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Macroeconomics Final Exam Study Guide
Questions With Verified Answers
What is the "fundamental economic problem" that exists in every economy? -
answer✔✔Scarcity- satisfying unlimited wants with limited resources. Forces people to make
choices.
Scarcity - answer✔✔Insufficiency of resources to satisfy people's unlimited wants
Economics - answer✔✔How people work to transform resources into goods and services to
distribute and satisfy wants
Difference between Macro and Micro economics - answer✔✔Micro- study of individuals or
specific firms or industries
Macro- study of the economy as a whole
What economic model depicts the flow of money, goods, and services between households and
firms? - answer✔✔Circular Flow Model
Opportunity Cost - answer✔✔quantity of goods that must be given up to obtain another good
PPC - what is looks like and be able to determine opportunity cost and graph it - answer✔✔One
good v another good
(look on study guide)
What shifts the PPC curve outward and inward - answer✔✔Inward- capital goods destroyed
(natural disasters or war)
Outward- Innovations, new resources, new technology
Absolute v Comparative Advantage - answer✔✔Absolute- who can produce more of a good
with fewer resources
Comparative- who can produce more of a good at a lower opportunity cost
Factors of Production - answer✔✔Land
Labor
, ©THEBRIGHTSTARS 2024
Capital
Entrepreneurship
Define and Illustrate the Law of Supply and Demand - answer✔✔Demand- as price goes up,
quantity demanded goes down and vice versa (inverse relationship between price and quantity
demanded)
Supply- As price goes up quantity supplied goes up and vice versa (direct relationship between
price and quantity supplied)
(See review for picture)
What causes a movement along the demand and supply curve - answer✔✔Changes in price
What are the determinants of supply and demand - answer✔✔Demand: change in income,
taste/preferences, price of substitute/complementary goods, future expectations, population size
Supply: technology, resource prices, prices of related goods, number of suppliers, expectations of
future prices
A Short-Run supply curve is drawn as _________ line. Long-Run is drawn as a _________line. -
answer✔✔Upward Sloping,
Vertical
What does the horizontal segment of the aggregate supply curve indicate - answer✔✔Real GDP
increase w/out affecting the economy's price level.
What are the determinants that would SHIFT the aggregate supply and demand curve -
answer✔✔AS: input changes, change in productivity, changes in ACTION of government (Not
gov't spending), environmental changes
AD: Changes in consumer spending, investment spending, gov't spending and net
exports(exports-imports) **C+I+G+(X-M)**
When would demand-pull inflation most likely occur? Illustrate Demand-Pull Inflation on the
aggregate model. - answer✔✔Aggregate demand curve increases pulling the price level up.
Usually as a result of military expansion (increase in government spending)
(See study guide for graph)
Cost-Push inflation will most likely occur during? Illustrate Cost-Push Inflation on the aggregate
model. - answer✔✔Aggregate supply curve decreases pushing the price level up. Usually as a
result of an increase in cost of basic goods (OPEC in 1970's causes Stagflation in U.S.)
(See study guide for picture)
Macroeconomics Final Exam Study Guide
Questions With Verified Answers
What is the "fundamental economic problem" that exists in every economy? -
answer✔✔Scarcity- satisfying unlimited wants with limited resources. Forces people to make
choices.
Scarcity - answer✔✔Insufficiency of resources to satisfy people's unlimited wants
Economics - answer✔✔How people work to transform resources into goods and services to
distribute and satisfy wants
Difference between Macro and Micro economics - answer✔✔Micro- study of individuals or
specific firms or industries
Macro- study of the economy as a whole
What economic model depicts the flow of money, goods, and services between households and
firms? - answer✔✔Circular Flow Model
Opportunity Cost - answer✔✔quantity of goods that must be given up to obtain another good
PPC - what is looks like and be able to determine opportunity cost and graph it - answer✔✔One
good v another good
(look on study guide)
What shifts the PPC curve outward and inward - answer✔✔Inward- capital goods destroyed
(natural disasters or war)
Outward- Innovations, new resources, new technology
Absolute v Comparative Advantage - answer✔✔Absolute- who can produce more of a good
with fewer resources
Comparative- who can produce more of a good at a lower opportunity cost
Factors of Production - answer✔✔Land
Labor
, ©THEBRIGHTSTARS 2024
Capital
Entrepreneurship
Define and Illustrate the Law of Supply and Demand - answer✔✔Demand- as price goes up,
quantity demanded goes down and vice versa (inverse relationship between price and quantity
demanded)
Supply- As price goes up quantity supplied goes up and vice versa (direct relationship between
price and quantity supplied)
(See review for picture)
What causes a movement along the demand and supply curve - answer✔✔Changes in price
What are the determinants of supply and demand - answer✔✔Demand: change in income,
taste/preferences, price of substitute/complementary goods, future expectations, population size
Supply: technology, resource prices, prices of related goods, number of suppliers, expectations of
future prices
A Short-Run supply curve is drawn as _________ line. Long-Run is drawn as a _________line. -
answer✔✔Upward Sloping,
Vertical
What does the horizontal segment of the aggregate supply curve indicate - answer✔✔Real GDP
increase w/out affecting the economy's price level.
What are the determinants that would SHIFT the aggregate supply and demand curve -
answer✔✔AS: input changes, change in productivity, changes in ACTION of government (Not
gov't spending), environmental changes
AD: Changes in consumer spending, investment spending, gov't spending and net
exports(exports-imports) **C+I+G+(X-M)**
When would demand-pull inflation most likely occur? Illustrate Demand-Pull Inflation on the
aggregate model. - answer✔✔Aggregate demand curve increases pulling the price level up.
Usually as a result of military expansion (increase in government spending)
(See study guide for graph)
Cost-Push inflation will most likely occur during? Illustrate Cost-Push Inflation on the aggregate
model. - answer✔✔Aggregate supply curve decreases pushing the price level up. Usually as a
result of an increase in cost of basic goods (OPEC in 1970's causes Stagflation in U.S.)
(See study guide for picture)
