LESSON 1 Flashcards
_______ achieved by avoiding or limiting fluctuations in production, employment, and prices. It seeks to avoid the recessionary declines and inflationary expansions
Stability
Defined as any situation where making one choice means losing something else, usually forgoing a benefit or opportunity.
Tradeoff
The pursuit of the five economic goals is inherently an act of..
Normative Economics
In a mixed economy, the pursuit of these goals is largely directed by..
Government
In an economy, production, consumption and exchange are carried out by three basic economic units:
Firms
Households
Government
Economic unit that makes the production decisions
Firms
Economic unit that makes consumption decisions and own factors of production.
Households
Collects taxes from households, buys goods from firms, and distributes those goods to households individually or collectively.
Government
______achieved by increasing the economy’s ability to produce goods and services. This goal is best indicated by measuring the growth rate of production.
Economic Growth
(Imports and Exports) Instead of money, this sector typically injects goods into the circular flow model in the form of imports and leaks goods in the form of exports.
Foreign Countries/Foreign Sectors
Latin phrase meaning ‘all other things remaining equal’
Ceteris Paribus
A social science that deals with the production, distribution, and consumption of goods and services.
Economics
The two Nature of Economics
Economics as a Science
Economics as an Art
Scope of economics thatexamines individual activity, industries, and their interaction.
Microeconomics
The study of the economy as a whole.
Macroeconomics
The theory which refers to the price of an individual commodity is determined by the market forces of demand and supply.
Theory of Product Pricing
The twomost important goals for microeconomics
Efficiency
Equity
Deals with efficiency in allocation of resources.
Theory of Economic Welfare
The focus of microeconomics is mainly confined to..
Price Theory
Resource Allocation
Refers to the actions that governments take in the economic field. It covers the systems for setting interest rates and government budget as well as the labor market, national ownership, and many other areas of government interventions into the economy.
Economic Policy
Factor that suggest Microeconomics, land, labor, capital and entrepreneur are the factors that contribute to the production process. Microeconomics helps in determining the factor rewards for land, labor, capital, and entrepreneur in the form of rent, wages, interest, and profit respectively.
Theory of Factor Pricing
It generally directed to achieve four major goals: stabilizing markets, promoting economicprosperity, ensuring business development, and promoting employment.
Policy
The type of economy that has five conditions including full employment, stability, economic growth, efficiency, and equity, that are generally desired by society and pursued by governments through economic policies.
Mixed Economy
_______is achieved when all available resources (labor, capital, land, and entrepreneurship) are used to produce goods and services
Full Employment
The three most important goals for macroeconomics
Full employment
Stability
Economic growth
_____ is achieved when society is able to get the greatest amount of satisfaction from available resources
Efficiency
_____ is achieved when income and wealth are fairly distributed within a society
Equity
