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What is the typical slope of the demand curve?
The demand curve typically slopes downwards from left to right.
What effect describes consumers substituting cheaper goods for more expensive ones?
Substitution Effect.
What does the income effect indicate when prices decrease?
A lower price increases the purchasing power of consumers, allowing them to buy more.
What is the slope of the supply curve?
The supply curve usually slopes upwards from left to right.
What makes it more profitable for producers to supply more?
Higher prices allow producers to cover their costs and earn greater profits.
What is marginal utility?
Marginal utility refers to the additional satisfaction or benefit from consuming one more unit of a good or service.
What principle describes the decrease in marginal utility as consumption increases?
Diminishing marginal utility.
What is marginal cost?
Marginal cost is the additional cost incurred by producing one more unit of a good or service.
How do marginal utility and marginal cost help determine market equilibrium?
They influence the prices at which consumers are willing to buy and producers are willing to sell.
What are the three functions of money?
Medium of exchange, unit of account, store of value.
What type of money operates on decentralized technology?
Cryptocurrency.
What is a housing bubble?
A significant increase in housing prices that leads to risky mortgage lending practices.
What financial products contributed to the 2008 economic crisis?
Mortgage-backed securities (MBS) and derivatives.
What was one major consequence of the 2008 economic crisis in the U.S.?
Massive bank failures, including Lehman Brothers.
What was the peak unemployment rate in the U.S. following the 2008 crisis?
10%.
What kind of monetary policy did the Federal Reserve implement after the crisis?
Slashed interest rates to near-zero and implemented quantitative easing.
What is the Gini coefficient?
A statistical measure of income or wealth inequality within a population.
What does a Gini coefficient of 0 represent?
Perfect equality, where everyone has the same income.
What does the Lorenz curve illustrate?
Income or wealth distribution within a population.
What does the area between the line of equality and the Lorenz curve represent?
The Gini coefficient quantifies income inequality.
What is the purpose of the Lorenz curve in economics?
To visualize inequality and calculate the Gini coefficient.
How can policymakers use the Lorenz curve?
To evaluate the effects of economic policies on income distribution.
What economic event triggered the European sovereign debt crisis?
The 2008 economic crisis.
What was one effect of the economic crisis on emerging markets?
Capital flight and currency devaluations.
What fiscal measure did the U.S. government enact to recover from the crisis?
The $787 billion American Recovery and Reinvestment Act.
What is a characteristic of cryptocurrencies like Bitcoin?
They operate on decentralized technology (blockchain).
What happens to the marginal utility of a good as its consumption increases?
Marginal utility typically decreases.
What happens when the price of a good increases for consumers?
They weigh the marginal utility against the cost, which may lead to a decrease in quantity demanded.
What happens to producers when the price exceeds their marginal cost?
They are incentivized to produce more, increasing supply.
What do higher prices provide producers in regards to costs?
Higher prices enable producers to cover their costs.
How does the Lorenz curve represent perfect equality?
As a 45-degree line from the origin.
What does the actual Lorenz curve usually do in relation to the line of equality?
It lies below the line of equality.
What does it mean if the Lorenz curve is further from the line of equality?
There is greater income inequality.
What is one challenge for cryptocurrencies as a unit of account?
Widespread instability in value.
What key factors contributed to the 2008 economic crisis?
Housing bubble, complex financial products, and regulatory failures.
What was an effect of austerity measures post-crisis in the Eurozone?
Public protests and economic contraction.
What have monetary policy measures generally aimed to achieve post-crisis?
Inject liquidity into the financial system and stabilize the economy.
Define income effect in the context of consumer behavior.
A lower price increases purchasing power, allowing for greater purchases.
How does the Gini coefficient range?
From 0 to 1, where 0 indicates perfect equality and 1 indicates perfect inequality.
What does a Gini coefficient closer to 1 indicate?
Greater income inequality in a population.
What does diminishing marginal utility imply for consumers?
The satisfaction gained from consuming additional units decreases.
How do high-interest rates generally affect consumer behavior?
They can lead to reduced spending and lower demand for goods.
What led to increased production among firms during price increases?
Firms have the incentive to produce more when prices rise.
What is a significant risk associated with cryptocurrencies as a store of value?
High volatility can affect their effectiveness as a store of value.
What is the long-term influence of the 2008 economic crisis?
A prolonged period of low-interest rates influencing global economic policy.
