What are the takeaways from I, Pencil? - ANSWER-small processes and "know-hows"
of making things are too abundant and complex for human minds to comprehend;
formations that occur in the absence of control relate to the Invisible Hand theory; once
governments control complex creative activities, people in that society will believe that
those activities can only be accomplished by structured government processes instead
of free-flow
What two documents were published in 1776? - ANSWER-Wealth of Nations (Adam
Smith), Declaration of Independence
What does Friedman argue is the relationship between economic and political freedom?
- ANSWER-economic freedom is an essential requisite for political freedom
Who wrote 'Free to Choose'? - ANSWER-Milton Friedman
Did Adam Smith and Thomas Jefferson believe that concentrated government power
would allow policy makers to maximize utility for citizens? - ANSWER-No
What is GDP? - ANSWER-the final value of all goods and services produced in a given
period of time
What federal agency compiles GDP in the US? - ANSWER-the Bureau of Economic
Analysis (BEA)
True or False: GDP can be calculated by either adding up the final value of all goods
and services OR adding up the value of each step in the production process (e.g. "value
added method"). Both will yield a similar, but not exact, result. - ANSWER-false; they
will yield the same result
What are the components of GDP? - ANSWER-Consumption (C), Investment (I),
Government purchases (G), Net exports (NX)
What is the difference between real and nominal GDP? - ANSWER-Real GDP is the
total value of all final goods and services produced in a country adjusted for inflation to
reflect constant purchasing power while nominal GDP does not adjust for inflation
,What is the definition for Gross National Product (GNP)? - ANSWER-the value of final
goods and services produced by residents of the US, even if production takes place
outside of the US
What is the definition for disposable personal income? - ANSWER-personal income
minus personal tax payments
If I mow my lawn, is that included in GDP? - ANSWER-No
If I pay a lawn service to mow my lawn, is that included in GDP? - ANSWER-Yes
If a factory is built, increasing both GDP and pollution, does that mean that the society is
better off because GDP is higher? - ANSWER-No because while GDP increases, GDP
does not account for the negative externalities like pollution, so society may or may not
be better off
If average work hours in a country fall, giving people more leisure time but causing
measured GDP to decline slightly, does that necessarily mean society is worse off? -
ANSWER-No because while GDP declines, GDP does not account for the value of
increased leisure, so overall welfare could be higher
How does Paul Krugman describe the magnitude of the Great Recession? - ANSWER-a
human disaster, corrosive for the present and the future, will do enormous damage to
our nation
What does Krugman argue is the impact of recession on young people? - ANSWER-this
will scar young people's careers for their entire lives
What theories does Krugman mention people have for poor economic performance? -
ANSWER-corporate tax rates, entitlements, shortage of very specific high skilled
workers
What is the problem according to Krugman? - ANSWER-there is not enough demand in
the economy
According to Krugman, from an economics standpoint, is the problem hard to fix? -
ANSWER-No
Does Krugman believe the stimulus programs implemented in the US and Europe were
adequate? - ANSWER-No, both the US and Europe have implemented austerity
(reverse of stimulus)
What does Krugman believe about government spending? - ANSWER-Additional
government spending during the great recession would have likely reduced the severity
of the recession
Does Krugman believe that the government spent too much money in response to the
2008 recession? - ANSWER-No
What is the relationship between Krugman's view of spending and Keynes' work? -
ANSWER-Krugman's view is a modern view of Keynes' work
What does Robert Barro argue is the origin of the 2008 recession? - ANSWER-housing
market
What critical mistake was made during the time of the recession? - ANSWER-people
thought housing prices could not fall on average
Does Barro believe that the next crisis is likely to occur due to the same mistakes of the
past? - ANSWER-No, the mistakes have been learned, particularly by the financial
sector; it's unlikely that the next crisis will look like this
How much did Real GDP decline in the great recession? - ANSWER-4.1%
What was the average growth rate during the 2008 recovery? - ANSWER-2.8%
,How does Barro characterize the recovery after the recessoin? - ANSWER-
disappointing
What was the growth rate during the recovery post 1982 recession? - ANSWER-4.3%
What was the growth rate during the recovery post 1991 recession? - ANSWER-3.6%
Does Barro believe that Reagan and Clinton had dramatically different economic
policies? - ANSWER-No, Clinton turned out to be a conservative in terms of economic
policy being kind of a twin with Reagan on economic policy
How did the Great Recession in the US compare with other countries globally? -
ANSWER-the US was a little bit less impacted than the average country
What is economics? - ANSWER-social science that utilizes the scientific method
What are the 3 pillars of economics? - ANSWER-micro (individuals and businesses),
macro (economy as a whole), and econometrics
Which pillars make up economic theory? - ANSWER-micro and macro
What is econometrics? - ANSWER-empirical approach that applies statistical methods
and economic data to test economic theory and estimate the magnitude of relationship;
inference from observation rather than experimentation
What is managerial economics? - ANSWER-the application of economic concepts,
tools, and methodologies to solve practical problems in business
Simply, how is demand derived? - ANSWER-first by consumer preferences then by
utility maximization
Simply, how is supply derived? - ANSWER-first by the production function then by profit
maximization
How does the slope of a budget line relate to opportunity cost? - ANSWER-the slope is
equal to the opportunity cost
What is an example of a quantity tax? - ANSWER-gasoline tax
What is an example of a value tax? - ANSWER-sales tax
What are the assumptions about preferences? - ANSWER-complete (bundles are
comparable), reflexive (any bundle is at least as good as itself), transitive (if x is
preferred to y, and y is preferred to z, x must be preferred to z)
What are well-behaved preferences? - ANSWER-preferences that are monotonic and
convex
What does monotonic mean in relation to preferences? - ANSWER-a little more of any
good increases utility
What does convexity mean in relation to preferences? - ANSWER-the weighted
average of 2 bundles is strictly preferred to the extreme bundles
What is the Marginal Rate of Substitution (MRS) - ANSWER-the slope of an indifference
curve at a particular point; the amount of one good the consumer is indifferent to trade
for the other good
What is the concept of diminishing MRS? - ANSWER-for convex monotonic
preferences, the MRS decreases in absolute value as good 1 increases
What is MRS also referred to as? - ANSWER-marginal willingness to pay when good 2
is a composite good (with price equal to 1); represents how much a consumer is wiling
to pay for one additional unit of good 1
What is utility? - ANSWER-neoclassical economic thought of happiness
What does the demand function show? - ANSWER-the demand bundles chosen as
income and prices change
, What is comparative statics? - ANSWER-the study of how a choice responds to
changes in the economic environment
How does demand relate to normal goods? - ANSWER-the demand increases as
income increases
How does demand relate to inferior goods? - ANSWER-demand decreases as income
increases
How does demand relate to substitutes? - ANSWER-if the price of good 2 increases,
the demand of good 1 increases
How does demand relate to complements? - ANSWER-if the price of good 2 increases,
the demand for good 1 decreases
How is market demand derived? - ANSWER-by adding up individual choices (aggregate
demand)
What are some key factors in macroeconomics? - ANSWER-GDP, price level,
unemployment rate, interest rates
How is the study of macroeconomics influenced? - ANSWER-through government
policies, especially monetary policy and fiscal policy
What type of economics does standard modern economics curriculum teach? -
ANSWER-neoclassical economics
Who is widely considered to be the first to contribute to modern economic work and was
labelled in his time as a "moral philosopher"? - ANSWER-Adam Smith
What widely known theory did Adam Smith develop? - ANSWER-Invisible Hand theory
Who is known as the founder of modern utilitarianism? - ANSWER-Jeremy Bentham
Who wrote about exponential population growth eventually causing famine? -
ANSWER-Thomas Malthus
Who conceptualized modern economic concepts like the value of labor, the value of
capital, and profits and made advancements in trade theory? - ANSWER-David Ricardo
Who wrote that utility maximization is the objective function of modern economic
thought? - ANSWER-John Stuart Mill
Who is known as one of the founders of neoclassical economics and developed the first
comprehensive economics text? - ANSWER-Alfred Marshall
Who argued that market based economics are destined to fail and that centralized
planning with two classes of workers, Bourgeoisie (ruling) and Proletariat (working), is a
superior economic system? - ANSWER-Karl Marx
Who introduced the first utility function and drew the first indifference curve? -
ANSWER-Francis Ysidro Edgeworth
Who wrote that government can play a role in smoothing short to medium term business
cycles through fiscal and monetary policies and fundamentally changed the theory and
practice of macroeconomics? - ANSWER-John Maynard Keynes
Who focused on how prices communicate information? - ANSWER-Freidrich Hayak
Who wrote that economics become mathematical and that economic theory allows us to
state a testable hypothesis? - ANSWER-Paul Samuelson
Inflation is best defined as: - ANSWER-a sustained increase in the general price level
over time
If inflation occurs, what happens to the purchasing power of money? - ANSWER-it
decreases
of making things are too abundant and complex for human minds to comprehend;
formations that occur in the absence of control relate to the Invisible Hand theory; once
governments control complex creative activities, people in that society will believe that
those activities can only be accomplished by structured government processes instead
of free-flow
What two documents were published in 1776? - ANSWER-Wealth of Nations (Adam
Smith), Declaration of Independence
What does Friedman argue is the relationship between economic and political freedom?
- ANSWER-economic freedom is an essential requisite for political freedom
Who wrote 'Free to Choose'? - ANSWER-Milton Friedman
Did Adam Smith and Thomas Jefferson believe that concentrated government power
would allow policy makers to maximize utility for citizens? - ANSWER-No
What is GDP? - ANSWER-the final value of all goods and services produced in a given
period of time
What federal agency compiles GDP in the US? - ANSWER-the Bureau of Economic
Analysis (BEA)
True or False: GDP can be calculated by either adding up the final value of all goods
and services OR adding up the value of each step in the production process (e.g. "value
added method"). Both will yield a similar, but not exact, result. - ANSWER-false; they
will yield the same result
What are the components of GDP? - ANSWER-Consumption (C), Investment (I),
Government purchases (G), Net exports (NX)
What is the difference between real and nominal GDP? - ANSWER-Real GDP is the
total value of all final goods and services produced in a country adjusted for inflation to
reflect constant purchasing power while nominal GDP does not adjust for inflation
,What is the definition for Gross National Product (GNP)? - ANSWER-the value of final
goods and services produced by residents of the US, even if production takes place
outside of the US
What is the definition for disposable personal income? - ANSWER-personal income
minus personal tax payments
If I mow my lawn, is that included in GDP? - ANSWER-No
If I pay a lawn service to mow my lawn, is that included in GDP? - ANSWER-Yes
If a factory is built, increasing both GDP and pollution, does that mean that the society is
better off because GDP is higher? - ANSWER-No because while GDP increases, GDP
does not account for the negative externalities like pollution, so society may or may not
be better off
If average work hours in a country fall, giving people more leisure time but causing
measured GDP to decline slightly, does that necessarily mean society is worse off? -
ANSWER-No because while GDP declines, GDP does not account for the value of
increased leisure, so overall welfare could be higher
How does Paul Krugman describe the magnitude of the Great Recession? - ANSWER-a
human disaster, corrosive for the present and the future, will do enormous damage to
our nation
What does Krugman argue is the impact of recession on young people? - ANSWER-this
will scar young people's careers for their entire lives
What theories does Krugman mention people have for poor economic performance? -
ANSWER-corporate tax rates, entitlements, shortage of very specific high skilled
workers
What is the problem according to Krugman? - ANSWER-there is not enough demand in
the economy
According to Krugman, from an economics standpoint, is the problem hard to fix? -
ANSWER-No
Does Krugman believe the stimulus programs implemented in the US and Europe were
adequate? - ANSWER-No, both the US and Europe have implemented austerity
(reverse of stimulus)
What does Krugman believe about government spending? - ANSWER-Additional
government spending during the great recession would have likely reduced the severity
of the recession
Does Krugman believe that the government spent too much money in response to the
2008 recession? - ANSWER-No
What is the relationship between Krugman's view of spending and Keynes' work? -
ANSWER-Krugman's view is a modern view of Keynes' work
What does Robert Barro argue is the origin of the 2008 recession? - ANSWER-housing
market
What critical mistake was made during the time of the recession? - ANSWER-people
thought housing prices could not fall on average
Does Barro believe that the next crisis is likely to occur due to the same mistakes of the
past? - ANSWER-No, the mistakes have been learned, particularly by the financial
sector; it's unlikely that the next crisis will look like this
How much did Real GDP decline in the great recession? - ANSWER-4.1%
What was the average growth rate during the 2008 recovery? - ANSWER-2.8%
,How does Barro characterize the recovery after the recessoin? - ANSWER-
disappointing
What was the growth rate during the recovery post 1982 recession? - ANSWER-4.3%
What was the growth rate during the recovery post 1991 recession? - ANSWER-3.6%
Does Barro believe that Reagan and Clinton had dramatically different economic
policies? - ANSWER-No, Clinton turned out to be a conservative in terms of economic
policy being kind of a twin with Reagan on economic policy
How did the Great Recession in the US compare with other countries globally? -
ANSWER-the US was a little bit less impacted than the average country
What is economics? - ANSWER-social science that utilizes the scientific method
What are the 3 pillars of economics? - ANSWER-micro (individuals and businesses),
macro (economy as a whole), and econometrics
Which pillars make up economic theory? - ANSWER-micro and macro
What is econometrics? - ANSWER-empirical approach that applies statistical methods
and economic data to test economic theory and estimate the magnitude of relationship;
inference from observation rather than experimentation
What is managerial economics? - ANSWER-the application of economic concepts,
tools, and methodologies to solve practical problems in business
Simply, how is demand derived? - ANSWER-first by consumer preferences then by
utility maximization
Simply, how is supply derived? - ANSWER-first by the production function then by profit
maximization
How does the slope of a budget line relate to opportunity cost? - ANSWER-the slope is
equal to the opportunity cost
What is an example of a quantity tax? - ANSWER-gasoline tax
What is an example of a value tax? - ANSWER-sales tax
What are the assumptions about preferences? - ANSWER-complete (bundles are
comparable), reflexive (any bundle is at least as good as itself), transitive (if x is
preferred to y, and y is preferred to z, x must be preferred to z)
What are well-behaved preferences? - ANSWER-preferences that are monotonic and
convex
What does monotonic mean in relation to preferences? - ANSWER-a little more of any
good increases utility
What does convexity mean in relation to preferences? - ANSWER-the weighted
average of 2 bundles is strictly preferred to the extreme bundles
What is the Marginal Rate of Substitution (MRS) - ANSWER-the slope of an indifference
curve at a particular point; the amount of one good the consumer is indifferent to trade
for the other good
What is the concept of diminishing MRS? - ANSWER-for convex monotonic
preferences, the MRS decreases in absolute value as good 1 increases
What is MRS also referred to as? - ANSWER-marginal willingness to pay when good 2
is a composite good (with price equal to 1); represents how much a consumer is wiling
to pay for one additional unit of good 1
What is utility? - ANSWER-neoclassical economic thought of happiness
What does the demand function show? - ANSWER-the demand bundles chosen as
income and prices change
, What is comparative statics? - ANSWER-the study of how a choice responds to
changes in the economic environment
How does demand relate to normal goods? - ANSWER-the demand increases as
income increases
How does demand relate to inferior goods? - ANSWER-demand decreases as income
increases
How does demand relate to substitutes? - ANSWER-if the price of good 2 increases,
the demand of good 1 increases
How does demand relate to complements? - ANSWER-if the price of good 2 increases,
the demand for good 1 decreases
How is market demand derived? - ANSWER-by adding up individual choices (aggregate
demand)
What are some key factors in macroeconomics? - ANSWER-GDP, price level,
unemployment rate, interest rates
How is the study of macroeconomics influenced? - ANSWER-through government
policies, especially monetary policy and fiscal policy
What type of economics does standard modern economics curriculum teach? -
ANSWER-neoclassical economics
Who is widely considered to be the first to contribute to modern economic work and was
labelled in his time as a "moral philosopher"? - ANSWER-Adam Smith
What widely known theory did Adam Smith develop? - ANSWER-Invisible Hand theory
Who is known as the founder of modern utilitarianism? - ANSWER-Jeremy Bentham
Who wrote about exponential population growth eventually causing famine? -
ANSWER-Thomas Malthus
Who conceptualized modern economic concepts like the value of labor, the value of
capital, and profits and made advancements in trade theory? - ANSWER-David Ricardo
Who wrote that utility maximization is the objective function of modern economic
thought? - ANSWER-John Stuart Mill
Who is known as one of the founders of neoclassical economics and developed the first
comprehensive economics text? - ANSWER-Alfred Marshall
Who argued that market based economics are destined to fail and that centralized
planning with two classes of workers, Bourgeoisie (ruling) and Proletariat (working), is a
superior economic system? - ANSWER-Karl Marx
Who introduced the first utility function and drew the first indifference curve? -
ANSWER-Francis Ysidro Edgeworth
Who wrote that government can play a role in smoothing short to medium term business
cycles through fiscal and monetary policies and fundamentally changed the theory and
practice of macroeconomics? - ANSWER-John Maynard Keynes
Who focused on how prices communicate information? - ANSWER-Freidrich Hayak
Who wrote that economics become mathematical and that economic theory allows us to
state a testable hypothesis? - ANSWER-Paul Samuelson
Inflation is best defined as: - ANSWER-a sustained increase in the general price level
over time
If inflation occurs, what happens to the purchasing power of money? - ANSWER-it
decreases
