Chap 1 Macro – Flashcards

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Economics is a social science that involves the study of how individuals choose among alternatives to satisfy their ______, which are what people would buy if their incomes were ________.
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wants unlimited
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______, the study of the decision-making process of individuals (or households) and firms, and ______, the study of the performance of the economy as a whole are the two main branches into which the study of economics are divided.
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microeconomics macroeconomics
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The three basic economic questions ask what and how much will be produced, how will items be produced, and for whom will items be produced. The two opposing answers are provided by the type of economic system with ____ ______ ____ _____ or the _______.
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centralized command and control price system
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In economics we assume that people do not intentionally make decisions that will leave them worse off. This is known as the ______ assumption.
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rationality
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a _______, or _________, uses assumptions and is by nature a simplification of the real world. The usefulness of a _______ can be evaluated by bringing emperical evidence to bear on its predictions
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model theory model
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Most models use the ______ ________ assumption that all other things are held constant or equal.
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ceteris paribus
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_________ economics emphasizes psychological constraints and complexities that potentially interfere with rational decision making. This approach utilizes _____ _______ hypothesis that people are not quite rational, because they cannot study every possible alternative but instead use simple rules of thumb to decide among choices.
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behavioral bounded rationality
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________ economics is value free and relates to statements that can be refutes, such as "if A, then B" _______ economics involves peoples values and typically uses the word should
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positive normative
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incentives
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rewards or penitiles for engaging in a particular activity
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economics
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the study of how people allocate their limited resources to satisfy their unlimited wants
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resources
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things used to make a goods or services to satisfy peoples wants
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wants
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what people would buy if their incomes were unlimited
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microeconomics
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the study of decision making undertaken by individuals (or households) and by firms
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macroeconomics
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the study of the behavior of the economy as a whole, including such economy wide phenomena as changes in unemployment, the general price level, and national income
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aggregates
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total amounts or quantities. aggregate demand, for example, is is total planned expenditures throughout a nation
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economic system
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a society institutional mechanism for determining the way which scarce resources are used to satisfy human desires
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rationally assumption
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the assumption that people do not intentionally make decisions that would leave them worse off
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models v. theories
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simplified representations of the real world used as the basis for predictions or explantions
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ceteris paribus
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the assumptions that nothing changes except the factors or factors being studied
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empirical
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relying on real world data in evaluating the usefulness of model
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behavioral economics
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an approach to the study of consumer behavior that emphaize psychological limitations and complications that potentially interfere with rational decision making
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bounded rationally
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the hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them
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positive economics
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analysis that is strictly limited to making either purely descriptive statements or scientific predictions: for example, "If A, then B" A statement of what is.
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normative economics
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analysis involving value judgements about economic policies; relates to whether outcomes are good or bad. A statement of what ought to be.
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