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Macroeconomics > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

Economic Problem

A

Goods and resources are limited, yet Consumers have unlimited wants and needs.

So both producers (sellers) and consumers (buyers) must make decisions

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2
Q

Market

A

Centrality of interaction of consumers and producers

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3
Q

Adam Smith

A

-Wealth of Nations 1776
-Founder of ‘classical’ economic theory
-Enlightenment “laws of nature” , he saw human behavior driven by self- interest
-Invisible Hand

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4
Q

Invisible Hand

A

All market participants (producers/sellers and consumers/buyers) will pursue their self-interest in a competitive market environment

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5
Q

Market forces

A

price
demand
supply
quantity

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6
Q

Macroeconomics

A

Large Systems

-Nations
-Legal Systems
-Economies

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7
Q

Mesoeconomics

A

Medium Systems

Orgs.
Communities
Political Parties
Ethnic Groups

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8
Q

Microeconomics

A

Small Systems

Families
Relationships
Individuals

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9
Q

Key issue in economics

A

Different people have different tastes and preferences

Different background and tools of analysis

-Education
-Experiences
-Ideological
-Bias

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10
Q

Branches of Macroeconomics

A
  • Classical / Free Market
  • Keynesian
  • Marxist
  • Austrian
    -Mercantilism
    -Monetarist
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11
Q

Marxist

A

Interpret world only in economic terms

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12
Q

Political Economy

A

study of role of govt. in macroeconomics

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13
Q

Economic Spectrum

A
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14
Q

Counter Factual “Fake News”

A

interpretations, claims and theories that are just false or inaccurate

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15
Q

Sources of reliable, accurate, precise information

A

Qualitative
Quantitative

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16
Q

Models

A

a statement of a theory that has relationship between certain assumptions (constants) and variables (changeable) and expectations/results/consequences

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17
Q

Variable

A

A measure that can change from time to time or from observation to observation.

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18
Q

Constants

A

Holding a variable unchanged or constant in a bid to analyze other variables

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19
Q

What models try to achieve

A

-Explain the present and past and offer predictive possibilities

-Models are generally valid when the behavior they analyze can be replicated and repeated

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20
Q

Graphs

A

Visual Representation of written model

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21
Q

Supply and Demand Graph

A
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22
Q

Positive Economics

A

Seeks to understand behavior and decision-making and systems operations without making judgements

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23
Q

Normative / Policy Economics

A

analyze the problem and situation or behavior
Evaluates the result as ‘good’ or ‘bad’

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24
Q

Empirical Economics

A

Rely upon statistics and quantitative analysis to analyze situation

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25
Q

Behavioural Economics

A

Rely upon psychology, sociology and institutional economics concepts and theories to analyze the situation

Rational, bounded rationality and irrationality

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26
Q

Rational Choice

A

using facts (data or information), logic and reason in the market (market forces of supply and demand with market clearing equilibrium point) to further their self interest.

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27
Q

Scarcity

A

Natural limitation in a availability of a resource

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28
Q

Shortage

A

Temporary man-made unavailablity

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29
Q

Irrational Choice

A

seeking gratification rather than maximizing or satisfying utility or benefits

No attempt at or ignoring rational choice

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30
Q

How to address market failure

A

Rationing

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31
Q

Constraints

A

Shortages + Scarcities that people face

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32
Q

Needs

A

Necessities / Essential for survival

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33
Q

Wants

A

Desires / Not essential for survival

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34
Q

Expectations

A

prospects, beliefs, hope, or probability from the (future) result of a decision.

Usually in the long-term

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35
Q

Rational Choice Theory

A

people will use information and logic to weigh the various options of costs and benefits to gain the maximum utility (satisfy their self interest)
at the lowest price

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36
Q

Economic utility

A

used to determine the worth or value of a good or service

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37
Q

Law of Diminishing Returns

A

As additional units of a variable input are combined with a fixed input, at some point the additional output starts to diminish

38
Q

Opportunity Cost

A

What one gives up when a choice is made over another

  • Money , Time , or Resources either now or in the future
  • Cost of the best rejected opportunity and is hidden or implied
39
Q

Sunk Cost

A

Occurred in the past and has no relevance to estimates of future costs and revenues related to an alternative

40
Q

Deliberate Shortage

A

Luxury goods in short supply (shortage) by definition

Deliberate shortage and high quality justifies high price: niche market

41
Q

Malthusian World

A
  • Thomas Malthus 1766 - 1834
42
Q

Economic Growth

A

an increase in the amount of goods and services produced per head of the population over a period of time:

43
Q

Economic Development

A

the expansion of capacities that contribute to the advancement of society through the realization of individual, firm and community potential

44
Q

Negative Externality

A

Imposed costs on economy

45
Q

Positive Externality

A

Imposed Benefits on economy

46
Q

Marginal

A

Additional

47
Q

Marginal Analysis

A

Used to assist people in allocating their scarce resources to maximize the benefit of the output reduced

(Getting most value for the resources used)

48
Q

Alfred Marshall (1842 - 1924)

A

Neo classical economist

49
Q

Marginal Cost

A

The cost of producing or servicing or buying 1 additional unit

50
Q

Marginal Revenue

A

Utility / Benefit from producing (or consuming 1 additional unit

As long as MB>MC, continue to produce

51
Q

Diminishing Marginal Utility

A

The amount of satisfaction provided by the consumption of every additional unit of a good decrease as we increase the consumption of that good

52
Q

Scissors Graph

A

Aim is to find where the marginal benefit (satisfaction from additional unit) equals the marginal cost (cost per additional unit)

53
Q

Marginal Benefit measured in:

A

Measured in quality: utility, satisfaction, time, or effort, or opportunity cost

54
Q

Information Cost

A

The penalty or cost (lost utility/benefit) from lack of sufficient or too much information (or experience) to make decision

55
Q

Factors of Economic Growth/Development

A
  1. Natural Resources
  2. Phys. Capital / Infrastructure
  3. Population / Labor
  4. Human Capital
  5. Technology
  6. Law
56
Q

GDP

A

Total production of goods and services in the economy

57
Q

World Economy classifications

A
  • Advanced economies
  • In transition
  • Less developed
  • Least developed
58
Q

Characteristics of Developing Economies

A
  1. Low standard of living
  2. Low levels of productivity
  3. Low levels of savings
  4. High population growth
  5. Primary sector dominates
  6. Unfavorable laws and policies
  7. High unemployment / under-employment
  8. Low economic power on the international stage
59
Q

NICs (Newly Industrialized Countries) include:

A

-Mexico
-Brazil
-Turkey
-South Africa
-India
-Singapore
-Hong Kong
-Taiwan
-Thailand

60
Q

BRICS

A

Fastest developing states

Brazil
Russia
India
China
South Africa

61
Q

Characteristics of Developed Countries

A
  1. High level of income + consumption
  2. High standard of living
  3. Better QOL of people
  4. High literacy rate and life expectancy
  5. Low infant mortality rate
  6. Advanced in industry + technology
  7. Low rate of population growth
  8. Low birth + death rate
62
Q

OECD (Organization for Economic Co-operation and Development)

A

international organization that works to build better policies for better lives. Our goal is to shape policies that foster prosperity, equality, opportunity and well-being for all.

63
Q

Socioeconomic Status

A

The social standing / class of an individual / group.

Often measured as combination of education + income + wealth + occupation

64
Q

Luddite

A

a person opposed to new technology or ways of working

65
Q

Political Ideology
(Progressive / Conservative favor:)

A

Progressive often in favor of economic and social changes

Conservatives want to preserve/maintain the past/present

66
Q

Aggregate supply curve

A
67
Q

Benefits of Economic Growth

A
  1. Higher employment
  2. Improved business confidence
  3. Increased tax revenues
  4. Improved living standard
  5. Higher investment
  6. Potential environment benefits
  7. Improvement in welfare
68
Q

Commodity

A

a raw material or primary agricultural product that can be bought and sold, such as copper or coffee:

69
Q

Capital Assets

A

Have a price(value): property, goods (equipment), money and human capabilities

Financial Assets often referred to as capital

70
Q

Investment

A

The act of redirecting resources from being consumed today so that they may create benefits for the future

71
Q

Entreprenuer

A

a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so

72
Q

Productivity

A

Output / Input

73
Q

How is Law an Economic Growth Factor?

A

Fair and objective courts and laws that protect the rights of producers and consumers

74
Q

GNP (Gross National Product)

A

GNP - GDP + net property income from abroad

75
Q

Real GDP

A

The value of final goods and services produced in a given year expressed in the prices of the base year.

Real / Constant

76
Q

Nominal GDP

A

The value of the final goods and services produced in a given year expressed the the prices of that same year.

Nominal / Current

77
Q

Costs of Economic Growth

A
  1. Inflation
  2. Use of non - renewable resources
  3. Inequality
  4. Disease of affluence
  5. Congestion
  6. Pollution
  7. Current account deficit
78
Q

Income

A

Flow of money going to factors of production

79
Q

Wealth

A

The current value of a stock of assets owned by someone or society as a whole.

80
Q

Income Inequality

A

the degree to which total income is distributed unevenly throughout a population.

81
Q

Phillips Curve

A

Lower unemployment associated with higher inflation and vice versa

82
Q

Hyperinflation

A

When prices rise more than 50% in a month

83
Q

Gresham’s Law

A

the tendency for money of lower intrinsic value to circulate more freely than money of higher intrinsic and equal nominal value (often expressed as “Bad money drives out good”).

84
Q

Keynesian

A

Govt. Intervention

85
Q

Stagflation

A
  • Low GDP
  • High inflation rates
  • High unemployment
86
Q

Marxist

A

State Control

87
Q

Austrian

A

Free market

88
Q

Mercantilism

A

Protectionism

89
Q

-Monetarist

A

Free market / control money

90
Q

Deflation

A

reduction of the general level of prices in an economy:

91
Q

Deflationary Spiral

A

When price levels decline, leading to lower production, reduced wages, decreased demand, and continued price declines.

Deflation can ripple through the economy, causing some consumers and companies to default on debt obligations

Macroeconomics (3 decks)

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