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Econ > Summer Reading Quiz > Flashcards

Summer Reading Quiz Flashcards

1
Q

What does the word economy come from?

A

The Greek “one who manages a household”

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2
Q

Scarcity

A

Society has limited resources and therefore cannot produce all the goods and services people wish to have, can’t give every individual the highest standard of living to which they might aspire
The limited nature of society’s resources

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3
Q

Economics

A

The study of how society manages its scarce resources

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4
Q

What do economists study?

A

How people make decisions, how people interact with one another, and analyze forces and trends that affect the economy as a whole

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5
Q

What is an economy

A

A group of people interacting with one another as they go about their lives

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6
Q

Principle one

A

People face trade offs

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7
Q

Classic example of a trade off

A

Guns and butter: the more we spend on national defense (guns) to protect our shores from foreign aggressors the less we spend on consumer goods (butter) to raise our standard of living at home

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8
Q

Efficiency

A

Society is getting the most it can from its scarce resources (the size of the economic pie, increasing efficiency is increasing the pie)

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9
Q

Equity

A

The benefits of those resources are distributed fairly among society’s members (how the economic pie is divided, increasing equity means making the pie slices more equal)

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10
Q

Principle two

A

The cost of something is what you give up to get it

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11
Q

Opportunity cost

A

What you give up to get something

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12
Q

High opportunity cost

A

You are giving up a lot more than you are getting

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13
Q

Principle 3

A

Rational people think at the margin

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14
Q

Marginal changes

A

Small incremental adjustments to an existing plan of action (adjustments around the edge of what you’re doing)

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15
Q

Marginal benefits

A

Small little benefits you get from doing little things

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16
Q

Marginal costs

A

Small little costs you get from doing little things

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17
Q

Plane example

A

If have empty seat, better to sell for less than average because marginal cost is only price of peanuts and soda so actually making money

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18
Q

A rational depiction maker takes an action if

A

The marginal benefit of the action exceeds the marginal cost

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19
Q

Principle four

A

People respond to incentives

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20
Q

Why are incentives important to consider

A

Policies can have unknown effects, if the policy changes people’s incentives then it will alter their behavior

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21
Q

Principle five

A

Trade can make everyone better off

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22
Q

What does trade allow for

A

Trade allows people/countries to specialize in what they do best, by trading with others by can buy a greater variety of goods and services at a lower cost

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23
Q

Principle six

A

Markets are usually a good way to organize economic activity

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24
Q

Communist countries had what type of economic thing

A

Government planners to guide economic activity, central planning, the theory was that only the government could organize economic activity in a way that promoted economic well being for the country as a whole, it collapsed because the invisible hand was tied behind the back

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25
Q

Market economy

A

The decisions of a central planner are replaced by the decisions of millions of firms and households
An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

26
Q

Firms and households roles

A

Firms decide whom to hire and what to make, households decide which firms to work for and what to buy with their incomes

27
Q

1776 Adam Smith an inquiry into the nature and causes of the wealth of nations

A

He made a very famous economics observation that households and firms interacting in markets act as if they are guided by an invisible hand that leads them to desirable market outcomes

28
Q

Invisible hand

A

Prices are the instrument with which the invisible hand directs economic activity
When the govErnment prevents prices from adjusting naturally to supply and demand, it impedes the invisible hand’s ability to coordinate the millions of households and firms that make up the economy—this is why too many taxes cause harm and policies that directly control prices cause even more harm

29
Q

Principle seven

A

Governments can sometimes improve market outcomes

30
Q

Two reasons for government to intervene in the economy

A

To promote efficiency and to promote equity

31
Q

Market failure

A

A situation in which the market on its own fails to produce an efficient allocation of resources (doesn’t allocate resources efficiently)

32
Q

Externality

A

The impact of one person’s actions on the well being of a bystander (ex pollution)

33
Q

Market power

A

The ability of a single person (or small group) to unduly influence market prices (ex one well, the owner isn’t subjected to competition because there is only one well, can make the prices however high they want)

34
Q

Principle eight

A

A country’s standard of living depends on its ability to produce goods and services

35
Q

Productivity

A

The amount of goods and services produced from each hour of a worker’s time

36
Q

Higher productivity

A

Nations with higher productivity have higher standards of living

37
Q

Growth rate of a nation’s productivity determines

A

Growth rate of average income

38
Q

Principle nine

A

Prices rise when the government prints too much money

39
Q

Inflation

A

An increase in the overall level of prices in the economy
High inflation imposes various costs on society so keeping inflation at a low level is a goal of economic policy makers everywhere

40
Q

Persistent inflation reason

A

The culprit is the growth in the quantity of money (large quantities of money mean the value of the money falls)

41
Q

Principle ten

A

Society faces a short run trade off between inflation and unemployment

42
Q

Results of government increasing amount of money in economy

A

Inflation and a lower level of unemployment (second one is in the short run)

43
Q

Philips curve

A

Illustrates the short run trade off between inflation and unemployment
Trade off is faced regardless of whether inflation and unemployment start high, low, or in between
Crucial for understanding the business cycle

44
Q

Business cycle

A

The irregular and largely unpredictable fluctuations in economic activity, as measured by the number of people employed or the production of goods and services

45
Q

Scientific method

A

The dispassionate development and testing of theories about how the world works
Interplay between theory and observation

46
Q

Assumptions

A

Economists make assumptions because assumptions can simplify the complex world and make it w skier to understand, allow economists to focus their thinking
Different assumptions used to answer different questions

47
Q

Models

A

Economists use models to study the world, often diagrams or equations, omit details to show what’s important
All models are built with assumptions

48
Q

Circular flow diagram

A

A visual model of the economy that show how dollars flow through markets among households and firms
Firs produce goods and services using inputs such as labor, land, and capital (these inputs are called factors of production)
Households own the factors of production and consume all the goods and s vices the firms produce)

49
Q

Graphs

A

Offer a way to visually express ideas that might be les clear if described with equations or rods and they also provide a way of finding how variables are related to the world

50
Q

Single variable graphs

A

Display one variable, pie charts, bar graphs, and time series graphs

51
Q

Positive correlation

A

When the the two variables in a scatter plot move in the same direction

52
Q

Negative correlation

A

When the two variables in a scatter plot move in opposite directions

53
Q

Demand curve

A

Traces out the effect of a good’s price on the quantity of the good consumers want to buy, represents the relationship between price and quantity demanded

54
Q

Negatively related and positively related

A

On a non scatter plot graph positive is when move in same direction negative is when move in opposite directions

55
Q

When necessary to shift a curve

A

When a variable that is not named on either axis changes, the curve shifts

56
Q

Slope

A

Change in y over change in x

57
Q

Causality and reverse causality

A

Causality is when things cause each other, reverse is when you think one determines the other but it’s actually the reverse

58
Q

Omitted variables

A

Variables that aren’t represented on the graph but may have something to do with the results

59
Q

How it’s graded

A

10% participation
30% projects and homework
60% quizzes (20% short answers 40% multiple choice)
Each quarter 22.5%, midterm and final 5%

60
Q

Podcasts per quarter

A

1 2 3 2

61
Q

How to find percent change

A

(New - original) / original

Econ (14 decks)

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