Applied Economics Overview
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Questions and Answers

What primary factor determines the market price and quantity of goods sold?

  • Production costs
  • Supply and demand interaction (correct)
  • Government regulations
  • Consumer income levels

Which type of market structure is characterized by many firms selling identical products with no barriers to entry?

  • Oligopoly
  • Monopolistic Competition
  • Perfect Competition (correct)
  • Monopoly

What does price elasticity of demand measure?

  • The relationship between demand and supply
  • The responsiveness of quantity supplied to price changes
  • The sensitivity of quantity demanded to price changes (correct)
  • The effect of consumer income on product demand

What is a key concept firms must understand in order to maximize profits?

<p>Fixed and variable costs (B)</p> Signup and view all the answers

Which of the following best describes an oligopoly?

<p>A market with a few firms that can collude (C)</p> Signup and view all the answers

What is one primary reason for understanding macroeconomics?

<p>To formulate policies for economic stability (C)</p> Signup and view all the answers

Which of the following best describes microeconomics?

<p>The decisions of individual consumers and firms (B)</p> Signup and view all the answers

What role does the interaction between supply and demand play in the market?

<p>It determines the market price and quantity of goods sold. (B)</p> Signup and view all the answers

How is price elasticity of demand defined?

<p>It indicates how demand responds to price changes. (D)</p> Signup and view all the answers

What does elasticity in economics measure?

<p>The response of quantity demanded or supplied to price changes. (B)</p> Signup and view all the answers

What is one of the primary reasons that Economics is considered a scientific discipline?

<p>Economic motives are regular and persistent. (A)</p> Signup and view all the answers

Why is factual information in the form of statistics important in Economics?

<p>It helps verify and form alternative economic theories. (C)</p> Signup and view all the answers

What does Macroeconomics focus on?

<p>Aggregate changes and trends in the overall economy. (A)</p> Signup and view all the answers

What role do economic motives play in resource allocation decisions?

<p>They provide insights into human behavior in economic contexts. (A)</p> Signup and view all the answers

What are the two main branches of Economics?

<p>Macroeconomics and Microeconomics. (B)</p> Signup and view all the answers

What does the term 'economics' mean in its Greek origin?

<p>Household management (C)</p> Signup and view all the answers

According to Fajardo, what is the main focus of economics?

<p>Efficient allocation of resources (C)</p> Signup and view all the answers

Which option best describes Samuelson's view on economics?

<p>It examines the production and distribution of goods using scarce resources. (A)</p> Signup and view all the answers

How does Nordhaus define economics?

<p>As the science of choice regarding scarce resources. (D)</p> Signup and view all the answers

What is one key focus of economics?

<p>Understanding how societies allocate scarce resources (B)</p> Signup and view all the answers

What fundamental aspect does economics study?

<p>Rational human behavior in meeting needs (A)</p> Signup and view all the answers

Which of the following definitions aligns with the study of economics according to Castillo?

<p>The best allocation and utilization of scarce resources to satisfy unlimited wants (C)</p> Signup and view all the answers

How does understanding economics contribute to practical applications?

<p>It helps in making informed decisions about resource utilization (B)</p> Signup and view all the answers

What is a significant social impact of studying economics?

<p>Providing a framework for understanding citizen challenges and promoting government growth (B)</p> Signup and view all the answers

Which aspect is NOT typically considered part of economics based on the definitions provided?

<p>Distribution of wealth among all citizens (B)</p> Signup and view all the answers

What is a theory in economics typically based on?

<p>Predictions confirmed by observations (D)</p> Signup and view all the answers

How does economics categorize as a science?

<p>It establishes laws through observations and experiments. (C)</p> Signup and view all the answers

What aspect of human activity does economics primarily study?

<p>Human behavior in the production and consumption of goods (B)</p> Signup and view all the answers

Which of the following is NOT a focus of economics?

<p>Human emotions in decision-making (A)</p> Signup and view all the answers

In what way is economics related to other social sciences?

<p>It interacts with multiple disciplines including psychology, history, and geography. (B)</p> Signup and view all the answers

What does GDP measure?

<p>Total value of finished goods and services produced within a country's borders (B)</p> Signup and view all the answers

What is indicated by a high unemployment rate?

<p>Economic distress (A)</p> Signup and view all the answers

What is inflation commonly associated with?

<p>Rise in the general level of prices (D)</p> Signup and view all the answers

Which of the following is NOT an example of fiscal policy?

<p>Monetary supply adjustment (D)</p> Signup and view all the answers

What is the primary goal of monetary policy?

<p>Achieve macroeconomic objectives (D)</p> Signup and view all the answers

What purpose do stimulus packages serve during economic recessions?

<p>Boost economic activity through spending and tax cuts (D)</p> Signup and view all the answers

How do tax cuts affect consumer behavior?

<p>They increase disposable income (B)</p> Signup and view all the answers

How do central banks influence the money supply?

<p>Through open market operations (B)</p> Signup and view all the answers

What happens when central banks lower interest rates?

<p>Investment and spending are encouraged (C)</p> Signup and view all the answers

What is the role of social welfare programs in fiscal policy?

<p>To support individuals during economic downturns (B)</p> Signup and view all the answers

What is quantitative easing?

<p>Purchasing longer-term securities to increase money supply (A)</p> Signup and view all the answers

What action might a government take during periods of high inflation?

<p>Reduce government spending or raise taxes (B)</p> Signup and view all the answers

What effect does raising reserve requirements have on banks?

<p>Reduces the money supply (B)</p> Signup and view all the answers

During which situation might a central bank lower interest rates?

<p>When the economy is in a recession (C)</p> Signup and view all the answers

What is forward guidance in monetary policy?

<p>Communicating future policy intentions (D)</p> Signup and view all the answers

What action might central banks take during an economic crisis?

<p>Engage in quantitative easing (A)</p> Signup and view all the answers

Flashcards

Supply

The quantity of a good or service that producers are willing to sell at various prices.

Demand

The quantity of a good or service that consumers are willing to buy at various prices.

Elasticity

The responsiveness of quantity demanded or supplied to changes in price.

Perfect Competition

A market structure where many firms sell identical products with no barriers to entry.

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Monopoly

A market structure where a single firm controls the entire market.

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What is Economics?

The study of how individuals and society make choices when facing scarcity.

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Why study Economics?

Economics looks at how societies use limited resources to satisfy unlimited wants.

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Practical Use of Economics

Understanding economics helps people make better choices about their money, work, and spending.

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Social Impact of Economics

Economics can help us analyze social problems like poverty, inequality, and even crime.

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Government and Economics

Economics helps governments understand how to manage the economy, control inflation, and create jobs.

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Origins of Economics

Economics is rooted in the concept of "OIKONOMIA," which translates to "household management" in Greek.

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Fajardo's definition of economics

Efficient allocation of limited resources to maximize human satisfaction.

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Samuelson's definition of economics

Economics examines the process of using scarce resources to create valuable goods and services, and distributing them fairly.

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Nordhaus's definition of economics

Economics is the study of decision-making, focusing on how individuals and societies choose to utilize scarce resources to produce and distribute goods and services.

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Microeconomics

The study of how individuals and businesses make decisions about allocating limited resources. It looks at how these decisions affect markets, prices, and supply and demand.

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Interaction of Supply and Demand

The interaction between supply and demand determines the market price and quantity of goods sold.

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What is an Economic Theory?

A specific explanation for an economic event, often tested and validated through observation.

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Why is Economics a Social Science?

Economics is about the study of people, their choices, and their interactions within a system.

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What is the core focus of Economics?

The study of the relationship between the production, distribution, and consumption of goods and the transfer of wealth needed to obtain those goods.

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How is Economics related to other sciences?

Economics is intertwined with other disciplines like psychology, history, sociology, political science, and geography, to understand human interactions.

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Economic Motives

The study of how individuals make decisions about allocating scarce resources, such as time, money, and effort.

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Economic Statistics

Data that provides information about economic activities, like production, consumption, and employment.

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What are economic motives?

The reasons why individuals choose one course of action over another when making economic decisions.

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What is GDP?

The total value of all goods and services produced within a country's borders in a specific time period.

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What is the unemployment rate?

The percentage of the labor force actively seeking work but unable to find it.

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What is inflation?

The rate at which prices for goods and services rise, decreasing purchasing power.

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What is fiscal policy?

Government spending and tax policies designed to influence the economy.

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What are stimulus packages?

Government spending programs designed to stimulate the economy, often used during recessions.

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What is infrastructure investment?

Government investments in infrastructure projects, like roads and bridges.

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What are tax cuts?

Reducing tax rates to increase disposable income for consumers, potentially leading to increased spending.

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What are social welfare programs?

Government programs like unemployment benefits or food assistance, designed to support individuals during economic hardships.

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What is monetary policy?

The central bank, acting as the nation's financial manager, uses monetary policy to manipulate the money supply and interest rates, aiming to control inflation, spending, growth, and liquidity within the economy.

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How do interest rates impact the economy?

A benchmark interest rate set by the central bank affects the lending rates between banks. Lower rates encourage borrowing and spending, while higher rates can cool down an overheated economy.

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What is the money supply?

The central bank manages the amount of money circulating within the economy, influencing its overall activity.

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Explain open market operations.

The central bank buys or sells government bonds to influence the money supply. Buying bonds injects money, while selling bonds removes it from circulation.

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What is the role of reserve requirements?

The central bank sets minimum reserves that banks must hold, influencing their lending capacity. Lowering reserves allows more lending, while raising them restricts it.

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Define quantitative easing.

A non-traditional monetary policy where the central bank purchases long-term securities to increase the money supply and encourage lending and investment.

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What is forward guidance?

The central bank communicates its future plans regarding interest rates and other policies to shape expectations and influence economic behavior.

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How can monetary policy address a recession?

In response to an economic downturn, the central bank may lower interest rates to encourage borrowing and stimulate spending.

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Study Notes

Applied Economics

  • Economics can be seen as the study of complex tables, charts, and statistics, but it's about rational human behaviour to meet needs and wants
  • The word "economics" comes from the Greek word "oikonomia", which means "household management".
  • Different definitions of Economics:
    • Fajardo: Efficient allocation of scarce resources for maximum satisfaction of human wants
    • Samuelson: Study of how societies use scarce resources to produce valuable commodities and distribute them among different people
    • Nordhaus: Science of choice; study of how people choose to use scarce resources to produce and distribute various commodities for consumption

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Description

Explore the fundamental concepts of applied economics through various definitions and the significance of resource allocation. Understand how economics pertains to human behavior as it relates to meeting needs and wants. Gain insights into the historical context of the term and its application in societal decision-making.

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