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Crash Course in Economics > Episode 1 > Flashcards

Episode 1 Flashcards

1
Q

What is a good definition of economics?

A

The study of scarcity and choices

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2
Q

What is opportunity cost?

A

The loss of opportunity that is associated with making a particular choice

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3
Q

What is the idea of scarcity in economics?

A

That people have limited resources, but unlimited wants.

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4
Q

What is the implication of scarcity?

A

That you must make a choice.

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5
Q

What the difficulty about incentives

A

It’s hard to find the right one that doesn’t have undesirable effects (e.g. rats tails)

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6
Q

What is macroecenomics?

A

The study of production, employment, prices and olicies on a nationwide scale?

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7
Q

What are some examples of questions asked in macroeconomics?

A

Will employment rise if there’s an increase in taxes?
Will an increase in the money supply boost output, or just increase inflation?
Will a slump in U.S. economy cause European economy to slow down?

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8
Q

What is microeconomics?

A

The study of how consumers, workers, and firms interact to generate outcomes in specific markets.

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9
Q

What are some of the questions that microeconomics might ask?

A

How many workers should we hire to maximise profit?

If your main competitor releases their product in may, when is the best time to release your product?

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10
Q

What is a ‘Production Possibilities Frontier’

A

It’s a graph showing the trade-off between producing two goods given a limited amount of resources.

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11
Q

In economics, what is a ‘comparative advantage’

A

When you have a lower opportunity cost for something compared with another party.

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12
Q

What’s the deal with specialization and trade?

A

Most economists agree that specialisation and trade made the world better off because overall, more can be produced and more needs met.

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13
Q

Economically speaking, what is the judgement of homesteading?

A

That it is inefficient.

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14
Q

What are the three main characteristics to each type of economic system

A

What is produced
How it is produced
Who gets the produces

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15
Q

What is a planned economy?

A

The government controls the facts of production

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16
Q

What is a command economy?

A

An economy that is completely controlled by the government

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17
Q

What is free market economy?

A

Where individual control the production and the government isn’t much informed.

18
Q

What is ‘the invisible hand’ of the free market?

A

The idea that individuals and businesses meet society’s need when they seek their own interest.

19
Q

Why is there still a need for the government?

A

To regulate production to take care of things that consumers might not think of. E.g. welfare of the employees, long term environmental effects.

20
Q

What is the circular flow model of a mixed economy/

A

A circular flow from the product market to the resource market, with government exerting control.

21
Q

What is GDP?

A

GDP is the value of all final goods and services produced within a country’s border in a specific period of time, usually a year.

22
Q

What kinds of things aren’t included in GDP?

A

Basically all things when ownership changes within a country, but nothing new is made (e.g. buying a second hand car, one company buying another)

23
Q

What’s the problem of measuring GDP in dollars?

A

It doesn’t take into account inflation and different currency values in different countries.

24
Q

What is nominal GDP

A

GDP not adjusted for inflation

25
Q

What is real GDP?

A

GDP that is adjusted for inflation

26
Q

What three economic goals do policy makers usually have?

A

Keep the economy growing, limit unemployment and keep prices stable.

27
Q

What three economic goals do policy makers usually have?

A

Keep the economy growing, limit unemployment and keep prices stable.

28
Q

What is the official definition of a recession?

A

When two successive quarters, or six months, show a decrease in real GDP.

29
Q

What are two reasons that the unemployment rate underestimates the problem in the labour market.

A

It doesn’t include ‘discouraged workers’ those who have given up actively looking for a job. Nor does it include those with a part time job, e.g. only five hours a week, who are looking for something better.

30
Q

What three types of unemployment do economists recognise?

A

Cyclical umemployment, frictional unemployment and structural unemployment.

31
Q

What is frictional unemployment.

A

When you are temporarily unemployed because you are looking for a job.

32
Q

What is structural unemployment.

A

When people can’t find a job because there aren’t enough jobs in that type of workforce.

33
Q

What is cyclical unemployment.

A

Unemployment due to a recession.

34
Q

What is the ‘natural rate’ of unemployment.

A

The unemployment rate when there is no cyclical unemployment.

35
Q

What are some of the reasons that high inflation is bad?

A

It decreases the purchasing power of money. This means that business costs increase as workers demand higher wages. Loans get more expensive so people buy fewer cars and houses.

36
Q

Why is deflation bad?

A

It discourages people from buying as prices might fall more in the future. This means that GDP decreases and unemployment is going to increase and that becomes a vicious cycle.

37
Q

What are recessions after accompanied by deflation?

A

Because the demand for goods and services falls.

38
Q

What are the four recognised components that make up GDP?

A

Consumer spending, government spending, net export and business spending (investments)

39
Q

What is one of the main drivers for creating a high GDP?

A

Having a high productivity.

40
Q

What are the main factors of production?

A

Land, labour and capita (including human capita)

41
Q

What’s human capita?

A

Skills, knowledge and education

42
Q

What is the economic’s definition of ‘Technology’

A

The sum of total knowledge and information that society has acquired concerning the use of resources to produce goods and services

Crash Course in Economics (1 decks)

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