ECN 222 UNCW Final Exam – Study Guide, Practice Questions & Comprehensive
Review
What is the current unemployment rate? - correct answer ✔✔4.4%
What might be considered a "natural" rate of unemployment? - correct answer ✔✔between 4.5
and 5%
Has labor force participation been increasing or decreasing over the past 10 years? - correct
answer ✔✔decreasing, partly due to discouraged workers leaving the labor force. starting to
increase since end of the recession
Has Gross domestic product been increasing, decreasing or flat over the past 60 years? - correct
answer ✔✔increasing. 18.57 trillion
What does economics study? - correct answer ✔✔how society manages its scarce resources
How are things such as air that seem abundant also scarce? - correct answer ✔✔while air is
abundant, clean, unpolluted air is scarce in some parts of the world. making air clean also costs
money.
What are some examples of tradeoffs? - correct answer ✔✔choose between eating a burger or
sandwich. if you eat the burger, your opportunity cost is the sandwich.
What's a big tradeoff that economics is concerned with? - correct answer ✔✔efficiency vs
equality. result of government programs redistributing income
,What is opportunity cost, how is it related to tradeoffs? - correct answer ✔✔whatever must be
given up to obtain some item tradeoffs result in opportunity cost because they force you to
make a choice.
What are rational people? - correct answer ✔✔people who systematically do the best they can
to achieve their objectives; make decisions by evaluating cost and benefits
What are marginal changes? - correct answer ✔✔incremental adjustments to an existing plan
Is it possible for us to assume someone who gives money to charity is rational? How? - correct
answer ✔✔no, it makes you feel good. smoking makes you feel good and slowly kills you
What's an example of a marginal decision? - correct answer ✔✔extra year of college; lost wages
but more future income
What does thinking at the margin suggest about expenditures already made? (such as previous
expenditures fixing our Mustang) - correct answer ✔✔they aren't important. let the past go and
think forward to how you will later expend your time and money. sunk costs are sunk
What are incentives? How are they important? - correct answer ✔✔something that induces a
person to act. incentives effect how the market works because people respond to them
How does trade make people better off? - correct answer ✔✔it can only be positive because it
is voluntary. allows people to specialize in what they do best.
Are both parties directly involved in a trade made better off and why? (hint, the answer is yes,
but why?) - correct answer ✔✔yes, because you only trade when you know that you will benefit
What is the primary function of government? - correct answer ✔✔enforce property rights
, What are two causes of market failure? - correct answer ✔✔externalities and market failure. e -
when production or consumption affects bystanders. mf - a single buyer or seller has substantial
influence on market price (monopoly)
In response to market failure, the government may intervene in markets to promote efficiency.
However, the government may also step in to promote _______. - correct answer ✔✔equality
What is productivity? - correct answer ✔✔the number of goods and services produced per unit
of labor
In the long run, what is the primary cause of inflation? - correct answer ✔✔the government
prints too much money
When unemployment is high, one potential policy is to increase the money supply to stimulate
demand, what is the tradeoff though? - correct answer ✔✔may cause a boom that leads to a
bust
Why is demand downward sloping? - correct answer ✔✔there is an inverse relationship
between the price of a product and quantity demanded
How does it (downward sloping) reflect the law of demand? - correct answer ✔✔the curve
reflects a direct correlation between quantity demanded and price
Why is supply upward sloping? - correct answer ✔✔higher price is needed to cover higher
marginal cost of production
How does it (upward sloping) reflect the law of supply? - correct answer ✔✔the higher the
price, the higher the quantity supplied
Review
What is the current unemployment rate? - correct answer ✔✔4.4%
What might be considered a "natural" rate of unemployment? - correct answer ✔✔between 4.5
and 5%
Has labor force participation been increasing or decreasing over the past 10 years? - correct
answer ✔✔decreasing, partly due to discouraged workers leaving the labor force. starting to
increase since end of the recession
Has Gross domestic product been increasing, decreasing or flat over the past 60 years? - correct
answer ✔✔increasing. 18.57 trillion
What does economics study? - correct answer ✔✔how society manages its scarce resources
How are things such as air that seem abundant also scarce? - correct answer ✔✔while air is
abundant, clean, unpolluted air is scarce in some parts of the world. making air clean also costs
money.
What are some examples of tradeoffs? - correct answer ✔✔choose between eating a burger or
sandwich. if you eat the burger, your opportunity cost is the sandwich.
What's a big tradeoff that economics is concerned with? - correct answer ✔✔efficiency vs
equality. result of government programs redistributing income
,What is opportunity cost, how is it related to tradeoffs? - correct answer ✔✔whatever must be
given up to obtain some item tradeoffs result in opportunity cost because they force you to
make a choice.
What are rational people? - correct answer ✔✔people who systematically do the best they can
to achieve their objectives; make decisions by evaluating cost and benefits
What are marginal changes? - correct answer ✔✔incremental adjustments to an existing plan
Is it possible for us to assume someone who gives money to charity is rational? How? - correct
answer ✔✔no, it makes you feel good. smoking makes you feel good and slowly kills you
What's an example of a marginal decision? - correct answer ✔✔extra year of college; lost wages
but more future income
What does thinking at the margin suggest about expenditures already made? (such as previous
expenditures fixing our Mustang) - correct answer ✔✔they aren't important. let the past go and
think forward to how you will later expend your time and money. sunk costs are sunk
What are incentives? How are they important? - correct answer ✔✔something that induces a
person to act. incentives effect how the market works because people respond to them
How does trade make people better off? - correct answer ✔✔it can only be positive because it
is voluntary. allows people to specialize in what they do best.
Are both parties directly involved in a trade made better off and why? (hint, the answer is yes,
but why?) - correct answer ✔✔yes, because you only trade when you know that you will benefit
What is the primary function of government? - correct answer ✔✔enforce property rights
, What are two causes of market failure? - correct answer ✔✔externalities and market failure. e -
when production or consumption affects bystanders. mf - a single buyer or seller has substantial
influence on market price (monopoly)
In response to market failure, the government may intervene in markets to promote efficiency.
However, the government may also step in to promote _______. - correct answer ✔✔equality
What is productivity? - correct answer ✔✔the number of goods and services produced per unit
of labor
In the long run, what is the primary cause of inflation? - correct answer ✔✔the government
prints too much money
When unemployment is high, one potential policy is to increase the money supply to stimulate
demand, what is the tradeoff though? - correct answer ✔✔may cause a boom that leads to a
bust
Why is demand downward sloping? - correct answer ✔✔there is an inverse relationship
between the price of a product and quantity demanded
How does it (downward sloping) reflect the law of demand? - correct answer ✔✔the curve
reflects a direct correlation between quantity demanded and price
Why is supply upward sloping? - correct answer ✔✔higher price is needed to cover higher
marginal cost of production
How does it (upward sloping) reflect the law of supply? - correct answer ✔✔the higher the
price, the higher the quantity supplied
