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What happens to the marginal product of an input as its usage increases while keeping other inputs fixed?
What happens to the marginal product of an input as its usage increases while keeping other inputs fixed?
In the production function $Q = F(K,L)$, what do K and L represent?
In the production function $Q = F(K,L)$, what do K and L represent?
What does the marginal rate of technical substitution (MRTS) indicate?
What does the marginal rate of technical substitution (MRTS) indicate?
What does a straight isoquant indicate about the inputs?
What does a straight isoquant indicate about the inputs?
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Which condition describes diminishing marginal returns?
Which condition describes diminishing marginal returns?
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What happens to MRTS as one moves along an isoquant?
What happens to MRTS as one moves along an isoquant?
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How are labor and capital treated in the simple model of producer behavior?
How are labor and capital treated in the simple model of producer behavior?
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What does the average product of labor represent?
What does the average product of labor represent?
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What is the formula for calculating the GDP deflator?
What is the formula for calculating the GDP deflator?
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Which measure includes the prices of capital goods?
Which measure includes the prices of capital goods?
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Which statement about the basket of goods used in CPI is true?
Which statement about the basket of goods used in CPI is true?
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As the money supply measure increases from M0 to M4, what happens to liquidity?
As the money supply measure increases from M0 to M4, what happens to liquidity?
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What does inflation represent in an economy?
What does inflation represent in an economy?
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Which measure is a proxy for overall price levels based on consumption?
Which measure is a proxy for overall price levels based on consumption?
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Which of the following best describes broad money in terms of money supply measures?
Which of the following best describes broad money in terms of money supply measures?
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Which statement accurately compares the CPI and GDP Deflator?
Which statement accurately compares the CPI and GDP Deflator?
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What is one method used by monetary policymakers in response to the 2008 financial crisis?
What is one method used by monetary policymakers in response to the 2008 financial crisis?
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What is the relationship described by the Fisher equation?
What is the relationship described by the Fisher equation?
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In the context of inflation targeting, what must happen if the real GDP is growing at 4% and the inflation target is 2%?
In the context of inflation targeting, what must happen if the real GDP is growing at 4% and the inflation target is 2%?
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Why is a negative real interest rate considered beneficial in a weak economy?
Why is a negative real interest rate considered beneficial in a weak economy?
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Which of the following characterizes the spending hypothesis regarding the Great Depression?
Which of the following characterizes the spending hypothesis regarding the Great Depression?
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What were the economic conditions during the Great Depression mentioned in the content?
What were the economic conditions during the Great Depression mentioned in the content?
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What is an emphasis that monetary policymakers are currently placing instead of inflation targeting?
What is an emphasis that monetary policymakers are currently placing instead of inflation targeting?
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What happens to purchasing power when the nominal interest rate exceeds the inflation rate?
What happens to purchasing power when the nominal interest rate exceeds the inflation rate?
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What does the classical dichotomy suggest regarding nominal and real variables?
What does the classical dichotomy suggest regarding nominal and real variables?
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According to the quantity theory of money, what does 'M x V = P x Y' represent?
According to the quantity theory of money, what does 'M x V = P x Y' represent?
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What is meant by monetary neutrality?
What is meant by monetary neutrality?
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What is a 'shoe leather cost' associated with inflation?
What is a 'shoe leather cost' associated with inflation?
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If the money supply were to double, what would happen to the price level according to the quantity theory?
If the money supply were to double, what would happen to the price level according to the quantity theory?
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What does the term 'velocity of money' refer to?
What does the term 'velocity of money' refer to?
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What outcome can be expected from unexpected inflation?
What outcome can be expected from unexpected inflation?
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Which of the following is NOT a cost of inflation?
Which of the following is NOT a cost of inflation?
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What happens to the Aggregate Demand (AD) curve when the level of output (Y) increases while the price level (P) remains the same?
What happens to the Aggregate Demand (AD) curve when the level of output (Y) increases while the price level (P) remains the same?
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What effect does a rise in production costs have on the Short-Run Aggregate Supply (SRAS) curve?
What effect does a rise in production costs have on the Short-Run Aggregate Supply (SRAS) curve?
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In the case of an adverse demand shock, which of the following occurs?
In the case of an adverse demand shock, which of the following occurs?
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What characterizes a favourable supply shock in the short run?
What characterizes a favourable supply shock in the short run?
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Why might the Short-Run Aggregate Supply (SRAS) curve be upward sloping?
Why might the Short-Run Aggregate Supply (SRAS) curve be upward sloping?
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What is the long-run effect of an adverse supply shock on price level and output?
What is the long-run effect of an adverse supply shock on price level and output?
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What type of shock is characterized by a sudden decrease in consumer confidence?
What type of shock is characterized by a sudden decrease in consumer confidence?
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What is a consequence of a decrease in costs of production for the SRAS curve?
What is a consequence of a decrease in costs of production for the SRAS curve?
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What is the primary cause of structural unemployment?
What is the primary cause of structural unemployment?
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Which factor is NOT associated with cyclical unemployment?
Which factor is NOT associated with cyclical unemployment?
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What does the natural rate of unemployment best align with?
What does the natural rate of unemployment best align with?
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Which of the following is a factor that contributes to wage rigidity?
Which of the following is a factor that contributes to wage rigidity?
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Which type of unemployment is particularly tied to the economic cycle?
Which type of unemployment is particularly tied to the economic cycle?
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How does structural unemployment affect those employed in different industries?
How does structural unemployment affect those employed in different industries?
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What is a consequence of high unemployment from the government’s perspective?
What is a consequence of high unemployment from the government’s perspective?
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What is the relationship between output and employment as suggested in the content?
What is the relationship between output and employment as suggested in the content?
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Study Notes
Principles of Economics - Week 1 (Introduction)
- Three key questions pertaining to "the economy" are:
- What goods should be produced and what services should be made available?
- How should those goods and services be supplied/produced?
- Who should get access to these goods and services?
- Scarcity is the concept of limited resources relative to unlimited needs.
- Opportunity cost is the value of the next best alternative forgone by a decision.
- Marginal changes are incremental adjustments.
- Economists assume Individuals want to maximise satisfaction and Firms want to maximise profits.
- Economics is defined as "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses" (Robbins, 1932).
- Marginal benefit is the change in benefit.
- Marginal cost is the change in cost.
- The economic system determines resource allocation and organisation.
- Market failure occurs when free markets fail to allocate resources efficiently.
Principles of Economics - Week 1 (Demand and Supply)
- Economists are interested in falsifiability and cause-and-effect relationships.
- Endogenous variables are those explained by the model.
- Exogenous variables influence the model from outside its scope.
- Models use diagrams and functions for key components.
- Special functions define the exact relationship between variables.
- Microeconomics studies behaviour of individuals and firms.
- The law of demand states that as price of a good rises, the quantity demanded of that good will fall.
- The law of supply states that as price of a good rises, the quantity supplied of that good will rise.
- Partial equilibrium is the study of specific markets in isolation.
- Markets are defined by products and geography.
- Assumption of the demand and supply model: many homogenous buyers/sellers and complete information.
- Ceteris paribus means holding all other variables constant.
- Factors that directly affect demand: number of consumers, income levels, preferences, other goods (substitutes and complements).
- Factors that directly affect supply are: number of sellers, cost of inputs, level of technology, regulations, and outside options.
- Equilibrium is when demand equals supply.
- Elasticity measures the responsiveness of one variable to changes in another.
- Price elasticity of demand measures percentage change in quantity demanded divided by percentage change in price.
- Price elasticity of supply measures percentage change in quantity supplied divided by percentage change in price.
- Terms: Elastic (greater/less than +/- 1), Inelastic (between +/- 1 and -1), Unit Elastic (=/- 1).
- Income elasticity of demand measures percentage change in quantity demanded divided by percentage change in income.
- Cross-price elasticity of demand measures percentage change in quantity of a good divided by percentage change in price of another
Principles of Economics - Week 2 (Consumer Choice)
- Key elements in the study of consumer behaviour:
- Consumer Preferences
- Budget Constraints
- Consumer Choices
- Rational agents (consumers) aim to maximise utility subject to constraints
- Preferences are complete (ranking possible options)
- Preferences are monotonic (more is better, assuming no satiation)
- Preferences are transitive (consistent in their preferences)
- Utility is satisfaction; a numerical score that reflects how satisfied consumers are
- Utility function: U=f(x,y). In other words: utility is a function of the consumption of 'x' and 'y'
- Budget Constraint: A maximum of spending. Y=Pfx+Pcy
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Description
This quiz covers the foundational concepts in economics, including scarcity, opportunity cost, and market dynamics. Gain a better understanding of how goods and services are allocated and the principles governing economic decisions. Explore the key questions of production, distribution, and resource management.
