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48 Cards in this Set

  • Front
  • Back
criteria for judging economic outcomes
efficient economy
produces what people want at least cost possible.
allocative efficiency
national output growing steadily

low inflation

ful employment of resources
decreased output rising unemployment
theory of comparative advantage
specialization and free trade will benefit all trading parties
absolute advantage
produce product using fewer resources
comparative advantage
produce product at lower opportunity cost
shows combinations of goods/services that can be produced if society's resources are used efficiently

unemployment=inside ppf
economic growth
increase in total output of an economy. occurs when society acquires new resources/when it learns to produce more w/ current resources
consumer sovereignty
conusmers dictate what is produced by choosing what to purchase
normal goods
D goes up when income is high, down when income is low
inferior goods
goods for which demand falls when income rises
ex:bus rides
determinants of household demand
prices of other goods/services
determinants of supply
price of good
cost of production
prices of related products: beef/leather
price rationing
process by whihc market system allocates goods to consumers when D>S
fiscal policy
taxes and expenditures
monetary policy
tools used by fed reserve to control quantity of money in economy
supply-side policies
gov policies that focus on stimulating agg supply instead of agg demand
macro focuses on 4 groups
households/firms(private sector)
gov(public sector)
rest of the world(int'l sector)
transfer payments
cash payments made by gov to ppl who do not supply goods, services, labor in exchange

social security benefits
veterans' benefits
welfare payments
3 market arenas
treasury bonds, notes, bills
promissory notes issued by fed when it borrows $
corp bonds
promissory notes issued by corps
shares of stock
financial instruments that give to holder a share in firm's ownership/right to share firm's profits
portion of corp's profits that firm pays out each period to shareholders
total market value of all final goods and services produced w/in given period by factors of production located w/in a country
value added
value of goods as they leave the stage - cost of goods as they entered the stage
what does GDP ignore
all transactions where $/goods change hands but no new goods/services produced
calculate GDP
sum up value added at each stage of production
take value of final sales
total market value of final goods/services produced w/in given period by factors of production owned by a country's citizen, regardless of where
expenditure approach
calc gdp: amt spent on all final goods during given period

GDP = C+I+G+(EX-IM)total market value of final goods/services produced w/in given period by factors of production owned by a country's citizen, regardless of where
income approach
calc gdp: income: waves, rents, interest, profits-received by all factors of production in producing final goods
expenditure categories
-personal (C) :consumer goods
-gross private domestic investment (I):spending by firms/households on new capital
-gov (G)
-net exports (EX-IM):net spending by rest of world
residential investment
expenditures by households and firms on new houses/apt buildings
gross investment
total value of all newly produced capital goods produced in a given period
net investment
gross investment-depreciation

measure of how much stock of capital changes during a period
capital at the end of the period
capital at the beginning + net investment
income approach
GDP=national income+depreciation+(indirect taxes-subsidies)+net factor payments to the world+other
proprietors' income
income of unincorporated businesses
rental income
income received by property owners in form of rent
national income
compensation of employees
proprietors' income
corporate profits
net interest
rental income
indirect taxes
sales taxes, customs duties, license fees
net factor payment to the rest of the world
payments of factor income to the rest of the world minus receive of factor income from the rest of the world
personal income
national income - (corporate profits-dividends)- (social insurance payments)+(interest income recieved from gov/households)+(transfer payments to households)
disposable personal income/after-tax income
personal income minus personal income taxes

amt households have to spend or save
nominal GDP
GDP meausred in current dollars
GNP converted to dollars using avg of currency exchange rates over several years adjusted for rates of infaltion