Macroeconomics - Ch 1

Question 0

Opportunity costs

Answer 0

To obtain more of one thing, society forgoes/sacrifices the opportunity of getting the next best thing

Question 1

Economic perspective

Answer 1

Economic way of thinking; stresses resource scarcity & necessity of making choices, assumption of purposeful/rational behavior, & comparisons of marginal benefit & marginal cost

Question 2

Utility

Answer 2

Pleasure, happiness, or satisfaction obtained from consuming a good or service

Question 3

Marginal analysis

Answer 3

Comparisons of marginal benefits & marginal costs, usually for decision making

Question 4

Scientific method

Answer 4

Procedure consisting of observing real world behavior and outcomes, formulating a hypothesis, testing the info, accepting/rejecting/modifying the hypothesis, continuing to test the hypothesis against the facts

Question 5

Economic principle

Answer 5

A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions; combos of these principles = models (simple representation of how something works)

Question 6

Price quantity principle

Answer 6

Consumers buy more of a product when the price falls

Question 7

Other-things-equal assumption (ceteris paribus)

Answer 7

Assumption that factors other than those being considered do not change; all variables except those under immediate consideration are held constant for a particular analysis)

Question 8

Microeconomics

Answer 8

Part of economics concerned with decision making by individual customers, workers, households, & business firms

Question 9

Macroeconomics

Answer 9

Examines either the economy as a whole or its basic subdivisions or aggregates (gov’t, household, & biz sectors)

Question 10

Positive economics

Answer 10

Focuses on facts and cause/effect relationships; includes description, theory development, & theory testing; avoids value judgments; tries to establish specific scientific statements about Econ behavior

Question 11

Normative economics

Answer 11

Value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal (what ought to be)

Question 12

Economics

Answer 12

Examines how individuals, institutions, & society make choices under conditions of scarcity

Question 13

Economizing problem

Answer 13

Need to make choices b/c economic wants exceed economic means

Question 14

Budget line/budget constraint

Answer 14

Schedule/curve that shows various combos of 2 products a consumer can purchase with a specific income

Question 15

Economic resources

Answer 15

All natural, human, & manufactured resources that go into the production of goods & services

Question 16

Resource categories/factors of production/inputs

Answer 16

(1) Land (natural resources used in the production process) ie forests, mineral/oil deposits, water, wind power, sunlight, arable land (2) labor (physical/mental activities people contribute (3) capital (capital goods; manufacturer aids) (4) entrepreneurial ability

Question 17

Investment

Answer 17

Spending that pays for production and accumulation of capital goods

Question 18

Capital goods vs consumer goods

Answer 18

Consumer goods satisfy wants directly; capital goods do so indirectly by aiding production of consumer goods

Question 19

Capital

Answer 19

Not money; tools, machinery, other productive equipment

Question 20

Entrepreneurial ability

Answer 20

Human resource, distinct from labor; entre combines resources of land, labor, & capital to produce good/svc; entre makes strategic biz decisions, sets course of enterprise; entre innovates, bears risk

Question 21

Production possibilities model

Answer 21

Full employment (using all available resources), fixed resources (qty, quality), fixed technology (constant), two goods (pizza - consumer good, industrial robots - capital good)

Question 22

Production possibilities curve

Answer 22

Different combos of goods & services society can produce in a fully employed economy assuming fixed availability of supplies of resources & fixed technology

Question 23

Law of increasing opportunity costs

Answer 23

As the production of a particular good increases, the opportunity cost of producing an additional unit rises

Question 24

Optimal allocation

Answer 24

Marginal benefit (MB) = marginal cost (MC)

Question 25

Economic growth

Answer 25

Larger total output; result of increases in supplies of resources, improvements in resource quality, & technological advances; international trade can help also

Question 26

Fallacy of composition

Answer 26

What is true for one individual or part of a whole is necessarily true for a group if individuals or the whole (not correct)

Question 27

Post hoc fallacy

Answer 27

Post hoc ergo propter hoc (after this, therefore because of this)

Question 28

Correlation does not = causation

Answer 28

Just b/c data associated doesn’t mean one caused other