Macroeconomics–Hubbard and O’Brien Chapter 1 – Flashcards
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scarcity
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A situation in which unlimited wants exceed the limited resources available to fulfill those wants.
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Economics
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The study of the choices people make to attain their goals, given their scarce resources.
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Economic model
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A simplified version of reality used to analyze real-world economic situations.
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Market
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A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
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Marginal analysis
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Analysis that involves comparing marginal benefits and marginal costs.
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Trade-off
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The idea that because of scarcity, producing more of one good or service means producing less of another good or service.
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Opportunity cost
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The highest-valued alternative that must be given up to engage in an activity.
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Centrally planned economy
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An economy in which the government decides how economic resources will be allocated.
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Market economy
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An economy in which the decisions of households and firms interacting in markets allocate economic resources.
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Mixed economy
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An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
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Productive efficiency
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A situation in which a good or service is produced at the lowest possible cost.
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Allocative efficiency
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A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it.
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Voluntary exchange
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A situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction.
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Equity
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The fair distribution of economic benefits.
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Economic variable
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Something measurable that can have different values, such as the wages of software programmers.
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Microeconomics
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The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
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Macroeconomics
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The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
