ECONOMICS FOR TODAY EXAMS SET
COMPLETE QUESTIONS AND ANSWERS
VERIFIED PREPARATION MATERIAL
●● ability-to-pay principle
Answer: The concept that those who have higher incomes can afford to
pay a greater proportion of their income in taxes, regardless of benefits
received.
●● absolute average
Answer: The ability of a country to produce a good at a lower
opportunity cost than another country.
●● adaptive expectations theory.
Answer: The concept that people believe the best indicator of the future
is recent information. As a result, people persistently underestimate
inflation when it is accelerating and overestimate it while it is slowing
down.
●● adjustable-rate mortgage (ARM)
Answer: A home loan that adjusts the nominal interest rate to changes in
an index rate, such as rates on Treasury securities.
,●● agency for international development (AID)
Answer: The agency of the U.S. State Department that is in charge of
U.S. aid to foreign countries.
●● aggregate demand curve (AD)
Answer: The curve that shows the level of real GDP purchased by
households, businesses, government, and foreigners (net exports) at
different possible price levels during a time period, ceteris paribus.
●● aggregate expenditure model
Answer: The model that determines the equilibrium level of real GDP by
the intersection of the aggregate expenditures and aggregate output and
income (real GPD) curves.
●● aggregate expenditures function (AE)
Answer: The total spending in an economy at different levels of real
GDP.
●● aggregate supply curve (AS)
Answer: The curve that shows the level of real GDP produced at
different possible price levels during a time period, ceteris paribus.
●● appreciation of currency
Answer: A rise in the price of one currency relative to another.
,●● arbitrage
Answer: The practice of earning a profit by buying a good at a low price
and reselling the good at a higher price.
●● automatic stabilizers
Answer: Federal expenditures and tax revenues that automatically
change levels in order to stabilize an economic expansion or contraction;
sometimes refereed to as "non-discretionary fiscal policy."
●● autonomous consumption
Answer: Consumption that in independent of the level of real disposable
income.
●● autonomous expenditure
Answer: Spending that does not vary with the level of real disposable
income.
●● average fixed cost (AFC)
Answer: Total fixed cost divided by the quantity of output produced.
●● average tax rate
Answer: The tax divided by the income.
, ●● average total cost (ATC)
Answer: Total cost divided by the quantitiy of output produced.
●● average variable cost (AVC)
Answer: Total cariable cost divided by the quantity of output produced.
●● balance of payments
Answer: A bookkeeping record of all the international transaction
between a country and other countries during a given period of time.
●● balance of trade
Answer: The value of a nation's imports subtracted from its exports.
Balance of trade can be expressed in terms of goods, services, or goods
and services.
●● balanced budget multiplier
Answer: An equal change in government spending and taxes, which
changes aggregate demand by the amount of the change in government
spending.
●● barrier to entry
Answer: Any obstacle that makes it difficult for a new firm to enter a
market.
COMPLETE QUESTIONS AND ANSWERS
VERIFIED PREPARATION MATERIAL
●● ability-to-pay principle
Answer: The concept that those who have higher incomes can afford to
pay a greater proportion of their income in taxes, regardless of benefits
received.
●● absolute average
Answer: The ability of a country to produce a good at a lower
opportunity cost than another country.
●● adaptive expectations theory.
Answer: The concept that people believe the best indicator of the future
is recent information. As a result, people persistently underestimate
inflation when it is accelerating and overestimate it while it is slowing
down.
●● adjustable-rate mortgage (ARM)
Answer: A home loan that adjusts the nominal interest rate to changes in
an index rate, such as rates on Treasury securities.
,●● agency for international development (AID)
Answer: The agency of the U.S. State Department that is in charge of
U.S. aid to foreign countries.
●● aggregate demand curve (AD)
Answer: The curve that shows the level of real GDP purchased by
households, businesses, government, and foreigners (net exports) at
different possible price levels during a time period, ceteris paribus.
●● aggregate expenditure model
Answer: The model that determines the equilibrium level of real GDP by
the intersection of the aggregate expenditures and aggregate output and
income (real GPD) curves.
●● aggregate expenditures function (AE)
Answer: The total spending in an economy at different levels of real
GDP.
●● aggregate supply curve (AS)
Answer: The curve that shows the level of real GDP produced at
different possible price levels during a time period, ceteris paribus.
●● appreciation of currency
Answer: A rise in the price of one currency relative to another.
,●● arbitrage
Answer: The practice of earning a profit by buying a good at a low price
and reselling the good at a higher price.
●● automatic stabilizers
Answer: Federal expenditures and tax revenues that automatically
change levels in order to stabilize an economic expansion or contraction;
sometimes refereed to as "non-discretionary fiscal policy."
●● autonomous consumption
Answer: Consumption that in independent of the level of real disposable
income.
●● autonomous expenditure
Answer: Spending that does not vary with the level of real disposable
income.
●● average fixed cost (AFC)
Answer: Total fixed cost divided by the quantity of output produced.
●● average tax rate
Answer: The tax divided by the income.
, ●● average total cost (ATC)
Answer: Total cost divided by the quantitiy of output produced.
●● average variable cost (AVC)
Answer: Total cariable cost divided by the quantity of output produced.
●● balance of payments
Answer: A bookkeeping record of all the international transaction
between a country and other countries during a given period of time.
●● balance of trade
Answer: The value of a nation's imports subtracted from its exports.
Balance of trade can be expressed in terms of goods, services, or goods
and services.
●● balanced budget multiplier
Answer: An equal change in government spending and taxes, which
changes aggregate demand by the amount of the change in government
spending.
●● barrier to entry
Answer: Any obstacle that makes it difficult for a new firm to enter a
market.
