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Macro Econ Study Guide > Macro > Flashcards

Macro Flashcards

1
Q

What does economics deal with?

A

Scarcity and choice.

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2
Q

What is micro-economics?

A

The economic analysis of the individual; including markets and individual consumers.

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3
Q

What are aggregates?

A

They are collections or groupings…in this case, the whole economy

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5
Q

What are models or theories?

A

They are also known as abstracts because they don’t represent real situations; just idealized situations.

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6
Q

What are Keynesian economics?

A

macroeconomics

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7
Q

Define production

A

Converting resources into consumer products.

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8
Q

What is labor and technology?

A

Substitute goods. If technology and machinery is too expensive, labor takes over. Vice versa, if labor is too expensive, technology takes over.

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9
Q

What is the production possibility curve?

A

Depicts the total output attainable with two inputs. It also depicts the limits of allocative efficiency. In other words it demonstrates the efficient allocation of resources. Points to the left of the curve are attainable but inefficient such as during a recession.

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10
Q

What does division of labor lead to?

A

Specialization

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11
Q

Specialization leads to?

A

Comparative advantage

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12
Q

What is comparative advantage?

A

Is specialization achieved through division of labor. Slot people into doing the tasks based upon ability differences. They then become specialized which leads to comparative advantage which is specialization advantage

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13
Q

What is absolute advantage?

A

Is the ability to produce a good or service at a lower opportunity cost compared to other producers.

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14
Q

What is normative economics?

A

Keynesian economics and they make value judgments. In other words, they not only describe the problem, they tell you what they think you should do about it

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15
Q

What is positive economics?

A

is classical or Austrian economics, and they do not make value judgments. They merely describe the problem and tell you that you must do something about it, but not what to do

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16
Q

What is the function of price on the market?

A

Price organizes the market. It rations scarce goods. It steers resources into their most efficient or profitable use.

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17
Q

What does profit do?

A

It drives the market.

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18
Q

What is price floor?

A

A price established by the government above market price (or by business with government sanction). It leads to a surplus. An example is farm subsidies

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19
Q

What is price ceiling?

A

a price established by the government below market price and leads to a shortage.
Ex: rent controls and price controls

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20
Q

What is macroeconomics?

A

It is Keynesian economics that deals with aggregates. Specifically the Aggregate Expenditure Model.

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21
Q

What are property rights?

A

The right of private property is essential to the market or price system. Price system means the same thing as market system.

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22
Q

Import quotas

A

Quantity restrictions on imports. They tend to restrict supply and raise prices

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23
Q

Import quotas

A

Quantity restrictions on imports. They tend to restrict supply and raise prices

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24
Q

Externalities - Spillovers

A

They mean essentially the same thing. Those are costs of production paid by a third party. Example, pollution and the effects on a farmer. There are also benefits to externalities and spillovers. Public health service is one of them (like getting free shots).

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25
Q

Public goods

A

Are not exclusionary goods. (The Fire Department and the Police Department, for example.) You can’t exclude someone from using them just because they didn’t pay taxes.

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26
Public goods
Are not exclusionary goods. (The Fire Department and the Police Department, for example.) You can’t exclude someone from using them just because they didn’t pay taxes.
27
Private goods
Are exclusionary goods. You can exclude people from using private goods, such as a golf course, by having people pay membership fees. The higher the membership fee, the more exclusionary it is
28
Durable goods
Have a service or shelf life of greater than 3 years such as automobiles, washing machines, computers and cell phones
29
Non-durable goods
Are goods that have a service or shelf life less than three years such as food and clothing
30
Double taxation
A major problem for investors in a corporation.
31
Common Stockholders
The true owners of the firm. They have what is called an equity or ownership position. They receive some of their returns in the form of dividends
32
Bonds
Are called a debt position. You’ve loaned the company your money.
33
Dividends
Payments made to the stockholders
34
Personal income tax
Federal government’s major source of income
35
Corporate income tax
The secondary source of Federal revenue
36
Leading trading nations
By percentage of GDP it is the Netherlands. By value it is the U.S.
37
Leading trading partners (By volume and value)
``` #1 is Canada #2 is Western Europe #3 is Japan #4 is Mexico. ```
38
Tariffs
Tariffs are a monetary restriction on imported goods. They are an excise tax
39
Subsidies
A tax in reverse. Payments made to a firm so that they can remain competitive in the domestic and foreign market
40
Smoot-Hawley Act
The major cause of the world-wide depression of the 1930s
41
Derived demand
Refers primarily to labor but it means that there is only a demand for a resource because of the productivity of the resource. In other words, there’s only a demand for a mechanic because there’s an automobile. There’s only a demand for a programmer because there’s a computer
42
Full Employment Act, 1946
Created 4 things: 1)Fiscal Policy, 2)Monetary Policy, 3)Joint Economic Committee of Congress, and 4) the Council of Economic Advisors. * Unemployment at 4% to 6%. * GDP 2% to 3%
43
Subjective valuation
Makes the market work. The concept upon which all exchange is based. That means something is only worth what somebody is willing to pay for it
44
Dollar appreciates
When the dollar appreciates it is called a strong dollar, it goes up on the world market and buys more foreign currency. It improves international trade for us. Makes it easier for us to buy things
45
Dollar depreciates
When the dollar depreciates, it goes down on the world market, it buys less foreign exchange or foreign currency, makes it harder for us to buy things but easier for foreigners to buy our stuff
46
Foreign exchange risk
The major problem with international trade. This is where the value of the two currencies change prior to the completion of the exchange
47
Inputs of production (factors of production)
They are also called economic resources. These are land, labor, capital and entrepreneurship
48
Opportunity cost
The next best alternative that must be sacrificed to satisfy a need or want. If you have the opportunity to go on vacation to Europe or buy a new car and you choose a new car, you had to give up the next best alternative, the vacation in Europe
49
Superior Goods
• Are the name-brand items.
50
Inferior Goods
The second tier of goods. When your disposable income goes up, you switch from the inferior to the superior good. Therefore the demand for inferior goods goes down and the demand for superior goods goes up. Inferior goods are re not necessarily inferior in quality. They are just not the name brand. They are what we call second tier goods.
51
Substitute Goods
If the price of one superior good (such as beef) goes up you’ll switch to a substitute good (such as poultry, ham, or seafood.)
52
Equilibrium
Where the quantity supplied equals the quantity demanded. This is price equilibrium or market equilibrium.
53
Progressive tax
When your income goes up your tax rate goes up. When your income goes down, your tax rate goes down
54
Voluntary exchange
The main feature of the price or market system
55
Independent variable
The first mover. The variable that moves first.
56
Dependent variable
The variable that changes in value because the value of another variable changed. For instance, when the price goes up, the quantity demanded goes down. The only reason the quantity demanded went down was that the price went up. Therefore, in this example, price is the independent variable, and quantity is the dependent variable.
57
Functional distribution of income
Is the payment for the inputs of production. Payments for land, labor, capital, and entrepreneurship. In other words, rent, wages, interest, and profit
58
Sole proprietorship
Is the most common business form in the country
59
Partnership
Partnership overcomes some of the problems of sole proprietorship
60
Corporation
The most important business form in the country
61
Limited liability
Investors have limited liability in the corporation
62
Unlimited liability
Sole proprietorships and partnerships have unlimited liability
63
The firm
Is the administrative function of a business.
64
The plant
Is where the service or product is produced.
65
Federal Government income source
Its primary source is personal income tax.
66
State Government income source
Primary source of income is sales or excise tax
67
Transportation technology
The major reason for the rapid increase in international trade after WWII.
68
Determinants of demand
Things that cause the entire demand schedule to shift either right or left other than price. The most important one being personal tastes and preferences, second would be income.
69
Determinants of supply
Things that cause the entire supply supply schedule to shift either right or left other than price. Most important is the cost of the inputs of production (land, labor, capital, and entrepreneurship).
70
GATT
General Agreement on Tariffs and Trade. It was replaced by the World Trade Organization (WTO).
71
WTO
World Trade Organization
72
Law of Demand
When the price goes up demand goes down, when the price goes down, demand goes up. Price and demand are inversely related. They move in opposite directions.
73
Law of Supply
When the price goes up, supply goes up. When price goes down, supply goes down. They move in the same direction. They are directly related
74
Government transfer payments
Are considered to be non-exhaustive. The government is not spending the money itself, it is merely redistributing income such as Social Security, Medicare, Medicaid, Disability, etc.
75
Inflation
The expansion of the money supply and/or the extension of credit
76
Government’s role in the market
The government’s primary role in the market is to maintain a stable currency.
77
Limited Government
Is important for the efficient use of scarce resources.
78
Supply and Demand
When supply and demand both change, equilibrium price, and quantity cannot be determined
79
Free Rider Problem
When others take on the burden to pay for a good and/or service and anyone can use it whether they pay for it or not
80
Monopoly
A firm that produces a product or service for which there is no close substitute
81
Supply and Demand
When supply and demand both change equilibrium cannot be determined
82
Supply Schedule
When drawing a supply schedule, supply must always have a positive intercept on the vertical or Y axis
83
Competition
Is essential to a market economy
84
Least cost method of production
Is used by entrepreneurs in a competitive environment
85
Federal finance
Is also called functional finance. It is the governments budgetary process
86
The Economizing Problem
Refers to scarcity and choice. Making the most efficient use of scarce resources to satisfy as many needs and wants as possible
87
What is an entrepreneur?
A risk taker. Marshals, land, labor and capital to find a way to fulfill consumers’ needs and wants in order to make a profit.
88
Economic Growth
An increase in GDP over time or an increase in GDP per capita over time, usually one year
89
What is Gross Profit?
(GP) the difference between the sales price and the sales cost. -it doesn't take into effect fixed costs, rent, salaries, etc.
90
What is economics?
Not a science, it's an art. No constants, only variables. Some of the variables are wildly variable.
91
3 conditions existing for a market economy
1. ) The right to private property 2. ) Freedom of Exchange 3. ) The Rule of Law or Legal Tradition
92
What is allocative efficiency?
To distribute efficiently according to a plan.
93
What is division of labor?
Taking a major task and reducing it to its component parts
94
What is a market?
Wherever a buyer and seller come together to exchange goods and or services.
95
What is individual product demand?
When the price of a product rises or falls demand will slide along the demand schedule.
96
What is aggregate market demand?
When things other than price change, the entire demand schedule will shift right or left as demand increases or decreases.
97
What is individual product supply?
When the price of a product rises or falls, supply will slide along the supply schedule.

Macro Econ Study Guide (1 decks)

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