Macroeconomics Definitions Flashcards

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1.Full production (full employment
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– the economy is employing all of its available resources. The use of all available resources to produce want-satisfying goods and services.
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2.Capital
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– Human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.
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3.Utility
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– the pleasure, happiness, or satisfaction from consuming a good or service.
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4.Private property
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– the right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property.
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5.Competition
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– the presence in a market of independent buyers and sellers competing with one another along with the freedom of buyers and sellers to enter and leave the market.
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6.Division of labor
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– the separation of the work required to produce a product into a number of different tasks that are performed by different workers; specialization of workers.
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7.Budget line
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– a line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products’ prices.
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8.Economizing problems
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– the choices necessitated because society’s economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited. (Limited resources, unlimited wants)
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9.Opportunity cost
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– the amount of other products that must be forgone or sacrificed to produce a unit of a product.
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10.Circular flow model
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– an illustration showing the flow of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and from households to firms.
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11.Dollar votes
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– the “votes” that consumers and entrepreneurs cast for the production of consumer and capital goods, respectively, when they purchase those goods in product and resource markets.
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12.Self-interest
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– that which each firm, property owner, worker, and consumer believers is best for itself and seeks to obtain.
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13. fundamental questions
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What goods and services will be produced? Who will get the goods and services? How will the system accommodate change? How will the system promote progress? How will the goods and services be produced?
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14.Product market
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– a market in which products are sold by firms and brought by households.
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15.Central planning
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– government determination of the objectives of the economy and how resources will be directed to attain those goals.
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16.Law of increasing opportunity cost
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– the principle that as the production of a good increases, the opportunity cost of producing an additional unit rises.
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17.Market system
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– (private property) All the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy’s scarce resources and to communicate and coordinate the decisions made by consumers, firms, and resource suppliers.
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18.Command economy (system)
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– a method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities; communism.
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19.Consumer sovereignty
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– determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy; consumer’s direction of production through their dollar votes.
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20.Market economy
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– an economy in which the private decisions of consumers, resource suppliers, and firms determine how resources are allocated; the market system.
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21.Barter
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– the exchange of one good or service for another good or service.
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22.Capitalism
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– an economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities.
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24.Economic resources
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– the land, labor, capital, and entrepreneurial ability that are used in the production of goods and services; productive agents; factors of production.
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25.Product market
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– a market in which products are sold by firms and bought by households.
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26.
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Capital goods are up, growth rates go up.
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27.Allocated efficiency
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– the apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which it marginal cost and price of marginal benefit are equal, and at which the sum of the consumer surplus and producer surplus is maximized.
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28.Know two characteristics that make an economic system different from another:
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Who owns the factors of production. The method used to motivate, coordinate, and direct economic activity.
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29.Specialization
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– the use of the resources of an individual, a firm, a region, or a nation to concentrate production on one or a small number of goods and services.
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30.”Invisible Hand”
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– the tendency of firms and resource suppliers that seek to further their own self-interests in competitive markets to also promote the interests of society.
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31.Full employment
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– 1.) the use of all available resources to produce want-satisfying goods and services; 2.) the situation in which the unemployment rate is equal to the full-employment rate of unemployment and where fractional and structural unemployment occur but not cynical unemployment.
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32.Creative destruction
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– the hypothesis that the creation of new product and production methods simultaneously destroys the market power of existing monopolies.
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33.Freedom of enterprise
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– the freedom of firms to obtain economic resources, to use those resources to produce products of the firm’s own choosing, and to sell their products in markets of their choice.
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34.Medium of exchange
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– any items sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter.
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35.What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: allocating a square block in the heart of New York City for a surface parking lot or allocating a square block at the edge of a typical suburb for such a lot? Explain.
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Opportunity cost is the amount of other products that must be forgone or sacrificed to produce a unit of product. In economics or economic costs for example, relates to opportunity cost in the aspect that the payment must be made to obtain and retain the services of a resource. The New York City square block would have a greater opportunity cost because it would just cost more money than it’s worth to change the lots of the already existing lot.
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36.What are economic resources? What categories do economists use to classify them? Why are resources also called factors of production? Why are they called inputs?
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Economic resources are the land, labor, capital, and entrepreneurial ability that are used in the production of good, services, and productive agents, factors of production. Categories are land, labor, capital, and entrepreneurial. They are factors of production because they produce products or services. Inputs are basically just another word for factors of production. Inputs are basically just another word for factors of production.
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37.How does self-interest help achieve society’s economic goals? Why is there such a wide variety of desired goods and services in a marker system? In what ways are entrepreneurs and businesses at the helm of the economy but commanded by consumers?
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Self-interest is the motivating force of the various economic units as they express their free choices. Self-interest helps achieve society’s economic goals usually by delivering something of value to others. There is such a wide variety of desired goods and goals because of freedom of choice. People are free to choose what they want. Consumers have a demand for certain products and businesses have to meet those demands in order to be successful.

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