Principles of Macroeconomics – Chapter 2 – Flashcards
Unlock all answers in this set
Unlock answersquestion
capital
answer
things that are produced and then used in the production of other goods
question
factors of production
answer
inputs into production; resources
question
production
answer
the process that transforms scarce resources into goods and services
question
inputs
answer
resources used in production
question
outputs
answer
goods or services useful to a household
question
theory of comparative advantage
answer
theory that specialization and trading will benefit all parties, even if one is an "absolutely" more efficient producer
question
absolute advantage
answer
ability to produce the same output with fewer resources
question
comparative advantage
answer
ability to produce the same output with lower opportunity cost
question
consumer goods
answer
goods produced for present consumption
question
investment
answer
the process of using resources to produce new capital
question
production possibility frontier
answer
all combinations of goods or services that can be efficiently produced
question
output efficiency
answer
producing what consumers want
question
production efficiency
answer
using all resources in the economy
question
marginal rate of transformation (MRT)
answer
slope of the PPF
question
economic growth
answer
an increase in an economy's total output
question
command economy
answer
central government directly or indirectly sets output targets, prices, or incomes
question
laissez-faire economy
answer
economy in which individuals and units pursue their own self-interest
question
market
answer
institution through which buyers and sellers interact and exchange goods
question
consumer sovereignty
answer
the idea that consumers ultimately dictate what will be produced by choosing what to purchase
question
free enterprise
answer
the ability of individuals to start and operate private businesses
