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Macro Exam 1 > EXAM 1 > Flashcards

EXAM 1 Flashcards

1
Q

4 main elements of the economy

A

households, businesses, governments and foreign countries

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2
Q

microeconomics

A

functioning of individual industries and behavior of individual economic decision making units, who gets the goods and services produced?

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3
Q

macroeconomics

A

factors that determine national output/product, looks at overall price level rising and falling, questions how many people will be hired in a year at a specific industry

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4
Q

economics

A

the study of how individuals choose to use resources provided by nature, behavioral science on how people make choices

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5
Q

opportunity cost

A

the best alternative given up when making a decision, occurs because resources are scarce

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6
Q

marginalize

A

process of analyzing the additional costs or benefits from a choice

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7
Q

efficient market

A

where profit opportunities are eliminated instantly

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8
Q

positive economics

A

understanding behavior and the operation of the economic systems without making judgments on the outcome

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9
Q

normative economics

A

looks at outcomes of economic behavior and asks if they are good or bad or if they can be improved

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10
Q

model

A

formal statement of a theory (usually mathematical) of a presumed relationship between two variables

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11
Q

variable

A

measure that can change from time to time

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12
Q

ceteris paribus

A

all else is equal, this is used to analyze a relationship between two variables while all others are unchanged

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13
Q

empirical economics

A

collection and use of data to test economic theories

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14
Q

4 criteria for judging economic outcomes

A

efficiency, equity, growth, stability

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15
Q

economic efficiency

A

condition in which the economy produces what people want at the least possible cost

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16
Q

economic equity

A

fairness, more equal distribution of income and wealth

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17
Q

economic growth

A

increase in total outcome of economy, occurs when a soccer acquires new resources or learns to produce more, when something was previously unattainable is now attainable

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18
Q

economic stability

A

the condition in which national output is growing steadily with low inflation and full employment resources

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19
Q

capital

A

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

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20
Q

examples of capital

A

buildings, equipment, desks, roads

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21
Q

factors of production

A

inputs into the production process

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22
Q

3 specific factors of production

A

land labor and capital

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23
Q

theory of comparative advantage

A

specialization and free trade will benefit all parties even when some are more efficient than others

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24
Q

absolute advantage

A

a producer can produce the same product as another good or service if they can do so using fewer resources lowering the cost per unit

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25
Q

comparative advantage

A

producing at a lower opportunity cost, trading present for future benefits

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26
Q

consumer goods

A

goods for present consumption, capital does not need to be tangible

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27
Q

investment

A

using resources to produce new capital

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28
Q

production possibility frontier (PPF)

A

graphic device that illustrates choice, opportunity cost and scarcity

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29
Q

marginal rate of transformation (MRT)

A

slope values of a societies PPF

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30
Q

economic expansion

A

economy is producing more, COULD be because of economy growth but not necessarily, PPF stays the same, we do not have things that were previously unattainable

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31
Q

economic contraction

A

we lose resources, entire PPF shifts, different than a recession because we just move to the interior of the PPF

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32
Q

saving

A

trading present for future benefits

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33
Q

intermediate good

A

a good that has not reached its final resting point

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34
Q

business cycle

A

a graphical representation of an economy production over time as a comparison to its potential production, ups and downs in performance

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35
Q

aggregate output

A

measure of how the economy is doing, total quantity of goods and services produced in a given period

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36
Q

expansion or boom

A

period from trough to peak of business cycle

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37
Q

recession or contraction

A

period from peak to trough of business cycle, a slump

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38
Q

depression

A

prolonged recession

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39
Q

unemployment rate

A

percentage of the labor force that is unemployed

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40
Q

inflation

A

increase in overall price

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41
Q

deflation

A

decrease in overall price

42
Q

transfer payments

A

recipients do not supply goods, services or labor

43
Q

goods and services market

A

households and government purchase goods in the market and from each other

44
Q

labor market

A

when firms and gov purchase labor from households, households supply labor and gov demands it

45
Q

money market

A

households purchase stocks and bonds from firms

46
Q

share of stock

A

financial instrument that gives the holder a share in the firms profit

47
Q

dividends

A

the firm can return some of its profit to stockholders instead of buying capital

48
Q

fiscal policy

A

gov decision on how much to tax and spend

49
Q

expansionary fiscal policy

A

taxes are cut or gov spending increases

50
Q

contractionary fiscal policy

A

tax increases or gov spending decreases

51
Q

great depression

A

severe economic contraction and a period of high unemployment, 1930s

52
Q

stagflation

A

a situation in which there is high inflation on and off

53
Q

financial markets

A

households save, businesses borrow

54
Q

business sector and household sector

A

these two interact in the product market and factors market

55
Q

government sector

A

takes those households and businesses taxes

56
Q

foreign sector

A

we engage through imports and exports

57
Q

blockage

A

problem in the economy

58
Q

indicators of a healthy economy

A

steady and sustainable economic growth, full employment (low unemployment), stable prices and inflation

59
Q

GDP

A

total market value of a countries output, the value of all final goods produced in a certain time

60
Q

old output

A

not considered GDP because it was already counted when it was produced

61
Q

expenditure approach

A

sums all the expenditures (purchases) on final goods as a proxy for production

62
Q

factor income approach

A

sums up all the income earned in a given period

63
Q

value added approach

A

adds up the value of each good at each stage go the production process

64
Q

current dollars

A

nominal GDP, value in current dollars today

65
Q

billions of chained dollars

A

real GDP, eliminates the role inflation plays

66
Q

G-Gross

A

depreciation is included

67
Q

D-Domestic

A

production within a countries borders

68
Q

P-Product

A

only final goods and services included

69
Q

depreciation

A

replacing old worn out capital

70
Q

gross private investment

A

purchase of new capital (finished product used to produce more), new home construction, chances in inventory levels

71
Q

personal consumption expenditures (C)

A

households spending on consumer goods

72
Q

gross private domestic investment (I^a)

A

spending by firms and households on new capital

73
Q

government expenditures and gross consumption

A

expenditures by federal, state, and local governments for final goods and services

74
Q

net exports (EX-IM)–>(NX)

A

net spending by the rest of the world, exports minus imports

75
Q

durable goods

A

last a relatively long time

76
Q

nondurable goods

A

used up quickly

77
Q

services

A

things we buy that do not involve production of a physical item

78
Q

nonresidential investment

A

expenditures by firms for machines, tools

79
Q

residential investment

A

expenditures for new houses and apartment buildings

80
Q

change in business inventory

A

amount changed in given period

81
Q

gross investment

A

total value of all newly produced capital goods

82
Q

net investment

A

gross investment minus depreciation

83
Q

national income

A

the total income earned by the factors of production owned by a country’s citizens (8 income items summed up)

84
Q

compensation of employees

A

largest component of national income, includes wages and salaries paid to house hold firms by gov

85
Q

proprietors income

A

income of unincorporated businesses

86
Q

rental income

A

minor, income received by property owners in form of rent

87
Q

corporate income

A

second largest component of national income, income of corporations

88
Q

net interests

A

interest paid by businesses

89
Q

indirect taxes minus subsidies

A

taxes such as sales taxes, customs duties and license fees

90
Q

net business transfer payments

A

transfer payments paid from business to others which are the income of others

91
Q

surplus of gov enterprises

A

income of gov enterprises

92
Q

net national product (NNP)

A

GNP-depreciation

93
Q

statistical discrepancy

A

data measurement error

94
Q

personal income

A

total income of households, income flowing in to households

95
Q

personal saving rate

A

percent of disposable personal income saved

96
Q

nominal GDP

A

GDP measured in current dollars

97
Q

fixed weight procedure

A

uses weight from a given base year

98
Q

Bureau of Labor Statistics

A

Calculates unemployment rate every month and it is released on the first Friday of each month at 8

99
Q

consumer price index (CPI)

A

fixed weight index, does not account for consumers substitution away from high priced goods which leads to a tendency to overestimate inflation, computed by BLS each month, used to calculate inflation rate

100
Q

producer price index (PPI)

A

indexes of prices that producers receive for productions at various stages not just at the final stage, detects prices early

101
Q

3 categories of PPIs

A

finished goods, intermediate materials, crude materials

Macro Exam 1 (1 decks)

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