5. Question:
◦ What is a negative externality?
Answer:
◦ Something that has a negative spillover
effect on a third party
6. Question
◦ What are the two types of inflation?
Answer
◦ Cost-Push and Demand-Pull
AND 1
◦ Explain what causes Cost-Push Inflation
7. Question
◦ What is the difference between official and
unofficial aid?
Answer
◦ Official aid is from the government,
unofficial aid is from a NGO
8. Question
◦ What are the 4 phases of the business cycle?
Answer
◦ Recovery, Peak, Recession, Trough
9. Question
◦ What is a price floor?
Answer
◦ A minimum price
AND 1
◦ Does a price floor create a surplus or a shortage?
10. Question
◦ What causes a fiscal deficit?
Answer:
◦ When a government spends more than it taxes
11. Question
◦ Give an example of a demand inelastic good.
Answer
◦ Medicine, cigarettes, etc.
12. Question
◦ What is opportunity cost?
Answer
◦ The cost of an economic decision in terms of what
was given up.
13. Question
◦ What are regressive taxes?
Answer
◦ Taxes that tax the rich less than the poor.
AND 1
◦ Give an example of a regressive tax.
14. Question
◦ Give an example of a MNC.
Answer
◦ Wal-Mart, Subway, McDonald’s, etc.
16. Question
◦ What is the purpose of the WTO?
Answer
◦ Lower tariffs
◦ Provide forum for trade negotiation
◦ Promote free-trade
◦ Help developing nations develop
17. Question
◦ What is the free-market?
Answer
◦ When economic decisions are made by the invisible
hand of supply and demand.
19. Question
◦ What is monetary policy?
Answer:
◦ Manipulation of an economy through the money
supply.
◦ A demand-side policy with the Central Bank using
changes in the money supply or interest rates to
affect AD
20. Question
◦ What are interest rates?
Answer
◦ Return on deposits, price of loans.
◦ The price of capital or borrowed/loaned money, usually
expressed as a percentage.
AND 1
◦ What will happen to the money supply if interest rates
increase?
21. Question
◦ Describe what will happen in a market
economy if prices are too high.
Answer:
◦ A surplus will be created. Eventually
prices will be lowered.
22. Question
◦ What is inflation?
Answer
◦ A sustained general rise in the price level.
23. Question
◦ What is a subsidy?
Answer:
◦ Payment by government to producers to encourage
production
24. Question
◦ What is an indirect tax?
Answer
◦ A tax levied on the exchange of goods.
25. Question
◦ List 3 types of unemployment
Answer:
◦ Cyclical, Classical, Structural, Frictional, Seasonal
And 1:
◦ Explain the cause of cyclical unemployment.
26. Question
◦ What are merit goods?
Answer
◦ Goods that have a beneficial impact to society.
27. Question
◦ Give an example of a NGO.
Answer
◦ Red Cross, Habitat for Humanity, Greenpeace,
Grameen Bank
28. Question
◦ What are the benefits of trade liberalization for
developing countries?
Answer:
◦ Encourages investment.
◦ Promotes efficiency.
29. Question
◦ What is the informal market?
Answer:
◦ Markets that exist outside of the legal
system
30. Question
◦ Give an example of something that would cause
appreciation of a currency.
Answer:
◦ Higher interest rates
◦ Speculation
◦ Investment into a country
◦ Current Account Surplus
◦ Trade Barriers
31. Question
◦ What is the gini coeffcient?
Answer
◦ Measure of inequality in an economy
32. Question
◦ What are the factors of production? (list 3)
Answer:
◦ Land, labor, capital, entrepeneurship
33. Question
◦ What is foreign direct investment
Answer:
◦ Investment in stores, factories, and production
centers in another country by a MNC
◦ Establishment of production units by multinational
companies in a foreign country
34. Question
◦ What is the difference between a specific
and a percentage tax.
Answer
◦ A specific tax is a flat amount. A
percentage tax is…a percentage?
35. Question
◦ What are the three types of exchange rate systems?
Answer:
◦ Floating, Managed, Fixed
36. Question
◦ What is the difference between GDP and GNI?
Answer
◦ GDP accounts for all production within the borders
of an economy
◦ GNI accounts for all revenues collected within an
economy (including returns on foreign investment)
37. Question
◦ Give two examples of non-tariff barriers
to trade.
Answer:
◦ Quota, Administrative Obstacles,
Subsidies, Regulations
38. Question
◦ What can cause demand to increase?
(provide 3 ways)
Answer
◦ Decrease in income, population,
expectations. Increase in price of
complement goods. Changes in
tastes/preferences.
39. Question
◦ What can a central bank do to depreciate
its currency?
Answer
◦ Lower interest rates. Sell its currency on
the foreign exchange market.
40. Question
◦ Give an example of a demand-side
policy.
Answer
◦ Increase in government spending.
Lowering interest rates. Increasing
welfare spending.
41. Question
◦ Give an example of supply-side policies.
Answer:
◦ Lowering wages, investing in technology,
reducing taxes, reducing regulation,
providing job training
AND 1
◦ Describe how you would show the success
of a supply-side policy with a diagram
42. Question
◦ How much government reduce an
overproduced negative externality (like
pollution)
Answer
◦ Fines, taxes (incentives and
disincentives, bans, tradable permits
43. Question
◦ What is project aid?
Answer:
◦ Aid given to a developing nation for the purposes of
a specific project.
44. Question
◦ What is dumping?
Answer
◦ Selling goods below costs in order to
predatory price.
AND 1:
◦ Explain why anti-dumping tariffs are
justified by the WTO.
