Mid Term ECO 201

Mid Term ECO 201 - is calculated every quarter and the...

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MID-TERM 1. How does the study of economics depend on the phenomenon of scarcity? As we are learning, Economics is really the study of the financial choices we as a society make. We make those choices because of the scarcity of resources. Our wants exceed the resources available to produce the end products. Scarcity is the fundamental foundation of the study of economics. Without scarcity, there would be no choices to be made; implying that there would be an abundance of resources. 2. Explain why an economy’s income must equal its spending. Because every dollar a person (or company) spends in an economy is a dollar of income for someone else (or another company). 3. What is the difference between the GDP deflator and the Consumer Price Index? The GDP Deflator takes into account all goods and services produced domestically. It
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Unformatted text preview: is calculated every quarter and the calculations change. The Consumer Price Index (CPI) is an averaged fixed basket of goods and services regardless of where they are produced. The two are not identical but rather alternative ways to measure inflation. 4. Explain how higher savings leads to a higher standard of living. The standard of living in an economy can be measured in large part by its productivity; the higher the productivity the higher the standard of living. Businesses save capital much like individuals save money. The greater a nations savings rate the greater the pool of capital a nation has for investment to produce more and better school....
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This note was uploaded on 03/25/2012 for the course ECO 101 taught by Professor Lindsey during the Spring '12 term at Post.

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