Ch. 1 An Introduction to Macroeconomics

Question 1

economics

Answer 1

the social science of choice

Question 2

microeconomics

Answer 2

study of economics emphasizing the role of the customer, product, and/or firm

Question 3

macroeconomics

Answer 3

study of economics emphasizing national consumption and production, as well as international trade

Question 4

markets

Answer 4

any place that facilitates an exchange between buyers and sellers

Question 5

what is the basic economic problem?

Answer 5

scarcity

Question 6

scarcity

Answer 6

unlimited wants but limited resources

Question 7

choices

Answer 7

scarcity forces us to make decisions

Question 8

opportunity cost

Answer 8

next best alternative foregone

Question 9

what are the 4 factors of production?

Answer 9

all goods and services are produced from a set of these factors
land, labor, capital, entrepreneurship talent

Question 10

land (N)

Answer 10

includes all natural resources found above, below, and/or on the earth’s surface (wind, solar, timber, oil)

Question 11

capital (K)

Answer 11

includes any produced good that is used in the production of another good or service (hammer, phone, marker)

Question 12

labor (L)

Answer 12

comprised of all human resources (people)

Question 13

entrepreneurship talent (ET)

Answer 13

includes all talent involved in the creation and production of a specific good (idea, risk)

Question 14

production function

Answer 14

y = f (N, L, K, ET)

Question 15

payment of land production

Answer 15

rents paid on natural resources

Question 16

payment of labor production

Answer 16

wages paid to workers

Question 17

payment to capital production

Answer 17

interest paid for usage of capital

Question 18

payment of entrepreneurship talent production

Answer 18

profits paid for ET

Question 19

what are the 3 questions for economic systems?

Answer 19

what stuff should we make?
how should we make it?
who gets the stuff?

Question 20

what is a market economy? (capitalism)

Answer 20

a free-market setting where producers are free to gauge their production levels on consumer preferences in the market

Question 21

what is a command economy? (communism)

Answer 21

controlled by the government, and they control the numbers of units produced of all goods and services

Question 22

what does the circular flow diagram show?

Answer 22

shows how households and firms constantly interact with each other in the factor market and the product market

Question 23

positive economics

Answer 23

economic statements using facts and/or date

Question 24

normative economics

Answer 24

economic statements that include judgements and/or personal feelings

Question 25

ceteris paribus

Answer 25

latin phrase commonly used in economics that means “all else held constant”