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63 Cards in this Set
- Front
- Back
Low Level of inflation is
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Primary Economic Goal
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Low Unemployment is
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Primary Economic Goal
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Growth in the Standard of living is
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Primary Economic Goal
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A Sustainable trade balance is
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Primary Economic Goal
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Marginal Utility
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of a good or service is the gain from an increase or loss from a decrease in consumption of that good or service
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Three components of interest rates
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risk premium, expected rate of inflation, time value of money
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Country A & B, A has high risk premium, while B has low, what does this indicate?
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higher interest rate for A
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High risk premium implies that bond investors...
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would demand higher interest rates to compensate for the higher risk of defaulting
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Country A &B, A has low expected rate of inflation and B has high, what does this indicate/
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higher inflation erodes the future value of B's bonds
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High expected rate of inflation implies....?
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higher interest rate, as investors would demand higher interest rates to offset higher inflation
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Opportunity cost is
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what you must give up when you make a decision
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What factors into the opportunity cost for a decision?
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1. The Actual financial cost of decision, 2. Time spent due to decision. 3. Benefits from the best forgone alternative
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Positive Statements describe....
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the way the world is
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Normative Statements describe...
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the world the way it should be
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Which type of statements make value judgments?
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Normative
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Households are demanders in
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The market for goods and services
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Households are suppliers in
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The Labor Market, The financial Capital Market
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In the circular flow diagram, payments...
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always go from buyer
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How to find the market demand curve
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sum the quantities (horizontally) of the individual demand curves of all the consumers
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The firm sends back payments in the form of
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interest and dividends
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The market demand curve displays the ....
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the quantity of a particular good or service at any given price for all consumers
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Grocers are selling more gluten free pasta than ever before, even though the price of gluten free pasta has dropped substantially
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Shift of Supply Curve
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After discovering that flash steaming tuna first, before using mechanical processes to extract meat, removes more tuna flesf, more cans of tuna hit the shelves of all major grocers
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Shift of the Supply Curve
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Amplitude decides to join the smartphone market
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shift of the supply curve
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Rising wages for igloos builders in Nunavut, Canada, result in igloo builders moving to Nunavut
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movement along the supply curve
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A national consumer products company produces less of its premium quality soap as a result of lower soap prices
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Movement along the supply curve
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Americans put up their gold and silver jewelry for sale as a result of rising prices
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Movement along the supply curve
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Shifts of the supply curve reflect....
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a change in the quantity supplied of a paricular good at all prices
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What does it mean when interest rates are low?
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price received from supplying money is low
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What is the effect on quantity, despite the fact that interest rates are low?
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the quantity supplied is greater
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Reasons why a supply curve can shift
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change in technology, number of producers
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Movement along the supply curve is reflective of a change in...
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the quantity supplied as a result of some price change
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If producers have less costly inputs available, they...
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are able to produce more end products at any given price
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What happens to the curve when producers have less costly inputs available?
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the supply curve shifts down (or to the right), equilibrium has higher quantity and a lower price
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How does the equilibrium point shift when producers have less costly inputs available?
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New equilibrium where demand meets the new supply, has a higher quantity and lower price
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What is the effect of substitutes/
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draws away would-be consumers of a product, resulting in lower demand
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What does lower demand imply on a graph?
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Demand curve shifts to the left
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If supply shifts more than demand....
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the equilibrium quantity increases
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If demand shifts more than supply,
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quantity decreases
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If supply and demand shift at the same amount...
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quantity stays the same
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The only way for both price and quantity to increase in the face of decreasing supply is if...
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there is an increase in demand that outweighs the decrease in supply
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Example of Price Ceiling
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Government making it illegal to charge a price above a certain threshold
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Example of Consumer Surplus
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The difference between what a person is willing to pay for a good and what they actually pay
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Example of Price Floor
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When the price of a good is forced above the equilibrium price.
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Example of Deadweight Loss
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A measure of the reduction in social welfare associated with an inefficient outcome
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Price Ceiling:
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A max price that can be legally charged for a good
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Consumer Surplus:
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The difference between what a consumer is willing to pay for a good and the price that is paid
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Price Floor:
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A minimum price that can be legally charged for a good
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Deadweight loss:
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the reduction in social surplus associated with deviating from the equilibrium.
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Price Floors and Price Ceilings typically result in
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deadweight loss
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with price floor, Setting a minimum price below the equilibrium price will...
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not change the demand or supply since sellers and buyers already have a better equilibrium price available
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Price ceilings can create....
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shortages of a good
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Maximum prices can create
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shortages of a good
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If price is set above the equilibrium price....
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the price ceiling will have no effect
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When the price of an input increases...
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the supply for the complement will decrease
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A decrease in supply shifts ....
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the supply curve to the left (or in)
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When the supply curve decreases,
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the equilibrium price of item increases and the equilibrium quantity of the item decreases
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When the price of an input increase, does that shift the supply or demand curve?
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Supply curve
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Equilibrium occurs when
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quantity supplied equals quantity demanded
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Which of the following is most likely to be a complement to coffee?
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Creamer
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Assume that a monsoon destroys the coffee crop in Vietnam, one of the world's largest coffee producers. What will likely occur?
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Consumer will try to find alternatives to coffee due to increases in the price of coffee
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Two goods are complements when they are often ...
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used together or in combination
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Two goods are substitutes if they can be...
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used in place of one another
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