EconomicsQ&A by dot point

Topic 1.3 Comparative Advantage and Gains from Trade: distinguish absolute from comparative advantage, calculate opportunity costs to determine comparative advantage, and identify the terms of trade that benefit both parties.

Topic 1.4 Demand: explain the law of demand, distinguish a change in quantity demanded from a change in demand, and identify the determinants that shift the demand curve.

Topic 1.6 Market Equilibrium, Disequilibrium, and Changes in Equilibrium: determine equilibrium price and quantity, analyze surpluses and shortages, and predict the new equilibrium when supply or demand shifts.

Topic 1.2 Opportunity Cost and the Production Possibilities Curve: use the PPC to illustrate scarcity, trade-offs, opportunity cost, efficiency, and growth, and explain constant versus increasing opportunity cost.

Topic 1.1 Scarcity: explain how scarcity forces individuals and societies to make choices, distinguish needs from wants, identify the factors of production, and describe how different economic systems answer the three basic economic questions.

Topic 1.5 Supply: explain the law of supply, distinguish a change in quantity supplied from a change in supply, and identify the determinants that shift the supply curve.

Topic 2.7 Business Cycles: describe the phases of the business cycle, relate them to real GDP, unemployment, and inflation, and explain expansionary and recessionary output gaps relative to potential output.

Topic 2.5 Costs of Inflation: explain the real costs of inflation, distinguish anticipated from unanticipated inflation, and identify how inflation redistributes income between borrowers, lenders, and people on fixed incomes.

Topic 2.2 Limitations of GDP: explain why GDP omits non-market and underground activity, ignores distribution, leisure, and externalities, and why GDP per capita is used to compare living standards.

Topic 2.4 Price Indices and Inflation: define inflation and deflation, build and use the Consumer Price Index, calculate the inflation rate, and distinguish demand-pull from cost-push inflation.

Topic 2.6 Real versus Nominal GDP: distinguish nominal from real GDP, use the GDP deflator to convert between them, and explain why real GDP is the correct measure of output growth.

Topic 2.1 The Circular Flow and GDP: describe the circular flow of income and expenditure, define gross domestic product, and explain the expenditure approach using C plus I plus G plus net exports.

Topic 2.3 Unemployment: define the labor force and unemployment rate, calculate them, distinguish frictional, structural, and cyclical unemployment, and explain the natural rate and full employment.

Topic 3.1 Aggregate Demand: define aggregate demand, explain the wealth, interest-rate, and exchange-rate effects that make it downward sloping, and identify the determinants that shift it.

Topic 3.9 Automatic Stabilizers: explain how the progressive tax system and transfer payments automatically dampen the business cycle without discretionary action.

Topic 3.6 Changes in the AD-AS Model in the Short Run: trace how shifts in aggregate demand or short-run aggregate supply change the price level, real output, and unemployment in the short run.

Topic 3.5 Equilibrium in the AD-AS Model: locate short-run and long-run macroeconomic equilibrium, and identify recessionary and inflationary output gaps.

Topic 3.8 Fiscal Policy: explain how expansionary and contractionary fiscal policy use government spending and taxes, with the multiplier, to close recessionary and inflationary output gaps.

Topic 3.4 Long-Run Aggregate Supply: explain why the long-run aggregate supply curve is vertical at full-employment (potential) output, and identify what shifts it.

Topic 3.7 Long-Run Self-Adjustment: explain how flexible wages and prices return the economy to full-employment output after a demand or supply shock, with no policy intervention.

Topic 3.2 Multipliers: define the marginal propensities to consume and save, derive the spending and tax multipliers, and use them to calculate the total change in real GDP from a change in spending or taxes.

Topic 3.3 Short-Run Aggregate Supply: explain why the short-run aggregate supply curve slopes upward using sticky wages and prices, and identify the determinants that shift it.

Topic 4.4 Banking and the Expansion of the Money Supply: explain fractional-reserve banking, use a T-account balance sheet, and calculate the money multiplier and maximum change in the money supply.

Topic 4.3 Definition, Measurement, and Functions of Money: state the functions of money, distinguish commodity and fiat money, and describe the money supply measures M1 and M2.

Topic 4.1 Financial Assets: define financial assets, distinguish stocks, bonds, and money, and explain the inverse relationship between bond prices and interest rates.

Topic 4.6 Monetary Policy: identify the central bank's tools, explain expansionary and contractionary monetary policy, and trace the transmission from the money market to aggregate demand.

Topic 4.2 Nominal versus Real Interest Rates: define nominal and real interest rates, apply the Fisher relationship, and explain how expected inflation affects borrowers and lenders.

Topic 4.7 The Loanable Funds Market: draw the loanable funds market, explain the supply of saving and demand for borrowing, and show how shifts determine the real interest rate.

Topic 4.5 The Money Market: draw the money market, explain money demand and the vertical money supply, and show how shifts determine the equilibrium nominal interest rate.

Topic 5.5 Crowding Out: explain how government deficit borrowing raises the real interest rate and reduces private investment, using the loanable funds market.

Topic 5.6 Economic Growth: define economic growth, identify its determinants, and show it as an outward shift of the production possibilities curve and the long-run aggregate supply curve.

Topic 5.1 Fiscal and Monetary Policy Actions in the Short Run: combine fiscal and monetary policy to close output gaps, and trace their joint effects on output, the price level, and interest rates.

Topic 5.4 Government Deficits and the National Debt: distinguish a budget deficit from the national debt, and explain the long-run consequences of persistent deficits.

Topic 5.3 Money Growth and Inflation: apply the quantity theory of money and the equation of exchange to explain why sustained money growth raises the price level in the long run.

Topic 5.7 Public Policy and Economic Growth: evaluate how supply-side and growth-oriented public policies, such as investment in capital, education, infrastructure, and research, raise long-run potential output.

Topic 5.2 The Phillips Curve: explain the short-run trade-off between inflation and unemployment, the vertical long-run Phillips curve at the natural rate, and how the curves shift.

Topic 6.1 Balance of Payments Accounts: describe the current account and the capital (financial) account, and explain why the two must offset each other.

Topic 6.5 Changes in the Foreign Exchange Market and Net Exports: explain how appreciation and depreciation change net exports, and trace the effect on aggregate demand.

Topic 6.4 Effect of Changes in Policies and Economic Conditions on the Foreign Exchange Market: identify the determinants that shift currency supply and demand, including interest rates, income, prices, and tastes.

Topic 6.2 Exchange Rates: define the nominal exchange rate, distinguish appreciation from depreciation, and calculate exchange rates between two currencies.

Topic 6.6 Real Interest Rates and International Capital Flows: explain how differences in real interest rates between countries drive international capital flows, exchange rates, and net exports.

Topic 6.3 The Foreign Exchange Market: draw the foreign exchange market for a currency, explain the supply of and demand for it, and find the equilibrium exchange rate.