Quiz 1 Flashcards
define economics
a social science that studies how economic agents make choices and how those choice affect how resources are distributed.
objective of economics?
efficiency (pareto efficient)
define Macro
a social science that studies how the
GOVERNMENT or CUMMULATIVE microeconomics agents
makes choices and how those choices affect the resources distributed.
MACROeconomocs wont be possible without
MICROeconomics
how do economists think? (rational choice making)
I nformation
D istribution
I ncentives
E xchange
T rade offs
the most important trade off is
opportunity cost
3 goals if macro
GDP growth
low unemployment
stable pries (low & stable inflation)
define GDP
TOTAL VALUE of the final goods & services produced with a country’s border within a time period.
3 ways to measure GDP
C+I+G+(X-M)
income
expenditure
value added
INFLATION
DEFLATION
STAGFLATION
Inflation is good because it assures us that people have jobs and money (demand-pull)
deflation is bad because it assumes that people hv no jobs or money; there is no spending causing a recession
High unemployment and High inflation (cost-push)
what changes prices easily?
economic shocks
interest rates is the price of _____________
holding money
4 tools to control inflation
government expenditure
taxation
interest rates
money supply
a curve that shows the relationship between inflation and unmeployment
the Phillips curve
- inflation decreases; unemployment rises
-unemployment decreases, inflation rises
unemployment formula and definition
number unemployed/ labor force x 100/1
unemployment refers to the number of individuals who are willing & able to work but can not find jobs
5 types of unemployment
frictional
structural
cyclical
seasonal
classical
