Economic Concepts Quiz

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is opportunity cost?

The value of the best alternative forgone when making a choice.

What does the Paradox of Thrift state?

Increased saving, while beneficial for individuals, can lead to decreased aggregate demand and, subsequently, reduced economic output and employment.

What happens when labor force participation goes up?

It leads to an increase in the supply of labor, potentially lowering wages and increasing output in the economy.

What is the difference between GDP (C + I + G + NX) and real GDP?

<p>Nominal GDP measures the value of all goods and services produced in a country at current prices, while real GDP removes the effects of inflation, providing a more accurate picture of economic growth.</p> Signup and view all the answers

What are CPI and a consumer price index?

<p>The Consumer Price Index (CPI) is a measure of the average change in prices paid by urban consumers for a basket of consumer goods and services.</p> Signup and view all the answers

What is the difference between Nominal GDP and Real GDP?

<p>Real GDP is measured in constant prices and reflects the changes in the quantities of goods and services produced, not the prices. (B), Nominal GDP measures the value of all goods and services produced in a country at current prices, while real GDP removes the effects of inflation, providing a more accurate picture of economic growth. (D)</p> Signup and view all the answers

What are cyclical and natural unemployment?

<p>Cyclical unemployment arises due to fluctuations in the business cycle, while natural unemployment includes frictional and structural unemployment, which are inherent features of the economy.</p> Signup and view all the answers

What is the meaning of a unit of account?

<p>It refers to the function of money that allows for the valuation and comparison of different goods and services.</p> Signup and view all the answers

What is the definition of "Paradox of Thrift"?

<p>A paradox where attempts to save more during a recession can actually worsen the recession.</p> Signup and view all the answers

What is the definition of "labor force"?

<p>The total number of people who are either employed or unemployed but actively seeking work.</p> Signup and view all the answers

Cyclical unemployment is a result of a lack of demand.

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

Natural unemployment is a result of structural changes in the economy.

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

What is the relationship between the short-run aggregate supply curve and the long-run aggregate supply curve?

<p>The short-run aggregate supply curve is upward sloping, while the long-run aggregate supply curve is vertical. This is because in the short run, firms are able to adjust prices and output, but in the long run, they can only adjust output as prices are fixed. This is because in the long run, all factors of production are fully employed.</p> Signup and view all the answers

What does "o multiplier" mean?

<p>It refers to the effect that a change in autonomous spending has on real GDP. In other words, it's the ratio of the change in real GDP to the initial change in autonomous spending.</p> Signup and view all the answers

The price level affects the aggregate supply in the long run.

<p>False (B)</p> Signup and view all the answers

Flashcards

Opportunity Cost

The value of the best forgone alternative when making a choice.

Paradox of Thrift

Increased saving can decrease overall economic activity.

GDP

The total value of all final goods and services produced in an economy.

GDP Components

GDP = Consumption (C) + Investment (I) + Government Spending (G) + Net Exports (NX).

Signup and view all the flashcards

Consumption (C)

Spending by households on goods and services.

Signup and view all the flashcards

Investment (I)

Spending by businesses on capital goods.

Signup and view all the flashcards

Government Spending (G)

Spending by the government on goods and services.

Signup and view all the flashcards

Net Exports (NX)

Exports minus imports.

Signup and view all the flashcards

Frictional Unemployment

Unemployment due to the time it takes to find a job.

Signup and view all the flashcards

Structural Unemployment

Unemployment caused by a mismatch between worker skills and available jobs.

Signup and view all the flashcards

Cyclical Unemployment

Unemployment caused by economic downturns.

Signup and view all the flashcards

Nominal GDP

GDP measured in current prices.

Signup and view all the flashcards

Real GDP

GDP adjusted for inflation.

Signup and view all the flashcards

CPI

A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Signup and view all the flashcards

Cost of Living

The total cost of purchasing goods and services needed to maintain a certain standard of living.

Signup and view all the flashcards

Inflation

A general increase in prices of goods and services.

Signup and view all the flashcards

Interest Rates

The cost of borrowing money or the return on lending money.

Signup and view all the flashcards

Government Policy

Actions taken by governments to influence the economy, like taxes and spending.

Signup and view all the flashcards

Multiplier Effect

The idea that an initial change in spending can have a larger impact on overall economic activity.

Signup and view all the flashcards

National Savings

The total amount of money saved by households, businesses, and governments.

Signup and view all the flashcards

Supply and Demand of Loans

The forces that determine the interest rate for loans.

Signup and view all the flashcards

What Influences Interest Rates?

Factors like inflation, government policy, and economic growth influence the cost of borrowing.

Signup and view all the flashcards

Bonds

A type of loan where the borrower promises to pay back the principal plus interest.

Signup and view all the flashcards

Stocks

Shares of ownership in a company.

Signup and view all the flashcards

Bank Deposits

Money deposited into a bank account.

Signup and view all the flashcards

Impact of Inflation on Loans

Inflation can erode the value of the money repaid on a loan, making it less valuable than when it was borrowed.

Signup and view all the flashcards

Tax Changes and Interest Rates

Tax changes can affect the cost of borrowing by influencing the supply and demand for loanable funds.

Signup and view all the flashcards

Government Spending and Real GDP

Government spending can stimulate economic growth by boosting demand.

Signup and view all the flashcards

Multiplier Effect of Government Purchases

Government purchases have a larger impact on GDP than the initial amount spent, due to subsequent rounds of spending.

Signup and view all the flashcards

Multiplier Effect of Taxation

Taxes reduce disposable income, leading to a decrease in spending and a smaller impact on GDP than the initial amount taxed.

Signup and view all the flashcards

Relationship between Real GDP and Economic Indicators

Economic indicators like unemployment and inflation are often correlated with the level of real GDP.

Signup and view all the flashcards

Relationship between National Savings and Economic Indicators

Higher national savings can lead to lower interest rates, stimulating investment and economic growth.

Signup and view all the flashcards

Loan Types and Interest Rates

Different types of loans have different interest rates depending on the risk and maturity of the loan.

Signup and view all the flashcards

Study Notes

Economic Concepts

  • Scarcity: Limited resources, forcing choices.
  • Opportunity Cost: Value of the next best alternative forgone.
  • Producer Surplus: Difference between market price and minimum price a producer is willing to accept.
  • Paradox of Thrift: Increased saving can lead to decreased spending and a lower GDP when there is reduced demand.
  • Labor Force: Individuals employed or actively seeking employment.
  • Labor Participation Rate: Percentage of labor force in the labor force.
  • Unemployment: Individuals actively seeking work but unable to find it.
    • Frictional Unemployment: Temporary unemployment while searching for a new job.
    • Structural Unemployment: Unemployment due to a mismatch between available job skills and available jobs.
    • Cyclical Unemployment: Unemployment resulting from fluctuations in the business cycle.
    • Natural Unemployment: The rate of unemployment that occurs when the economy is at full employment.

Economic Measures

  • GDP (Gross Domestic Product): Total market value of all final goods and services produced in a country in a given period.
  • CPI (Consumer Price Index): Measures the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.
  • Nominal GDP: GDP measured in current market prices.
  • Real GDP: GDP adjusted for inflation, expressed in constant prices.
  • PPI (Producer Price Index): Measures the average change over time in prices received by domestic producers for their output.

Economic Relationships

  • GDP Formula: GDP = C + I + G + NX (Consumption + Investment + Government Spending + Net Exports).
  • Inflation: A general increase in the average price level of goods and services in an economy over a period of time.
  • Deflation: A general decrease in the average price level of goods and services in an economy over a period of time.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

More Like This

Types of Unemployment Flashcards
10 questions
Unemployment Concepts and Types
24 questions
Use Quizgecko on...
Browser
Browser