Introduction to Economics

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Questions and Answers

Which of the following scenarios would LEAST likely lead to an increase in a country's Gross Domestic Product (GDP)?

  • A significant rise in consumer spending due to increased confidence.
  • Increased government spending on infrastructure projects.
  • A large-scale shift from domestic production to importing cheaper goods. (correct)
  • Technological advancements that increase productivity across various industries.

The Gini coefficient is used to measure income inequality. Which of the following scenarios describes a situation where the Gini coefficient would likely increase?

  • Technological advancements disproportionately benefit high-skilled workers, increasing wage disparities. (correct)
  • A progressive tax system is implemented, redistributing wealth from the rich to the poor.
  • A large portion of the population gains access to higher education and higher-paying jobs.
  • Government implements policies that reduce discrimination in the labor market.

Which of the following is the MOST likely consequence of rapid population growth in a developing economy with limited resources?

  • Increased investment in education and healthcare due to a larger workforce.
  • A decrease in the dependency ratio as the working-age population expands.
  • A rapid increase in technological innovation and productivity driven by a larger pool of potential inventors.
  • Increased strain on natural resources and infrastructure, potentially leading to environmental degradation and poverty. (correct)

Which of the following scenarios is MOST indicative of a contractionary phase in the business cycle?

<p>Decreasing consumer confidence, rising unemployment and reduced business profits. (D)</p> Signup and view all the answers

Which of the following is NOT a primary function of money in an economy?

<p>Providing a double coincidence of wants. (C)</p> Signup and view all the answers

Which of these scenarios would MOST directly reduce structural unemployment?

<p>A new job training program is established to teach unemployed workers skills demanded by employers. (D)</p> Signup and view all the answers

If potential GDP is greater than actual GDP, which type of unemployment is MOST likely to be high?

<p>Cyclical unemployment (C)</p> Signup and view all the answers

How would unexpectedly high inflation most likely affect borrowers and lenders in an economy?

<p>Benefitting borrowers and harming lenders. (C)</p> Signup and view all the answers

Which fiscal policy action is MOST likely to help reduce inflation?

<p>Increasing taxes and decreasing government spending. (B)</p> Signup and view all the answers

Which scenario would MOST likely lead to a decrease in the velocity of money?

<p>Increased hoarding of cash due to economic uncertainty. (A)</p> Signup and view all the answers

Flashcards

Gross Domestic Product (GDP)

Total market value of all final goods and services produced within a country in a given period.

Real GDP

GDP adjusted for inflation; reflects the real value of goods and services produced.

Absolute Poverty

A state where basic human needs like food, shelter, and clothing are not met.

Relative Poverty

Compares a person's income to the incomes of others to determine relative economic status.

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Lorenz Curve

Graphical representation of income distribution, showing the cumulative percentage of income earned by each percentage of the population.

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Gini Coefficient

A statistical measure of income inequality, ranging from 0 (perfect equality) to 1 (complete inequality).

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Business Cycle

Alternating periods of economic expansion and contraction.

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Recession

A period of declining economic activity, typically defined by two consecutive quarters of negative GDP growth.

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Money

Anything generally accepted as a medium of exchange, a store of value, and a unit of account.

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Liquidity

The characteristic of money that enables it to be easily converted into goods and services.

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Study Notes

  • Economics is introduced
  • National output and income are measured
  • Poverty and income distribution are discussed
  • The relationship between population and economic growth is examined
  • Business cycles and fluctuations are analyzed
  • The evolution, function, and characteristics of money are explored

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