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Macroecon > Glossary > Flashcards

Glossary Flashcards

1
Q

Scarcity

A

The limited nature of societies resources.

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2
Q

Economics

A

The study of how society manages its scarce resources.

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3
Q

Efficiency

A

The property of society getting the most it can from its scarce resources.

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4
Q

Equity

A

The property of distributing economic prosperity fairly among the members of society.

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5
Q

Opportunity Cost

A

Whatever must be given up to obtain
some item

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6
Q

Marginal Changes

A

Small incremental adjustments to a plan
of action

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7
Q

Market Economy

A

An economy that allocates resources
through the decentralised decisions of
many firms and households as they
interact in markets for goods and services.

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8
Q

Market Failure

A

A situation in which a market left on its
own fails to allocate resources efficiently

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9
Q

Externality

A

The impact of one person’s actions on the
wellbeing of a bystander.

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10
Q

Market Power

A

The ability of a single economic actor (or
small group of actors) to have a
substantial influence on market prices

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11
Q

Productivity

A

The quantity of goods and services
produced from each hour of a worker’s
time.

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12
Q

Inflation

A

An increase in the overall level of prices
in the economy.

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13
Q

Phillips Curve

A

The short-term trade-off between inflation
and unemployment

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14
Q

Circular-flow Diagram

A

A visual model of the economy that shows
how dollars flow through markets among
households and firms

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15
Q

Production Possibilities
Frontier

A

A graph that shows the various
combinations of output that the economy
can possibly produce given the available
factors of production and the available
production technology.

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16
Q

Absolute Advantage

A

A country has an absolute advantage in
the production of a good if it uses fewer
resources to produce a unit of the good
than any other country

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17
Q

Comparative Advantage

A

The ability to produce a good at a lower
opportunity cost than others can produce
it.
The gains from specialisation and trade
depend upon the pattern of comparative,
not absolute advantage.

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18
Q

Microeconomics

A

The study of how households and firms make decisions and how they interact in

markets.

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19
Q

Macroeconomics

A

The study of economy-wide phenomena,
including inflation, unemployment and
economic growth.

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20
Q

Positive Statements

A

Claims that attempt to describe the world
as it is.

21
Q

Normative Statements

A

Claims that attempt to prescribe how the
world should be.

22
Q

GDP

(Gross Domestic Product)

A

The market value of all final goods and
services produced within a country in a
given period of time.
Expenditure Approach:
C+I+G+NX=GDP (Y)

23
Q

GNP
(Gross National Product

A

The market value of all final goods and
services produced by permanent residents
of a nation within a given period of time

24
Q

Consumption (C)

A

Spending by households on goods and
services, with the exception of purchases
of new housing. C= Co + cY

25
Q

Investment (I)

A

Spending on new capital equipment,
inventories and structures, including
household purchases of new housing.

26
Q

Government Purchases

(G)

A

Spending on goods and services by local,
state and federal governments.

27
Q

Net Exports (NX)

A 
Spending on domestically produced goods
 by foreigners (exports) minus spending on
 foreign goods by domestic residents
 (imports)
28
Q

Value Added

A

The value of a firm’s output minus the
value of its inputs.

29
Q

Nominal GDP

A

The production of goods and services
valued at current prices.

30
Q

Real GDP

A

The production of goods and services
valued at constant prices.

RGDP = (NGDP/price index) x 100

31
Q

Economic Growth

A

Increases in real GDP.

32
Q

GDP Deflator

A

A measure of the price level calculated as the ratio of nominal GDP to real GDP

times 100.

= (norminal GDP / real GDP) x 100

33
Q

CPI

(Consumer Price Index)

A

A measure of the overall cost of the goods
and services bought by a typical
consumer.

34
Q

Inflation Rate

A

The percentage change in the price index
from the preceding period.

35
Q

Producer Price Index

A

A measure of the cost of a basket of goods
and services bought by firms.

36
Q

Indexation

A

The automatic correction of a dollar
amount for the effects of inflation by law
or contract.

37
Q

Nominal Interest Rate

A

The interest rate as usually reported
without a correction for the effects of
inflation

38
Q

Real Interest Rate

A

The interest rate corrected for the effects
of inflation.
Real Interest Rate =
Nominal Interest Rate – Inflation Rate

39
Q

Labor Force

A

The total number of workers, including
both the employed and the unemployed.
Labour force = No. of employed + No. of
unemployed

40
Q

Unemployed

A

Those aged 15 years and over who are
actively looking for work, available to
take a job immediately but who are
currently not working.

41
Q

Unemployment Rate

A

The percentage of the labour force that is
unemployed.

42
Q

Labor-force Participation Rate

A

The percentage of the adult population that is in the labour force.

43
Q

Natural Rate of
Unemployment

A

Unemployment accounted for by
structural factors around which the actual
unemployment rate fluctuates.

44
Q

Cyclical Unemployment

A

The deviation of unemployment from its
natural rate.

45
Q

Structural Unemloymen

A

Unemployment due to fundamental
changes in the kinds of jobs that the
economy offers. Workers may have
inappropriate skills.

46
Q

Frictional Unemployment

A

Includes workers who are in the process
of voluntarily switching jobs, workers
who are temporarily laid off because of
seasonality, and new entrants into the
labour force. Largely due to imperfect
information.

47
Q

Discouraged Workers

A

Individuals who would like to work but
have given up looking for a job.

48
Q
A

Macroecon (2 decks)

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