APE REVIEW

A DUAL TO THE DEATH!

National Income and Price Determination

The LRAS curve is conceptually the same as this other curve. Production Possibilities Curve (PPC)

Measurement of Economic Performance

Explain the difference between nominal and real GDP. Nominal doesnt account for inflation, Real uses consistent base year prices.

Basic Economic Concepts

Fundamental problem facing all people; unlimited wants and limited resources to satisfy those wants. Scarcity

Basic Economic Concepts

Which of the following nations should produce butter?
Guns U.S. Canada 20 40 Butter 60 80

United States

Basic Economic Concepts

What would be the acceptable terms of trade between the two nations? 1 gun for _____ butter.
Guns U.S. Canada 20 40 Butter 60 80

Canada trades 1 gun for 1 1/3 butter.

Measurement of Economic Performance

Total GDP is 200. There are 5 people in the economy. What is the Real GDP per Capita? 40

Graphing
Draw a correctly labeled AS/AD graph, complete with labeled equilibrium.

Basic Economic Concepts

State the Law of Demand When prices are high, people buy less, and when prices are low, people buy more the price of a good/service is inversely related with the quantity demanded.

Inflation, Unemployment and Stabilization Policies

List the two tools at the disposal of the federal government Taxation, Government Spending

Measurement of Economic Performance

GDP = ____ + ____ + ____ + ____ C + I + G + Xn

Financial Sector
If an individual puts $1,000 in the bank, what amount will the bank have in excess reserves with a required reserve ratio of 10%? $900

Measurement of Economic Performance

List three items excluded from GDP. Intermediate products, Used goods, nonmarket transactions, black market goods.

Economic Growth and Productivity

If the government enacts expansionary fiscal policy, it would have this affect on interest rates and unemployment. Increase interest rates and decrease unemployment

Measurement of Economic Performance

What is the economist definition of a recession? Real GDP falls for two consecutive quarters (6 straight months)

Open Economy: International Trade and Finance

The market of exchange that provides for the trading of international currencies FOREX market

Measurement of Economic Performance

Explain the 2 theories of inflation. Demand-pull = too much demand for too little supply Cost-push = increased input costs cause rising prices

Graphing
Draw a properly labeled FOREX market for the US dollar, in relation to the Japanese Yen.

Basic Economic Concepts

Used by economists to measure the cost of decision-making; value of the most desirable alternative given up. Next best alternative use of money, time, or resources (Highest-valued alternative forgone) Opportunity Cost

Measurement of Economic Performance

Given an example of the 4 types of unemployment. Structural, frictional, cyclical, seasonal

National Income and Price Determination

Which phase of the business cycle occurs when business is good, there is a large amount of customers and profits are growing? Expansionary

Basic Economic Concepts

The average quantity of goods and services that can be produced per each unit of labor input Productivity

National Income and Price Determination

Name the four determinants of Aggregate Demand. Consumption, Investment, Government Spending, Net Exports

Graphing
Draw a Production Possibilities Curve, with points identifying efficient (A), inefficient (B) and unattainable (C) economies.

Open Economy: International Trade and Finance

Suppose that interest rates are lower in the US relative to interest rates in Canada. Financial capital would flow ______ the US and the US dollar would ________. Out of, depreciate

National Income and Price Determination

The Keynesian theory that says that laborers are unwilling to immediately take reductions in pay due to a contracting economy. Sticky wage theory

Measurement of Economic Performance

List the phases of the business cycle. Peak, Contraction (Recession), Trough, Expansion (Recovery)

National Income and Price Determination

Which curve would be shifted and in what direction? Government announces a large increase in spending on health and education. AD, to the right

National Income and Price Determination

Which curve would be shifted and in what direction? There is a significant increase in world oil prices. AS, to the left

Measurement of Economic Performance

The total market value of all final goods and services produced within a countrys borders in a given period of time GDP

National Income and Price Determination

Which curve would be shifted and in what direction? Due to a decrease in demand for loanable funds, the real interest rate decreases. AD, to the right.

Basic Economic Concepts

This concept allows each labor input to focus on the specific activities that cost them the least (also known as division of labor) Specialization

Financial Sector
This financial instrument acts as an IOU for the government. Bond

Financial Sector
If an individual puts $1,000 in the bank with a RRR of 10%, what change does that deposit have on the money supply? $9000

Financial Sector
If the Federal Reserve purchases $100 million in government securities, with a RRR of 20%, what change does that have on the money supply? $500 million

Financial Sector
If the Fed decides to adopt contractionary monetary policy, what is the likely affect on the Loanable Funds Market? Supply of Loanable Funds will decrease

Inflation, Unemployment and Stabilization Policies

This type of policy is controlled by the government Fiscal

Inflation, Unemployment and Stabilization Policies

The percentage (%) of additional disposable income that each consumer will spend Marginal propensity to consume

Inflation, Unemployment and Stabilization Policies

What does the short run Phillips curve illustrate? The inverse relationship between unemployment and inflation

Financial Sector
What are the three tools of monetary policy? Required Reserve Ratio, Open Market Operations, Discount Rate

Inflation, Unemployment and Stabilization Policies

Give an example of both expansionary fiscal and monetary policy. Fiscal lower taxes, increase spending Monetary lower discount rate, lower RRR, buy bonds

Graphing
Draw a properly labeled investment demand graph.

Economic Growth and Productivity

Other things equal, an improvement in productivity has what affect on the AS/AD graph in the short-run? Shift SRAS to the right

Graphing
Draw an AS/AD graph with demand-pull inflation.

National Income and Price Determination

List two scenarios that would shift the LRAS curve to the right. Increasing capital stock, discovery of new natural resources, technological advancements, increased education or training for laborers.

Graphing
Draw a properly labeled money market graph.

Economic Growth and Productivity

How is economic growth measured? GDP

Open Economy: International Trade and Finance

Domestically produced goods and services sold abroad are called this Exports

Inflation, Unemployment and Stabilization Policies

The side effect that occurs when expansionary fiscal policy increases AD, which in turn raises interest rates. Crowding Out effect

Open Economy: International Trade and Finance

Exports and imports would be recorded into this account Current Account

Open Economy: International Trade and Finance

The relocation of a Toyota factory from Japan to San Antonio would be recorded in this account Capital (Financial) Account

Basic Economic Concepts

The four Factors of Production Land, Labor, Capital, Entrepreneurship

Graphing
Draw an AS/AD graph with cost push inflation.

Open Economy: International Trade and Finance

Describe the appreciation and depreciation of currency Appreciation = strengthening of currency, Depreciation = weakening of currency

Inflation, Unemployment and Stabilization Policies

What change in the AS/AD graph would lead to a shift of the SRPC curve? Shift of the SRAS

Financial Sector
If the Fed decides to adopt expansionary monetary policy, what is the likely effect for the following: AD, interest rates, international value of the dollar Shift right, lower, depreciate

Graphing
Draw a properly labeled FOREX market for the US dollar, in relation to the Japanese Yen.

Economic Growth and Productivity

Name two things that would shift the PPC outward? Increasing capital stock, discovery of new natural resources, technological advancements, increased education or training for laborers.