ECN 211 Final Exam
scarcity - ANS-the limited nature of society's resources
Opportunity cost - ANS-Whatever must be given up to obtain some item
principles of specialization and exchange - ANS-trade can benefit everyone in society
because it allows people to specialize in activities in which they have comparative
advantage
Absolute advantage - ANS-The ability to produce a good using fewer inputs than
another producer
Comparative advantage - ANS-The ability to produce a good at a lower opportunity cost
than another producer
Law of demand - ANS-the claim that, other things being equal, the quantity demanded
of a good falls when the price of the good rises
Law of supply - ANS-the claim that other things being equal, the quantity supplied of a
good rises when the price of the good rises
Market equilibrium - ANS-A situation in which the market price has reached the level at
which quantity supplied equals quantity demanded
Factors that shift the demand curve - ANS-Income, wealth, prices of related goods,
population, expected price, taste
Factors that shift the supply curve - ANS-input prices, price of alternatives, technology,
number of firms, expectations, changes in weather, or other natural events
GDP - ANS-the market value of all final goods and services purchased within a country
in a given period of time
real vs nominal GDP - ANS-real is valued at constant prices while nominal is valued at
current prices
, unemployment - ANS-those who were not employed, were available for work, and had
tried to find employment during the previous four weeks
discouraged workers - ANS-individuals who would like to work but have given up
looking for a job
consumer price index (CPI) - ANS-an index of the cost, through time of a market basket
of good purchased by a typical household
Calculating the inflation rate - ANS-amount in today's dollars = amount in year t dollars *
price level today/price level in year t
Real wages - ANS-purchasing power of your wage adjusted for inflation: nominal wage
in the year/CPI in that year * 100
nominal wages - ANS-number of dollars you earn not adjusted for inflation
nominal interest rate - ANS-interest rate not corrected for inflation
real interest rate - ANS-corrected for inflation: nominal interest rate - rate of inflation
inflation and purchasing power - ANS-inflation, an increase in the price level, decreases
the purchasing power of money
Redistributive affects of inflation - ANS-inflation can shift purchasing power away from
those who are awaiting future payments specified in dollars and toward those who are
obligated to make such payments
money - ANS-the set of assets in an economy that people regularly use to buy goods
and services from other people
money supply - ANS-the set of money available in the economy which includes
currency and demand deposits
functions of the fed - ANS-supervising and regulating banks, acting as a "bank for
banks," issuing paper currency, check clearing, guiding the macroeconomy, dealing with
financial crises
objectives of the fed - ANS-price stability, full employment exchange rate stability,
financial stability
scarcity - ANS-the limited nature of society's resources
Opportunity cost - ANS-Whatever must be given up to obtain some item
principles of specialization and exchange - ANS-trade can benefit everyone in society
because it allows people to specialize in activities in which they have comparative
advantage
Absolute advantage - ANS-The ability to produce a good using fewer inputs than
another producer
Comparative advantage - ANS-The ability to produce a good at a lower opportunity cost
than another producer
Law of demand - ANS-the claim that, other things being equal, the quantity demanded
of a good falls when the price of the good rises
Law of supply - ANS-the claim that other things being equal, the quantity supplied of a
good rises when the price of the good rises
Market equilibrium - ANS-A situation in which the market price has reached the level at
which quantity supplied equals quantity demanded
Factors that shift the demand curve - ANS-Income, wealth, prices of related goods,
population, expected price, taste
Factors that shift the supply curve - ANS-input prices, price of alternatives, technology,
number of firms, expectations, changes in weather, or other natural events
GDP - ANS-the market value of all final goods and services purchased within a country
in a given period of time
real vs nominal GDP - ANS-real is valued at constant prices while nominal is valued at
current prices
, unemployment - ANS-those who were not employed, were available for work, and had
tried to find employment during the previous four weeks
discouraged workers - ANS-individuals who would like to work but have given up
looking for a job
consumer price index (CPI) - ANS-an index of the cost, through time of a market basket
of good purchased by a typical household
Calculating the inflation rate - ANS-amount in today's dollars = amount in year t dollars *
price level today/price level in year t
Real wages - ANS-purchasing power of your wage adjusted for inflation: nominal wage
in the year/CPI in that year * 100
nominal wages - ANS-number of dollars you earn not adjusted for inflation
nominal interest rate - ANS-interest rate not corrected for inflation
real interest rate - ANS-corrected for inflation: nominal interest rate - rate of inflation
inflation and purchasing power - ANS-inflation, an increase in the price level, decreases
the purchasing power of money
Redistributive affects of inflation - ANS-inflation can shift purchasing power away from
those who are awaiting future payments specified in dollars and toward those who are
obligated to make such payments
money - ANS-the set of assets in an economy that people regularly use to buy goods
and services from other people
money supply - ANS-the set of money available in the economy which includes
currency and demand deposits
functions of the fed - ANS-supervising and regulating banks, acting as a "bank for
banks," issuing paper currency, check clearing, guiding the macroeconomy, dealing with
financial crises
objectives of the fed - ANS-price stability, full employment exchange rate stability,
financial stability
