PROPHECY CORE MANDATORY PART 1 LATEST 2023
EXAM QUESTIONS AND CORRECT ANSWERS|AGRADE
Abatement Policy - ANSWER: policy designed to reduce environmental damages
Abatement - ANSWER: practices to limit or reverse environmental damages
Absolute Advantage - ANSWER: person or country has this in the production of a
good if the inputs it uses to produce this good are less than in some other person or
country
Accountability - ANSWER: obligation of a decision-maker or body to be responsive to
the needs and wishes of people affected by his, her or its decisions
Acyclical - ANSWER: no tendency to move either in the same or opposite direction to
aggregate output and employment over the business cycle
Adjustment Gap - ANSWER: lag between some outside change in labour market
conditions and the movement of the economy to the neighbourhood of the new
equilibrium
Administratively Feasible - ANSWER: policies for which the government has sufficient
information and staff for implementation
Adverse Selection - ANSWER: problem faced by parties to an exchange in which the
terms offered by one party will cause some exchange partners to drop out. Also
referred to as the 'hidden attributes' problem (the state of already being ill is the
hidden attribute), to distinguish it from the 'hidden actions' problem of moral hazard
Example of Adverse Selection - ANSWER: problem of asymmetric information in
insurance: if the price is sufficiently high, the only people who will seek to purchase
medical insurance are people who know they are ill but the insurer does not. This
will lead to further price increases to cover costs
Aggregate Demand - ANSWER: total of the components of spending in the economy,
added to get GDP: Y = C + I + G + X - M. It is the total amount of demand for or
expenditure on goods and services produced in the economy
Aggregate Output - ANSWER: total output in an economy, across all sectors and
regions
Allocation - ANSWER: description of who does what, the consequences of their
actions, and who gets what as a result
Altruism - ANSWER: willingness to bear a cost in order to benefit somebody else
, Antitrust Policy - ANSWER: government policy and laws to limit monopoly power and
prevent cartels
Arbitrage - ANSWER: buying a good at a low price in a market to sell it at a higher
price in another. Traders engaging in arbitrage take advantage of the price difference
for the same good between two countries or regions. As long as the trade costs are
lower than the price gap, they make a profit
Artificially Scarce Good - ANSWER: public good that it is possible to exclude some
people from enjoying
Asset Price Bubble - ANSWER: sustained and significant rise in the price of an asset
fuelled by expectations of future price increases
Asset - ANSWER: anything of value that is owned
Asymmetric Information - ANSWER: information that is relevant to the parties in an
economic interaction, but is known by some but not by others
Austerity - ANSWER: policy where a government tries to improve its budgetary
position in a recession by increasing its saving
Automatic Stabilisers - ANSWER: characteristics of the tax and transfer system in an
economy that have the effect of offsetting an expansion or contraction of the
economy]
Example of an Automatic Stabiliser - ANSWER: unemployment benefits system
Automation - ANSWER: use of machines that are substitutes for labour
Autonomous Consumption - ANSWER: consumption that is independent of current
income
Autonomous Demand - ANSWER: components of aggregate demand that are
independent of current income
Average Cost - ANSWER: total cost of the firms's output divided by the total number
of units of output
Average Product - ANSWER: total output divided by a particular input
Balance of Payments (BP) - ANSWER: records the sources and uses of foreign
exchange. This account records all payment transactions between the home country
and the rest of the world, and is divided into two parts: the current account and the
capital and financial account.
EXAM QUESTIONS AND CORRECT ANSWERS|AGRADE
Abatement Policy - ANSWER: policy designed to reduce environmental damages
Abatement - ANSWER: practices to limit or reverse environmental damages
Absolute Advantage - ANSWER: person or country has this in the production of a
good if the inputs it uses to produce this good are less than in some other person or
country
Accountability - ANSWER: obligation of a decision-maker or body to be responsive to
the needs and wishes of people affected by his, her or its decisions
Acyclical - ANSWER: no tendency to move either in the same or opposite direction to
aggregate output and employment over the business cycle
Adjustment Gap - ANSWER: lag between some outside change in labour market
conditions and the movement of the economy to the neighbourhood of the new
equilibrium
Administratively Feasible - ANSWER: policies for which the government has sufficient
information and staff for implementation
Adverse Selection - ANSWER: problem faced by parties to an exchange in which the
terms offered by one party will cause some exchange partners to drop out. Also
referred to as the 'hidden attributes' problem (the state of already being ill is the
hidden attribute), to distinguish it from the 'hidden actions' problem of moral hazard
Example of Adverse Selection - ANSWER: problem of asymmetric information in
insurance: if the price is sufficiently high, the only people who will seek to purchase
medical insurance are people who know they are ill but the insurer does not. This
will lead to further price increases to cover costs
Aggregate Demand - ANSWER: total of the components of spending in the economy,
added to get GDP: Y = C + I + G + X - M. It is the total amount of demand for or
expenditure on goods and services produced in the economy
Aggregate Output - ANSWER: total output in an economy, across all sectors and
regions
Allocation - ANSWER: description of who does what, the consequences of their
actions, and who gets what as a result
Altruism - ANSWER: willingness to bear a cost in order to benefit somebody else
, Antitrust Policy - ANSWER: government policy and laws to limit monopoly power and
prevent cartels
Arbitrage - ANSWER: buying a good at a low price in a market to sell it at a higher
price in another. Traders engaging in arbitrage take advantage of the price difference
for the same good between two countries or regions. As long as the trade costs are
lower than the price gap, they make a profit
Artificially Scarce Good - ANSWER: public good that it is possible to exclude some
people from enjoying
Asset Price Bubble - ANSWER: sustained and significant rise in the price of an asset
fuelled by expectations of future price increases
Asset - ANSWER: anything of value that is owned
Asymmetric Information - ANSWER: information that is relevant to the parties in an
economic interaction, but is known by some but not by others
Austerity - ANSWER: policy where a government tries to improve its budgetary
position in a recession by increasing its saving
Automatic Stabilisers - ANSWER: characteristics of the tax and transfer system in an
economy that have the effect of offsetting an expansion or contraction of the
economy]
Example of an Automatic Stabiliser - ANSWER: unemployment benefits system
Automation - ANSWER: use of machines that are substitutes for labour
Autonomous Consumption - ANSWER: consumption that is independent of current
income
Autonomous Demand - ANSWER: components of aggregate demand that are
independent of current income
Average Cost - ANSWER: total cost of the firms's output divided by the total number
of units of output
Average Product - ANSWER: total output divided by a particular input
Balance of Payments (BP) - ANSWER: records the sources and uses of foreign
exchange. This account records all payment transactions between the home country
and the rest of the world, and is divided into two parts: the current account and the
capital and financial account.
