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Flashcards in Chapter 3 Deck (29):
1

What makes gold valuable is its

relative scarcity

2

Smith says we are wealthy if

we consume valuable stuff

3

In order to consume something of value,

we must create that value

4

Value is created

through production and through trade

5

The production process

turns inputs into consumable outputs

6

Consumable outputs

are goods and services

7

Natural Resources/land are

tangible, but not produced, and are priced with rent.

8

Labor is

the physical and mental talents applied to production. Priced by wage.

9

Capital is

the produced means of production. Priced by interest

10

Entrepreneurship is

risk taking/bearing and innovation. Priced by profit.

11

Middlemen are often said to be

ones who do not change the value of the product that the final consumer uses

12

Technology is

the way inputs are combined to produce output.

13

Karl Marx thought that technology caused

unemployment

14

The make work fallacy

is the idea that jobs are valuable, whether or not the labor's production adds value

15

The production possibilities frontier (PPF) is

a simplified way of understanding the production tradeoffs that are made in an economy

16

The PPF Model assumes

only two goods are produced over some time period, there is a fixed amount of resources, and there is a given technology.

17

Applying the principle of optimal arrangement of two goods where resources are not all the same results in

the law of increasing opportunity cost.

18

The law of increasing opportunity costs states

that as more of a good is produced, the opportunity cost of producing a unit of that good rises

19

PPF only shows

possibilities, not preferences. it can't tell us "what is best"

20

A market economy answers the question of how much to produce

through the spontaneous order of the market

21

Wealth is

about having valuable stuff

22

In a market economy

all choices are made based on value.

23

On the PPF, choices in blue (under the curve) are

attainable, but inefficient.

24

On the ppf, choices in green are

not yet attainable.

25

To achieve the green portion of the PPF,

economic growth has to happen.

26

Economic growth is

the expansion of an economy's productive capabilities.

27

For individuals and for entire economies, income and wealth depend on

quantity of resources, quality of resources, and the freedom to use those resources.

28

Individuals upgrade their labor by education and training through

development of human capital.

29

Freedom in a market economy

gives incentives for greater creation of value.