Instructor: Basil Al Hashimi 

Please be sure to visit each of the following links: 

syllabus

module 1

module 2

module 3

module 4

module 5

Instructions for Module # 1 

1. Required Reading as follows: Review Chapters 1-5 in Macroeconomics. 
2. Written Report Assignment: 
Prepare a 2-4 page report addressing one of the topics below. The paper should be based upon reading, research, or experience, such as a personal job experience or case study. Concepts from the text should be integrated when applicable. Identify the microeconomics concept(s) or principle(s) involved, relate the report to a specific business or industry, and provide conclusions, recommendations, or lessons learned as a result of yourresearch. 

Supply and Demand and Equilibrium Price 

or

Production Possibility Frontier

Discuss the economics of a specific firm relative to how its current size and level of production are, or are not, optimizing its potential. Look at the production function, marginal and average product, diminishing returns, specilization, and the effects of technology. Use these clues to make an estimate as to how effectively the firm is operating. 

Important Points of Chapters 1-5 (handout for these chapters): 

The following notes have been created in order to assist you in your understanding of the text as well as to help you prepare for your examination. 

1. The single word that best describes the fundamental problem of economics is scarcity. 
2. Economic policies can be designed to fight inflation , unemployment , and trade imbalance. 
3. Economic goods are goods that are in scarce or limited supply. 
4. Economic analysis plays an integral role in helping us to better understand our society. 
5. A free good differs from an economic good in that it is not scarce . 
6. "Distribution " in economics refers to "for whom". 
7. Absolute prices are prices in terms of some monetary unit. 
8. Relative prices are the prices of goods and resources in terms of each other. 
9. Production is a creation of value or additional value. 
10. Opportunity cost is the value of the sacrificed alternative. 
11. A mixed economy is an economy that is one in which public and private sectors play important roles. 
12. Economic efficiency is the adoption of the technology that minimizes the total cost. 
13. Allocative efficiency is the production of goods in that combination that maximizes the total satisfaction of consumers. 
14. Capital is best defined as produced goods used for further production. 
15. Normative economics considers what ought to be - value judgments, or goals, of public policy. 
16. Positive economics is the analysis of facts and behavior in an economy, or the way things are. 
17. Division of labor is a method of organizing production whereby each worker specializes in part of the production process. 
18. The law of comparative advantage says that a nation should specialize in producing and exporting those commodities which it can produce at relatively lower cost, and that it should import those goods for which it is a relatively high cost producer. 
19. The law of diminishing returns states that the additional output will decline as more of one input is added. 
20. Economic growth is an increase in the total output of a nation over time . Economic growth is usually measured as the annual rate of increase in a nation's real GDP. 
21. Production Possibility Frontier (PPF) is a graph showing the menu of goods that can be produced by an economy. 
22. Being on the PPF between guns and butter means that more guns can be produced only by doing without some butter. 
23. A mixed economy is an economy that is one in which public and private sectors play important roles. 
24. The economic role of government in mixed economies can include; public works, tax collections ,and income redistribution. 
25. The law of demand states that, other things being constant, the higher the price of a good ,the lower is the quantity demanded. 
26. The law of supply implies that, other things being constant, the higher the price of a good , the higher the quantity supplied. 
27. If the price is above equilibrium, then there will be a surplus. 
28. The price of a good will increase if the supply of a good decreases. 
29. If x is an inferior good and consumer income rises, the demand for x will decrease and thus the price and the quantity traded will decrease. 
30. If x and y are substitute goods (in consumption) and the price of x increases, we will observe a decrease in price but an increase in the quantity traded of y. 
31. If x and y are complementary goods (in consumption) and the price of x increases, we will observe a decrease in the price and the quantity traded of y. 
32. If a market is said to be in equilibrium, then the quantity demanded and the quantity supplied will be the same. 
33. A technological improvement in the production of good x will shift the supply curve for good x to the right. 
34. Income, taste, and substitution factors would shift demand curve to the right. 
35. Technology, cost of production, and consumer's preference would shift supply curve to the right. 
36. The functional distribution of income refers to the distribution of income according to basic resource classes, i.e., wages, rents, interest, and profits. 
37. If a product generally has an expected life of six months, it is classified as a nondurable good. 
38. If a company owns plants at various stages of the production process, this is an example of a vertical combination. 
39. One of the major advantages of the sole enterprise and partnerships is that they have to pay a single tax. 
40. One of the major disadvantages of sole enterprise and partnerships is unlimited liability. 
41. The major advantage of corporations is that owners have limited liability. 
42. The major disadvantage of corporations is that they pay double taxation. 
43. The primary way that government deals with monopoly is to regulate the monopoly firm. 
44. An example of a negative externality is a neighbor who plays loud music and makes a lot of noise. 
45. Public education, public health programs, and requiring drivers to undergo periodic eye examinations generate spillover benefits or positive externalities. 
46. The two largest sources of revenue for the Federal government are personal income taxes and social security taxes. 
47. The marginal tax rate is the increase in taxes as a percentage of an increase in income. The largest revenue and expenditure categories for local governments are, respectively; property taxes and spending for education. 
48. The ups and downs of real GDP are called business cycles. 
49. An increase in aggregate demand in the classical model leads to higher prices and constant output. 
50. Malthus's prediction of the stabilization of the economy at subsistence levels ignored the possibility of technological change. 
51. Malthus focused his theory of economic growth on the land-to-labor ratio. 
52. Personal income taxes are examples of fiscal policy instruments. 
53. The effects of business cycles tend to affect even non- economic matters like births and alcoholism. 
54. According to classical theory, the national output moves up and down inresponse to movements in the aggregate supply curve. 
55. According to Keynesian theory , the national output moves up and downin response to movement in the aggregate demand. 
56. The AD curve shifts out when the government increases its expenditureat every price level. 
57. A short-run aggregate supply curve will shift ( to the right) when new firms enter markets and the economy expands. 
58. Stagflation can be caused by supply shocks.59) Aggregate demand is negatively sloped because a higher price level causes reduced spending on our domestic output. 

Basil Al Hashimi 

Please be sure to visit each of the following links: 

syllabus

module 1

module 2

module 3

module 4

module 5