Macroeconomics

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Economics

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study of choice under conditions of scarcity

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Resources classified into four categories:

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labor, capital, land, entrepreneurship

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Macroeconomics

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the study of the behavior of the overall economy

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Opportunity Cost

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what is given up when taking an action or making a choice

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explicit cost

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the dollars sacrificed-- and actually paid out-- for a choice

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implicit cost

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the value of something sacrificed when no direct payment is made

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production possibilities frontier (ppf)

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a curve showing all combinations of two goods that can be produced with the resources and technology currently available

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law of increasing opportunity cost

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the more of something we produce, the greater the opportunity cost of producing even more of it

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productively inefficient

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a situation in which more of at least one good can be produced without sacrificing the production of any other good

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recession

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slowdown in overall economic activity, resources are idle, widespread unemployment

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absolute advantage

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the ability to produce a good or service, using fewer resources than other producers use

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comparative advantage

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the ability to produce a good or service at a lower opportunity cost than other producers

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quantity demanded

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the amount of a good that all buyers in a market would choose to buy during a period of time, given their constraints.

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law of demand

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as the price of a good increases, the quantity demanded decreases

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ceteris paribus

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Latin for "all else remaining the same."

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change in quantity demanded

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a movement along a demand in response to a change in price

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change in demand

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a shirt of a demand curve in response to a change in some variable other than price

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quantity supplied

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the specific amount of a good that all sellers in the market would choose to sell over some time period given a particular price for the good and all other constraints on firms

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equilibrium price

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the market price that, once achieved, remains constant until either the demand curve or supply curve shirts

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equilibrium quantity

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the market quantity bought and sold per period that, once achieved, remains constant until either the demand curve or supply curve shifts

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excess demand

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at a given price, the amount by which quantity demanded exceeds quantity supplied

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economic growth

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the increase in our production of goods and services that occurs over long periods of time

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business cycle

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fluctuations in real GDP around its long-term growth trend

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GDP

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the total value of all final goods and services produced for the marketplace during a given year within the nation's borders

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expenditure approach

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measuring GDP by adding the value of goods and services purchased by each type of final user

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value-added approach

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measuring GDP by summing the values added by all firms in the economy

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factor payments

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payments to the owners of resources that are used in production

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factor payments approach

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measuring GDP by summing the factor payments earned by all households in the economy

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frictional unemployment

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joblessness experienced by people who are between jobs or who are just entering or reentering the labor market

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seasonal unemployment

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joblessness related to changes in weather, tourist patterns, or other seasonal factors

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structural unemployment

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joblessness arising from mismatches between workers' skills and employers' requirements or between workers' locations and employers' locations

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cyclical unemployment

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joblessness arising from changes in production over the business cycle

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full employment

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a situation in which there is no cyclical unemployment

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labor force

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those people who have a job or who are looking for one

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unemployment rate

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the fraction of the labor force that is without a job

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discouraged workers

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individuals who would like a job, but have given up searching for one

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Consumer Price Index

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An index of the cost, through time, of a fixed market basket of goods purchased by a typical household in some base period

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indexed payment

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a payment that is periodically adjusted in proportion with a price index

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substitution bias

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categories of goods whose prices are rising most rapidly are overweighted in the CPI market basket and categories of goods whose prices are rising most slowly are underweighted