Exam 1

Question 1

Opportunity Cost

Answer 1

Whatever must be given up to obtain something

Question 2

Marginal Changes

Answer 2

Incremental adjustments to and existing plan

Question 3

Market

Answer 3

A group of buyers and sellers

Question 4

The Invisible Hand

Answer 4

Works through the price system and supply and demand

Question 5

Important Government Role

Answer 5

Enforce property rights

Question 6

Mixed Economy

Answer 6

Government and private industry play a role in the economy

Question 7

Productivity

Answer 7

The amount of goods and services produced per labor unit

Question 8

Inflation vs Unemployment

Answer 8

Many economics policies push these two in opposite directions

Question 9

Circular Flow Diagram

Answer 9

How money flows through markets among households and firms

In simple form there are no taxes, trade or government

Question 10

Factors of Production

Answer 10

The resources and economy uses to produce goods and services (Land, labor, capital [machines])

Question 11

Households

Answer 11

Own the factors of production

Question 12

Firms

Answer 12

Buy or hire factors of production to produces goods/services

Question 13

Production Possibility Frontier (PPF)

Answer 13

A curve that depicts maximum attainable combinations of goods.

(Illustrates scarcity and opportunity cost)

Question 14

PPF Straight Line?

Answer 14

Only if opportunity cost is constant

Question 15

Positive Statements

Answer 15

How the world works, what is (Testable/Evidence)

Question 16

Normative Statements

Answer 16

What should be (Personal Values)

Question 17

Slope on a PPF

Answer 17

Tells us the opportunity cost of the x-variable to the y-variable

Y2-Y1
over
X2-X1

Question 18

Competitive

Answer 18

Each seller competes with many others selling identical products

Question 19

Price Taker

Answer 19

An individual or company which is not influential enough to affect the price of an item

Question 20

Demand

Answer 20

Relationship between quantity of good and price

Question 21

Price Goes on the _____ Axis

Answer 21

Y-Axis always

Question 22

Law of Demand

Answer 22

People buy more of something when the price is lower

Question 23

Substitution Effect

Answer 23

This is why demand slopes down. The higher the price of the iPad, the more likely you buy another tablet instead.

The higher the price of tablets in general, the more people use laptops or smartphones instead

Question 24

Market Deamand

Answer 24

The combination of all individual demands

Question 25

Downward Slope

Answer 25

Downward slope of market demand comes from more people choosing to buy at lower prices

Question 26

Ceteris Paribus

Answer 26

All else equal

Question 27

What Shifts the D Curve

Answer 27

Income
Substitutes
Complements

Question 28

Supply

Answer 28

Relationship between quantity of good and price

Question 29

Law of Supply

Answer 29

Quantity supplies will be higher at higher prices, usually

Question 30

Market Equilibrium

Answer 30

Buyers and sellers getting what they want

Question 31

GDP

Answer 31

The market value of all final goods and services produced in a country during a period of time, typically one quarter or one year.

Question 32

Market Value

Answer 32

we measure goods and services in dollars spent on them

Question 33

GDP Equation

Answer 33

Y= C + I + G + NX

Question 34

Consumption

Answer 34

Purchases of new goods and services, not used good or homes

Question 35

Investment

Answer 35

Spending on durable things that are used to produce other things. Example: structures and equipment (capital)

Question 36

Government

Answer 36

Purchases of good and services or investments (roads) values at what they cost to produce. Payment checks (Social Security) not included

Question 37

Net Exports

Answer 37

Exports - Imports = Net Exports

Question 38

GDP Deflator

Answer 38

(Nominal GDP/Real GDP)x100 = GDP Deflator

Question 39

GNP

Answer 39

is value of final goods and services produced by permanent residents of a country, even if the production takes place elsewhere