ECON Test 1 Flashcards
What is economics?
how society manages its scarce resources
What are the three basic policy goals of most countries?
Full employment, Price Stability, Economic Growth
What is the relationship between inflation, purchasing power, and the value of a dollar?
Inflation makes prices go up, making your purchasing power with the dollar decrease.
What is the difference between normative and positive statements?
Positive are statements and normative are opinions.
What is capital?
Plant and equipment. NOT MONEY
What is the difference between micro and macroeconomics?
Micro-Households and Firms.
Macro- Country as a whole.
What are the characteristics of command/communist countries?
The government controls everything.
Know what it means to be producing inside, on, or outside the PPF
On the line is efficient
Inside the line is inefficient
Outside the line is impossible
what causes a shift in the PPF
economic growth- increase in resources and/or technology
What is the law of demand?
price of the product and the quantity demanded for that product.
What is the law of supply?
price of the product and the quantity supplied for that product.
what is the equillibrium
where the lines of the supply and demand graphs meet.
surplus and shortages
surplus is above the equilibrium
shortages are below the equilibrium
what are tariffs
tax on imported goods.
what is a quota
quantative limit on imported goods.
Arguments for restricting trade.
- Destroys domestic jobs
- National Security
3.Infant Industries - Unfair competition
Def of GDP
market value of all final goods and services produced within a country in a given time period
Components of GDP
Consumption (C)
Investment(I)
Government Purchases(G)
Net Exports(NX)
Nominal GDP Vs Real GDP
Nominal is not adjusted for inflation
Real is adjusted for inflation
GDP deflator
nomial GDP/real GDP
what is inflation
the rate at which goods and services rises
what is CPI
measure of overall cost of a market basket of goods and services bought by a typical consumer
Calculate CPI
cost of current basket/ base year cost basket.