|
Structure
Interesting Questions, Facts and Information
- There are a total of 50 general entries. We are selecting 30 for display.
Special Topics
|
 Interesting Questions, Facts, and Information
 Economics
| Two types of approaches are widely used when it comes to the problem of measurement of ‘utility’. What are those two approaches known as? | Simpleton Learns Economics
|
Cardinalist & Ordinalist. Cardinalist approach says that utility can be measured in monetary units. Some economists even coined the word ‘utils’ for measurement units.
The Ordinalist approach says the consumer need not know in specific units the utility, but it is enough if he can rank the various ‘baskets of goods’ to determine order of preference.
Ordinalist approach can be further divided into "indifference curves" and "revealed preference hypothesis."
J.B Say. Better known as Say’s Law, this is one of the reasons for the great Depression in the U.S.A. It was debunked by Keynes. Some of the implications of this theory were -
(1) Automatic adjustment of every element in an economy
(2) General overproduction not possible
(3) No general unemployment etc
| In simplistic terms, what is the difference between Production and Consumption in an economy better known as? | Simpleton Learns Economics
|
Capital formation. Production – Consumption = Capital formation. What it means is that those goods which are not consumed contribute to the capital formation in an economy.
| This type of unemployment is due to the operation of the business cycle. It is generally suffered by Capitalist countries. It is also called ‘Keynesian Unemployment’. What is this type of unemployment better known as? | Simpleton Learns Economics
|
Cyclical Unemployment. It happens when aggregate effective demand (Macro economics) of the community becomes deficient in relation to the productive capacity of the country. It can be eliminated, or at least reduced, by increasing expenditure on consumption and investing more in economy.
Keynes. Keynes brought about this concept in 1929. It was further developed by R.F Kahn in 1931. Kahn’s multiplier was actually an ‘employment’ multiplier, not an ‘investment’ multiplier.
‘Investment Multiplier is the ratio of change in income (revenue) to change in investment’. Multiplier is generally denoted by the letter ‘K’.
| According to Okun's Law, a 1% increase of unemployment rate results in a loss of GDP of how many percentage points? | Macroeconomics
|
2. Okun's Law is named after Arthur Okun who discovered that unemployment rate and GDP are negatively correlated.
| What is the alternative name for Consumer Price Index (CPI)? | Macroeconomics
|
Laspeyres Index. CPI or Lapeyres Index uses fixed weights on price of various goods. CPI measures the price of the commodities that is bought by domestic consumers. Thus, CPI indexes vary between countries because different countries have different consumer needs, tastes and priorities, and thus form different 'national shopping baskets'.
A one for one relation between inflation and the nominal interest rate. Thus a 1% increase in inflation rate results in a 1% increase in nominal interest rate.
| If an economy uses a floating exchange rate system then what will happen to GDP if the government decided to use expansionary fiscal policy? (Assuming capital mobility is perfect) | Macroeconomics
|
No change. Since expansionary fiscal policy causes the exchange rate to appreciate, this means imports will increase which results in a fall in GDP. This offsets the increase in GDP caused by the expansionary fiscal policy.
| What theory explains why deflation may actually lead to an increase in GDP? | Macroeconomics
|
Pigou Effect. According to Pigou Effect, a fall in prices leads to increase in real money balances causing consumer to spend more, when we spend more other people earn more, this never-ending cycle will eventually leads to an increase in GDP.
| Who introduced the concept of 'Permanent Income Hypothesis'? | Macroeconomics
|
Milton Friedman. He believes that transitory income and permanent income forms our present income. Transitory income represents the proportion of income which is not considered to be permanent and may change in the foreseeable future.
| The 'Quantity Equation' can be expressed as MV=PY, from this what is the other form of expression for real money balances? | Macroeconomics
|
kY. By rearranging MV=PY, real money balances (M/P) becomes (M/P)=kY where k=(1/V)
| In what year was the WTO (World Trade Organisation) created? | Macroeconomics
|
1995. Before WTO, GATT (General Agreement on Tariffs and Trade) was the official agreement of free trade between countries but it's not an organisation.
| Since human wants are unlimited and available resources are limited, what will a rational consumer do? | Basic Economics
|
Satisfy the most urgent needs which can be met within his/her income levels. Though Buddha said that one should renounce all wants to attain happiness, unfortunately, in real world, it appears that people are more inclined towards being jealous of well-to-do neighbours, or be resigned to their fate, as some of us Indians are.
| Suppose you eat cakes continuously. Then the satisfaction derived from eating the tenth cake, as compared to satisfaction derived from eating the ninth cake will be _______ ? | Basic Economics
|
less. The Law of Diminishing Marginal Utility states that as you keep on consuming a (homogeneous) commodity continuously, the satisfaction derived from each subsequent unit will keep on falling (but the total level of satisfaction will still rise, as said in question 2). This is because the urgency of the want it self will be diminishing. For instance, when you are very hungry, you would welcome a Big Mac. But once you have eaten the Big Mac and your hunger is overcome, you may rather have an Ice Cream rather than another Big Mac.
profits. Traditional theory says that profit maximisation is the basic objective of a firm. However, there are theories which state that firms try to maximise their Sales or Revenue also. But these theories assume certain special conditions like constant returns to scale. (We will not go into those details). In any case, if the special conditions are met, then it transpires that the firm is actually doing profit maximisation ultimately.
seller. It is very difficult to have a pure monopoly, unless there is some "entry barrier" like huge capital requirement, etc. However, sometimes, the governments may "create" monopolies to meet some special needs. One such example is the currency issuing authorities of different countries, like FED in US, Bank of England in UK and the Reserve Bank of India in my country.
| What is the single most important factor that makes the markets work? | Basic Economics
|
Money. Even though Marxists believe that markets don't work (at least in the long run), it appears that they do work indeed. The other wrong answers may also appeal to some as being true, but it's really money, honey. The greatest attribute of money (currency) is that it is universally acceptable medium of exchange. So when you produce a commodity, you sell it in exchange of money and then use the money to buy whatever you want. Imagine a barter economy where you are producing hats and need a horse. Then you have to go around to find a fellow who has a horse and also wants a hat. Such activity is obviously time consuming and hampers economic activity.
| When the economic activity in an economy is on the decline, then it is called a _______ ? | Basic Economics
|
recession. Boom is when the economic activity is thriving. Deflation means a fall in general price level. Depression is an acute fall in economic activity characterised by widespread losses due to lack of demand, job retrenchment, etc. Recession precedes a depression, and when the recession becomes uncontrollable, it will precipitate into a depression. The global economy has witnessed a recession as recently as the late 1990s. It has not precipitated into a depression, thankfully due to the lessons we have learnt from the Great Depression.
| What usually constitutes the main source of a government's income? | Basic Economics
|
Taxes and levies. All the wrong answers also provide some income to the governments. And in some cases, the loans may even exceed the tax revenues. But the ultimate source of income for a government is taxes.
Capital is produced by factors of production.. Factors of production are the scare resources available for use in the production of goods and services to satisfy wants. Capital is a man-made resource.
Water is a scarce resource.. An economic problem states that wants are unlimited, while resources are scarce. Scarcity is when choices of resources are limited, which leads to opportunity cost. In this question, water is a scarce resource, which means that not all people have access to water. Opportunity cost is the next best alternative chosen after giving up another.
| Commercial companies are reclaiming marshland to construct golf courses. What is the opportunity cost to society? | The Basics of Economics
|
The natural habitat that is lost.. Opportunity cost is the benefit of the next best alternative foregone because of a particular choice. If you had to choose a green car or a blue car, and you chose the blue car, the green car is the opportunity cost.
| A charity sold tickets at $5 each. A ticket was picked and a prize of $100 was given to the owner of the ticket. A student bought a ticket but did not win. What is the opportunity cost to the student? | The Basics of Economics
|
What could have been bought with $5. What could have been bought with $5 dollars is the opportunity cost. If the students didn't buy charity ticket with $5 dollars, he could buy other things with this $5 dollars, such as 2 or 3 chocolate bars.
Delta Gold: a rapidly expanding Australian gold and platinum mining company. Primary sector means to extract the raw materials from land such as fossil fuels and mining.
readily acceptable. Many years ago, before paper money was invented, people traded one good for another good. This trade is call barter trade. In order to trade a good with another, the goods have to be acceptable by both sides.
| The prices of goods remain fixed in the shops of a planned economy, yet in the shops of a neighboring market economy they fluctuate widely. What is the most likely reason for the difference between the two economies is that, in the market economy? | The Basics of Economics
|
buyers and sellers determine prices. In a market economy, the aim of firms is to make as much profits as possible. In order to do this, they have to know what their consumers want and produce as their consumers want.
an incentive to innovate. In a free market economy, people who work hard will have bonus income while in a planned economy, no matter how hard you work, you will receive the same amount of income as others.
| The table shows government expenditure as a percentage of Gross Domestic Product for four countries.
Country expenditure:
W 40%
X 36%
Y 50%
Z 33%
Which type of economy exists in these countries? | The Basics of Economics
|
Mixed. A mixed economy will have equal to or less than 50% of expenditures by the government. This is when firms are owned by both the private and public sector. Therefore, the government's ownership must not exceed 50%.
| The Federal Reserve is responsible for maintaining the United States money supply so that they can control inflation in the long and unemployment in the short run. What is usually the first thing the Fed would do in order to decrease the money supply? | The Big View on Economics
|
sell government bonds to the public. The most direct way the Federal Reserve decreases the money supply is through the selling government bonds. Selling the bonds take out money in the economy since people are giving money to the Feds in exchange for a bond.
labor. The households provide the necessary workers needed by the firms. The factors for production market part of the circular flow that also includes the markets of goods and services where the firms sell to the households.
|
Fun Trivia | 
Quizzes | 
Games
| 
People | 
Services | 
Help | 
Me
