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Macroeconomics > Exam 1 > Flashcards

Exam 1 Flashcards

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1
Q

Economic Problem

A

Goods and resources are limited, yet Consumers have unlimited wants and needs.

So both producers (sellers) and consumers (buyers) must make decisions

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2
Q

Market

A

Centrality of interaction of consumers and producers

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3
Q

Adam Smith

A

-Wealth of Nations 1776
-Founder of ‘classical’ economic theory
-Enlightenment “laws of nature” , he saw human behavior driven by self- interest
-Invisible Hand

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4
Q

Invisible Hand

A

All market participants (producers/sellers and consumers/buyers) will pursue their self-interest in a competitive market environment

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5
Q

Market forces

A

price
demand
supply
quantity

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6
Q

Macroeconomics

A

Large Systems

-Nations
-Legal Systems
-Economies

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7
Q

Mesoeconomics

A

Medium Systems

Orgs.
Communities
Political Parties
Ethnic Groups

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8
Q

Microeconomics

A

Small Systems

Families
Relationships
Individuals

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9
Q

Key issue in economics

A

Different people have different tastes and preferences

Different background and tools of analysis

-Education
-Experiences
-Ideological
-Bias

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10
Q

Branches of Macroeconomics

A
  • Classical / Free Market
  • Keynesian
  • Marxist
  • Austrian
    -Mercantilism
    -Monetarist
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11
Q

Marxist

A

Interpret world only in economic terms

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12
Q

Political Economy

A

study of role of govt. in macroeconomics

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13
Q

Economic Spectrum

A
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14
Q

Counter Factual “Fake News”

A

interpretations, claims and theories that are just false or inaccurate

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15
Q

Sources of reliable, accurate, precise information

A

Qualitative
Quantitative

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16
Q

Models

A

a statement of a theory that has relationship between certain assumptions (constants) and variables (changeable) and expectations/results/consequences

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17
Q

Variable

A

A measure that can change from time to time or from observation to observation.

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18
Q

Constants

A

Holding a variable unchanged or constant in a bid to analyze other variables

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19
Q

What models try to achieve

A

-Explain the present and past and offer predictive possibilities

-Models are generally valid when the behavior they analyze can be replicated and repeated

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20
Q

Graphs

A

Visual Representation of written model

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21
Q

Supply and Demand Graph

A
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22
Q

Positive Economics

A

Seeks to understand behavior and decision-making and systems operations without making judgements

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23
Q

Normative / Policy Economics

A

analyze the problem and situation or behavior
Evaluates the result as ‘good’ or ‘bad’

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24
Q

Empirical Economics

A

Rely upon statistics and quantitative analysis to analyze situation

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25
Behavioural Economics
Rely upon psychology, sociology and institutional economics concepts and theories to analyze the situation Rational, bounded rationality and irrationality
26
Rational Choice
using facts (data or information), logic and reason in the market (market forces of supply and demand with market clearing equilibrium point) to further their self interest.
27
Scarcity
Natural limitation in a availability of a resource
28
Shortage
Temporary man-made unavailablity
29
Irrational Choice
seeking gratification rather than maximizing or satisfying utility or benefits No attempt at or ignoring rational choice
30
How to address market failure
Rationing
31
Constraints
Shortages + Scarcities that people face
32
Needs
Necessities / Essential for survival
33
Wants
Desires / Not essential for survival
34
Expectations
prospects, beliefs, hope, or probability from the (future) result of a decision. Usually in the long-term
35
Rational Choice Theory
people will use information and logic to weigh the various options of costs and benefits to gain the maximum utility (satisfy their self interest) at the lowest price
36
Economic utility
used to determine the worth or value of a good or service
37
Law of Diminishing Returns
As additional units of a variable input are combined with a fixed input, at some point the additional output starts to diminish
38
Opportunity Cost
What one gives up when a choice is made over another - Money , Time , or Resources either now or in the future - Cost of the best rejected opportunity and is hidden or implied
39
Sunk Cost
Occurred in the past and has no relevance to estimates of future costs and revenues related to an alternative
40
Deliberate Shortage
Luxury goods in short supply (shortage) by definition Deliberate shortage and high quality justifies high price: niche market
41
Malthusian World
- Thomas Malthus 1766 - 1834
42
Economic Growth
an increase in the amount of goods and services produced per head of the population over a period of time:
43
Economic Development
the expansion of capacities that contribute to the advancement of society through the realization of individual, firm and community potential
44
Negative Externality
Imposed costs on economy
45
Positive Externality
Imposed Benefits on economy
46
Marginal
Additional
47
Marginal Analysis
Used to assist people in allocating their scarce resources to maximize the benefit of the output reduced (Getting most value for the resources used)
48
Alfred Marshall (1842 - 1924)
Neo classical economist
49
Marginal Cost
The cost of producing or servicing or buying 1 additional unit
50
Marginal Revenue
Utility / Benefit from producing (or consuming 1 additional unit As long as MB>MC, continue to produce
51
Diminishing Marginal Utility
The amount of satisfaction provided by the consumption of every additional unit of a good decrease as we increase the consumption of that good
52
Scissors Graph
Aim is to find where the marginal benefit (satisfaction from additional unit) equals the marginal cost (cost per additional unit)
53
Marginal Benefit measured in:
Measured in quality: utility, satisfaction, time, or effort, or opportunity cost
54
Information Cost
The penalty or cost (lost utility/benefit) from lack of sufficient or too much information (or experience) to make decision
55
Factors of Economic Growth/Development
1. Natural Resources 2. Phys. Capital / Infrastructure 3. Population / Labor 4. Human Capital 5. Technology 6. Law
56
GDP
Total production of goods and services in the economy
57
World Economy classifications
- Advanced economies - In transition - Less developed - Least developed
58
Characteristics of Developing Economies
1. Low standard of living 2. Low levels of productivity 3. Low levels of savings 4. High population growth 5. Primary sector dominates 6. Unfavorable laws and policies 7. High unemployment / under-employment 8. Low economic power on the international stage
59
NICs (Newly Industrialized Countries) include:
-Mexico -Brazil -Turkey -South Africa -India -Singapore -Hong Kong -Taiwan -Thailand
60
BRICS
Fastest developing states Brazil Russia India China South Africa
61
Characteristics of Developed Countries
1. High level of income + consumption 2. High standard of living 3. Better QOL of people 4. High literacy rate and life expectancy 5. Low infant mortality rate 6. Advanced in industry + technology 7. Low rate of population growth 8. Low birth + death rate
62
OECD (Organization for Economic Co-operation and Development)
international organization that works to build better policies for better lives. Our goal is to shape policies that foster prosperity, equality, opportunity and well-being for all.
63
Socioeconomic Status
The social standing / class of an individual / group. Often measured as combination of education + income + wealth + occupation
64
Luddite
a person opposed to new technology or ways of working
65
Political Ideology (Progressive / Conservative favor:)
Progressive often in favor of economic and social changes Conservatives want to preserve/maintain the past/present
66
Aggregate supply curve
67
Benefits of Economic Growth
1. Higher employment 2. Improved business confidence 3. Increased tax revenues 4. Improved living standard 5. Higher investment 6. Potential environment benefits 7. Improvement in welfare
68
Commodity
a raw material or primary agricultural product that can be bought and sold, such as copper or coffee:
69
Capital Assets
Have a price(value): property, goods (equipment), money and human capabilities Financial Assets often referred to as capital
70
Investment
The act of redirecting resources from being consumed today so that they may create benefits for the future
71
Entreprenuer
a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so
72
Productivity
Output / Input
73
How is Law an Economic Growth Factor?
Fair and objective courts and laws that protect the rights of producers and consumers
74
GNP (Gross National Product)
GNP - GDP + net property income from abroad
75
Real GDP
The value of final goods and services produced in a given year expressed in the prices of the base year. Real / Constant
76
Nominal GDP
The value of the final goods and services produced in a given year expressed the the prices of that same year. Nominal / Current
77
Costs of Economic Growth
1. Inflation 2. Use of non - renewable resources 3. Inequality 4. Disease of affluence 5. Congestion 6. Pollution 7. Current account deficit
78
Income
Flow of money going to factors of production
79
Wealth
The current value of a stock of assets owned by someone or society as a whole.
80
Income Inequality
the degree to which total income is distributed unevenly throughout a population.
81
Phillips Curve
Lower unemployment associated with higher inflation and vice versa
82
Hyperinflation
When prices rise more than 50% in a month
83
Gresham's Law
the tendency for money of lower intrinsic value to circulate more freely than money of higher intrinsic and equal nominal value (often expressed as “Bad money drives out good”).
84
Keynesian
Govt. Intervention
85
Stagflation
- Low GDP - High inflation rates - High unemployment
86
Marxist
State Control
87
Austrian
Free market
88
Mercantilism
Protectionism
89
-Monetarist
Free market / control money
90
Deflation
reduction of the general level of prices in an economy:
91
Deflationary Spiral
When price levels decline, leading to lower production, reduced wages, decreased demand, and continued price declines. Deflation can ripple through the economy, causing some consumers and companies to default on debt obligations

Macroeconomics (3 decks)

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