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$100 $100 $100 $100 $100$100

$200 $200 $200 $200 $200$200

$300 $300 $300 $300 $300$300

$400 $400 $400 $400 $400$400

$500 $500 $500 $500 $500$500

Key TermsSupply Demand GDP

Unemployment/Inflation Misc.

- $100- $100

What is the law of supply?

The higher the price for a good or service, all other things being equal, leads suppliers to supply a greater quantity of that good or service

- $200What kind of relationship is present in the law of supply and

why?

Positive/direct relationship because at higher prices, profit-seeking firms have an incentive to produce more

- $300What are the shifters of supply?

1. Prices/Availability of inputs

2. Number of Sellers

3. Technology

4. Government Action

5. Opportunity Cost of Alternative Production

6. Expectations of Future Profit

- $400What is the difference between a long-run aggregate supply curve and a short-run aggregate supply curve?

Wages and prices will increase as price levels increase in a LRAS; wages and princes will not increase as price levels increase in a SRAS

- $500What are the shifters of aggregate supply?

1. Resource prices

2. Actions of the government

3. Productivity/technology

- $100

What is the law of demand?

The higher the price for a good or service, al other things being equal, leads people to demand a smaller quantity of that good or service

- $200What type of relationship can be found in the law of

demand and what does that say about the slope?

Inverse relationship; demand curve will slope downward

- $300What are the shifters of demand?

1. Tastes and preferences

2. Number of consumers

3. Price of related goods

4. Income

5. Future Expectations

- $400What shifts the aggregate demand curve?

GDP= C+I+G+X

- $500What are the determinants of aggregate demand?

1. Change in consumer spending

2. Change in investment spending

3. Change in government spending

4. Change in net export spending

- $100How is GDP calculated?

C+I+G+X

- $200How is the percent change in GDP, from year to year,

calculated?

(Year 2-year 1)/Year 1 x 100

- $300What is the best measure of a nation’s standard of

living?

Real GDP per capita

- $400What is the difference between real GDP and nominal

GDP?

Real GDP is expressed in constant dollars and nominal GDP is measured in current prices

- $500Why do some countries have higher GDPs than others?

1. Availability and quantity of natural resources

2. Availability of capital

3. Economic system

- $100What is unemployment rate?

The percent of people in the labor force who want a job but are not working

- $200Who is in the labor force?

People above 16 years old, able and willing to work, not institutionalized, not in the military, in school full time, or retired

- $300What is the main effect of inflation?

It reduces the purchasing power of money; each dollar of income will buy fewer goods and services

- $400What are the three causes of inflation?

1. The government prints too much money

2. Demand-pull inflation

3. Cost-push inflation

- $500

Who is hurt by inflation? Who is helped?

Hurt- lenders, people with a fixed income, savers

Helped- debtors, a business where the price of the product increases faster than the price of resources

- $100

What is consumer price index (CPI)?

Most commonly used measurement of inflation for consumers

- $200

What does the business cycle show?

How the national economy fluctuates resulting in periods of boom and bust

- $300What is the government’s role in the economy?

Prevent unemployment and prevent inflation at the same time

- $400What is the Invisible Hand?

Society’s goals will be met as individuals seek their own self-interest

- $500All decisions involve trade-offs. What are trade-

offs?

Alternatives that we give up whenever we choose one course of action over others

- $100Define opportunity cost.

The real cost of an item, what you must give up in order to get it

- $200What are the factors of production?

Land, labor, capital, entrepreneurship

- $300Define automatic stabilizer.

Government spending and taxation rules that cause a fiscal policy to be automatically expansionary when the economy contracts and automatically contractionary when the economy expands, without requiring any deliberate action by policy makers

- $400

What is scarcity?

Resources are not unlimited and are not available in sufficient quantities to satisfy all the various ways a society wants to use them

- $500What is gross domestic product (GDP)?

The total value of all final goods and services produced in the economy during a given year