Global Econ Chap 1

Question 1

definitions

Question 2

circular flow diagram

Answer 2

Diagram that views the economy as consisting of households and firms interacting in goods/service/labour markets

Question 3

command economy

Answer 3

economy where econ decisions are passed down from gov authority and where they have the resources

Question 4

division of labor

Answer 4

how workers are divided to complete required tasks for goods/services

Question 5

economics

Answer 5

the study of how humans make choices under conditions of scarcity

Question 6

exports

Answer 6

products (goods/services) made domestically and sold abroad

Question 7

fiscal policy

Answer 7

econ policies that involve government spending and taxes

Determined by a nation’s legislative body (such as the U.S. Congress)

Question 8

globalization

Answer 8

the trend in which buying/selling in markets has increased crossing national borders

Question 9

gross domestic product (GDP)

Answer 9

measure of size of total production in an economy

Question 10

imports

Answer 10

products (goods/services) made abroad and sold domestically

Question 11

macroeconomics

Answer 11

the branch of econ that focuses on broad issues such as growth, unemployment, inflation, and trade balance

Question 12

market economy

Answer 12

economy where economic decisions are decentralized. private individuals own resources, and businesses supply goods/services based on demand

Question 13

microeconomics

Answer 13

branch of econ focusing on actions of particular agents within the economy. E.g. households, workers, and business firms

Question 14

(model - see theory)
theory

Answer 14

a representation of an object or situation that is simplified while including enough of the key features to help us understand

Question 15

monetary policy

Answer 15

policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing

Determined by a nation’s central bank (such as the Federal Reserve in the U.S.)

Question 16

scarcity

Answer 16

when human wants for goods and services exceed the available supply

Question 17

specialization

Answer 17

when workers or firms focus on particular tasks for which they are well-suited within the overall production process

Question 18

traditional economy

Answer 18

typically an agricultural economy where things done have remained the same as they have always been

Question 19

underground economy

Answer 19

a market where the buyers/sellers make transactions in violation of one or more government regulations

Question 20

Key concepts

Answer 20

Welcome to Econ

Question 21

What Is Econ?

Question 22

Why Is econ Important?

Answer 22

Econ is not just facts to memorize, Instead, econ is a collection of questions to answer or puzzles to work. Most
importantly, economics provides the tools to solve those puzzles.

Question 23

FRED?

Answer 23

Federal Reserve Economic Data is a database maintained by the Research division of the Federal Reserve Bank of St. Louis

Question 24

how does scarcity become a problem?

Answer 24

through the decision families, towns, corporations and governments make regarding the reason they have need and want.

Question 25

why does division of labour increase production through specialisation

Answer 25

specialization allows workers to focus on the parts of the production process People have different skills, talents, education and interests, so they will be better at some jobs than at others.
Second, workers who specialize in certain tasks often learn to produce more quickly and with higher quality
Third, specialization allows businesses to take advantage of economies of scale, which means that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

Question 26

compare micro and macro economics

Answer 26

Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses. Macroeconomics looks at the economy as a whole. It 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.

Question 27

what is the purpose of a theory?

Answer 27

A theory is a simplified representation of how two or more variables interact with each other. The purpose of a theory is to take a complex, real-world issue and simplify it down to its essentials.

Question 28

why is a theory important?

Answer 28

If done well, this enables the analyst to understand the issue and any problems around it. A good theory is simple enough to understand, while complex enough to capture the key features of the object or situation you are studying.

Question 29

theory vs model

Answer 29

Strictly speaking, a theory is a more abstract representation, while a model is a more applied or empirical representation. We use models to test theories.

Question 30

circular flow diagram

Answer 30

It pictures the economy as consisting of two groups—households and firms—that interact in two markets: the goods and services market in which firms sell and households buy and the labor market in which households sell labor to business firms or other employees.

Question 31

3 ways societies organise economies

Answer 31

traditional, command and makret

Question 32

how do traditional economies work?

Answer 32

Traditional economies organize their economic affairs the way they have always done (i.e., tradition). Occupations stay in the family. Most families are farmers who grow the crops using traditional methods. What you produce is what you consume. Because tradition drives the way of life, there is little economic progress or development.

Question 33

how do command economies (Planned economy) work?

Answer 33

In a command economy, economic effort is devoted to goals passed
down from a ruler or ruling class the government decides what goods and services will be produced and what prices it will charge for them. The government decides what methods of production to use and sets wages for workers.
The government provides many necessities like healthcare and education for free. Currently, Cuba and North Korea have command economies.

Question 34

how do market economies work?

Answer 34

In a market economy, decision-making is decentralized. Market economies are based on private enterprise: the private individuals or groups of private individuals own and operate the means of production (resources and businesses). Businesses supply goods and services based on demand

Question 35

Most Economic Freedom
1. Hong Kong
2. Singapore
3. New Zealand
4. Switzerland
5. Australia
6. Canada
7. Chile
8. Ireland
9. Estonia
10. United Kingdom
11. United States
12. Denmark
(as of 2016)

Answer 35

Least Economic Freedom
167. Timor-Leste
168. Democratic Republic of Congo
169. Argentina
170. Equatorial Guinea
171. Iran
172. Republic of Congo
173. Eritrea
174. Turkmenistan
175. Zimbabwe
176. Venezuela
177. Cuba
178. North Korea

Question 36

rules of the game

Answer 36

Regulations always define the “rules of the game” in the economy. Economies that are primarily market-oriented have fewer regulations—ideally just enough to maintain an even playing field for participants. At a minimum, they safeguard private property against theft, enforcing legal contracts, preventing fraud, and collecting taxes. Conversely, even the most command-oriented economies operate using markets.

Question 37

how does social media impact economics?

Answer 37

Economics is greatly impacted by how well information travels through society. Today, social media giants Twitter, Facebook, and Instagram are major forces on the information superhighway

Question 38

who was adam smith?

Answer 38

Adam Smith introduced the idea of dividing labor into discrete tasks, in his famous 1776 book, titled The Wealth of Nations.

Question 39

who was john maynard keynes?

Answer 39

Keynes was one of the most influential economists in modern times and thought that economics teaches you how to think, not what to think.

Question 40

what do real world economies look like?

Answer 40

Most economies in the real world are mixed. They combine elements of command, traditional, and market systems. The U.S. economy is positioned toward the market-oriented end of the spectrum. Many countries in Europe and Latin America, while primarily market-oriented, have a greater degree of government involvement in economic decisions than the U.S. economy. China and Russia, while they have moved more in the direction of having a market-oriented system, remain closer to the command economy end of the spectrum.