ECON 2010 LSU FINAL EXAM SHARKEY QUESTIONS WITH
CORRECT ANSWERS
Market Equilibrium - ANSWER occurs in a market when all buyers and sellers are satisfied
with their respective quantities at the market price
What cause demand to shift (either right or left) - ANSWER Factors that cause an
increase or rightward shift in Demand
1) decrease in the price of compliments
2) increase in the price of substitutes
3) increase in income (for a normal good)
4) increased preference by demanders
5) increase in the population of potential buyers
6) expectations of higher prices in the future
** When these factors move in the opposite direction, demand will shift LEFT**
What cause supply to shift (either right or left) - ANSWER Factors that cause an increase
or rightward shift in Supply
1) decrease in cost of materials, labor, or other inputs used in production
2) improvement in technology that reduce cost of production
3) improvement in the weather (agricultural goods)
4) increase in the number of suppliers
,5) expectation of lower prices in the future
**When these factors move in the opposite direction, supply will shift LEFT**
Gross Domestic Product (GDP) - ANSWER the market value of the final goods and
services produced in a country during a given period
Y= C + I + G + NX
Y = GDP or Output
C = Consumption Expenditure
I = Investment
G = Government Purchases
NX = Net Exports
Nominal GDP - ANSWER a measure of GDP in which the quantities produced are valued
at current-year prices; measures the current dollar value of production
Calculate real GDP - ANSWER a measure of GDP in which the quantities produced are
valued at the prices in a base year rather than at current prices; measures the actual
physical volume of production
What is included in GDP? - ANSWER - newly produced final goods
- only goods and services produced within a nation's boarders
, - only goods and services produced during the current year
What is not included in GDP? - ANSWER - goods and services that are not sold in
markets, such as unpaid house work
- intermediate goods, which are used in the process of production
Value added method - ANSWER the market value of its product or service minus the cost
of inputs purchased from other firms
Real Interest Rate - ANSWER the annual percentage increase in the purchasing power of
a financial asset
= nominal interest rate - inflation rate
Nominal Interest Rate - ANSWER the annual percentage increase in the nominal value of
a financial asset
Rate of Inflation - ANSWER the annual percentage change in the price level, can be
measured by the Consumer Price Index (CPI)
Fisher Effect - ANSWER the tendency for nominal interest rates to be high when inflation
is high and low when inflation is low
Cost of Inflation - ANSWER - "noise" in the price system
CORRECT ANSWERS
Market Equilibrium - ANSWER occurs in a market when all buyers and sellers are satisfied
with their respective quantities at the market price
What cause demand to shift (either right or left) - ANSWER Factors that cause an
increase or rightward shift in Demand
1) decrease in the price of compliments
2) increase in the price of substitutes
3) increase in income (for a normal good)
4) increased preference by demanders
5) increase in the population of potential buyers
6) expectations of higher prices in the future
** When these factors move in the opposite direction, demand will shift LEFT**
What cause supply to shift (either right or left) - ANSWER Factors that cause an increase
or rightward shift in Supply
1) decrease in cost of materials, labor, or other inputs used in production
2) improvement in technology that reduce cost of production
3) improvement in the weather (agricultural goods)
4) increase in the number of suppliers
,5) expectation of lower prices in the future
**When these factors move in the opposite direction, supply will shift LEFT**
Gross Domestic Product (GDP) - ANSWER the market value of the final goods and
services produced in a country during a given period
Y= C + I + G + NX
Y = GDP or Output
C = Consumption Expenditure
I = Investment
G = Government Purchases
NX = Net Exports
Nominal GDP - ANSWER a measure of GDP in which the quantities produced are valued
at current-year prices; measures the current dollar value of production
Calculate real GDP - ANSWER a measure of GDP in which the quantities produced are
valued at the prices in a base year rather than at current prices; measures the actual
physical volume of production
What is included in GDP? - ANSWER - newly produced final goods
- only goods and services produced within a nation's boarders
, - only goods and services produced during the current year
What is not included in GDP? - ANSWER - goods and services that are not sold in
markets, such as unpaid house work
- intermediate goods, which are used in the process of production
Value added method - ANSWER the market value of its product or service minus the cost
of inputs purchased from other firms
Real Interest Rate - ANSWER the annual percentage increase in the purchasing power of
a financial asset
= nominal interest rate - inflation rate
Nominal Interest Rate - ANSWER the annual percentage increase in the nominal value of
a financial asset
Rate of Inflation - ANSWER the annual percentage change in the price level, can be
measured by the Consumer Price Index (CPI)
Fisher Effect - ANSWER the tendency for nominal interest rates to be high when inflation
is high and low when inflation is low
Cost of Inflation - ANSWER - "noise" in the price system
