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ECON 1BB3 Final: Econ 1BB3 Exam Review.docx

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School
McMaster University
Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy

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ECON 1BB3 Full Course Notes
11
ECON 1BB3 Full Course Notes
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11 documents

Document Summary

In a given period of time: in a year goods and services income (market prices: output (basic prices, expenditure (market prices) Problems with cpi: substitution bias: ignores consumer substitution; overstates inflation, introduction of new goods: cpi is based on a fix basket of goods and services; overstates inflation, unmeasured quality change: some price changes reflected quality improvements; overstates inflation. 1) financial markets (provide a direct link between borrowers and savers) (firms are borrowing to invest and the households are saving) bond market (bond is a piece of paper that reps a loan) (giving a company a loan by buying their bond) loan large businesses, governments term; risk stock market (not making a loan, rather you are buying partial ownership of a firm) ownership profit (dividends) or capital gain risk of capital loss issued by large companies the return on stocks is greater than bonds because: riskier bankruptcy laws (stock holders get paid after bondholders)

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Related Questions

When the price of a good or service changes,

a. the supply curve shifts in the opposite direction.

b. there is a movement along a given demand curve.

c. the demand curve shifts in the opposite direction.

d. the demand curve shifts in the same direction.

Explain whether each of the following events shifts the short-run aggregate-supply curve, the aggregate-demand curve, both, or neither. For each event that does shift a curve, draw a diagram to illustrate the effect on the economy.

a.Households decide to save a larger share of their income.

b. Florida orange groves suffer a prolonged period of below-freezing temperatures.

c.Increased job opportunities overseas cause many people to leave the country.

28) All shredded wheat producers have decided to add a new ingredient, the "crunch enhancer" to shredded wheat. Crunch enhancer keeps cereals crisper longer in milk and, as a result, consumers decide they like shredded wheat more than before. What happens to the supply and demand curves for shredded wheat now that it costs more to produce and consumers like it better? A) The supply curve shifts rightward and the demand curve remains unchanged. B) The supply curve shifts leftward and the demand curve remains unchanged. C) The supply and demand curves both shift rightward. D) Neither curve changes but a movement occurs up along the demand curve and a movement occurs up along the supply curve. E) The supply curve shifts leftward and the demand curve shifts rightward.