ECON 100 Macroeconomics Midterm 1 Study Guide
ECON 100 Macroeconomics Midterm 1 Study Guide Econ 100
Long Beach State
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This 5 page Study Guide was uploaded by Astrea Presley on Tuesday February 16, 2016. The Study Guide belongs to Econ 100 at California State University Long Beach taught by Dan Pynn in Spring 2016. Since its upload, it has received 198 views. For similar materials see Principles of Macroeconomics in Economcs at California State University Long Beach.
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Date Created: 02/16/16
ECON 100 - Macroeconomics Study Guide Midterm 1 Chapter 1 Scarcity - limited goods to satisfy society’s unlimited wants/needs Economics - study of how people allocate their resources to satisfy wants/needs Marginal thinking - requires decision maker to evaluate whether or not one unit of something is worth more than the cost Opportunity cost - what is sacriﬁced in order to obtain something else Macroeconomics - Study of overall economy Microeconomics - Study of individual units that make up the economy Law of increasing opportunity cost - principle that the opportunity cost increases as the production of a good increases Production possibilities frontier - Possible combinations of two goods that an economy can produce in a certain amount of time under the condition of technology, no unemployed resources, and efﬁcient production Trade, resources, technology change the production possibilities curve Adam Smith Limited role of government, problems with taxation, diagram of the pin factor shows the concept of the specialization of labor. Invisible hand - give us ability to act under economic circumstances promotes growth and higher income Chapter 2 - Supply and Demand Equilibrium - Where price and supply meet Law of demand - as price rises quantity demanded falls and visa versa Law of diminishing marginal utility - for a given time period the marginal satisfaction gained by consuming equal successive units of a good will decline as the amount consumed increases. ** What is the difference between change in demand and a change in quantity demanded** Change in demand moves the demand curve - caused my by non price determinants Change in quantity demanded moves along demand curve and cause by change in price. Non price determinants DEMAND: (MUST KNOW FOUR) 1. Income 2. Tastes and preferences 3. Price of related goods 4. Number of buyers 5. Expectations 6. World events Law of supply - relation between price and quantity of sellers willing to offer for sale in deﬁned time period Non price determinants SUPPLY: 1.Price of related goods 2. Technology 3. Number of sellers 4. Price expectations 5. Government regulation 6. Taxes and subsidies Chapter 4 - Floors and Ceilings Ceilings - Maximum price established by government that causes shortages ex. rent control Floors - Minimum government mandated price that causes surpluses ex. minimum wage Chapter 6 - GDP GDP(Gross Domestic Product) : the total market value of all ﬁnal goods and services produced annually within a countries boarders Two ways to calculate: expenditure and income approach Intermediate goods: input into ﬁnal production of ﬁnal good Double counting: counting good more than once Inﬂation: prices rise Real GDP: GDP adjusted for inﬂation Net Domestic Product: GDP capital consumption allowance GDPshortcomings: • doesn't include leisure • doesn't include mom (housework not included) • doesn't count illegal activities (black market) • all ﬁnancial information is not accounted for *GDPindicates that economy grew or shrank but doesn't tell if change is good or bad* GDPgap: distance in real terms between where we are in the economy and where we should be (fully employed economy) Chapter 7 - Unemployment Four types of unemployment: • Frictional - due to natural frictions in economy which is caused by changing market conditions and is represented by qualiﬁed individuals with transferable skills who change jobs • Structural - unemployment due to structural changes in the economy that eliminates some jobs and creates others for which the unemployed are unqualiﬁed • Cyclical - unemployment that is the difference between the unemployment rates and the natural unemployment rates • Natural - lowest rate of unemployment an economy can sustain over a long period of time. The natural rate of unemployment is a combination of frictional and structural unemployment that persists in an efﬁcient, expanding economy when labor and resource markets are in equilibrium. Chapter 8 - CPI CPI - weighted statistical average that measures ﬂuctuation in prices How well does it measure inﬂation? Not very well because: • Ignores the law of demand • Ignores quality ex. car goes up in price but also in quality • Problems with basket ex. no one had computers, now we have laptops 3 types of inﬂation: Demand-pull - everybody wants xxx so demand curves shifts out Cost-push - demand shifts in. If oil price rises gas price rises Monetary based inﬂation - government prints money to pay debt, currency loses value Stagﬂation: tendency of prices to rise and unemployment to rise at the same time Business cycle diagram shows GDPover time Important parts of business cycle diagram: • Peak • Recession Trough • • Recovery/Expansion Describe the impact on income for each if inﬂation is at 10% 1. Federal income tax - no effect. Inﬂation indexing accounts for inﬂation in federal tax rate 2. Collect social security - beneﬁts rise because it is adjusted for inﬂation 3. Own a small business - businesses costs would rise and proﬁts would fall Which of the following are counted in GDPcalculation? A. Used car is sold B. Mother cooks meal at home C. Buy 100 shares of Starbucks What is happening to GDPcurrently? GDP is growing by 1% Where are we on GDPcycle? We are in recovery. What are the three economic goals Obama has? Stable prices, GDP growing, and unemployment shrinking Last question (Guns, butter and the deﬁcit) should U.S. budget be balanced? Yes or no and why?Answers vary. Abalanced budget means the U.S. would have revenues that equal expenditures so no deﬁcit or surplus would occur.
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