American Political Economy

Front 1

People Face Tradeoffs. Which principle is this?

Back 1

Principle #1

Front 2

The Cost of Something Is What You Give Up To Get It. Which principle?

Back 2

Principle #2

Front 3

Rational People Think at the Margin. Which principle?

Back 3

Principle #3

Front 4

People Respond to Incentives. Which principle?

Back 4

Principle #4

Front 5

Trade Can Make Everyone Better Off. Which principle?

Back 5

Principle #5

Front 6

Markets Are Usually A Good Way to Organize Economic Activity. Which principle?

Back 6

Principle #6

Front 7

Government Can Sometimes Improve Market Outcomes. Which principle?

Back 7

Principle #7

Front 8

The Standard of Living Depends on a Country's Production. Which principle?

Back 8

Principle #8

Front 9

Prices Rise When the Government Prints Too Much Money. Which principle?

Back 9

Principle #9

Front 10

Society Faces a Short-run Tradeoff Between Inflation and Unemployment. Which principle?

Back 10

Principle #10

Front 11

What does the word Economy mean?

Back 11

"One who manages a household"

Front 12

What is the definition of Economics?

Back 12

The study of how society manages its scarce resources

Front 13

What decision do both a household and an economy face?

Back 13

Who will work?
What goods and how many of them should be produced?
What resources should be used in production?
At what price should the goods be sold?

Front 14

Why is the management of society's resources important?

Back 14

Because resources are scarce

Front 15

What does scarcity mean in APE?

Back 15

That society has limited resources and therefore cannot produce all the goods and services people wish to have.

Front 16

Principles 1-4 deal with what?

Back 16

How people make decisions

Front 17

Principles 5-7 deal with what?

Back 17

How people interact with each other

Front 18

Principles 8-10 deal with what?

Back 18

The forces that affect how the economy as a whole works

Front 19

Efficiency means...?

Back 19

Society gets the most that it can from its scarce resources

Front 20

Equity means...?

Back 20

The benefits of those resources are distributed fairly among the members of society.

Front 21

What is the Opportunity Cost?

Back 21

What you give up to obtain that item

Front 22

Marginal changes are...?

Back 22

Small, incremental adjustments to an existing plan of action

Front 23

People make decisions by...?

Back 23

Comparing the costs and benefits at the margin

Front 24

The Rational person will establish a/an...?

Back 24

cost/benefit analysis

Front 25

The decision to choose one alternative over another occurs when...?

Back 25

That alternative's marginal benefits exceed its marginal costs

Front 26

Trade allows people to...?

Back 26

Specialize in what they do best

Front 27

Competition results in...?

Back 27

Gains from trading

Front 28

People gain from...?

Back 28

Their ability to trade with one another

Front 29

What motivates people to respond?

Back 29

Marginal changes in costs or benefits

Front 30

What is a Market Economy?

Back 30

An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

Front 31

Adam Smith made the observation...?

Back 31

That households and firms interacting in markets act as if guided by an invisible hand

Front 32

Households and firms unknowingly take into account the social costs of their actions because they...?

Back 32

Look at prices when deciding what to buy and sell

Front 33

Because households and firms take social costs of their actions into account prices guide decision makers to...?

Back 33

Reach outcomes that tend to maximize the welfare of society as a whole

Front 34

Market Failure occurs when?

Back 34

The market fails to allocate resources efficiently

Front 35

The government can intervene to promote efficiency and equity when...?

Back 35

The market fails

Front 36

Market failure can be caused by either...?

Back 36

An externality or market power

Front 37

An externality is...?

Back 37

The impact of one person or firm's actions on well-being of a bystander

Front 38

Market power is...?

Back 38

The ability of a single person or firm to unduly influence market prices

Front 39

Standard of living can, economically speaking be measured in what two ways?

Back 39

By comparing personal incomes
OR
By comparing the total market value of a nation's production

Front 40

Almost all variations in living standards explained by what?

Back 40

The differences in countries' productivities