Questions and Answers on Eonomics - Paper Example

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George Washington University
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2. Examples of Unilateral Transfers

Unilateral transfers are economic transactions that exist between residents of the nation especially two conceding a specified period. They include

i. Pension payments

ii. Gift exchanges

3. Memorize the Components of the Current Account

i. Trade- its the main component of the current account

ii. Net Income- its the income received by the residents if country minus the revenue to the foreigners

iii. Direct Transfers- there is a countries government foreign aid.

iv. Asset Income- these are decreases and increases in assets.

4. Different Unemployment Types and make sure you know examples for each of them

i. Cyclical Unemployment. These are the ups and downs that are faced by a country due to cycles that are experienced by a nation. For example when an economy gets into a recession

ii. Frictional Unemployment- this is a type of unemployment that occurs due to the average turnover that happens in the labor market making people lose jobs as they look for newer ones. For example, when a fresh graduate is employed after looking for a job for say over three months, at this time its the frictional type of unemployment.

iii. Structural unemployment- this is the type of unemployment that occurs due to lack of demand required in a particular field. For example when there is no demand of geologist is a county the unemployed in this scenario are suffering from the structural unemployment.

5. You should know the definition of Cost-Push and Demand Pull Inflation and be able to provide examples for them.

Cost-push inflation is the type of inflation that happens due to an increase in the cost of raw materials that are used in the cost of production and a decrease in the aggregate supply.

Demand-pull inflation thus is the type of inflation which occurs if in case the aggregate demand for the products and services increases rapidly than the aggregate supply of an economy arising from the financial factors.

6. You should know definition of Unemployed People

These are people who are looking and willing to get employe4d but are not able to get the job due to the unemployment issues.

7. You should know what relationship that Aggregate Demand represents (spending and price level), and its four components (C+I+G+NX)

Spending increases the level of aggregate demand while the level of price decreases the total market. The four elements include

C: households

I: firms

G: Government

NX: business

8. You should know the Definition of Wealth, Income, and other determinants of consumption.

Wealth- its the accumulation of resources that is resulting from the subtraction of debts from assets. The resultant figure is termed wealth.

Income- is the total money received by an individual or business after delivering a service or through the investment of capital.

Goods- these are tangible things that are used in consumption

9. What causes net exports to increase/decrease?

Increase in net exports- it is caused by a shift in the upward direction of the line of the commodities and the domestic income and production level.

The decrease in Net Exports:

Is caused by any decline that may occur in the global prosperity.

If foreign income affects exports, how does that affect net exports?

The net exports have affected an income affecting exports because of the more the number of commodities in a country, the higher the net exports and vice versa.

If domestic income affects imports, how does that affect net exports? The effect that local income imposes on imports affects the net exports because if in case the internal revenue of a country increases the rate of imports then automatically the net exports will be affected and vice versa.

10. You should know the definition of definition of Disposal Income.

This is the net profit that is received within a specified period after paying all business expenses such as taxes, bills, and labor charges on the employees.

11. Definition of Autonomous Consumption, particularly the relationship between consumption and income.

An autonomous consumption is the least or the minimum level of waste that has to happen even if the there is no disposable income by the consumer for other expenses and necessities. Autonomous consumption has nothing to do with the level of income of the consumer.

12. Consumer Price Index Definition

It is the measure of monthly changes regarding the price for a range of the products of consumers. Through the consumer index change, there is a record of inflation.

13. You should know the four phases of the business cycle and the link between the interactions of what two variables

i. Prosperity Phase: this illustrates the uprising stage of an economy.

ii. Recession Phase: this is the upper turning point from prosperity to the recession.

iii. Depression Phase: at this phase, its compost of Downswing and Contraction of an economy.

iv. Recovery Phase: its at the lower turning point from prosperity to depression to

14. Total spending and total outputs produced in the economy.

Total spending is the cost incurred in the production of goods and services by an economy regarding expenses while total outputs are the resultant figure got regarding income after the destruction of all payments by an economy

15. In a business cycle, you should know

What follows a peak? At this stage what follows are depression and recession.

What follows a trough what tracks here are the recovery and prosperity.

15. Business cycle definition

A business cycle is the sequence of circles that are representing an expansion in an economy about the expansion and contraction.

Marginal Propensity to Consume

Its a metrics that quantifies an induced consumption that has the concept of the personal use depends on the level of income.

16. You should study determinants of

Consumption. The determinants of consumption depend on factors such as the level of income, distribution of wealth, future expectation of an increase in the price of products, the availability of goods.

Investment depends on factors such as the level of disposable income, the cost of the standard goods in the market, the expense of other factors and the technological changes in future.

17. You should know what wealth effect is and interest rate effect, and how the price level affects aggregate expenditures.

Wealth effect is the premise where when there is an increase in the value of stock portfolios, the investors are comfortable because they tend to reap more income because of the more spending that they do.

Interest rate effect is that is arising from the money borrowed. This makes lenders to borrow more when the interest rate has increased.

An increase in the price levels increases the aggregate demand and the vice versa

18. Aggregate expenditures

Know the components that cause it to increase and decrease.

Increase in aggregate demand is brought by factors such as an increase in consumption, investment, an increase in the exports and a decrease in the level of imports.

A decrease to be brought by factors such as an increase in interest rates.

19. Inflation.

i. You should see the definition of inflation,

Inflation is a consistent increase in price of goods and services in an economy

ii. The two different types of inflation


Cost-push inflation

Contributors to the two different types of inflation,

Demand-pull inflation- affected by the aggregate demand of an economy

Cost-push inflation an inflation cost by an increase in the price of goods and services.

20. Know the difference between unexpected and expected inflation

The conventional component of inflation does not seem to be of more risk to an economy while the surprising part is considered as a risk. This is mainly because the Expected increase is not shocked at the price in the market and the unexpected inflation is shocked by the amount in the market.


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