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ECONOMOMICS > First Quiz - Chp 1,10,11,15 > Flashcards

First Quiz - Chp 1,10,11,15 Flashcards

1
Q

Chp.1: Scarcity

A

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

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2
Q

Chp. 1: What is economics the study of?

A

How society manages its scarce resources

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3
Q

Chp. 1: What is efficiency?

A

Society is getting the maximum benefits from its scarce resources

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4
Q

Chp. 1: Who is in the best position to allocation the economy’s scarce resources?

A

Government officials

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5
Q

Chp 1: What are property rights?

A

The ability of an individual to own and exercise control over scarce resources

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6
Q

Chp 1: What is one of the decisions that a household faces?

A

Allocating scarce resources

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7
Q

Chp 1: Choice

A

There are always choices being made; and this is where opportunity cost comes in. No such thing as a free lunch

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8
Q

Chp 1: Opportunity Cost

A

The opportunity cost of something is what you give up to get it

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9
Q

Chp 1: Where to rational people think?

A

Rational people think at the margin; marginal change/ marginal cost, is the small incremental adjustment to an existing plan of action.

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10
Q

Chp 1: Externalities

A

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

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11
Q

Chp 10: GDP (Gross Domestic Product)

A

Measures the total income of everyone in the economy; measures the total expenditure on the economy’s output of goods and services

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12
Q

Chp 10: In GDP, what must income equal to?

A

Expenditure; it is also equal to the total wages, rent, and profit paid by firms in the market for the factors of production

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13
Q

Chp 10: Gross Domestic Product Continued

A

-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

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14
Q

Chp 10: The equation: Y = C + I + G + NX

A

Y= GDP
C= Consumption
I = investment
G= government purchases
NX= net exports

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15
Q

Chp 10: C = Consumption

A

Spending by households goods and services
* durable + nondurable
*services: intangible, spending on ed.
Exception: PURCHASES OF NEW HOUSING

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16
Q

Chp 10: I = Investment

A

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

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17
Q

Chp. 10: G = Government Purchases

A

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.)

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18
Q

Chp. 10: NX = Net Exports

A

Exports: spending on domestically produced goods by foreigners
Imports: Spending on foreign goods by domestic residents

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19
Q

Chp 10: Circular flow model

A

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.

20
Q

Circular flow model

A

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.

20
Q

Chp 10: Nominal GDP

A

production of goods and services valued at current prices

21
Q

Chp 10: Real GDP

A

production of goods and services valued at constant prices, designated one year as base year and is not affected by changes in price

22
Q

Chp 10: What is the case for nominal GDP for the base year?

A

Nominal GDP will be equal to real GDP in the base year

23
Q

Chp 10: Factors of production

A

labor, land, and capital (buildings and machines); households own all of the factors of production

24
Q

Chp 10: Problems with GDP

A
  • GDP does not directly measure those things that make life worthwhile, but it does measure our ability to obtain many of the inputs for a worthwhile life.
  • omits leisure
  • excludes the value of things that take place outside the market
  • examples: childcare at home by parents is not included in GDP, a meal prepared by a chef for her family
    does not include the quality of environment
  • says nothing about the distribution of income
25
Q

Chp 11: CPI (Consumer Price Index)

A

A measure of the overall cost of the goods and services bought by a typical consumer; it is a price index that measure the price level and thus determines the size of the inflation correction.

26
Q

Chp 11: Calculating the CPI

A
  1. Fixing the basket
  2. Find the prices
  3. Compute basket’s cost
  4. Choose a base year and compute the index

CPI = ((price of basket of goods and services in current year)/(price of basket in base year)) x 100

  1. Compute the inflation rate

inflation rate in year 2 = ((CPI in year 2 - CPI in year 1)/ (CPI in year 1)) x 100

27
Q

Chp 11: Inflation/ inflation rate

A

Economy’s overall price level is rising; percentage change in some measure of the price level from one period to the next

28
Q

Chp 11: GDP Deflator

A

Measures the current level of prices relative to the level of prices in the base year. Can be used to take inflation out of nominal GDP; ratio of nominal GDP/ Real GDP

29
Q

Chp 11: How do you bring old dollars into today’s money?

A

amount in today’s dollars = amount in year T dollars x (price level today/ price level in year T)

30
Q

Chp. 11: Problems with Inflation?

A
31
Q

Chp 15: Labor Force

A

Employed (paid employees, self-employed, and unpaid workers in a family business) + Unemployed (people not working who have looked for work during pervious 4 weeks

32
Q

Chp 15: Adult population

A

Employed + Unemployed + everyone else

33
Q

Chp 15: Who is not in the labor force?

A

Anyone who is not employed (not categorized as employed or unemployed) and hasn’t been looking

34
Q

Who is not in the labor force?

A

Anyone who is not employed (not categorized as employed or unemployed) and hasn’t been looking

34
Q

Chp 15: Unemployment Rate (“U-rate”):

A

% of the labor force that is unemployed
U-rate = 100 x (# of unemployed/labor force)

35
Q

Chp 15: Labor Force Participation Rate (LFPR):

A

% of the adult population that is in the labor force
LFPR = 100 x (LF/Adult Pop)

36
Q

Chp 15: What is the U-rate not a perfect indicator of? Why?

A

-joblessness; it excludes discouraged workers
-it does not distinguish between full-time and part-time work, or people working part time because full-time jobs not available.
-some people misreport their work status in the BLS survey

37
Q

Chp 15: Structural Unemployment

A
  • Occurs when there are fewer jobs than workers
  • Usually longer-term
38
Q

Cap 15: Frictional Unemployment

A
  • occurs when workers spend time searching for the jobs that best suit their skills and tastes
  • short-term for most workers
39
Q

Chp 15: Cyclical unemployment

A

The deviation of unemployment from its natural rate; associated with business cycles

40
Q

Chp 15: Natural rate of unemployment

A

the normal rate of unemployment around which the cyclical unemployment rate fluctuates

41
Q

Chp 15: Sectoral shifts

A

Changes in the composition of demand across industries or regions of the country

42
Q

Chp 15: Unemployment Insurance

A
  • A govt. program that partially protects worker’s incomes when they become unemployed
  • People respond to incentives
43
Q

Chp 15: Business Cycles

A

Expansion, peak, recession, depression, trough <– all parts of a business cycle

ECONOMOMICS (6 decks)

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