1.2 how economists approach the world//????

Question 1

ceteris paribus

Answer 1

The Latin expression for ‘everything else being equal’. It means that all other variables, except the one that you are studying, are assumed to be fixed or unchanged.

Question 2

positive economics

Answer 2

Economics statements based on facts or evidence, free from subjectivity. They can be tested scientifically and proved or disproved.

e.g. if govt increases spending, unemploymentt will fall or brazil’s inflation rate in 2016 was 9%

Question 3

normative economics

Answer 3

Economic statements based on norms, and thus based on subjective evaluation. They cannot be proved or disproved scientifically

e.g. healthcare should be free for all, extreme poverty should be eradicated

Question 4

barter trade

Answer 4

The exchange of goods or services for other goods or services without using money.

Question 5

(a bunch of shit abt history)

Question 6

division of labour

Answer 6

The distribution of different parts of a manufacturing process or task to different people in order to improve efficiency.

Question 7

mass production

Answer 7

The production of large quantities of a standardised product by an automated mechanical process.

Question 8

laissez-faire

Answer 8

A term that comes from the French phrase ‘laissez faire et laissez passer’ (it means approximately ‘leave alone’). It makes reference to the economic concept of government not interfering in the working of the free market.

Question 9

microeconomics

Answer 9

The area of economics that studies the behaviour of individual economic agents, such as households, firms, industries and the government, and how they make economic decisions.

Question 10

utility

Answer 10

measure of satisfaction or usefulness a consumer receives when they consume a product.

Question 11

total utility

Answer 11

The total satisfaction gained by consuming a certain amount of a good or service.

Question 12

marginal utility

Answer 12

The total satisfaction gained by consuming a certain amount of a good or service.

Question 13

law of diminishing marginal utility

Answer 13

The principle that as additional units of a good or services are consumed, the marginal utility will decline.

Question 14

monetary policy

Answer 14

Where the central bank uses the money supply and interest rates to manage the economy.

Question 15

fiscal policy

Answer 15

Fiscal policy is where the government adjusts government expenditure and/or taxation to stimulate the economy.

Question 16

business cycles

Answer 16

The boom–bust cyclical nature of the economy.

Question 17

business cycles

Answer 17

The boom-bust cyclical nature of the economy

Question 18

budget deficit

Answer 18

A budget deficit arises when government expenditure is greater than tax revenue.

Question 19

inflation

Answer 19

A sustained increase in the general price level over a period of time.

Question 20

money supply

Answer 20

The total amount of money in circulation; it’s all the money individuals have available to spend at any given period of time. It consists of all of the coins, notes and bank balances and money available to consumers and producers to buy and sell goods.