Basic concepts issues and relationships of macroeconomics part 1 Flashcards
What is economics?
A social science that studies how societies allocate scarce resources to meet virtually limitless wants.
What are the two branches of economics?
- Microeconomics
- Macroeconomics
Define a theory in economics.
A plausible or scientifically acceptable general principle or body of principles offered to explain phenomena.
What is a model in economics?
A physical representation that shows what an object looks like or how it works.
What is a random variable?
A variable whose value is unknown or a function that assigns values to each of an experiment’s outcomes.
What is an independent variable?
A factor or phenomenon that causes or influences another associated factor or phenomenon called a dependent variable.
What is a dependent variable?
A factor or phenomenon that is changed by the effect of an associated factor or phenomenon called the independent variable.
What does microeconomics analyze?
The behavior of individual households, firms, or markets.
What is the focus of macroeconomics?
The working of the national economy as a whole and its interaction with other economies.
What are some aggregates studied in macroeconomics?
- Total employment
- National income
- National output
- Total investment
- Total consumption
- Total savings
- Aggregate supply
- Aggregate demand
- General price level
- Wage level
- Cost structure
What are the three schools of thought in macroeconomics?
- Classical
- Keynesian
- Monetarists
Who are some notable contributors to classical economics?
- Adam Smith
- David Ricardo
- Thomas Malthus
- Anne Robert Jacques Turgot
- John Stuart Mill
- Jean-Baptiste Say
- Eugen Böhm von Bawerk
What is laissez-faire in economics?
A looser market strategy that prefers minimal government interference with market exchanges.
What do classical and neoclassical economists believe about full employment?
The economy is at full employment and any departures will be corrected automatically by the free market.
What is Keynesian economics?
An economic theory that advocates for a controlling role for central governments in economic affairs.
What do Keynesian economists believe can control the economy?
Manipulating the demand for goods and services.
What is the main criticism of Keynesian economics by monetarists?
Monetarists focus on controlling the money supply in the economy, while Keynesians focus on government expenditures.
True or False: Classical economists believed involuntary unemployment could occur in capitalist economies.
False
Fill in the blank: Classical economists favored _______ and competition among workers and businesses.
free trade
