First Quiz - Chp 1,10,11,15 Flashcards
(45 cards)
Chp.1: Scarcity
The limited nature of society’s resources; society has limited resources and therefore cannot produce all the goods and services people wish to have; allocating scarce resources; resources are scarce
Chp. 1: What is economics the study of?
How society manages its scarce resources
Chp. 1: What is efficiency?
Society is getting the maximum benefits from its scarce resources
Chp. 1: Who is in the best position to allocation the economy’s scarce resources?
Government officials
Chp 1: What are property rights?
The ability of an individual to own and exercise control over scarce resources
Chp 1: What is one of the decisions that a household faces?
Allocating scarce resources
Chp 1: Choice
There are always choices being made; and this is where opportunity cost comes in. No such thing as a free lunch
Chp 1: Opportunity Cost
The opportunity cost of something is what you give up to get it
Chp 1: Where to rational people think?
Rational people think at the margin; marginal change/ marginal cost, is the small incremental adjustment to an existing plan of action.
Chp 1: Externalities
People respond to incentives; this can affect the marginal cost and marginal benefit of something, and can influence a persons choice; impact of one person’s actions on the well being of a bystander; pollution
Chp 10: GDP (Gross Domestic Product)
Measures the total income of everyone in the economy; measures the total expenditure on the economy’s output of goods and services
Chp 10: In GDP, what must income equal to?
Expenditure; it is also equal to the total wages, rent, and profit paid by firms in the market for the factors of production
Chp 10: Gross Domestic Product Continued
-Market value of all final goods and services
- Produced within a country
-In a given period of time
- All items produced in the economy (AND SOLD LEGALLY)
-Produced and consumed at home
-includes tangible + intangible services
- goods + services currently produced
Chp 10: The equation: Y = C + I + G + NX
Y= GDP
C= Consumption
I = investment
G= government purchases
NX= net exports
Chp 10: C = Consumption
Spending by households goods and services
* durable + nondurable
*services: intangible, spending on ed.
Exception: PURCHASES OF NEW HOUSING
Chp 10: I = Investment
Purchase of (capital) goods that will be used to produce other goods and services in the future
i.e business (business structures, equipment, intellectual property), Residential (landlord’s apartment building; a homeowner’s personal residence), inventory accumulation
Chp. 10: G = Government Purchases
Gov. consumption expenditure and gross investment. Spending on goods and services. By local, state, and federal governments. DOES NOT INCLUDE TRANSFER PAYMENTS (food stamps, etc.)
Chp. 10: NX = Net Exports
Exports: spending on domestically produced goods by foreigners
Imports: Spending on foreign goods by domestic residents
Chp 10: Circular flow model
Households buy goods and services from firms, and firms use their revenue from sales to pay wages to workers, rent to landowners, and profit to firm owners.
Circular flow model
Households buy goods and services from firms, and firms use their revenue from sales to pay wages to workers, rent to landowners, and profit to firm owners.
Chp 10: Nominal GDP
production of goods and services valued at current prices
Chp 10: Real GDP
production of goods and services valued at constant prices, designated one year as base year and is not affected by changes in price
Chp 10: What is the case for nominal GDP for the base year?
Nominal GDP will be equal to real GDP in the base year
Chp 10: Factors of production
labor, land, and capital (buildings and machines); households own all of the factors of production
