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60 Cards in this Set
- Front
- Back
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The cost of any decision is the forgone value of the next best alternative that is not chosen
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Opportunity cost
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Shows the different combinations of various goods that a producer or an economy can turn out given available resources and existing technology
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Production Possibilities Frontier
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The opportunity cost of production is given by the ? of the production possibilities frontier.
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slope
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As the production of one good expands, the opportunity cost of producing another unit of this good generally increases
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Principle of increasing opportunity cost
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What type of good is used to produce goods in the future?
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Capital
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What type of good is for immediate use?
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Consumption
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The PPF will shift out due to what?
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Increases in available capital, better trained labor, technical advance, population growth
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Three coordination tasks of the economy?
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How to utilize resources efficiently.
Allocative efficiently Distribution |
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Form of economic organization in which resource allocation decisions are left to individual producers and consumers acting in their own best interests without central direction
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Market system
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Why does the demand curve have a negative slope?
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Substitutes
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What causes a shift in demand?
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Income
Population Consumer preferences Price of related goods |
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An increase in income leads to an increase in demand for what kind of good?
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Normal
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An increase in income leads to a decrease in demand for what kind of good?
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Inferior
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Why is the slope curve upward sloping?
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principle of increasing costs
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What causes a shift in the supply curve?
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Firm entry/exit
Technological progress Prices of input into production |
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An increase in the price of a good ? supply, while a decrease in input prices ? supply.
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Decreases, increases
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Situation in which there are no inherent forces that produce change
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equilibrium
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Term for analyzing how outside forces will disturb an equilibrium and lead to a new equilibrium values.
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comparative statics
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Sets a legal maximum price that if below the equilibrium cause a shortage.
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Price ceiling
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Legal minimum price which may be charged for a commodity that if above equilibrium causes a surplus
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Price floor
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A minimum wage is a price ? which is set in the labor market.
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Floor
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Combines individual markets into one overall market.
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Aggregation
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Shows the quantity of domestic product that is demanded at each possible value of price level
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Aggregate demand curve
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Shows the quantity of domestic product that is supplied at each possible value of the price level
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Aggregate supply
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When aggregate demand shifts out there is an increase in what?
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Output and price level
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Growth rate of prices over time
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inflation
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Sum of the money values of all final goods and services produced in the domestic economy and sold on organized markets during a specified period of time, usually a year.
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Gross Domestic Product
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Calculated by valuing all outputs at current prices
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Nominal GDP
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Calculated by valuing outputs of different years at common prices
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Real GDP
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Which growth rate is superior for measuring changes in total production?
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Real GDP
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Real GDP per capita formula
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Real GDP/Population
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A good purchased for resale of for use in producing another good
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intermediate goods
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Limitations of GDP
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Black market
Cash or barter transactions Housework |
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Real GDP per capita does not tell us anything about the
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distribution of income
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Name given to the government programs designed to prevent or shorten recessions and to counteract inflation
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Stabilization policy
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Wrote the General Theory of Employment, Interest and Prices in 1936. In some ways, he started the field on macroeconomics and emphasized the need for the stabilization policy by the government.
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John Maynard Keynes
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Measures economic activity within the borders of the U.S. regardless of factor ownership
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GDP
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Measures output by U.S. factors of production no matter where they are located
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GNP-Gross National Product
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The real output that the economy would produce if its labor and other resources were fully employed
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Potential GDP
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Full employment does not imply a ? rate of unemployment
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zero
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The amount of output a worker turns out in an hour of labor
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labor productivity
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labor productivity formula
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GDP/Total hours worked
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Intersection of the labor supply with the production function gives us what?
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Potential GDP
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Growth Rate of potential GDP=
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growth rate of labor input+growth rate of labor productivity
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The number of people having or seeking jobs
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Labor Force
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Those with jobs even if only a part timer who would like to work full time
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Employed
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Unemployment Rate Formula
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(Number of Unemployed/Labor Force)x100
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Unemployment due to normal turnover in the labor marker.
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Frictional unemployment
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Refers to workers that have lost their jobs because they have been displaced by automation, their skills are no longer in demand, changes in the productive structure of the economy, etc.
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Structural unemployment
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Portion of unemployment that is attributable to a decline in the economy's total production
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Cyclical unemployment
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At full employment, the unemployment rate formula
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(structural+frictional unemployed/labor force)x100
Cyclical unemployment=0 |
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Occurs when aggregate demand increases faster than aggregate supply
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Inflation
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Wage rate adjusted for the price level. Indicates the volume of goods and services the money wage will buy.
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Real Wage Rate
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Percentage by which the money the borrower pays back exceeds the money that she borrowed, making no adjustment for any fall in the purchasing power of this money that results from inflation.
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Nominal rate of interest
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Expected percentage increase in real purchasing power that the borrower pays to the lender for the privilege of borrowing.
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Real Rate of Interest
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Real Rate of Interest Formula
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Nominal rate-expected inflation rate
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Difference between the price at which an asset is sole and the price at which it is bought
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Capital gain
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Taxes are paid on what kind of capital gains?
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Nominal
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Legal limits on the maximum permissible interest rate for a particular type of loan
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Usury laws
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Tell you how much purchasing power you are giving up to get some good or service
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Prices transmit information
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