Basic Economic Concepts For Exam

Front 1

Fiscal Policy

Back 1

government demanding supply and demand and adjusting spending levels and tax rates to influence the economy

Front 2

What is the purpose of injections and withdrawals?

Back 2

they are central to an economy’s income spending abilities. They are also indicators of market equilibrium.

Front 3

Sources of economic growth

Back 3

Capital, Technological Progress, Quality Labour, Efficiency in Production, Quantity of Natural Resources

Front 4

Explain "capital" as a tool of economic growth

Back 4

saving disposable income= increased capital resources thereby fueling economic growth

Front 5

Explain "Technical Progress" as a tool of economic growth

Back 5

includes R&D as well as discoveries; applied to production or new product development

Front 6

Explain "quality labour" as a tool of economic growth

Back 6

human capital investment

Front 7

Explain "Efficiency in Production" as a tool of economic growth

Back 7

returns to scale, reallocation of resources

Front 8

Explain "Quantity of Natural Resources" as a tool of economic growth

Back 8

remained constant throughout economic fluctuations

Front 9

5 characteristics of money

Back 9

1.Divisible 2.Portable 3.Durable 4. Recognizable 5. Scarce

Front 10

3 types of deposits

Back 10

1.Demand deposits

2.Notice deposits -requires you to give notice, carries low interest rate

3. Term deposit

Front 11

Trade Policies

Back 11

General agreement on tariffs (GATT)/World Trade Organization (WTO)World trade organization -150 members

Free Trade Agreement (USA and Canada)

NAFTA, North American Free Trade Agreement( Mexico, USA, Canada)

Front 12

Types of economic resources

Back 12

Land (forests, fossil fuels, vegetation)

Labour(paid workforce, volunteer services)

Capital (office buildings, computers, bank accounts)

Enterprise (marketing executives, business investors, researchers and developers)

Front 13

Types of industries

Back 13

Primary (wood, iron, fish, cotton)

Secondary (lumber, steel, food, clothes)

Tertiary (Home Depot, aritzia, jack astors, gas stations)

Quaternary= ideas, inventions, discovery ,design

Front 14

GDP equation

Back 14

GDP=C+I+G+(x-m)

Front 15

Define Double Counting

Back 15

Items that when calculating the GDP have been counted twice

Front 16

What happens as a result of Double Counting?

Back 16

economists will calculate the risk of double counting and then subtract a possible % of items from the final GDP that may have been double counted

Front 17

What is the government's role in double counting?

Back 17

To ensure accuracy and reliability

Front 18

2 approaches to calculating GDP

Back 18

Income Approach and Expenditure Approach

Front 19

7 categories involved in Income approach (GDP)

Back 19

1.Wages and Saleries

2.Corporate Palates

3.Invest income

4.Properties income and rates

5.Indirect taxes

6.Depreciation

7.Statistical Discrepancy

Front 20

Expenditure Approach equation breakdown

Back 20

(C)=Personal Consumption-can be durable of non-durable goods

(I)= Gross Investment- assets to make money--stocks, bonds, equipment,home/land

(G)=Government Purchases- purchase of goods and services, transfer payment, gov't owned businesses

(x-m) net exports .. x=exports, m=imports (x-m=net)

Front 21

How would the government (at any level) in general, use these measurement tools to determine how the economy is performing?

Back 21

-to predict/anticipate in which the economy is heading

-consumer confidence in the economy

-currency is an excellent measurement tool as it is a comparative value with other economic systems

Front 22

How would provincial governments use GDP measurement tools to determine how the economy is performing?

Back 22

they use this data to help frame requests for additional funds from the federal level

Front 23

How would federal governments use GDP measurement tools to determine how the economy is performing?

Back 23

to make key decisions regarding money (the allocation of it, spending etc.)

Front 24

Inflation

Back 24

overall price rising...can stay at zero or decrease

-happens over time

Front 25

If the inflation rate was 2% in November and 1.9% in December

Back 25

That means that the prices rose less in December than they did in November

Front 26

Deflation

Back 26

the opposite of inflation

Front 27

Hyperinlfation

Back 27

rapid (occurs in a very short time frame)

Front 28

zero inflation

Back 28

stays stable over time

Front 29

CPI

Back 29

Consumer Price Index- a tool used to measure the overall

Front 30

Limitations of CPI

Back 30

1.consumer differences

2.changing in spending patterns

3.product quality and new products

Front 31

GNP-Gross National Product

Back 31

total income (earnings) acquired by Canadians- inside and outside of our country, ex if a Canadian is working overseas for a year or Canadian citizens investing internationally

Front 32

Official Unemployment Rate

Back 32

number of unemployed people in the labour force as a % of the entire labour force

Front 33

Types of unemployment

Back 33

frictional - moving between jobs

structural-do not have the necessary skills for the job

cyclical- higher supply than demand, therefore may have to lay off workers

seasonal-seasonal

Front 34

What is the relationship between price and quantity demanded

Back 34

if we raise the price of a product it will lower the quantity demanded of the product and vise versa

Front 35

A demand schedule is an explanation of

Back 35

a table that shows the relationship between price and quantity demanded. all else being equal/ignoring all other variables

Front 36

ceteris paribus

Back 36

"all other things equal"

Front 37

Does “ceteris paribus” apply to the law of demand? If so, explain how?

Back 37

Yes it does because all other factors have to be considered equal by economists, in theory, to be the same so they can look at the relationship between the two variables under consideration.

Front 38

What happens to the demand curve if the price of other an item goes up?

Back 38

The curve shifts to right. this is a shift in the demand curve because the entire line is moving in response to an increase in price.

Front 39

What is the impact of a change in price for a substitute product on the demand for the original product?

Back 39

It’s in an inverse relationship because they move in opposite directions.

Front 40

What is the definition of supply?

Back 40

A stock of a resource from which a person or place can be provided with the necessary amount of that resource.

Front 41

What is the relationship between price and quantity supplied?

Back 41

If the price goes up, the quantity supplied goes up- and vise versa. aka a direct relationship

Front 42

Does the law of “ceteris paribus” apply to the law of supply?

Back 42

Yes it does because “all else equal” is included in the schedule and is compared to price and quantity supply.

Front 43

What is a supply schedule?

Back 43

more time spent = more effort= less profit .. time is a scarce resource

Front 44

If the price of inputs goes down, what happens to supply?

Back 44

Supply would increase when the input goes down. The curve will shift to the right.

Front 45

productive substitutes

Back 45

(other things goods that are similiar and could cause competition)

Front 46

Change in Expected Future Prices and Demand

Back 46

ex. gas prices

Front 47

Normal Goods

Back 47

goods where their demand increases with an increase of income ex. the more money people are making the higher the demand for normal goods will be

Front 48

Inferior goods

Back 48

goods where their demand decreases with an increase in income (which makes this an inverse relationship) ex. a cheaper tv (if people can afford bigger and better things than they will be less likely to buy a cheaper version of the product)

Front 49

Income effect

Back 49

the change in an individual's or economy’s income and how it will impact quantity demand of a good or service

Front 50

What is the relationship between scarcity & opportunity cost?

Back 50

Scarcity and opportunity cost are related because the economy has to choose between scarce resources, this means not all resources are available all the time; we have limited amounts and the economy has to decide which resources will be produced. The problem is that we as humans have an endless amount of wants/needs but the economy only has a limited amount of resources to fulfill our wants and needs, therefore we have to decide which products are more important.

Front 51

How can production possibility curves be used to guide economic decisions about the allocation of scarce resources?

Back 51

This is because it helps us manage our resources and the potential costs and benefits of distributing them. It also allows us to see what is possible and what is not.

Front 52

the 3 questions that every economic system must answer as they plan their model for production.

Back 52

What should be produced?

How should it be produced?

For whom should it be produced?

Front 53

The Three Theoretical Economic Systems

Back 53

Traditional Economy(bartering)

Command Economy(public transit, education,healthcare etc. )

Market Economy(privately owned land, the buying and selling of goods like clothing etc.)

Front 54

Why is Canada a mixed market Economy?

Back 54

Mixed economy is when there are privately owned businesses and government owned businesses in a country together. To make that clear: in Canada, we have Government owned hospitals and Privately owned store chains like Sears.

Front 55

The three biggest contributors of Canada’s mixed economy are

Back 55

businesses, the government, and consumers

Front 56

monetary policy

Back 56

gov't increasing the supply of money that's out there (to be lent) by printing more money