Macroeconomics Terms Chapters 1-10 – Flashcards
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Limited resources and unlimited wants.
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Scarcity
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Study of how society manages its scarce resources.
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Economics
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The property of society getting the most from its scarce resources.
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Efficiency
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The property of distributing output fairly amonf society's members.
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Equity
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Whatever is given up to get something else.
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Opportunity Cost
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Incremental adjustments to an existing plan.
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Marginal Changes
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An economic system where interaction of households and firms in markets determine the allocation of resources.
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Market Economy
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The principle that self-interested market participants may unknowingly maximize the welfare of the economy as a whole.
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"Invisible Hand"
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A situation in which the market fails to allocatre resources efficiently.
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Market Failure
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When one person's actions have an impact on a bystander.
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Externality
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The ability of an individual or group to substantially influence the maket prices.
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Market Power
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The case in which there is only one seller in a market.
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Monopoly
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The amount of goods and services produced per hour by a worker.
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Productivity
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An increase in the overall level of prices.
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Inflation
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The short-run tradeoff between inflation and unemployment.
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Philips Curve
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Objective development and testing of theories.
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Scientific Method
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Simplifications of reality based on assumptions.
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Economic Models
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A diagram of the economy that shows the flow of goods and services, factors of production, and monetary payments between households and firms.
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Circular-Flow Model
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Inputs such as land, labor, and capital.
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Factors of Production
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A graph that shows the combinations of output the economy can possibly produce given the available factors of production and the available production technology.
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Production Possibilities Frontier
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The study of households and firms make decisions and how they interact in markets.
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Microeconomics
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The study of economy wide phenomena,
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Macroeconomics
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Descriptions of the world as it is.
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Positive Statements
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Prescription for how the world ought to be.
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Normative Statements
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The comparison among producers of a good based on their productivity.
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Absolute Advantage
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The comparison among producers of a good based on their oppurtunity cost.
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Comparative Advantage
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The increase in total production due to specialization allowed by trade.
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Gains from Trade
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Goods produced abroad and sold domestically.
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Imports
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Goods produced domestically and sold abroad.
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Exports
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Make decisions by evaluating costs and benefits of marginal changes; think at the margin.
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Rational People
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A cost or benefit that motivates a decision or action by consumers, businesses, or other participants in the economy.
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Incentive
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Some item of value does not have an owner with the legal authority to control it.
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Property Rights
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Fluctuations in economic activity such as employment and production.
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Business Cycle
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A group of buyers and sellers of a particular good or service.
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Market
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A market with many buyers and sellers trading indentical products so that each buyer and seller is a price taker.
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Competitive Market
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The amount of a good that buyers are willing and able to purchase.
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Quantity Demanded
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The claim that, other things equal, the quantity demanded of a good falls when the price of the good rises.
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Law of Demand
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A table that shows the relationship between the price of a good and the quantity demanded.
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Demand Schedule
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A graph of the relationship between the price of a good and the quantity demanded.
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Demand Curve
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A good for which, other things equal, an increase in income leads to an increase in demand.
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Normal Good
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A good for which, other things equal, an increase in income leads to a decrease in demand.
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Inferior Good
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Two goods for which an increase in the price of one leads to an increase in demand for the other.
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Substitutes
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Two goods for which an increase in the price of one leads to a decrease in the demand for the other.
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Complements
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The amount of a good that sellers are willing and able to sell.
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Quantity Supplied
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The claim that, other things equal, the quantity supplied of a good rises when the price of the good rises.
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Law of Supply
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A table that shows the relationship between the price of the good and the quantity supplied.
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Supply Schedule
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A graph of the relationship between the price of a good and the quantity supplied.
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Supply Curve
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A situation in which supply and demand have been brought into balance.
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Equilibrium
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The price that balances supply and demand.
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Equilibrium Price
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The quantity supplied and the quantity demanded when the price has adjusted to balance supply and demand.
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Equilibrium Quantity
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A situation in which quantity supplied is greater than quantity demanded.
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Surplus
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A situation in which quantity demanded is greater than quantity supplied.
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Shortage
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The claim that the price of any good adjusts to bring the supply and demand for that good into balance.
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Law of Supply and Demand
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A measure of the responsiveness of the quantity demaded or quantity supplied to one of its determinants.
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Elasticity
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A measure of how much the quantity demanded of a good responds to a change in the price of that good.
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Price Elasticity of Demand
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When the quantity demanded or supplied responds substantially to a change in one of its determinants.
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Elastic
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When the quantity demanded or supplied responds only slightly to a change in one of its determinants.
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Inelastic
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The amount paid by buyers and recieved by sellers of a good computes as P*Q.
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Total Revenue
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A measure of how much the quantity demanded of a good responds to a change in consumers' income.
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Income Elasticity of Demand
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A measure of how much the quantity demanded of one good responds to a change on the price of another good.
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Cross-Price Elasticity of Demand
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A measure of how much the quantity supplied of a good responds to a change om tje price of that good.
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Price Elasticity of Demand
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A legal maximum on the price at which a good can be sold.
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Price Ceiling
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A legal minimum on the price at which a good can be sold.
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Price Floor
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The study of who bears the burden of taxation.
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Tax Incidence
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The difference between what the buyer pays and the seller recieves after a tax has been imposed.
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Tax Wedge
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The study of how the allocation of resources affects economic well-being.
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Welfare Economics
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The maximum amount that a buyer will pay for a good.
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Willingness to Pay
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A buyer's willingness to pay minus the amount the buyer actually pays.
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Consumer Surplus
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The value of everything a seller must give up to produce a good.
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Cost
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The amount a seller is paid for a good minus the seller's cost.
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Producer Surplus
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The reduction in total surplus that results from a tax.
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Deadweight Loss
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A graph showing the relationship between the size of a tax and the tax revenue collected.
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Laffer Curve
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The price of a good that prevails in the world market for that good.
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World Price
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Market participants that cannot influence the price so they view the price as given.
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Price Takers
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A tax on goods produced abroad and sold domestically (imports).
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Tariff
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The market value of all final goods and services produced within a country in a given period of time.
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Gross Domestic Product (GDP)
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Spending by households on goods and services, with the exception of purchases of new housing.
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Consumption
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Spending on goods and services by local, state, and federal governments.
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Government Purchases
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The value of a nation's exports minus the value of its imports, also called trade balance.
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Net Exports
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The production of goods and services valued at current prices.
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Nominal GDP
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The production of goods and services valued at a constant prices.
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Real GDP
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A measure of the price level calculated as the ratio of nominal GDP to real GDP times 100.
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GDP Deflator
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A Latin phrase, translated as "other things being equal," used as a reminder that all variables other than the ones being studied are assumed to be constant.
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Ceteris Paribus
