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Macro Hammock Final Exam Review (1)
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Macro Hammock Final Exam ReviewWhat is opportunity cost? - ANS-Value of the next best thing
What is the law of demand? - ANS-As price rises, quantity demanded falls
The price of a sandwich at Chick fil a rises from $4 to $7, where does demand shift? -
ANS-There is no shift because it is a final good
What is the law of supply? - ANS-As price rises, quantity supplied rises
The price of flour rises, what happens to the supply of bread? - ANS-Shifts left
Why do price ceilings/floors occur? - ANS-Lobbying by interest groups
What is deadweight loss? - ANS-Lost consumer and producer surplus
Jeff was willing to pay $100 for his new phone, the phone price was $80. The store owner was
willing to sell it for $65. What is the total surplus? - ANS-$35
When there is a price ceiling, is there a shortage or a surplus? - ANS-shortage
When there is a price floor, is there a shortage or a surplus? - ANS-Surplus
What is final good? - ANS-Reached its final consumer
Jamie gives his neighbor $10 every time she washes his car. What kind of market production is
this? - ANS-Grey Market Production
Due to inflation, supermarkets hire staff to update product costs, this is an example of -
ANS-Menu cost
if there is a trade deficit what do you know about capital outflow? - ANS-Capital inflow > Capital
outflow
What are some uses of money? - ANS-Medium of exchange, store of value, and unit of account
Is silver an example of Fiat or Commodity money? - ANS-Commoditiy
Which is the most liquid:
M0, M1, or M2? - ANS-M0
, Computers nowadays cost about $1500, computers in the 90s cost about $3000, what causes
this phenomenon? - ANS-Product quality/New goods
If the fed increases the reserve requirement, what will banks do? - ANS-loan less
What happens to prices in the long run? - ANS-They become flexible
What is the differences between nominal and real GDP? - ANS-Real accounts for inflation
Where do you find inflation on a MV=PY graph? - ANS-Intersection between AD and SGC
Why is economic growth higher in India then North Korea? - ANS-India is open to competitive
markets
If AD shifts to the left, spending growth? - ANS-grows slower
What is rent-seeking? - ANS-wasteful spending of resources
What are the ways the government can manage spending? - ANS-spend more money and cut
taxes
What is absolute advantage? - ANS-one group can produce greater quantity than another
Why do trade barriers occur? - ANS-special interest effect
What is a reason FP/MP might not work? - ANS-people anticipate policy changes, the
government borrowing creates crowding out, and people think in terms of the Ricardian
equivalent
What are some types of inside time lags? - ANS-recognition lag, implementation lag, decision
making lag
what is dumping? - ANS-importing goods below the countries market price
Why are subsidies inefficient? - ANS-Firms produce too much, we waste resources, and we pay
for it in taxes
Why does the infant industry argument fail? - ANS-Old firms normally get protection (from gov)
All arguments referring standards in other countries fail because countries need? - ANS-trade to
become developed and then improve
Why does the labor standards argument being too low fail? - ANS-these workers are still taking
the best of their options
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