Introduction to Economics

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Questions and Answers

What is economics?

Economics is the study of how individuals and society manage their scarce resources.

What does scarcity refer to in economics?

Scarcity refers to the fact that people's wants are unlimited whereas the resources to satisfy them are limited.

What does microeconomics study?

Microeconomics is concerned with small parts of the economic system and explains the behavior of individuals and firms.

What does macroeconomics study?

Macroeconomics is concerned with the economy as a whole and studies determinants of total output, inflation, unemployment, national income, and economic growth. Signup and view all the answers

What is a mixed economic system?

A mixed economic system is where governments choose to intervene in markets side by side with private enterprise. Signup and view all the answers

What is a command economy?

A command economy is where governments make almost all the economic decisions. Signup and view all the answers

What are the main macroeconomic aims of government? (Select all that apply)

Low unemployment Signup and view all the answers

What do classical economists believe in regarding government intervention?

Classical economists believe in a laissez-faire economy, which entails free trade and minimal government intervention. Signup and view all the answers

What does the Keynesian model promote?

The Keynesian model promotes that the government should take an active stance in stabilizing the economy. Signup and view all the answers

What are the four factors of production?

The four factors of production are Land, Labour, Capital, and Enterprise. Signup and view all the answers

What is Gross Domestic Product (GDP)?

GDP is the total value of all goods and services produced in a country over one year regardless of who produces them. Signup and view all the answers

What is Gross National Product (GNP)?

GNP is the total value of all goods and services produced by Irish residents over one year regardless of where they are produced. Signup and view all the answers

How do you calculate GNP?

GNP = GDP + F, where F is net factor income/payments from the rest of the world. Signup and view all the answers

What was GNP at current market prices in 2023 if GDP was €509.9bn and Net Factor Income was €-121.9bn?

GNP was €388.0bn. Signup and view all the answers

Why is net factor income from the rest of the world usually a negative figure for Ireland?

Due to a large amount of profit repatriation by foreign-owned multi-national companies. Signup and view all the answers

How to estimate nominal GDP per capita in 2023 given nominal GDP was €509,952m and the Irish population was 5.282m?

GDP per capita = €509,952 / 5.282 = €96,500. Signup and view all the answers

What is real GDP and how is it calculated?

Real GDP = Nominal GDP / GDP deflator. Signup and view all the answers

What was NNP at current market prices in 2023 if GNP was €388.0bn and Depreciation was €128.3bn?

NNP was €259.7bn. Signup and view all the answers

How to calculate real GDP growth for 2023 if GDP at constant market prices was €520.9bn in 2022 and €492.1bn in 2023?

Real GDP growth = ((492.1 - 520.9) / 520.9) × 100 = -5.5%. Signup and view all the answers

When is an economy classified to be in recession?

An economy is classified to be in recession if there is a fall in real GDP. Signup and view all the answers

Study Notes

Introduction to economics

Economics studies how individuals and society manage scarce resources.
Scarcity in economics means that people's wants are unlimited, but the resources to satisfy them are limited.
Microeconomics focuses on individual behavior and firms in the economy.
Macroeconomics studies the economy as a whole, analyzing determinants like total output, inflation, unemployment, national income, and economic growth.
A mixed economic system combines government intervention with private enterprise.
A command economy is where the government makes most economic decisions.
Government macroeconomic objectives include economic growth (4%), low unemployment (4%), low inflation (2%), and long-term balance of public finances.
Classical economists advocate for a laissez-faire economy emphasizing minimal government intervention.
Keynesian economics promotes government intervention to stabilize the economy and minimize boom/bust cycles.
The four factors of production are land, labor, capital, and enterprise.
Corresponding payments for these factors are rent, wages, interest, and profit.

National Income

Gross Domestic Product (GDP) measures the total value of goods and services produced within a country in a year, regardless of who produces them.
GDP = Consumption (C) + Investment (I) + Government expenditure (G) + Exports (X) - Imports (M).
Gross National Product (GNP) measures the total value of goods and services produced by a country's residents in a year, regardless of their location.
GNP = GDP + Net Factor Income (F).
Net Factor Income (F) includes payments from the rest of the world, like profit repatriation by foreign-owned companies.
GDP per capita is calculated by dividing GDP by the population and is useful for international wealth comparisons.
GDP deflator/inflator measures the inflation rate.
Real GDP is calculated by dividing the nominal GDP by the GDP deflator.
Net National Product (NNP) is GNP minus depreciation.
Real GDP growth measures the percentage change in real GDP between periods.
A recession is characterized by a decline in real GDP (negative growth).

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Description

This quiz covers the basic concepts of economics, including the study of scarcity, microeconomics and macroeconomics, and the types of economic systems. Explore government roles in economic stability and the theories of classical and Keynesian economics. Test your understanding of these fundamental ideas.