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Will K. > MACROECONOMICS > Flashcards

MACROECONOMICS Flashcards

1
Q

Economics

A

the study of how society manages its scarce resources

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2
Q

First principle of economics

A

you have to trade one goal for another

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3
Q

Efficiency

A

occurs when society gets the maximum benefits from its scarce resources; the size of the economic pie

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4
Q

Equality

A

occurs when economic prosperity is distributed uniformly among the members of society; how the pie is divided into individual slices

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5
Q

Opportunity cost

A

whatever a person has to give up in order to get something else; the next-highest-valued alternative use of that resource

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6
Q

Second principle of economics

A

comparing costs and benefits

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7
Q

Third principle of economics

A

based on the belief that rational people systematically and purposefully do the best they can to achieve their objectives; rational people focus on the marginal changes they can make to to their plans of action

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8
Q

Marginal changes

A

small, incremental adjustments

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9
Q

Fourth principle of economics

A

people respond to incentives

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10
Q

Incentive

A

anything–such as a punishment or reward–that induces a person to act in a certain way

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11
Q

Fifth principle of economics

A

trade can make everyone better off

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12
Q

Imports

A

the goods produced in a foreign country and purchased by domestic residents

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13
Q

Exports

A

the goods produced domestically and purchased by foreigners

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14
Q

Specialization

A

focusing and producing the goods we have an advantage on and trading with others

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15
Q

Sixth principle of economics

A

markets are usually a good way to organize economic activity

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16
Q

Market economoy

A

made up of millions of companies and individual households; allocates the resources as its members interact for goods and services; guided by price and self-interest; supported by Adam Smith

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17
Q

Seventh principle of economics

A

governments can sometimes improve market outcomes

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18
Q

Externalities

A

the impact of one person’s actions on the well-being of a bystander

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19
Q

Market power

A

the ability of a single economic actor to have a substantial influence on market prices

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20
Q

Gross domestic product (GDP)

A

the market value of all final goods and services produced within a country in a given period of time

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21
Q

Consumption

A

spending by households on goods and services, with the exception of purchases of new housing.

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22
Q

Investment

A

spending on business capital, residential capital, and inventories

23
Q

Government purchases

A

spending on goods and services by local, state, and federal governments

24
Q

Net exports

A

spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)

25
Non-durable goods
goods that wear out easily and can only be used for a short period of time (such as food, clothing, gasoline, etc.)
26
Durable goods
goods that do not wear out easily and can be used repeatedly (such as books, electronics, cars, appliances, etc.)
27
Business capital
capital that includes business structures (such as factories or office buildings), equipment (such as a worker’s computer), and intellectual property products (such as the software that runs the computer).
28
Residential capital
capital that includes the landlord’s apartment building and a homeowner’s personal residence.
29
Transfer payments
payments from the government to households, but not in exchange for any goods or services being produced (so they are not included in GDP). Examples include Social Security benefits and unemployment insurance benefits.
30
Nominal GDP
the production of goods and services valued at current prices
31
Real GDP
the production of goods and services valued at constant (base-year) prices
32
GDP deflator
a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
33
Gross national product (GNP)
total production performed by citizens of a nation, including overseas production.
34
Net national product
the total income earned by a nation’s residents (GNP) in the production of goods and services. Net National Product = GNP – depreciation
35
Depreciation
the wear and tear on the physical capital of an economy.
36
National income
the total income earned by a nation’s residents (GDP) in the production of goods and services. National Income = GDP – depreciation
37
Personal income
income that households and noncorporate businesses receive. Personal income = national income + transfer payments – retained earnings.
38
Disposable personal income
income that households and noncorporate businesses have left after satisfying all their obligations to the government. Disposable personal income = personal income – taxes.
39
Inflation
a situation in which the economy’s overall price level is rising
40
Inflation rate
the percentage change in the price level from the previous period
41
Consumer price index (CPI)
a measure of the overall cost of the goods and services bought by a typical consumer
42
Core CPI
a measure of the overall cost of consumer goods and services excluding food and energy
43
Producer price index (PPI)
a measure of the cost of a basket of goods and services bought by firms measure of the cost of a basket of goods and services bought by firms
44
Indexation
the automatic correction by law or contract of a dollar amount for the effects of inflation
45
Nominal interest rate
the interest rate as usually reported without a correction for the effects of inflation
46
Real interest rate
the interest rate corrected for the effects of inflation
47
Deflation
a situation in which the economy’s overall price level is falling (negative inflation)
48
Real GDP per capita
a measurement of the total economic output (and total income) of a country, divided by the number of people in a country, and adjusted for inflation
49
Productivity
the quantity of goods and services produced from each unit of labor input (per worker or hour worked)
50
Physical capital
the stock of equipment and structures that are used to produce goods and services
51
Human capital
the knowledge and skills that workers acquire through education, training, and experience
52
Natural resources
the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits
53
Technological knowledge
society’s understanding of the best way to produce goods and services
54
Production function
a function used in economics to describe the relationship between the quantity of inputs used in production and the quantity of output from production

Will K. (10 decks)

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