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1. What is economics? Formulate and explain the main economic problems. 1

2. How did the oil price shocks affect the world economy? Describe the changes in terms of what, how and for whom to produce. 2

3. What are the main types of economic systems? Characterize each of them in detail. What is the most prevalent type? Why? 3

4. What is the difference between microeconomics and macroeconomics? Explain the main macroeconomic concepts and issues. 4

5. What is a market? What economic functions do markets perform? Describe market forces. 5

6. What do demand and supply depend on? Formulate the law of demand and the law of supply. Explain the concept of elasticity. 6

7. What are the main types of market structures? Characterize each type. 7

8. What do governments do in mixed economies? 9

9. What is a market failure? Describe main kinds of market failures. 11

10. Describe the main functions of money. 12

11. What are the main kinds of money? (evolution) 13

12. What are the motives for holding money? Give examples. 15

13. Describe the modern banking system. How does the clearance system work? 17

14. What are the functions of the Central Bank? 18

15. What is the goal of monetary policy? Describe the tools of monetary policy. What are the drawbacks of monetary policy in comparison with fiscal policy? 18

16. Describe the main tools of fiscal policy. What are its drawbacks in comparison with monetary policy? 20

Stabilizing The Economy 20

17. What are the main stages of business cycle? What causes fluctuations in the business cycle? 21

18. Unemployment and its types. 22

19. Inflation and its causes. 23

1. What is economics? Formulate and explain the main economic problems.

Everyone goes through life having to make choices, because nobody can have everything. Every year the most important political debates concern questions about spending taxpayers’ money.

Economists note that there is no limit to the amounts or kinds of things that people want. There is, however, a limit to the resources available to satisfy those wants. Once that limit is reached, nothing else can be produced.

When a nation’s resources (all its workers, factories, farms, etc.) are fully employed, the only way to increase the production of one thing is to reduce the production of something else.

To summarize: human wants are unlimited, but the resources necessary to satisfy those wants are limited. Thus, every society is faced with the identical problem, the problem of scarcity.

we can define economics as the social science that describes and analyses how society chooses from among scarce resources to satisfy its wants.

The need to choose is imposed on us all by our income, wealth and ability to borrow. The problem that each must face with the problem of choices and opportunity costs. The opportunity cost of something is its cost measured in terms of what you have to give up to get it.

The resources that go into the creation of goods and services are called the factors of production. The factors of production include natural resources, human resources, capital and entrepreneurship.

Natural Resources or “Land”. Natural resources are the things provided by nature that go into the creation of goods and services. The price paid for the use of land is called rent. Rent becomes income to the owner of the land.

Human Resources or “Labor”. Economists call the physical and mental efforts that people put into creation of goods and services labor. The price paid for the use of labor is called wages.

Capital. is something created by people to produce other goods and services. A factory, tools and machines are capital resources because they can be used to produce other goods and services. Payment for the use of someone else’s money, or capital, is called interest.

Entrepreneurship. the managerial or organizational skills needed by most firms to produce goods and services. The entrepreneur brings together the other three factors of production.

The central problem of economics is to determine the most efficient ways to allocate the factors of production and solve the problem of scarcity created by society’s unlimited wants and limited resources. So, every society must answer to three questions: What, How and for whom to produce.

What Goods and Services Are to be Produced and in What Quantities Are They to be Produced?

Individuals and societies can obtain things by producing them themselves, exchanging things that they already own for them, or receiving them as gifts. Since a society cannot have everything, it must decide which goods and services it will have now and which ones it is willing to postpone having or give up completely

How Are Those Goods and Services to be Produced?

There is more than one way to build a home or a school, manufacture an automobile, or farm a piece of land. In some societies government decides how to produce smt, other society follow traditions, while in others private individuals decide.

Who Will Get to Use the Goods and Services Produced by the Economy?

But how the output is divided? Who, for example, will ride in limousines; who will have to use public trans­portation; and who will have to walk? In one countries larger share of the national output belongs to people of noble birth, in other to members of a particular political party, in the USA to the owners of wealth.