ECN 211 FINAL EXAM ASU LATEST ACTUAL EXAM 200
QUESTIONS AND CORRECT DETAILED ANSWERS
The Circular Flow Diagram - ANSWER: Green arrows represent the flow of money
and red represents to flow of goods/services
Production possibilities Frontier/ Curve PPF: PPC - ANSWER: The curve shows what
is possible within an economy
D- impossible
A&B - feasible efficient
C - feasible & inefficient
PPF shifts out when... - ANSWER: the economy can produce more of everything
Opportunity Cost - ANSWER: the cost of what you give up to get something else in
terms of time, money, or other goods
Absolute Advantage - ANSWER: Who can make most of that good
Comparative Advantage - ANSWER: The lowest opportunity cost for that good
What would allow Panama and Canada to trade? - ANSWER: They want to trade
within their opportunity cost
Demand - ANSWER: The amount consumers are willing and able to purchase
Supply - ANSWER: The amount that producers are willing and able to produce
Law of demand - ANSWER: Demand always slopes down
Law of supply - ANSWER: Supply always slopes up
Equilibrium - ANSWER: Where the two curves meet
Demand shifters - ANSWER: - Price of substitute or complement
- Consumer preference
- population growth
- Income and expectation of future income
Supply shifters - ANSWER: - Price of input
- Technological advancement
- Number of producers
- Producer expectation
, Solve for Equilibrium Price and Quantity - ANSWER: Make both sides equal to each
other
Ex. Q = 100 - 6P & Q = 28 + 3P
100 - 6P = 28 + 3P
72 - 9P
P=8
28 + 3(8)
28 + 24
52 = Q
Economic Growth is measured... - ANSWER: Growth is measured in many ways,
usually GDP (the market value of all final goods and services produced in a nation's
borders) Productivity (output/labor hours)
What causes productivity? - ANSWER: - Human Capital
- Natural Resources
- Physical Capital
- Technological Knowledge
Human Capital - ANSWER: Knowledge and skills of workers (education, training)
Natural Resources - ANSWER: Anything that comes from nature (timber, oil, coal)
Physical Capital - ANSWER: All the physical tools and machines used to do business
Technological Knowledge - ANSWER: The general knowledge of the world
GDP Equation - ANSWER: GDP = G + C + I + NX = ALL PRODUCTION = ALL
CONSUMPTION
Consumption (C) - ANSWER: Things purchased for final use
Investment (I) - ANSWER: Things purchased to use to make more money later
Government Spending (G) - ANSWER: Any money the government uses
Nominal GDP - ANSWER: is this years' prices * this years quantities
Real GDP - ANSWER: is base years' prices * is years quantities
GDP Deflator - ANSWER: Nominal GDP/Real GDP*100
Inflation - ANSWER: using GDP deflator = (this years deflator - last years' deflator)
last years' deflator
CPI- Consumer Price Index - ANSWER: Makes a basket of good to calculate the cost
of living for a given year. Multiply current year prices * base year quantities
QUESTIONS AND CORRECT DETAILED ANSWERS
The Circular Flow Diagram - ANSWER: Green arrows represent the flow of money
and red represents to flow of goods/services
Production possibilities Frontier/ Curve PPF: PPC - ANSWER: The curve shows what
is possible within an economy
D- impossible
A&B - feasible efficient
C - feasible & inefficient
PPF shifts out when... - ANSWER: the economy can produce more of everything
Opportunity Cost - ANSWER: the cost of what you give up to get something else in
terms of time, money, or other goods
Absolute Advantage - ANSWER: Who can make most of that good
Comparative Advantage - ANSWER: The lowest opportunity cost for that good
What would allow Panama and Canada to trade? - ANSWER: They want to trade
within their opportunity cost
Demand - ANSWER: The amount consumers are willing and able to purchase
Supply - ANSWER: The amount that producers are willing and able to produce
Law of demand - ANSWER: Demand always slopes down
Law of supply - ANSWER: Supply always slopes up
Equilibrium - ANSWER: Where the two curves meet
Demand shifters - ANSWER: - Price of substitute or complement
- Consumer preference
- population growth
- Income and expectation of future income
Supply shifters - ANSWER: - Price of input
- Technological advancement
- Number of producers
- Producer expectation
, Solve for Equilibrium Price and Quantity - ANSWER: Make both sides equal to each
other
Ex. Q = 100 - 6P & Q = 28 + 3P
100 - 6P = 28 + 3P
72 - 9P
P=8
28 + 3(8)
28 + 24
52 = Q
Economic Growth is measured... - ANSWER: Growth is measured in many ways,
usually GDP (the market value of all final goods and services produced in a nation's
borders) Productivity (output/labor hours)
What causes productivity? - ANSWER: - Human Capital
- Natural Resources
- Physical Capital
- Technological Knowledge
Human Capital - ANSWER: Knowledge and skills of workers (education, training)
Natural Resources - ANSWER: Anything that comes from nature (timber, oil, coal)
Physical Capital - ANSWER: All the physical tools and machines used to do business
Technological Knowledge - ANSWER: The general knowledge of the world
GDP Equation - ANSWER: GDP = G + C + I + NX = ALL PRODUCTION = ALL
CONSUMPTION
Consumption (C) - ANSWER: Things purchased for final use
Investment (I) - ANSWER: Things purchased to use to make more money later
Government Spending (G) - ANSWER: Any money the government uses
Nominal GDP - ANSWER: is this years' prices * this years quantities
Real GDP - ANSWER: is base years' prices * is years quantities
GDP Deflator - ANSWER: Nominal GDP/Real GDP*100
Inflation - ANSWER: using GDP deflator = (this years deflator - last years' deflator)
last years' deflator
CPI- Consumer Price Index - ANSWER: Makes a basket of good to calculate the cost
of living for a given year. Multiply current year prices * base year quantities
