Category: Economics

➤ What factors cause the aggregate supply curve to shift?
Aggregate supply shifts when an economy’s productive capacity or costs change. Positive shifts come from faster productivity, more capital, larger labour supply, or better technology. Negative shifts follow higher input costs, adverse supply shocks, stricter regulation, or higher business taxes. Distinguish permanent shifts to long-run capacity from temporary short-run cost movements.

What is the primary objective of the FOMC (Federal Open Market Committee)? Regulating stock markets Maximizing inflation Achieving maximum employment Issuing currency

➤ Why do tariffs and quotas often lead to higher consumer prices and lower living standards?
Tariffs and quotas limit competition and force consumers to buy more expensive domestic goods or pay import taxes. This reduces purchasing power and variety, creating deadweight loss. Higher prices hit low-income households hardest, and the economy loses efficiency as resources move away from comparative advantage into protected, less productive activities.

Competition exists when there are many consumers buying a standardized product from numerous small businesses.
A. Monopolistic
B. Perfect
C. Pure
D. Oligopoly

For an industry which causes pollution, the social marginal cost equals the private marginal cost plus the marginal damage from pollution.
Question 4 options:
True
False

➤ Why do economists abstract from complexities?
Abstraction isolates key variables and uses ceteris paribus assumptions to focus on cause-and-effect relationships. By simplifying institutions, preferences, and constraints, models become tractable and provide clear hypotheses. This method supports theoretical clarity, comparative statics, and policy analysis while acknowledging that real-world details must be reintroduced for empirical validation and external validity checks.