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Econ 102 > Chapter 1,6,7,8 Review > Flashcards

Chapter 1,6,7,8 Review Flashcards

1
Q

Economics

A

Is the study if how an individual, family, business, or society makes decisions in the face if scarcity.

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2
Q

Scarcity

A

Reflects the gap between human wants and the limited availability of resources such as goods, services or factors of production.

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3
Q

Adam Smith

A

Considered the founder of modern economics.

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4
Q

Division of Labor

A

The way in which different workers divide required tasks to produce a good or service.

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5
Q

Specialization

A

Workers or firms focus on simpler tasks within a complex production process.

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6
Q

Economies of Scale

A

As the level of production increases, the cost per unit falls.

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7
Q

Microeconomics

A

Focuses on the actions of individual agents within the economy, like households, workers, and businesses.

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8
Q

Macroeconomics

A

Looks at the economy as a whole. Focuses on broad issues such as growth of production, the number of unemployed people, the inflationary increase in prices, government deficits, and levels of exports and imports.

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9
Q

Monetary Policy

A

Interest rates, the availability of credit in the economy, and the extent of borrowing.

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10
Q

Fiscal Policy

A

Government spending and taxes.

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11
Q

John Maynard Keynes

A

As opposed to classical economic thinking, which believed in a minimal role for government, he proposed a much more active role for government especially in times of macroeconomic slow down, in times of recession.

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12
Q

Theory

A
  • Is a simplified representation of how two or more variables interact with each other.
  • More abstract
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13
Q

Models

A
  • Tests theories
  • More applied or empirical representation
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14
Q

Traditional Economy

A

What you produce is what you consume; little economic growth, little efficiency.

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15
Q

Command Economy

A

The government owns the resources, little private property, virtually no markets; Education, health, are provided by the government. Little incentives for improvement.

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16
Q

Market Economy

A

Decentralized decisions, private property, prices determined by markets. High inequality; Markets undersupply public goods and damage the environment.

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17
Q

Mixed Economy

A

Elements of command and market. Most common, virtually all countries are mixed, with wide variations.

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18
Q

Underground Economies

A

Are markets where the buyers and sellers make transactions without the government’s approval.

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19
Q

Globalization

A

An increase in international exchanges in goo and services, capital, and labor.

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20
Q

Exports

A

are the goods and services that one produces domestically and sells abroad.

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21
Q

Imports

A

Are the goods and services that one produces abroad and then sells domestically.

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22
Q

Gross Domestic Product (GDP)

A

Measures the size of total production in an economy.

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23
Q

Trade Balance

A

Gap between exports and imports.

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24
Q

Trade Surplus

A

Exports are larger than its imports (positive balance)

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25
Q

Trade Deficit

A

Imports are larger than its exports (negative balance)

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26
Q

Gross National Product (GNP)

A

Includes what is produced domestically and what is produced by domestic labor and business abroad in a year.

27
Q

Depreciation

A

The process by which capital ages over time and therefore loses its value.

28
Q

Recession

A

A significant decline in GDP

29
Q

Depression

A

An especially lengthy and deep decline in output.

30
Q

Exchange Rate

A

The value or price of one currency in terms of another currency.

31
Q

Standard of Living

A

All elements that affect people’s happiness and well-being, whether they are bought and sold in the market or not.

32
Q

Modern Economic Growth

A

The period of rapid economic growth from 1870 onward.

33
Q

Industrial Revolution

A

Refers to the widespread use of power-driven machinery, and the economic and social changes that resulted in the first half of the 1800s.

34
Q

Rule of Law

A

The process of enacting laws that protect individual and entity rights to use their property as they see fit. Laws must be clear, public, fair, and enforced, and applicable to all members of society.

35
Q

Contractual Rights

A

The rights of individuals to enter into agreements with others regarding the use of their property providing recourse though the legal system in the event of noncompliance.

36
Q

Production Function

A

The relationship between inputs used in production and the quantity of output.

37
Q

Aggregate Production Function

A

A production function extended to the whole economy.

38
Q

Labor Productivity

A

Is the value that each employed person creates per unit of their input.

39
Q

Determinants

A
  • Human capital
  • Technological change
  • Economies of scale
40
Q

Human Capital

A

Is the accumulated knowledge (from education and experience), skills, and expertise that the average worker in an economy possesses.

41
Q

Technological Change

A

Is a combination of invention—advances in knowledge—and innovation, which is putting those advances to use in a new product or service.

42
Q

Compound Growth Rates

A

The rate of growth when multiplied by a base that includes past GDP growth.

43
Q

Physical Capital

A

The plant and equipment that firms use in production; this includes infrastructure.

44
Q

Infrastructure

A

A component of physical capital such as roads and rail systems.

45
Q

Capital Deepening

A

When society increases the level of capital per person.

46
Q

Convergence

A

Happens when poorer countries grow faster than richer countrie

47
Q

Employed

A

Number of persons currently working for pay.

48
Q

Unemployed

A

Out of work and actively looking for a job.

49
Q

Out of the labor force

A

Out of paid work and not actively looking for a job.

50
Q

Labor force

A

Employed + unemployed

51
Q

Adult population

A

Any person 15 and over

52
Q

Employment rate

A

Employed as a percentage of adult population.

53
Q

“Hidden Unemployment”

A

Part-time or temporary workers looking for full-time or permanent work.

54
Q

Underemployed

A

Individuals who are employed in a job that is below their skills.

55
Q

Discouraged workers

A

Those who have stopped looking for employment due to lack of suitable positions available.

56
Q

Labor Force Participation Rate

A

The percentage of adults in an economy who are either employed or who are unemployed and looking for a job.

57
Q

Implicit contract.

A

Which is that the employer will try to keep wages from falling when the economy is weak or the business is having trouble, and the employee will not expect huge salary increases when the economy or the business is strong.

58
Q

Efficiency wage theory

A

Argues that workers’ productivity depends on their pay, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.

59
Q

Adverse selection of wage cuts argument

A

Points out that if an employer reacts to poor business conditions by reducing wages for all workers, then the best workers, those with the best employment alternatives at other firms, are the most likely to leave.

60
Q

Insider-outsider model

A

Argues that those already working for firms are “insiders,” while new employees, at least for a time, are “outsiders.”

61
Q

Relative wage coordination argument

A

Points out that even if most workers were hypothetically willing to see a decline in their own wages in bad economic times as long as everyone else also experiences such a decline, there is no obvious way for a decentralized economy to implement such a plan.

62
Q

Frictional Unemployment

A

Occurs in the meantime, as workers move between jobs.

63
Q

Structural Unemployment

A

Are individuals who have no jobs because they lack skills valued by the labor market, either because demand has shifted away from the skills they do have, or because they never learned any skills.

Econ 102 (1 decks)

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