Module 1 Flashcards
Laissez-Faire means?
Let events take their course.
Concert Ticket Price Attendance
$100 0
$80 1000
$60 2000
$40 3000
$20 4000
what is the relationship between concert ticket price and attendance?
Negative
Johnny pays his friend Chris to fix his car, what happens to GDP?
It understates GDP if Chris does not report the income
The economic system in which the market operates but government regulates markets significantly is what?
Welfare capitalism
Factual tools are important tools for helping economists understand how they function together. They include statistics and ?
History
Consumers purchase what from the firms?
Goods
Which of the following best describes a monetary policy tool?
Taxes
Interest rates
Government spending
Household savings?
Interest rates
regardless of whether you are looking through the microeconomics or the macroeconomics telescope, the fundamental subject material of the interconnected … does not change
economy
Economics is the study of?
How to allocate scarce resources among alternative uses
Output Total Costs
0 100
1 125
2 160
3 205
4 260
5 300
6 330
the total cost of production shows that firm has what kind of relationship with output?
direct
what kind of economy is an economic system in which the basic questions of what, how, and for whom to produce are resolved primarily by customs of the society?
traditional
What is scarcity? Can you think of two causes of scarcity?
Scarcity means human wants for goods and services exceed the available supply. Supply is
limited because resources are limited. Demand, however, is virtually unlimited. Whatever the
supply, it seems human nature to want more
Residents of the town of Smithfield like to consume hams, but each ham requires 10 people to
produce it and takes a month. If the town has a total of 100 people, what is the maximum
amount of ham the residents can consume in a month?
100 people / 10 people per ham = a maximum of 10 hams per month if all residents produce
ham. Since consumption is limited by production, the maximum number of hams residents
could consume per month is 10.
Circular flow design
a diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market.
Command economy
An economy where economic decisions are passed down from government authority and where the government owns the resources
Division of labour
the way in which different workers divide required tasks to produce a good or service
economies of scale
when the average cost of producing each individual unit declines as total output increases
exports
products (goods and services) made domestically and sold abroad
fiscal policy
economic policies that involve government spending and taxes
globalization
the trend in which buying and selling in markets have increasingly crossed national borders
goods and services market
a market in which firms are sellers of what they produce and households are
buyers
gross domestic product (GDP)
measure of the size of total production in an economy
imports
products (goods and services) made abroad and then sold domestically
labor market
the market in which households sell their labor as workers to business firms or other employers
macroeconomics
the branch of economics that focuses on broad issues such as growth, unemployment,
inflation, and trade balance
market
interaction between potential buyers and sellers; a combination of demand and supply
market economy
an economy where economic decisions are decentralized, private individuals own
resources, and businesses supply goods and services based on demand
microeconomics
the branch of economics that focuses on actions of particular agents within the economy,
like households, workers, and business firms
monetary policy
policy that involves altering the level of interest rates, the availability of credit in the
economy, and the extent of borrowing
private enterprise
system where private individuals or groups of private individuals own and operate the
means of production (resources and businesses
specialization
when workers or firms focus on particular tasks for which they are well-suited within the
overall production process
traditional economy
typically an agricultural economy where things are done the same as they have always
been done
underground economy
a market where the buyers and sellers make transactions in violation of one or more
government regulations
theory
a representation of an object or situation that is simplified while including enough of the key features
to help us understand the object or situation
Why might Belgium, France, Italy, and Sweden have a higher export to GDP ratio than the United States?
The US is a large country economically speaking, so it has less need to trade internationally than the other countries mentioned. One additional reason is that each of the other countries are a member of the European Union, where trade between member occurs without barriers to trade, like tariffs and quotas.
Give the three (3) reasons that explain why the division of labor increases an economy’s level of production.
1) Division of labor allows for specialization,
2) Workers learn to be more efficient
3) businesses can take advantage of economies of scale.
What are three reasons to study economics?
1) Economics factors into every major policy decision.
2) Encourages good citizenship
3) Makes for a well-rounded education
What are examples of individual economic agents?
*Individuals
*Households
*Businesses
What are the three main goals of macroeconomics?
1) Growth in the standard of living
2) Low Unemployment
3) Low inflation
How did John maynard keyes define economics?
As a method of thinking that help people draw correct conclusions.
What are three ways that societies can organize themselves ecnomically?
1) as a command economy
2) a market economy
3) mixture of the two
