Chapter 1 Macroeconomics Answers – Flashcards
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Social science concerned with the efficient use of scarce resources to satisfy unlimited wants.
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Economics
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when goods and services occur through an organizational mechanism.
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Economic system
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simply means "the economic way of thinking"
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Economical perspective
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1)Recognizes scarcity 2)Rational self-interest theory 3) Comparing MB to MC
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Components of economic perspective:
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1) Well-informed citizen for voting 2) Practical applications to professional and personal life.
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Reasons to study economics:
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1) Theoretical Economics or Economic Analysis 2) Policy economics
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Approaches to economical methodology
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1) gather the facts 2) analyze and interpret 3) formulate a theory or economical principle
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Steps for Theoretical Economics/Economic Analysis
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From facts to theory
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What is induction?
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From theory to facts
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What is deduction?
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A simplification of reality.
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What is a theory?
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Graphs, words, and equations
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What are examples of models?
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"Everything else remains constant"
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What is ceteris paribus?
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The use of economic principles to solve political, economical, and social problems.
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What is policy economics?
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1) State the goal 2) Determine the policy options 3) Implement and evaluate the policy chosen
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What are the steps of policy economics?
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Economic growth.
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What is the #1 goal of policy economics?
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The ability for the economy to produce more goods and services.
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What is economic growth?
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1) Macroeconomics 2) Microeconomics
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What are the branches of economics?
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The study of the economy as a whole. It looks at the "aggregate" (collection of specific economic units).
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What is macroeconomics?
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National Economy, unemployment, GDP, deficit, inflation, national income.
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Examples of macroeconomics
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The study of the economy at an individual level.
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What is microeconomics?
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1 firm, 1 consumer, 1 product. price of 1 product, employees in 1 firm.
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Examples of microeconomics
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1) positive 2) normative
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What are the types of economic analysis?
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The analysis based on facts. "what is"
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What is positive economic analysis?
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The analysis based on value-judgements. "what ought to be"
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What is normative economic analysis?
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1) fallacy of composition 2) association as causation
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What are the pitfalls of objective thinking?
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What applies to something, applies to everything.
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What is fallacy of composition?
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Two events happened at the same time... one caused the other.
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What is association as causation?
