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Questions and Answers
What is one of the main functions of money?
What is one of the main functions of money?
What is a trade deficit?
What is a trade deficit?
Which policy involves the use of interest rates to influence the economy?
Which policy involves the use of interest rates to influence the economy?
What is economic development primarily focused on?
What is economic development primarily focused on?
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Which term describes goods that are non-excludable and non-rivalrous?
Which term describes goods that are non-excludable and non-rivalrous?
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What characterizes inflation?
What characterizes inflation?
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Which of the following indicates low economic performance in a country?
Which of the following indicates low economic performance in a country?
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What is the difference between cyclical and structural unemployment?
What is the difference between cyclical and structural unemployment?
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What does scarcity in economics refer to?
What does scarcity in economics refer to?
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Which of the following best defines opportunity cost?
Which of the following best defines opportunity cost?
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Which economic system is characterized by private ownership and free markets?
Which economic system is characterized by private ownership and free markets?
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What is the definition of Gross Domestic Product (GDP)?
What is the definition of Gross Domestic Product (GDP)?
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In microeconomics, what does the term 'market equilibrium' refer to?
In microeconomics, what does the term 'market equilibrium' refer to?
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Which market structure involves many sellers with differentiated products?
Which market structure involves many sellers with differentiated products?
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What does the Production Possibilities Frontier (PPF) illustrate?
What does the Production Possibilities Frontier (PPF) illustrate?
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Which of the following represents the average income of a country's citizens?
Which of the following represents the average income of a country's citizens?
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Study Notes
Introduction to Economics
- Economics is the study of how societies allocate scarce resources to satisfy unlimited wants and needs.
- It focuses on the production, distribution, and consumption of goods and services.
- Microeconomics analyzes individual markets and decisions, while macroeconomics examines the economy as a whole.
Basic Economic Concepts
- Scarcity: Resources are limited, while wants are unlimited, leading to choices.
- Choice: Individuals and societies must choose how to use scarce resources efficiently.
- Opportunity Cost: The value of the next best alternative foregone when making a choice.
- Factors of Production: Land, labor, capital, and entrepreneurship are vital inputs for producing goods and services.
- Production Possibilities Frontier (PPF): Illustrates the maximum output combinations of two goods or services given available resources and technology.
- Economic Systems: Different systems (e.g., capitalist, socialist, mixed) handle resource allocation and economic activity in various ways.
- Demand: The quantity of a good or service that consumers are willing and able to buy at different prices.
- Supply: The quantity of a good or service that producers are willing and able to sell at different prices.
- Market Equilibrium: The point where supply and demand intersect, determining market price and quantity.
Market Structures
- Perfect Competition: Many buyers and sellers, homogeneous products, free entry and exit, price takers.
- Monopoly: One seller, unique product, barriers to entry, price maker.
- Monopolistic Competition: Many sellers, differentiated products, relatively easy entry and exit.
- Oligopoly: Few sellers, interdependence among firms, significant barriers to entry.
National Income and Related Aggregates
- Gross Domestic Product (GDP): The market value of all final goods and services produced within a country in a given period.
- Gross National Product (GNP): The market value of all final goods and services produced by the residents of a country in a given period, regardless of where they are produced.
- National Income: Total factor income earned by the residents of a country in a given period.
- Per Capita Income: Measures the average income of a country's citizens.
- Circular Flow of Income: Shows the flow of money and resources between households and firms in an economy.
Money and Banking
- Money: Anything generally accepted as a medium of exchange, a store of value, and a unit of account.
- Functions of Money: Medium of exchange, unit of account, store of value.
- Central Bank: The institution responsible for controlling the money supply and ensuring the stability of the financial system.
- Commercial Banks: Financial intermediaries that accept deposits, make loans, and facilitate payments.
- Inflation: A sustained increase in the general price level of goods and services in an economy.
- Deflation: A sustained decrease in the general price level of goods and services in an economy.
Government Role in the Economy
- Fiscal Policy: Government's use of taxation and spending to influence the economy.
- Monetary Policy: Central bank's use of interest rates and money supply to influence the economy.
- Public Goods: Goods and services that are non-excludable and non-rivalrous, often provided by the government.
- Externalities: Costs or benefits imposed on third parties by the production or consumption of a good or service.
- Market Failures: Situations where markets fail to allocate resources efficiently, leading to government intervention.
International Trade
- Balance of Trade: Difference between a country's exports and imports.
- Trade Deficit: Imports exceed exports.
- Trade Surplus: Exports exceed imports.
- Comparative Advantage: Ability of a country to produce a good or service at a lower opportunity cost than another country.
- Absolute Advantage: Ability of a country to produce a good or service using fewer resources than another country.
Development Economics
- Economic Development: Process of improving the economic well-being and living standards of a country's people.
- Indicators of Development: GDP per capita, life expectancy, literacy rates, poverty rates.
- Growth vs. Development: Growth focuses on increasing production, while development encompasses improvements in living standards and human capital.
Other Important Concepts
- Economic Growth: An increase in the productive capacity of an economy over time, measured by increases in real GDP.
- Economic Underdevelopment: A situation where a country has low income per capita, limited human capital, and poor infrastructure.
- Unemployment: The situation where a person who is actively seeking work cannot find employment.
- Types of Unemployment: Cyclical, frictional, structural, seasonal.
- Poverty: The state of lacking basic necessities of life.
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Description
This quiz covers fundamental concepts in economics, including scarcity, choice, and opportunity cost. It delves into microeconomics and macroeconomics, highlighting the production possibilities frontier and various economic systems. Test your understanding of how societies allocate resources to meet their needs.
