Econ 220 Quiz 1 study guide questions with accurate
answers
Commodity substitution bias Ans✓✓✓ If there is an increase in the
price of carrots, while Broccoli remains the same, decide to buy more
broccoli and less carrots. CPI says the price of vegetables has increased
because it ignores your substitution between goods in the CPI market
basket
How are attainable, production efficient combinations of output shown
on the production possibilities frontier? Ans✓✓✓ Any point on the
production possibilities frontier that is placed either on or inside the
curve
How are income and demand related? Ans✓✓✓ If the economy has
higher incomes, people will be able to buy more goods-meaning an
increase in demand
How are real GDP and potential GDP related over the course of the
business cycle? Ans✓✓✓ Potential GDP equals Real GDP when the
economy is at full employment. When the unemployment rate is above
the natural rate, Real GDP is below potential GDP, output gap is
negative. When the unemployment rate is below the natural
unemployment rate, Real GDP is above potential GDP, output gap is
positive.
How are surpluses and shortages shown on a demand and supply
diagram? Ans✓✓✓ Surpluses are shown when the price is above the
, equilibrium point and shortages are shown when the price is below an
equilibrium point
How are the decisions made by firms and households coordinated?
Ans✓✓✓ Households choose the quantity of the factors of production
to supply in response to the incomes they receive for their services.
When firms decide the quantity of factors of production to hire, they
consider the wages that are demanded by households. Similarly, when
firms consider how much quantities of goods and services to offer, they
consider how much they receive in expenditures from the households.
When households choose the quantity of goods and services to buy, they
respond to the amounts they must pay the firms.
How do economists define opportunity cost? Ans✓✓✓ the next best
option that you give up
How do economists define part-time workers for noneconomic reasons?
Ans✓✓✓ someone who works less than thirty five hours and does not
want to work full time nor is able for such work. This includes people
with health problems, educational conflicts, or personal responsibilites
How do economists measure the benefit from a good or service that
someone purchases? Ans✓✓✓ what you're willing to give up to get
something
How do we calculate the real interest rate? Ans✓✓✓ Nominal interest
rate minus the inflation rate.
answers
Commodity substitution bias Ans✓✓✓ If there is an increase in the
price of carrots, while Broccoli remains the same, decide to buy more
broccoli and less carrots. CPI says the price of vegetables has increased
because it ignores your substitution between goods in the CPI market
basket
How are attainable, production efficient combinations of output shown
on the production possibilities frontier? Ans✓✓✓ Any point on the
production possibilities frontier that is placed either on or inside the
curve
How are income and demand related? Ans✓✓✓ If the economy has
higher incomes, people will be able to buy more goods-meaning an
increase in demand
How are real GDP and potential GDP related over the course of the
business cycle? Ans✓✓✓ Potential GDP equals Real GDP when the
economy is at full employment. When the unemployment rate is above
the natural rate, Real GDP is below potential GDP, output gap is
negative. When the unemployment rate is below the natural
unemployment rate, Real GDP is above potential GDP, output gap is
positive.
How are surpluses and shortages shown on a demand and supply
diagram? Ans✓✓✓ Surpluses are shown when the price is above the
, equilibrium point and shortages are shown when the price is below an
equilibrium point
How are the decisions made by firms and households coordinated?
Ans✓✓✓ Households choose the quantity of the factors of production
to supply in response to the incomes they receive for their services.
When firms decide the quantity of factors of production to hire, they
consider the wages that are demanded by households. Similarly, when
firms consider how much quantities of goods and services to offer, they
consider how much they receive in expenditures from the households.
When households choose the quantity of goods and services to buy, they
respond to the amounts they must pay the firms.
How do economists define opportunity cost? Ans✓✓✓ the next best
option that you give up
How do economists define part-time workers for noneconomic reasons?
Ans✓✓✓ someone who works less than thirty five hours and does not
want to work full time nor is able for such work. This includes people
with health problems, educational conflicts, or personal responsibilites
How do economists measure the benefit from a good or service that
someone purchases? Ans✓✓✓ what you're willing to give up to get
something
How do we calculate the real interest rate? Ans✓✓✓ Nominal interest
rate minus the inflation rate.
