Economics 201 Study questions Unit # 1

The study questions serve as a guide to the material we will be covering in each unit as well as examples of the kind of questions that you may get on the essay portion of each unit test.

Chapters 1 and 2:

1) What is the basic economic problem that all individuals and societies face? Why does this problem exist and what way do families to deal with the basic economic problem.

2) What is the difference between an economic (scarce) good and a free good? Is the air that we breathe a good example of a free good?

3) What is the difference between poverty and scarcity?

4) Describe the “eight guideposts to economic thinking”. Explain and provide an example of each guidepost.

5) What is the meaning of opportunity costs? (pages 28-30)

6) Define economics. Explain why economics is both a social discipline as well as a science.

7) What is the difference between macroeconomics and microeconomics

8) What is the difference between positive economics and normative economics? How can we distinguish a positive economic statement from a normative economic statement?

9) Describe several macroeconomic goals that societies might use to evaluate the effectiveness of their economic systems.

Chapter 7:

1) Define GDP. What is the difference between GDP and GNP?

2) Explain why GDP can be measured by adding up the value of final market goods and services. (final demand G. and S.)

3) Describe the two ways of looking at GDP as either an expenditure concept or an income (factor cost) concept.

4) Explain the elements in the following equation: GDP = C + I + G + Xn

5) What is the difference between “Ig” and “In”?

6) Trace the steps from GDP to GNP to NI to PI to DI.

7) What is the difference between nominal GDP and real GDP? Why are Real GDP measures developed?

8) Describe the problems that we encounter when GDP is used as a measure of production.