Reference no: EM132123965

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The Market System and Circular Flow

1. Inflation is the general increase in prices with some prices rising faster than average and even some prices falling. Inflation attracts a great deal of attention among policy makers and some of the remedies for it can have serious consequences in production and employment.

Why would you, as a business manager, care whether annual inflation is 2% or 20%?

2. What are the main characteristics of the market system?

3. How does the market system answer the five fundamental questions?

4. What are the mechanics of the circular flow model?

Demand, Supply, and Market Equilibrium

5. Successful managers plan for the right number of employees to staff their organization. Managers do not want to have too many employees for their business, nor do they want to have to compete for employees in an overheated labor market.

What macroeconomic data can employers monitor to help them plan for the right number of employees?

What risks to their costs do they run if they find themselves overstaffed? What recourse do they have in a tight labor market?

6. What is the difference between supply and quantity supplied? What is the difference between demand and quantity demanded?

7. How do prices, quantity supplied, quantity demanded, supply, and demand interact to determine market equilibrium?

8. How do government-set prices, such as price ceilings and price floors, cause surpluses and shortages?

Introduction to Macroeconomics

9. Recessions seem to show up every so often and create economic hardship. You might think that policy-makers could tame the business cycle and implement policies that would end recessions. Are recessions a necessary fact of macroeconomic life? If not, what would it take to eliminate them? If they are unavoidable, what types of business can benefit from them?