ECON 2301 FINAL EXAM
How does the simple circular flow model work? - ANSWERS-Businesses buy resources from
households at the resource market.
Businesses sell products to households at the product market.
Households buy products from businesses at the product market.
Households sell resources to businesses at the resource market.
What does the law of demand state? - ANSWERS-Other things equal, as price falls, the
quantity demanded rises, and as price rises, the quantity demanded falls.
What are the determinants / shifters of the demand curve? - ANSWERS-Consumer tastes
Number of buyers
Consumer incomes
Prices of related goods
Consumer expectations
What are the determinants / shifters of the supply curve? - ANSWERS-Resource prices
Producer expectations
Number of sellers
Technology
, Prices of other goods
Taxes and subsidies
What is happening when a market is in equilibrium? - ANSWERS-The supply curve intersects
the demand curve, and the right amount of products are being produced and sold. Everyone
is happy.
What is a nation's true gain from trade? - ANSWERS-Nations, as well as individuals, can gain
by specializing. With trade, everyone ends up better off than before.
Who is the world's leading trade nation? - ANSWERS-United States
In recent years, has the U.S. imported more or exported more? - ANSWERS-Imported
Define Gross Domestic Product - ANSWERS-Gross domestic product is the total market or
monetary value of all final goods and services produced in the economy in one year.
How is GDP calculated? - ANSWERS-C+I+G+X=GDP
How do we avoid double-counting gross domestic product? - ANSWERS-We avoid double-
counting gross domestic product by:
1. Ignores intermediate goods
2. counts only final goods
3. or could count value added
What is the business cycle? - ANSWERS-Business cycles are alternating increases and
decreases in economic activity over time.
What are the 4 phases of the business cycle? - ANSWERS-Peak, recession, trough, expansion
How does the simple circular flow model work? - ANSWERS-Businesses buy resources from
households at the resource market.
Businesses sell products to households at the product market.
Households buy products from businesses at the product market.
Households sell resources to businesses at the resource market.
What does the law of demand state? - ANSWERS-Other things equal, as price falls, the
quantity demanded rises, and as price rises, the quantity demanded falls.
What are the determinants / shifters of the demand curve? - ANSWERS-Consumer tastes
Number of buyers
Consumer incomes
Prices of related goods
Consumer expectations
What are the determinants / shifters of the supply curve? - ANSWERS-Resource prices
Producer expectations
Number of sellers
Technology
, Prices of other goods
Taxes and subsidies
What is happening when a market is in equilibrium? - ANSWERS-The supply curve intersects
the demand curve, and the right amount of products are being produced and sold. Everyone
is happy.
What is a nation's true gain from trade? - ANSWERS-Nations, as well as individuals, can gain
by specializing. With trade, everyone ends up better off than before.
Who is the world's leading trade nation? - ANSWERS-United States
In recent years, has the U.S. imported more or exported more? - ANSWERS-Imported
Define Gross Domestic Product - ANSWERS-Gross domestic product is the total market or
monetary value of all final goods and services produced in the economy in one year.
How is GDP calculated? - ANSWERS-C+I+G+X=GDP
How do we avoid double-counting gross domestic product? - ANSWERS-We avoid double-
counting gross domestic product by:
1. Ignores intermediate goods
2. counts only final goods
3. or could count value added
What is the business cycle? - ANSWERS-Business cycles are alternating increases and
decreases in economic activity over time.
What are the 4 phases of the business cycle? - ANSWERS-Peak, recession, trough, expansion
