econ final 2 Flashcards
empirical
relying on real-world data in evaluating the usefulness of a model
bounded rationality
the hypothesis that people are nearly but not fully rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them
positive economics
descriptive statements, objective
normative economics
judements
economic goods
goods that are scarce, for which the quantity demanded exceeds the quantity supplied at a zero price
comparative advantage
produce at a lower opportunity cost compared to others
absolute advantage
produce more units using given quantity of resources
relative price
of units that must be sacrificed to buy another
money price
nominal price
ceteris paribus conditions
determinants of the relationship between price and quantity that are unchanged along a curve. changes in these factors cause the curve to shift
normal goods
income rise, demand rise
inferior goods
income rise, demand falls
price system
price is always changing to reflect demand and supply i.e. expensive= rare
voluntary exchange
two parties trade expecting both to be better off
nonprice rationing devices
all methods used to ration scarce goods that are price-controlled. (ex: price ceiling & floor)
medium of exchange’s advantages?
decrease transaction costs: specialization and efficiency
standard of deferred payment
item is desirable for use as means of settling debts maturing in future
transactions deposits
checkable and debitable account balances
fiduciary monetary system
currency issued by government and its value rests on public confidence that it can be exchanged for G&S
transaction approach
money as medium
liquidity approach
money as store of value
M1
transaction approach: currency + transactions deposits + traveler’s checks
thrift insitution
receive funds from ppl’s saving 存钱的
M2
liquidity approach: M1+ savings deposits+ small denomination time deposits+ balances in retail money market mutual funds
