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ECONOMICS (CIA4U1-01) QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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ECONOMICS (CIA4U1-01) QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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ECONOMICS (CIA4U1-01) QUESTIONS ANDANSWERS WITH SOLUTIONS 2024
UNIT 1 - ANSWER
Economics - ANSWER The study of human decisions in using limited resources to satisfy unlimited wants
physical wants (needs) - ANSWER Those that are necessary to sustain human life
psycological wants - ANSWER Wants that aren't needed to sustain life
goods - ANSWER Concrete, visible things that satisfy a human want.
Services - ANSWER Items that satisfy wants but aren't tangible and are consumed at the time of
production.
human resources - ANSWER the broad category of human efforts, both physical and mental, used to
produce goods and services. This can be time, energy, and skills.
capital resources - ANSWER The tools, equipment, and buildings that are used to produce goods and
services
natural resources - ANSWER Materials or substances such as minerals, forests, water, and fertile land
that occur in nature and can be used for economic gain
Scarcity - ANSWER The limited amount of resources available to satisfy an unlimited amount of human
wants. Note that goods that aren't scarce are or would be free.
opportunity cost - ANSWER The cost of doing something rather than doing another. The next best
option.
,economic system - ANSWER the structure of methods and principles that a society uses to produce and
distribute goods and services
Traditional Economy - ANSWER An economic system that focuses on habit. Families will often work the
same jobs that their ancestors have worked.
command economy - ANSWER an economic system in which all resources are government-owned and all
production is directed by the central plans of government. While these economies tend to act on
emergencies quickly and tend to people equally, they often have no opportunity and lacks the need for
hard work and creativity.
market economy - ANSWER an economic system with no government so that private firms account for all
production. People will work out of self interest, motive or profit.
mixed economy - ANSWER An economy in which private enterprise exists in combination with a
considerable amount of government regulation and promotion.
Economic Freedom - ANSWER The freedom to own property, to make a profit, and to make choices
about what to produce, buy, and sell
economic growth - ANSWER the ability of the economy to increase the production of goods and services
Efficency - ANSWER when society gets the most from its scarce resources
Equity - ANSWER the quality of being fair
Full employment - ANSWER the level of employment reached when there is no cyclical unemployment.
Security - ANSWER The goal to have a stable income and resources to support a standard of living.
Stability - ANSWER The goal is to reduce/avoiding/limiting dramatic fluctuations in employment,
production, and prices.
, Adam Smith - ANSWER Scottish moral philosopher and a pioneer of political economics. Seen today as
the father of Capitalism. Wrote On the Wealth of Nations (1776) One of the key figures of the Scottish
Enlightenment.
Karl Marx - ANSWER 1818-1883. 19th century philosopher, political economist, sociologist, humanist,
political theorist, and revolutionary. Often recognized as the father of communism. Analysis of history
led to his belief that communism would replace capitalism as it replaced feudalism. Believed in a
classless society.
Leon Walras - ANSWER Created the general equilibrium theory. A theory that attempts to explain the
macro economy as a whole
John Maynard Keynes - ANSWER English economist who advocated the use of government monetary
and fiscal policy to maintain full employment without inflation (1883-1946)
Miltion Friedman - ANSWER He believed that government intervention only causes inflation and
unemployment. Advocated monetary targeting ("monetarism") to control inflation, labour market
"flexibility" (eg. deunionization) to solve unemployment.
Normative economic analysis - ANSWER Subjective and value based. May use stats but injects ideas
about how the world "should" be.
Positive economic analysis - ANSWER Fact/Value based analysis. This type of analysis focuses only on
facts provided
substitution effect - ANSWER the change in the quantity demanded of a good that results from a change
in price, making the good more or less expensive relative to other goods that are substitutes
income effect - ANSWER the change in the quantity demanded of a good that results from the effect of a
change in the good's price on consumers' purchasing power
Law of Marginal Utility - ANSWER there is an inverse relationship between the quantity of a good and
the marginal utility of that good
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