Economics Exam

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Questions and Answers

Which of the following best describes the fundamental economic problem?

  • Human wants are unlimited, but resources are limited. (correct)
  • Countries always face trade deficits.
  • Governments struggle to balance budgets.
  • Businesses aim to maximise profits.

Scarcity only affects poor countries; wealthy countries have overcome the problem of scarcity.

False (B)

Explain the concept of opportunity cost using an example from a student's life.

Opportunity cost is the value of the next best alternative forgone when making a decision. For example, if a student chooses to spend three hours studying for an economics exam, the opportunity cost might be the three hours they could have spent working at a part-time job or studying for a different subject.

A graphical representation showing the maximum combinations of goods and services that can be produced with given resources and technology is called a Production Possibility [Blank].

<p>Frontier</p> Signup and view all the answers

Match the sector with its primary role in the circular flow of income:

<p>Households = Provide resources and consume goods/services Firms = Produce goods/services and employ resources Government = Provides public goods/services and regulates the economy Financial Sector = Intermediates between savers and borrowers</p> Signup and view all the answers

Which action by the government is most likely to increase economic activity during a recession?

<p>Increasing government spending (C)</p> Signup and view all the answers

Equilibrium in a market occurs when quantity demanded is greater than quantity supplied.

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

Briefly describe two phases of the economic cycle and a characteristic of each.

<p>Expansion: characterised by increasing GDP, employment, and consumer confidence. Recession: characterised by decreasing GDP, rising unemployment, and reduced consumer spending.</p> Signup and view all the answers

The total value of all final goods and services produced within a country's borders in a specific time period is known as [Blank] [Blank] Product.

<p>Gross Domestic</p> Signup and view all the answers

An increase in consumer income, holding all other factors constant, will most likely cause:

<p>An increase in the demand for normal goods. (B)</p> Signup and view all the answers

Flashcards

Economic problem

The fundamental issue of limited resources versus unlimited wants.

Scarcity

The limited availability of resources to meet unlimited wants and needs.

Opportunity cost

The value of the next best alternative that is forgone when making a decision.

Production possibility schedule

A table showing the maximum possible combinations of two goods that can be produced with given resources and technology.

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Production possibility frontier

A graph illustrating the maximum possible combinations of two goods that can be produced with given resources and technology.

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Circular flow of income

A model showing the flow of goods, services, and money between households and firms, including the roles of government, financial sector, and international sector.

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Equilibrium and disequilibrium

A state where supply equals demand, or a situation where supply and demand are not equal.

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Economic cycle

The fluctuations in economic activity that an economy experiences over a period of time.

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Gross domestic product

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

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Demand and Supply (Price Mechanism)

The interaction of buyers and sellers that determines the allocation of goods and services in a market.

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Study Notes

  • This task assesses understanding and application of consumer, financial, economic, business, legal, political, and employment concepts.
  • It also looks at the analysis of individual rights and responsibilities, key decision-making factors, problem-solving, and goal-oriented planning.
  • Research, information assessment, and effective communication skills are evaluated.
  • Independent and collaborative work abilities within time constraints are also assessed.
  • The task is an exam completed in class within 45 minutes.
  • Any adjustments needed (scribe, extra time) must be requested from the ESS Department at least one week prior.

Content to be Assessed

  • Economic problem
  • Scarcity
  • Opportunity costs
  • Production possibility schedule
  • Production possibility frontier
  • Circular flow of income
  • Role of government
  • Role of the financial sector
  • Role of the international sector
  • Equilibrium and disequilibrium
  • Economic cycle
  • Gross Domestic Product (GDP)
  • Effects of changes
  • Demand and supply
  • Price mechanism

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