ECON 103 UIUC FINAL EXAM QUESTIONS
WITH CORRECT ANSWERS
microeconomics - ANSWER the study of how households and firms make
decisions and how they interact in specific markets
macroeconomics - ANSWER the study of economy-wide phenomena
How is physics done though? - ANSWER The Scientific Method
The Scientific Method - ANSWER 1. Question
2. Hypothesis
3. Prediction
4. Experiment
5. Analysis
economic model - ANSWER a theoretical construct representing economic
processes by a set of variable and a set of logical and/or quantitative
relationships between them
positive statements - ANSWER facts, descriptive, describe how the world is
without judgement
normative statements - ANSWER opinions, prescriptive, make a claim about how
the world should be
When economists make normative statements they are acting as... - ANSWER
policy advisers
When economists make positive statements they are acting as... - ANSWER
scientists
Perhaps the most basic model of the economy is the... - ANSWER Circular Flow
Diagram
Output Market - ANSWER "Market for Goods and Services" - firms sell goods
and services and households by goods
Factor Market - ANSWER "Market for factors of production" - households sell
factors of production to firms
, Two Markets - ANSWER Output Market and Factor Market
Two Agents - ANSWER Consumers and Firms
Government purchases are... - ANSWER anything the government purchases,
including labor.
Transfer payments are... - ANSWER any direct transfer of funds to a citizen.
A closed economy... - ANSWER does not trade with the rest of the world. (no
exports nor imports)
An open economy... - ANSWER does trade with other countries. (outputs
markets, financial markets)
Money is... - ANSWER the set of assets in an economy that people use to buy
goods and services from other people
Money must fulfill three functions. It must be... - ANSWER a medium of
exchange, a unit of account, a store of value
inflation - ANSWER a general increase in prices and fall in the purchasing value
of money
deflation - ANSWER higher productivity, same amount of money
Gross Domestic Product (GDP) - ANSWER The market value of all final goods
and services produced within a country in a given period of time
market value - ANSWER the market prices measure the value of these goods
because that is what people are willing to pay
a final good is... - ANSWER any good that is subsequently consumed by the
consumer
an intermediate good is... - ANSWER used as an input into the production of the
final good
Why are intermediate goods not counted in the GDP? - ANSWER this would lead
to double-counting of goods
intangible good - ANSWER one that you cannot physically touch
tangible good - ANSWER one that you can physically touch
Services are always... - ANSWER intangible (haircuts, concerts, etc.)
WITH CORRECT ANSWERS
microeconomics - ANSWER the study of how households and firms make
decisions and how they interact in specific markets
macroeconomics - ANSWER the study of economy-wide phenomena
How is physics done though? - ANSWER The Scientific Method
The Scientific Method - ANSWER 1. Question
2. Hypothesis
3. Prediction
4. Experiment
5. Analysis
economic model - ANSWER a theoretical construct representing economic
processes by a set of variable and a set of logical and/or quantitative
relationships between them
positive statements - ANSWER facts, descriptive, describe how the world is
without judgement
normative statements - ANSWER opinions, prescriptive, make a claim about how
the world should be
When economists make normative statements they are acting as... - ANSWER
policy advisers
When economists make positive statements they are acting as... - ANSWER
scientists
Perhaps the most basic model of the economy is the... - ANSWER Circular Flow
Diagram
Output Market - ANSWER "Market for Goods and Services" - firms sell goods
and services and households by goods
Factor Market - ANSWER "Market for factors of production" - households sell
factors of production to firms
, Two Markets - ANSWER Output Market and Factor Market
Two Agents - ANSWER Consumers and Firms
Government purchases are... - ANSWER anything the government purchases,
including labor.
Transfer payments are... - ANSWER any direct transfer of funds to a citizen.
A closed economy... - ANSWER does not trade with the rest of the world. (no
exports nor imports)
An open economy... - ANSWER does trade with other countries. (outputs
markets, financial markets)
Money is... - ANSWER the set of assets in an economy that people use to buy
goods and services from other people
Money must fulfill three functions. It must be... - ANSWER a medium of
exchange, a unit of account, a store of value
inflation - ANSWER a general increase in prices and fall in the purchasing value
of money
deflation - ANSWER higher productivity, same amount of money
Gross Domestic Product (GDP) - ANSWER The market value of all final goods
and services produced within a country in a given period of time
market value - ANSWER the market prices measure the value of these goods
because that is what people are willing to pay
a final good is... - ANSWER any good that is subsequently consumed by the
consumer
an intermediate good is... - ANSWER used as an input into the production of the
final good
Why are intermediate goods not counted in the GDP? - ANSWER this would lead
to double-counting of goods
intangible good - ANSWER one that you cannot physically touch
tangible good - ANSWER one that you can physically touch
Services are always... - ANSWER intangible (haircuts, concerts, etc.)
