ECO 270 Final Exam Study Guide UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Aggregate Demand the amount of goods and services in the economy that will be purchased at all
possible price levels
Aggregate Supply the total amount of goods and services in the economy available at all possible
price levels
, Argument against balanced budget
Automatic Stabilizers changes in fiscal policy that stimulate aggregate demand when the economy
goes into a recession without policymakers having to take any deliberate action
Balanced Budget Multiplier the factor by which a change in both spending and taxes changes real GDP
Basic economic decisions faced by all nations
Business Cycle Fluctuations in economic activity, such as employment and production
Consumer Spending household spending on goods and services
Cost-push Inflation When prices rise due to an increase in the cost of production.
Consumer Price Index (CPI) a measure of the overall cost of the goods and services bought by a typical
consumer
Cyclical unemployment unemployment that rises during economic downturns and falls when the
economy improves
Demand curve (shift of curve vs. movement along curve,
causes of shifts, etc.)
Demand-pull Inflation increases in the price level (inflation) resulting from an excess of demand over
output at the existing price level, caused by an increase in aggregate demand
Determinants of supply (causes of curve shifts, etc.)
Discouraged worker a person who wants a job but has given up looking
Disposable Income Income remaining for a person to spend or save after all taxes have been paid
Equation for change in total spending (initial change in
spending x multiplier)
Equation for desired stimulus (desired stimulus = AD
shortfall/multiplier)
Equilibrium price (define and locate) the price that balances quantity supplied and quantity demanded
Exports Goods and Services sold to other countries
Federal Reserve the central bank of the United States
Final Good a good sold to final users
Fiscal Policy Government policy that attempts to manage the economy by controlling taxing
and spending.
CORRECT ANSWERS
Aggregate Demand the amount of goods and services in the economy that will be purchased at all
possible price levels
Aggregate Supply the total amount of goods and services in the economy available at all possible
price levels
, Argument against balanced budget
Automatic Stabilizers changes in fiscal policy that stimulate aggregate demand when the economy
goes into a recession without policymakers having to take any deliberate action
Balanced Budget Multiplier the factor by which a change in both spending and taxes changes real GDP
Basic economic decisions faced by all nations
Business Cycle Fluctuations in economic activity, such as employment and production
Consumer Spending household spending on goods and services
Cost-push Inflation When prices rise due to an increase in the cost of production.
Consumer Price Index (CPI) a measure of the overall cost of the goods and services bought by a typical
consumer
Cyclical unemployment unemployment that rises during economic downturns and falls when the
economy improves
Demand curve (shift of curve vs. movement along curve,
causes of shifts, etc.)
Demand-pull Inflation increases in the price level (inflation) resulting from an excess of demand over
output at the existing price level, caused by an increase in aggregate demand
Determinants of supply (causes of curve shifts, etc.)
Discouraged worker a person who wants a job but has given up looking
Disposable Income Income remaining for a person to spend or save after all taxes have been paid
Equation for change in total spending (initial change in
spending x multiplier)
Equation for desired stimulus (desired stimulus = AD
shortfall/multiplier)
Equilibrium price (define and locate) the price that balances quantity supplied and quantity demanded
Exports Goods and Services sold to other countries
Federal Reserve the central bank of the United States
Final Good a good sold to final users
Fiscal Policy Government policy that attempts to manage the economy by controlling taxing
and spending.
