Macroeconomics Questions And Answers – Flashcards
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resources
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the basic categories of inputs used to produce goods and services; also called factors of production
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land
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any natural resource provided by nature that is used to produce a good of service
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labor
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the mental and physical capacity of workers to produce goods and service
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capital
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human made good used to produce other goods and services
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macroeconomics
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studies decision making for the economy as a whole
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microeconomics
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studies decision making by a single individual, household, firm, industry, or level of government
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ceteris paribus
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a Latin phrase that means while certain varibles change, "all other things remain unchanged"
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positive economics
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an analysis limited to statement that are verifiable: the facts
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normative economics
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an analysis based on the value judgement: what should be
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scarcity
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the condition in which human wants are forever greater than the available supply of time, goods and resoucres
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resources are divide into 3 categories
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land, labor, capital
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GDP
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gross domestic product
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3 steps in the model building process
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problem identification, model development, test a theory
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scarcity is a problem
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because human wants are unlimited while resources are limited
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the condition of scarcity
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cannot be eliminated, prevails in poor economics, prevails in rich economics
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the perpetual problem in economics is
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our inability to satisfy everyone's wants with the available resources
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people are forced to make choices because of
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unlimited wants and limited resources
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a factor of production is the same as
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a resource
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a positive economics statement is
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a statement testable by facts
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what type of economic analysis is limited to testable, verifiable statements
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positive economics
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the term ceteris paribus means that
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one influence is changing and everything else is being held constant
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a model is defined as
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simplified description of reality to understand and predict an economic event
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policies to create jobs in the nation is the concern of
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macroeconomics
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a normative economics statement is
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a statement of opinion which advocates a particular position
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microeconomics approaches the study of economics from the viewpoint of
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individual economics units, such as consumers, firms, and units of government
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3 fundamental economics questions
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what to produce, how to produce, for whom to produce
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opportunity cost
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the best alternative sacrified for a choosen alternative
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3 basic assumptions underlie the production possibilities curve model
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fixed resources, fully employed resource, technology unchanged
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because of the problem of scarcity, each economic system must make which of the following choice?
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how to produce, what to produce, for whom to produce
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which fundamental economic question is most closely related to the issues of the income distribution and poverty
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the for whom to produce question
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which fundamental economics question requires society to choose the technological and resource mix use to produce goods
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the how to produce question
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the opportunity cost of an economic decision is
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the best alternative that was sacrificed
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on a production possibilities curve, the opportunity cost of good x, in terms of good y, is represented by the:
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movement along the curve
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in the context of the production possibilities curve, opportunity cost is measured in
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the quantity of other goods given up
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any point on the production possibilities curve illustrates
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maximum production combination
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production possibilities curve analysis includes the idea of
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opportunity cost, scarcity, maximum production choices
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which of the following would be most likely to cause the production possibilities curve for computer and education to shift outward?
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an increase in the quantity of resources
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Given a production possibilities curve, a point
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inside the curve represent unemployed, on the curve represent full employment, outside the curve is currently unattaintable
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As production of a good increases, opportunity costs rise because
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workers are not equally suited to all taskes
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If society leaves some of its resources unemployed, then it will be operating at a point:
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beneath its production possibilities curve
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The ability of an economy to produce greater levels of output in the same period of the time is called
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economic growth
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law of demand
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the principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period
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demand
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a curve or scheduled showing the various quantity of product consumers are willing to purchase at possible prices during a specified period of time
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change in quantity demanded
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a movement between point along a stationary demand curve
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change in demand
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an increase (rightward shift) or a decrease (leftward shift) in the quantity demanded at each possible price
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normal good
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any good for which there is a direct relationship between changes in income and its demand curve
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inferior good
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any good for which there is an inverse relationship between changes in income and its demand curve
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substitute good
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a good that competes with another good for consumers purchases
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complementary good
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a good that is jointly consumed with another good
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market
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any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged
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surplus
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a market condition existing at any price where the quantity supplied is greater than the quantity demanded
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shortage
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a market condition existing at any price at where the quantity supplied is less than the quantity demanded
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equilibrium
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a market condition that occurs at any price and quantity at which the quantity demanded and the quantity supplied are equal. "everything is in balance" or "at rest"
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The nonprice determinants of demand are
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the number of buyers, tastes and preferences, income, expectations of future changes in prices, income and availability of good, prices of related goods
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The nonprice determinants of supply are
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the number of sellers, technology, resources prices, taxes and subsides, expectations, prices of other goods
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price ceiling
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a legally established maximum price a seller can charge
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price floor
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a legally established minimum price a seller can be paid
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4 important cases of market failure
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lack of competition, externalities, public goods, income inequality
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externality
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a cost or benefit of a good imposed on the people who are not buyers or sellers of that good
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public goods
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are goods that are consumed by all people in a society regardless of whether they pay or not
