macroecon_Exam 1 Flashcards
Choices are necessary bc we live in a world of ….
Scarcity
Explain when Scarcity occurs
When unlimited wants to exceed limited resources
Explain the 3 Key Economic Ideas
People are Rational
People Respond to Incentives
Optimal decisions are made at the margin
Explain the 3 Problems every society must solve
What goods/services must be produced?How will those goods/services be produced?Who will receive the goods/services produced?
3 types of economies
Centrally Planned MarketMixed
Summarize a Centrally planned economy
Govt decide what to produce, how, and who gets it
Summarize a Market economy
Households/firms decide what to produce, how, and who gets it
Summarize a Mixed economy
Features of both market and centrally planned economies, most developed countries
Important features of economic models
Assumptions/SimplificationsTestabilityEconomic Variables
Explain Positive Analysis
Study of “what is”, can be tested
Explain Normative Analysis
Study of “what ought to be”, judgmental/opinionated
Microeconomics is the study of…
How households make choices, interact in markets, how govt attempts to influence those choices
Macroeconomics is study of…
Economy as a whole, including inflation, unemployment, and economic growth
Paraphrase Economic growth
A phase of the business cycle when GDP is increasing
Paraphrase what a Business cycle is
Alternating periods of economic expansion and recessuon
Expansion/Economic Growth
Rising real GDP, from a trough to next peak
Recession/Contraction
Falling RGDP, from peak to next trough, real GDP has to been declining for at least 6 months
Explain a Recovery
Early part of expansion, immediately after trough
Summarize a Depression
Deep and long recession
GDP calculated by the____ should be approximately the same as the the GDP calculated by the_____ + explain why
Spending approach, income approach, bc every expenditure will end up as somebody’s income
Interpret Real GDP
Value of final goods and services evaluated at base-year prices
Interpret Nominal GDP
Value of final goods and services evaluated at current-year prices