Chap. 1: Sec. 1.1: What is Economics and Why It's Important Flashcards
What is a circular flow diagram?
A diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market.
What is a command economy?
An economy where economic decisions are passed down from government authority and where the government owns the resources.
What is the concept of division of labor?
The way in which different workers divide required tasks to produce a good or service. It allows individuals and firms to specialize and to produce more for several reasons: a) It allows the agents to focus on areas of advantage due to natural factors and skill levels; b) It encourages the agents to learn and invent; c) It allows agents to take advantage of economies of scale.
What is economics?
The study of how humans make choices under conditions of scarcity.
What is economies of scale?
When the average cost of producing each individual unit declines as total output increases.
What are exports?
Products (goods and services) that are made domestically and sold abroad.
What is fiscal policy?
Economic policies that involve government spending and taxes.
What is globalization?
The trend in which buying and selling in markets have increasingly crossed national borders.
What is the goods and services market?
A market in which firms are sellers of what they produce and households are buyers.
What is gross domestic product (GDP)?
The measure of the size of total production in an economy.
What are imports?
Products (goods and services) that are made abroad and then sold domestically.
What is the labor market?
The market in which households sell their labor as workers to business firms or other employers.
What is macroeconomics?
The branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance.
What is a market?
Interaction between potential buyers and sellers; a combination of demand and supply
What is a market economy?
An economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand.
What is microeconomics?
The branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms.
How is the word model used by economists?
Sometimes economists use the word model instead of theory.
What is monetary policy?
Policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing.
What is a private enterprise?
A system where private individuals or groups of private individuals own and operate the means of production (resources and businesses).
What is scarcity?
When human wants for goods and services exceed the available supply.
What is specialization?
When workers or firms focus on particular tasks for which they are well-suited within the overall production process.
What is a theory?
A representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation.
What is a traditional economy?
Typically an agricultural economy where things are done the same as they have always been done.
What is an underground economy?
A market where the buyers and sellers make transactions in violation of one or more
government regulations.
