My mom went in for emergency surgery tonight and I have a Macroeconomics final a
ID: 1121801 • Letter: M
Question
My mom went in for emergency surgery tonight and I have a Macroeconomics final at 12 tomorrow so if someone could help me out with this study guide so I can cram in the morning I would really appreciate it!
1.What is the fundamental economic problem having to do with resources vs. desires?
2.Know the characteristics of a capitalist system, such as competition, private property, prices set by free-market demand and supply, and limited government.
3.On a demand and supply graph, where is the equilibrium? What happens to the product price if there is a shortage? A surplus?
4.On a demand and supply graph, say that demand decreases. What happens to the equilibrium price? Equilibrium quantity? What if the supply decreases?
5.Define real GDP and per capita GDP.
6.During a recession, what happens to GDP, unemployment, and inflation? What happens during an expansion?
7.If the free market fixes a recession by itself (no government action), what is the technical term for that in economics? Who believes more strongly that government action is unnecessary, (neo)classical economists or Keynesians?
8.What are the U.S. government’s definitions of “employed” and “unemployed”? What’s the difference between frictional and structural unemployment?
9.What is “inflation”? What causes inflation?
10.If the government cuts income taxes, what will probably happen to consumer spending? What happens to aggregate demand?
11.How is business investment in machines and buildings affected by interest rate changes?
12.Define budget deficit and budget surplus.
13.To fight a recession, what would Keynesians recommend that the government do with government spending? Transfer payments? Taxes?
14.The Federal Reserve is responsible for what sort of policy? If the Fed wants to boost the GDP, what will it probably do with interest rates and the money supply?
15.What does it mean if a country has a “comparative advantage” in producing and exporting something? How do tariffs affect imports?
Explanation / Answer
1). The fundamental economic problem is that of scarcity, which states that there are only limited resoures in the market, but there is no limit on dersire of wants. Thus, there is a big gap between the demand and supply of resources in this world which could lead to scarcity or degradation of resources.
3). Equilibrium is established where demand curve intersects the supply curve. In case of a shortage, this would mean that demand curve has shifted to the right or either the supply curve has shifted to the left. In either case, there is a rise in equilibrium price. In case of a surplus supply on the other hand, the situation is opposite and thus the price is reduced.
4). An increase in demand shifts the demand curve to the right, thus the equilibrium price level increases. Equilibrium quantity also increases at increased demand. A decrease in supply will shift the supply curve to the left, with price increasing and equilibrium output being reduced.
5). Real GDP can be defined as the value of the total output a country produced at base prices. Per capita GDP as the average income/GDP of each person in the country. It is calculated by diving the total GDP by number of people.
6). During recession, the GDP of a country contracts, reducing the level of output and subsequently increasing unemployment. There is also reduction in inflation, as inflation and unemployment are inversely related. During an expanson, the opposte happens, increasing the level of output and inflation, and reducing unemployment.
7).
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