Macro Econ Flashcards
Test 1
To obtain more than one thing, society sacrifices the opportunity of getting the next big thing
Opportunity costs
The allocation of limited goods
Economics
Comparisons of marginal benefits and marginal costs, usually for decision making
Marginal analysis
Is concerned with making individual customers, workers, households, and business firms
Microeconomics
Examines the performance and behavior of the economy as a whole
Macroeconomics
A larger total output
Economic growth
A particular set of institutional arrangements and a coordination mechanism- to respond to the economizing problem
Economic system
Economic systems differ as to
Economic systems differ as to
1. Who owns the factors of production
2. The method used to motivate, coordinate, and direct economic activity
Also known as the capitalist or the mixed economy
Market system
Is characterized by the mixture of centralized government economy is incentives and decentralized actions taken by individuals and firms
Market system
Place where buyers and sellers come together to buy and sell goods, services and resources
Markets
Couples with the freedom to negotiate binding legal contracts, enables individuals and businesses to obtain, use, and dispose property resources as they see fit
Private property
The determination by customers the types and quantities of a good and service that will be produced with the scarce resources of the economy
Customer sovergnty
The tendency of competition to cause individuals and firms to unintentionally but quite effectively promote the interests of society even when each individual or firm is only attempting to pursue its own interests
Invisible hand
Illustrates those flows for a simplified economy in which there is no government
The circular flow diagram
All natural resources used in the production process
Land
Resource consists of the physical actions and mental activities that people contribute to the production of goods and services
Labor
All manufactured aids used in producing consumer goods and services
Capital
To describe spending that pays for the production and accumulation of capital goods
Investment
Do so indirectly by aiding the production of consumer goods
Capital good
Land, labor, capital and entrepreneurial ability
Factors of production
Special human resource distinct from labor
Entrepreneurial ability
Is a schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase
Demand
Its a downward slope reflects the law of demand-people buy more of a product, service or resource
Demand curve
Products whose demand varies directly with money income
Normal income
A good or service whose consumption declines as income rises, prices held constant
Inferior goods
Is one that can be used in place of another good
Substitute good
Is one that is used together with another good
Complementary good
The principle that other things equal an increase in the price of a product will increase the quantity of it supplied and conversely for a price increase
Law of supply
A curve that illustrates the supply for a product by showing how each possible price is associated with a specific quantity supplied
Supply curve
The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific price
Surplus
A graph that demonstrate the flow of inputs and outputs
Circular-flow diagram
There is a natural relationship between price and quantity demanded
Law of demand
There’s possible relationships between price and quantity supply
Law of supply
Capita
Per person
recurring increases and decreases in the level of economic activity over periods of years: consists of peak, recession, through and expansion phases
Business cycles
Gross domestic product adjusted for inflation
Real GDP
Measured in terms of price level at time of measurements
Nominal GDP
Expenditures that increase the volume of physical capital; and intangible ideas that help produce goods and services
Investment
Sudden changes in demand
Demand shocks
Sudden change in supply
Supply shocks
Product prices that remain in place
Inflexible prices
Product prices that freely more upward or downward when product demand and supply changes
Flexible prices
y= C+ IG + G + XN
GDP equation
C=
Personal consumption
Spending by households on goods and services
Personal consumption
IG=
Gross domestic product
Spending on equipment, machinery, structures including new housing and changes in inventories
Gross domestic product
G=
Gross investment
Xn=
Exports minus imports
