ECON topic1-EXAM#1 Flashcards Preview

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Flashcards in ECON topic1-EXAM#1 Deck (59):
1

economics is about people as decision makers

time is a scarce resource

2

what are the 4 main categories of people (decision makers) in the economy

consumers, firms, government, and the rest of the world.

3

C+I+G+(EXP-IMP)=

AE- aggregate expenditure

4

Aggregate expenditure is

reps the demand side of the economy which is a strong predictor of production and unemployment

5

what is the heart of economics

decision making

6

people make decisions because

resources are scarce

7

resources are scarce because

people want more than they need (unlimited wants)

8

scarcity

refers to the limited nature of societies resources

9

all decisions involve what

trade-offs

10

the cost of something is everything you give up to get it

opportunity cost

11

scarcity pushes people to make choices,

each choice involves a trade-off (opp. cost)

12

people respond to what

incentives

13

incentive

something that determines a person to act, i.e. to prospect of a reward or punishment

14

market

a group of buyers and sellers

15

free market

many decision makers

16

command economy

one decision maker with no incentives

17

markets are usually a good way to

organize economic activity

18

organize economic activity

what, how, how much, who

19

are signals that guide the allocation of resources in a market economy

prices

20

-tend to go to extremes
-mkt power (monopoly)
-public goods (highway)

markets are not perfect, the government can improve them with economic policies

21

roles of government (2)

1. enforce property rights and rule of law
2. provide public goods

22

exernalities

taken to produce a benefit, but comes with side effects
ex: second hand smoke

23

government may alter market outcome to promote efficiency by correcting what

market failures

24

causes of market failure (2)

1. exernalities, when the production or consumption of a good affects bystandards (pollution)
2. market power, a single buyer or seller has substantial influence on the market price (monopoly)

25

macroeconomics refers to

policy making in economics

26

a country`s standard of living depends on

its ability to produce goods and services

27

the most important determinant of living standards is

productivity, the amount of goods and services produced per unit of labor

28

production depends on what (4)

education, skills, technology, and equipment (capital) available to workers

29

what is the most important economic process?

production

30

production is the process that transforms scarce resources into

useful goods and services

31

this is the outputs of the production process

goods and services

32

resources or factors of production are the what into the production process?

inputs

33

inputs=factors of production=resources

anything provided by nature and previous generations that can be used in production (to satisfy human needs)

34

what are the 4 types of resources?

1. labor
2. capital
3. land
4. entrepreneurship

35

the physical and mental potential that people contribute in the production of goods and services

labor

36

goods that are themselves produced and used in the future production of other goods and services

capital

37

is the physical space in which production takes place, as well as the natural resources found under it or on it, such as oil, iron, coal, and lumber

land

38

the special skill of organizing labor, land, and capital, for production. start a new business, develop new production techs, and introduce new products

entrepreneurship

39

what is the only way of producing new capital

investment

40

investment

the process of using resources to produce new capital

41

the opportunity cost of investment in new capital is the

forgone consumption

42

the economy behaves differently in the

SR than in the LR

43

in the SR, the major objective is (2)

production and unemployment

44

in the LR, the major objective is (1)

economic growth

45

unemployment

the group of people, in the labor force, that do not have a job despite their efforts to find one

46

economic growth

the speed or rate at which production increases

47

main sources of economic growth (3)

1. better education- human capital accumulation
2. technological innovations (thru research and development)
3. physical capital accumulation (via investment)

48

what can make everyone better off

trade

49

produce what your best in one good or service and exchange it for other goods and services

specialization

50

why do countries benefit from trade and specialization (2)

1. get a better price abroad for goods and services
2. buy goods that cannot be produced domestically

51

what are the 3 basic economic questions any society has to answer because of scarcity

1. what gets produced?
2. how is it produced? (labor, capital)
3. who gets what is produced?

52

a production arrangement that transforms society`s scarce resources into useful goods and services

economic system

53

two economic visions

-the capitalistic vision
-the socialist vision

54

what is core mechanism in capitalistic vision

price system

55

what are the 3 main benefits of government intervention? (mixed system)

1. minimize market inefficiencies
2. provide public goods
3. stabilize the economy thru economic policies

56

what is a normal inflation rate?

3%

57

income inequality

min wage

58

SR benefits and LR consequences

entry to work force will be lowered and the solution is in the LR

59

crisis are opportunities to

learn and innovate