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Econ 104 > ECON topic1-EXAM#1 > Flashcards

ECON topic1-EXAM#1 Flashcards

1
Q

economics is about people as decision makers

A

time is a scarce resource

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2
Q

what are the 4 main categories of people (decision makers) in the economy

A

consumers, firms, government, and the rest of the world.

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3
Q

C+I+G+(EXP-IMP)=

A

AE- aggregate expenditure

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4
Q

Aggregate expenditure is

A

reps the demand side of the economy which is a strong predictor of production and unemployment

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5
Q

what is the heart of economics

A

decision making

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6
Q

people make decisions because

A

resources are scarce

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7
Q

resources are scarce because

A

people want more than they need (unlimited wants)

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8
Q

scarcity

A

refers to the limited nature of societies resources

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9
Q

all decisions involve what

A

trade-offs

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10
Q

the cost of something is everything you give up to get it

A

opportunity cost

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11
Q

scarcity pushes people to make choices,

A

each choice involves a trade-off (opp. cost)

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12
Q

people respond to what

A

incentives

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13
Q

incentive

A

something that determines a person to act, i.e. to prospect of a reward or punishment

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14
Q

market

A

a group of buyers and sellers

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15
Q

free market

A

many decision makers

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16
Q

command economy

A

one decision maker with no incentives

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17
Q

markets are usually a good way to

A

organize economic activity

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18
Q

organize economic activity

A

what, how, how much, who

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19
Q

are signals that guide the allocation of resources in a market economy

A

prices

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20
Q
  • tend to go to extremes
  • mkt power (monopoly)
  • public goods (highway)
A

markets are not perfect, the government can improve them with economic policies

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21
Q

roles of government (2)

A
  1. enforce property rights and rule of law

2. provide public goods

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22
Q

exernalities

A

taken to produce a benefit, but comes with side effects

ex: second hand smoke

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23
Q

government may alter market outcome to promote efficiency by correcting what

A

market failures

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24
Q

causes of market failure (2)

A
  1. exernalities, when the production or consumption of a good affects bystandards (pollution)
  2. market power, a single buyer or seller has substantial influence on the market price (monopoly)
25
Q

macroeconomics refers to

A

policy making in economics

26
Q

a country`s standard of living depends on

A

its ability to produce goods and services

27
Q

the most important determinant of living standards is

A

productivity, the amount of goods and services produced per unit of labor

28
Q

production depends on what (4)

A

education, skills, technology, and equipment (capital) available to workers

29
Q

what is the most important economic process?

A

production

30
Q

production is the process that transforms scarce resources into

A

useful goods and services

31
Q

this is the outputs of the production process

A

goods and services

32
Q

resources or factors of production are the what into the production process?

A

inputs

33
Q

inputs=factors of production=resources

A

anything provided by nature and previous generations that can be used in production (to satisfy human needs)

34
Q

what are the 4 types of resources?

A
  1. labor
  2. capital
  3. land
  4. entrepreneurship
35
Q

the physical and mental potential that people contribute in the production of goods and services

A

labor

36
Q

goods that are themselves produced and used in the future production of other goods and services

A

capital

37
Q

is the physical space in which production takes place, as well as the natural resources found under it or on it, such as oil, iron, coal, and lumber

A

land

38
Q

the special skill of organizing labor, land, and capital, for production. start a new business, develop new production techs, and introduce new products

A

entrepreneurship

39
Q

what is the only way of producing new capital

A

investment

40
Q

investment

A

the process of using resources to produce new capital

41
Q

the opportunity cost of investment in new capital is the

A

forgone consumption

42
Q

the economy behaves differently in the

A

SR than in the LR

43
Q

in the SR, the major objective is (2)

A

production and unemployment

44
Q

in the LR, the major objective is (1)

A

economic growth

45
Q

unemployment

A

the group of people, in the labor force, that do not have a job despite their efforts to find one

46
Q

economic growth

A

the speed or rate at which production increases

47
Q

main sources of economic growth (3)

A
  1. better education- human capital accumulation
  2. technological innovations (thru research and development)
  3. physical capital accumulation (via investment)
48
Q

what can make everyone better off

A

trade

49
Q

produce what your best in one good or service and exchange it for other goods and services

A

specialization

50
Q

why do countries benefit from trade and specialization (2)

A
  1. get a better price abroad for goods and services

2. buy goods that cannot be produced domestically

51
Q

what are the 3 basic economic questions any society has to answer because of scarcity

A
  1. what gets produced?
  2. how is it produced? (labor, capital)
  3. who gets what is produced?
52
Q

a production arrangement that transforms society`s scarce resources into useful goods and services

A

economic system

53
Q

two economic visions

A
  • the capitalistic vision

- the socialist vision

54
Q

what is core mechanism in capitalistic vision

A

price system

55
Q

what are the 3 main benefits of government intervention? (mixed system)

A
  1. minimize market inefficiencies
  2. provide public goods
  3. stabilize the economy thru economic policies
56
Q

what is a normal inflation rate?

A

3%

57
Q

income inequality

A

min wage

58
Q

SR benefits and LR consequences

A

entry to work force will be lowered and the solution is in the LR

59
Q

crisis are opportunities to

A

learn and innovate

Econ 104 (15 decks)

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