ECON 202 WVU Exam 1

Resources

Scarce for households and economies

People face tradeoffs

"There's no such thing as free lunch" illustrates that....

Devise theories, collect data, analyze data

What steps does an economist take when studying the economy?

Change in the price of the good or service

A movement along the supply curve might be caused by...

Supply & demand

Forces that make market economies work are...

a market

A group of buyers and sellers of a particular good or service...

the DIFFERENCE between "movement along the demand curve" and "shift in the demand curve" is that...

the change in a price of a good causes movement, while demand shifters such as income & taste changes cause it to be shifted

productivity

amount of goods and services produced from each unit of labor input

If total spending rises from one year to the next, then...

The economy must be producing a larger output of goods & services, or they're selling at higher prices

Economists want to study...

REAL GDP

Nominal GDP

values production @ CURRENT prices at the CURRENT year

Real GDP

values production @ CONSTANT prices of a BASE year

GDP

total value of goods and services produced by a country

Intermediate goods

goods that are produced to produce a final good

In Y = C + I + G + NX .... Y is...

the value of total output

In Y = C + I + G + NX .... C is...

consumption

In Y = C + I + G + NX .... I is...

investment

In Y = C + I + G + NX .... G is...

government spending

In Y = C + I + G + NX .... NX is...

net exports

Durable goods

goods that last a long time

Nondurable goods

goods that last a short time

Rational people make decisions by...

comparing marginal costs and marginal benefits

The goal of measuring cost of living...

is to find a calculation to get rid of inflation

The leverage ratio is calculated as...

assets divided by bank capital

Banks are able to create money only when...

only a fraction of deposits are held in reserve

If an economy used gold as money, its money would be...

commodity money, but not fiat money

The measure of the money stock called M1 includes...

wealth held by people in their checking accounts

Bank capital

the machinery, structures, and equipment of the bank

Commodity money

money with intrinsic value (gold coins, cigarettes in POW camps)

The agency responsible for regulating the money supply in the US is....

the Federal Reserve

Consumption consists of spending by households on goods and services, with the expectation of....

purchases of new houses

Fiat money

money without intrinsic value (the US dollar)

Leverage

the use of borrowed money to supplement existing funds for investment purposes

Money serves three functions...

medium of exchange, unit of account, and store of value

Law of Demand

the claim that the quantity demanded of a good falls when the price of the good rises

Demand schedule

a table that shows the relationship between the price of a good & the quantity demanded

What happens to CPI measure for inflation if people substitute goods?

Overstate inflation

CPI is found by...

taking the year T divided by the base year

GDP deflator is found by...

taking the nominal GDP, dividing it by the real GDP, and multiplying that by 100

If P denotes the price of goods and services measured in terms of money, then...

1/P represents the value of money measured in terms of goods and services

If the value of a dollar falls, then the quantity of money demanded

RISES, meaning people would want to hold more of their wealth in a liquid form

The supply of money increases when...

The Fed makes open-market purchases

To explain the determinants of the price level and the inflation rate, most economists rely on...

quantity theory of money