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macroecon > Test 1 > Flashcards

Test 1 Flashcards

1
Q

Circular flow diagram

A

views the economy as consisting of households and firms interacting in a goods and services market and a labor market

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2
Q

Command economy

A

economic decisions are passed down from government authority and where resources are owned by the government

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3
Q

Economics

A

the study of how humans make choices under conditions of scarcity

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4
Q

Economies of scale

A

when the average cost of producing each individual unit declines as total output increases

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5
Q

Fiscal policies

A

economic policies that involve government spending and taxes

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6
Q

Globalization

A

the trend in which buying and selling in markets have increasingly crossed national borders

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7
Q

Goods and services market

A

firms are sellers of what they produce and households are buyers

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8
Q

Exports

A

goods and services made domestically and sold abroad

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9
Q

Gross domestic product (GDP)

A

measure of the size of total production in an economy

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10
Q

Imports

A

products made abroad and then sold domestically

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11
Q

Labor market

A

households sell their labor as workers to business firms or other employers

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12
Q

Macroeconomics

A

focuses on broad issues such as growth, unemployment, inflation, and trade balance

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13
Q

Market

A

interaction between potential buyers and sellers; combo of supply & demand

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14
Q

Market economy

A

economic decisions are decentralized, resources are owned by private individuals, and businesses supply goods & services based on demand

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15
Q

Microeconomics

A

focuses on actions of specific agents within the economy like households, workers, and business firms

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16
Q

Model

A

theory

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17
Q

Private enterprise

A

system where the means of production are owned & operated by private individuals or groups of private individuals

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18
Q

Scarcity

A

human wants for goods and services exceed the available supply

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19
Q

Specialization

A

when workers/firms focus on particular tasks for which they are well-suited within the overall production process

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20
Q

Theory

A

representation of an object or situation that is simplified while including enough of the key features to help us understand the object/situation

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21
Q

Traditional economy

A

typically an agricultural economy where things are done the same as they have always been done

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22
Q

Underground economy

A

market where buyers and sellers make transactions in violation of one+ governmental regulations

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23
Q

Allocative efficiency

A

when the mix of goods being produced represents the mix that society most desires

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24
Q

Budget constraint

A

all possible consumption combinations of goods that someone can afford, given the price of goods, when all income is spent; the boundary of the opportunity set

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25
Q

Comparative advantage

A

when a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production

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26
Q

Invisible hand

A

Idea that self interested behavior by individuals can lead to positive social outcomes

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27
Q

Law of diminishing marginal utility

A

as we consume more of a good/service, the utility we get from additional units of the good/service tend to become smaller than what we received from earlier units

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28
Q

Marginal analysis

A

examination of decisions on the margin, meaning a little more or less from the status quo

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29
Q

Normative statement

A

describes how the world should be, opinion

30
Q

Opportunity cost

A

measures cost by what is given up in exchange

31
Q

Opportunity set

A

all possible combos of consumption that someone can afford given the prices of goods and the individuals income

32
Q

Positive statement

A

statement which describes the world as it is

33
Q

Production possibilities frontier (PPF)

A

diagram showing the productively efficient combinations of two products that an economy can produce given the resources it has

34
Q

Productive efficiency

A

when it’s impossible to produce more of one product without decreasing the quantity produced of another product

35
Q

Utility

A

satisfaction, usefulness, or value one obtains from consuming goods/services

36
Q

Ceteris paribus

A

holding everything else constant

37
Q

Complements

A

goods that are often used together so that consumption of one good tends to enhance consumption of the other

38
Q

Demand curve

A

graphic representation of the relationship between price and quantity demanded of a product. quantity on horizontal axis, price on vertical axis

39
Q

Demand schedule

A

table that shows a range of prices for a certain product and the quantity demanded at each price

40
Q

Equilibrium

A

the situation where quantity demanded is equal to the quantity supplied; no economic pressure from surpluses or shortages that would cause price/quantity change

41
Q

Equilibrium price

A

price where quantity demanded = quantity supplied

42
Q

Equilibrium quantity

A

quantity at which quantity demanded = quantity supplied, for a certain price level

43
Q

Excess demand

A

a shortage; at the existing price, the quantity demanded exceeds the quantity supplied

44
Q

Excess supply

A

a surplus; at the existing price, the quantity supplied exceeds the quantity demanded

45
Q

Factors of production

A

Land, labor, capital, entrepreneurial ability, and tech

46
Q

Inferior goods

A

good in which the quantity demanded falls as income rises & vice versa

47
Q

Inputs

A

Land, labor, capital, entrepreneurial ability, and tech

48
Q

Law of demand

A

common relationship that a higher price leads to a lower quantity demanded, ceteris parabis

49
Q

Law of supply

A

common relationship that a higher price leads to a greater quantity supplies, ceteris parabis

50
Q

Normal good

A

Quantity demanded rises as income rises & quantity demanded falls as income falls

51
Q

Price ceiling

A

legal max price

52
Q

Price control

A

government laws to regulate prices

53
Q

Price floor

A

legal minimum price

54
Q

Quantity demanded

A

total number of units of a product consumers are willing to purchase at a given price

55
Q

Shift in demand

A

when a change in some economic factor (other than price) causes a different quantity to be demanded at every price

56
Q

Shift in supply

A

when a change in some economic factor (other than price) causes a different quantity to be supplied at every price

57
Q

Shortage

A

at the existing price, the quantity demanded exceeds the quantity supplied

58
Q

Substitute

A

a good that can replace another to some extent, so that greater consumption of one can mean less of the other

59
Q

Supply

A

the relationship between price and the quantity supplied of a product

60
Q

Supply curve

A

a line that shows the relationship between price and quantity supplied on a graph, quantity of the horizontal axis and price on the vertical axis

61
Q

Supply schedule

A

table showing range of prices for a product and the quantity supplied at each price

62
Q

Surplus

A

at the existing price, quantity supplied exceeds the quantity demanded

63
Q

Intertemporal decision making

A

concept of basing decisions on expected future conditions rather than existing conditions

64
Q

Minimum wage

A

a price floor that makes it illegal for an employer to pay employees less than a certain hourly rate

65
Q

What kind of resource is an arrowhead?

A

Capital (also tech)

66
Q

Why would a company be producing inside the PPF curve?

A

unemployment, inefficiency, & discrimination

67
Q

Margin/Marginal

A

1 increment more

68
Q

Why is the PPF curved?

A

the law of increasing opportunity cost / diminishing marginal returns

69
Q

What are some pitfalls to sound reasoning?

A

bias, loaded terminology, fallacy of composition (stereotyping, general assumptions), post hoc fallacy (false cause)

70
Q

What are some determinants of demand?

A

tastes & preferences, income, price/availability of complement/substitute goods, and # of buyers

macroecon (4 decks)

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