Chapter 1 Modern Economics

Question 0

scarcity

Answer 0

excess of desirability of something over its availability at zero cost

Question 1

trade-offs

Answer 1

deciding to spend more on one thing leaves less for another

Question 2

inflation

Answer 2

rate of price change

Question 3

endogenous variables

Answer 3

those determined within the model

Question 4

exogenous variables

Answer 4

not explained within the model

Question 5

market economy

Answer 5

most exchanges take place through markets and these changes are guided by the prices of the goods and services involved

Question 6

mixed economy

Answer 6

relies primarily but not exclusively on free interaction of producers and consumers to determine how what and for whom questions

Question 7

privatization

Answer 7

government sells enterprises to private sector

Question 8

product market

Answer 8

firms sell their outputs to households (or firm to firm)

Question 9

labor market

Answer 9

firms purchase services of workers

Question 10

capital markets

Answer 10

firms raise funds to buy inputs

Question 11

inputs

Answer 11

various materials of production (labor, machinery, land)

Question 12

outputs

Answer 12

goods and services they sell

Question 13

capital goods

Answer 13

machines, buildings used in production

Question 14

microeconomics

Answer 14

detailed study of decisions of firms and households, and of prices and production in specific industries

Question 15

macroeconomics

Answer 15

behavior of economy as a whole, such as unemployment rates, inflation, economic growth, and the balance of trade (general price levels, interest rates, exchange rates)

Question 16

theory

Answer 16

set of assumptions and conclusions derived from these assumptions

Question 17

positive economics

Answer 17

economists describe the economy and construct models that predict how different policies affect the economy

Question 18

normative economics

Answer 18

economists evaluate alternative policies, weighing the various benefits and costs