500
Based on the chart, what is Japan’s opportunity
cost of making computers? What is U.S’
opportunity cost of making cars?
Cars
Computers
USA
12
4
Japan
10
6
*For every computer, it must give up 5/3
of a car.
*For every car, it must give up 1/3 of a
computer.
- $100
Fill in the missing parts:
Households
The Circular
Flow Model
Goods
and
Services
Money
- $200
Name the 4 components of GDP:
GDP= C+I+G+Xn
1. Consumer Spending
2. Investments
3. Government Expanding
4. Net Exports (Exports-Imports)
- $300
What kind of unemployment are there?
Explain each of them.
1. Frictional-unemployment due to the time
workers spend in job search.
2. Structural-change in the structure of the labor
force make that make some skills absolate.
3. Cyclical-results from a recession.
- $400
If a the government focus too much
on preventing inflation and slows
down the economy, what would
happen?
*there will be unemployment
- $500
Suppose a country has inflation,
determine whether the following
situation would help or hurt a(n):
-lender
-debtor
-saver
-employee with a fixed
income
-hurt
-help
-hurt
-hurt
- $100
Define Aggregate Demand and
Supply:
*Aggregate Demand-all goods and services that
buyers are willing and able to purchase at different
prices.
*Aggregate Supply-amount of goods and services
that firms will produce in an economy at different
price levels.
- $200
Graph and label each of the
following: AD, SRAS, and LRAS.
LRAS
SRAS
Price
Level
AD
Real Domestic Output (Real GDP)
- $300
What is the marginal propensity to
consume? What is its formula?
*MPC-is the average propensity of disposable
income to be consumed.
*calculated by the change in consumption over the
change in disposable income.
____
1
1-MPC
OR
____
1
MPS
- $400
What are the shifters of AD and AS?
*Shifter of AD are changes in:
-Consumer Spending
-Investment Spending
-Government Spending
-Net Exports Spending
*Shifter of AS are:
-Resource Prices
-Actions of the Government
-Productivity/Technology
- $500
What is the Keynesian model? Identify
what fiscal policy would increase AD in
this model.
*the Keynesian model advocates increasing
government spending and lower taxes to stimulate
demand.
*the fiscal policy that would increase AD is
Expansionary Fiscal Policy.
- $100
Define Opportunity Cost:
*the most desirable alternatives given
as a result of a decision.
- $200
Fill in the blank:
“The _______ _______ _______
shows how factors of production go
from households to firms in order to
create goods for people to buy.”
*Circular Flow Model
- $300
Define Normative and Positive
Economics:
*Normative-makes prescriptions about the way the
economy should work, value judgements.
*Positive-a branch of economic analysis that
describes the way the economy actually works,
fact based statements.
- $400
What is Nominal GDP?
*the total value of all goods and services produced
in the economy during a given year, calculated
with the prices current in the year in which the
output is produced.
- $500
Define Discretionary Fiscal Policy:
*it means that the federal government must
take deliberate action or pass a new law
changing taxes or spending during economic
hardships.
- $100
What is the main difference between
Real and Nominal GDP?
*Real GDP is adjusted for price changes; Nominal
GDP is not adjusted for price changes.
- $200
What causes movement along the AS
curve?
*changes in the price level
- $300
According to automatic or built in
stabilizers, what would happen to
taxation during a recession?
*when a recession occurs, taxes usually
decrease because persons and corporations
make less. This gives them extra money to
spend or invest, which helps GDP remain
higher than it would otherwise.
- $400
According to automatic or built in
stabilizers, what would happen to
taxation during a recession?
*when a recession occurs, taxes usually
decrease because persons and corporations
make less. This gives them extra money to
spend or invest, which helps GDP remain
higher than it would otherwise.
- $500
Fill in the blanks:
“The downward sloping aggregate
demand curve is explained by the
_____ ______ effect, the _______
effect, and the _____ _____ effect.”
*interest rate
*wealth (AKA real balance effect)
*net export
- $100
Describe the Ratchet Effect:
*it is rare for prices to fall because its hard for
resources’ prices to fall, therefore laver cost is
rarely to fall. So it is easy for prices to go up but
not down.
- $200
Give at least 3 examples of what is
not included in the measure of GDP.
*stocks and bonds, transfer payments (such as
Social Security benefits), unemployment
compensation, some interest payments, profits
earned by U.S.-owned companies overseas, and
income earned by U.S. citizens working abroad.
- $300
State and give examples of the
factors of production:
*land-minerals, timber, petroleum
*labor-workers
*capital-ovens,sewing machines, robots
*entrepreneurship-taking risks for new
enterprises, innovating, developing a new
production process
- $400
Which type(s) of unemployment is
inevitable?
*Frictional and Structural Unemployment
- $500
What are the Classical economic
assumptions?
1. Prices of resources (wages) are very flexible.
2. Change in AD will not change output; even in
the short run.
3. AD can’t increase without inflation.