Principles of Macroeconomics Chapter 4 Exam Questions with Answers

Principles of Macroeconomics: Chapter 4 Exam Questions with Answers Demand - Correct Answers: A relationship between price and the quantity demanded of a certain good or service. Quantity demanded - Correct Answers: The total number of units of a good or service purchased at a certain price. Law of demand - Correct Answers: The common relationship that a higher price leads to a lower quantity demanded of a certain good or service. Demand schedule - Correct Answers: A table that shows a range of prices for a certain good or service and the quantity demanded at each price. Demand curve - Correct Answers: A line that shows the relationship between price and quantity demanded of a certain good or service on a graph, with quantity on the horizontal axis and price on the vertical axis. Supply - Correct Answers: A relationship between price and the quantity supplied of a certain good or service. Quantity supplied - Correct Answers: The total number of units of a good or service sold at a certain price. Law of supply - Correct Answers: The common relationship that a higher price is associated with a greater quantity supplied. Supply schedule - Correct Answers: A table that shows a range of prices for a good or service and the quantity supplied at each price. Supply curve - Correct Answers: A line that shows the relationship between price and quantity supplied on a graph, with the quantity supplied on the horizontal axis and the price on the vertical axis. Equilibrium price - Correct Answers: The price where quantity demanded is equal to quantity supplied. Equilibrium quantity - Correct Answers: The quantity at which quantity demanded and quantity supplied are equal at a certain price. Equilibrium - Correct Answers: The combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to shift. Excess supply/surplus - Correct Answers: When at the existing price, quantity supplied exceeds quantity demanded; also called a "surplus". Excess demand/shortage - Correct Answers: At the existing price, the quantity demanded exceeds the quantity supplied. Ceteris paribus - Correct Answers: Other things being equal. Shift in demand - Correct Answers: When a change in some economic factor related to demand causes a different quantity to be demanded at every price. Normal goods - Correct Answers: Goods where the quantity demanded rises as income rises. Inferior goods - Correct Answers: Goods where the quantity demanded falls as the income rises. Substitutes - Correct Answers: Goods that can replace each other to some extent, so that greater consumption of one good can mean less of another. Complements - Correct Answers: Goods that are often used together, so that consumption of one good tends to increase consumption of the other. Shift in supply - Correct Answers: When a change in some economic factor related to supply causes a quantity to be supplied at every price. Price controls - Correct Answers: Government laws to regulate prices. Price ceiling - Correct Answers: A law that prevents a price from rising above a certain level. Price floor - Correct Answers: A law that prevents a price from falling below a certain level. Black market - Correct Answers: An illegal market that breaks government rules on prices or sales. Consumer surplus - Correct Answers: The benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid. Producer surplus - Correct Answers: The benefit consumers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept. Social surplus - Correct Answers: The sum of consumer surplus and producer surplus. Deadweight loss - Correct Answers: The loss in social surplus that occurs when a market produces and inefficient quantity.