Topic 1- Additional notes

Question 1

Marginal Benefit Formula

Answer 1

CHANGE in Total Rev/Change in output

Question 2

Marginal Cost formula

Answer 2

Change in total cost/change in output

Question 3

What happens during expansion

Answer 3

low unemplyment
high inflation

Question 4

What happens during recession

Answer 4

high unemployment
low inflation

Question 5

Deflation= Low inflation

Answer 5

Deflation= Low inflation

Question 6

does central bank printing more money do anything

Answer 6

short run yeah! decreases interest rate

long term prices ar e just permanently increased nothing happens

Question 7

What determines Labour profuctivity

Answer 7

1. Physical Capital: stock of equipment/ structure to produce goods
2. Human capital: accumulated knowledge and skills of workers (education and training)
3. Natural resources: inputs into production of goods produced by nature (land rivers mineral deposits)
4. Tehc change: quanittiy of output a firm can profudece using quanitity of inputs

Physical, Human, Technological and Natural Capital > Labour productivity >PPP

Question 8

define allocative fficiency!!!

Answer 8

MARGINAL BENEFIT OF THE LAST UNIT OF PRODUCTION OF A GOOD OR SERVICE IS EQUAL TO MARIGNAL COST OF PRODUCING IT (MARKET PRINCIPLE)