Macroeconomics Test

Front 1

Economics

Back 1

Study of the way scarce resources are allocated to satisfy competing human wants

Front 2

Scarce

Back 2

Human wants being greater than the means to achieve them

Front 3

Methods of Allocation

Back 3

Seinority, Merit, Lottery, Willingness to pay, Needs, competition, First come first serve

Front 4

Opportunity Cost

Back 4

The opportunity cost of doing ________ is the next best alternative forgone

Front 5

Economic System

Back 5

A set of rules that determines how a society answers the Big Three Questions

Front 6

"Big Three" Questions

Back 6

1. What to produce
2. How to produce
3. How to allocate

Front 7

Capitolism / Market economy

Back 7

Q1. Private suppliers decide based on profits.
Q2. Cost minimization
Q3. Willingness to pay

Front 8

Market

Back 8

An arrangement where buyers and sellers exchange info. and trade

Front 9

Types of property

Back 9

Real - good or service
Financial - money, deposit,etc
Intellectual - Ideas (trademark)

Front 10

Value of trade

Back 10

1. Differences in preferences
2. Benifits from division of labor

Front 11

Marginal Cost (MC)

Back 11

The additional cost incurred for producing or consuming one extra unit of something; ex. Spagetti

Front 12

Differences in productivity

Back 12

1. Absolute advantage - Fastest
2. Comparative advantage - Lower opportunity cost

Front 13

Productivity

Back 13

The amount someone can produce w/ certian resources

Front 14

Demand curve

Back 14

Relationship between price and quantity demanded

Front 15

Law of Demand

Back 15

Decrease in price will cause quantity demanded to increase

Front 16

Cause of Demand shifting

Back 16

1. Preferences
2. Income
3. Price of other goods
4. Expected future price
5. # of potential customers

Front 17

Perfect Competition

Back 17

-Perfect info.
-Many buyers and sellers
-No single individual or firm can influence price

Front 18

Cause of Supply shifting

Back 18

1. Input cost
2. Technology
3. # of suppliers
4. Shocks

Front 19

Elasticity

Back 19

Measure of buyer / seller sensitivity to prices

Front 20

Elastic

Back 20

More sensitive

Front 21

Inelastic

Back 21

Less sensitive

Front 22

Macroeconomics

Back 22

Study of the economy of a country as a whole

Front 23

GDP def.

Back 23

The market value of ALL final goods & services produced in a country in a year

Front 24

Final goods

Back 24

Used by consumer; Not intermediate goods

Front 25

Real GDP or RGDP

Back 25

Measure of production that pretends that prices stay the same

Front 26

Measure price levels

Back 26

1. GDP deflator
2. Consumer price Index (CPI)

Front 27

CPI

Back 27

Measure of price level; focuses on the cost of products that a typical consumer buys

Front 28

CPI includes Military weapons and Public services. (T/F)

Back 28

False

Front 29

Basket

Back 29

Represents consumer purchases in a year

Front 30

GDP or y =

Back 30

C + I + G + NX

Front 31

NX =

Back 31

X - M

Front 32

Business Cycle

Back 32

Periodic alternation between expansion and contraction

Front 33

Risk Averse

Back 33

Does Not like to gamble

Front 34

Investment equation; I =

Back 34

( y - t - c) + ( t - g ) - nx OR
I = Sp + Sg - nx

Front 35

Budget Deficit =

Back 35

- Sg OR - ( t - g )

Front 36

Budget Deficit

Back 36

How much the government borrows in a year

Front 37

Borrowing

Back 37

Negative savings

Front 38

" A deficit "

Back 38

Budget deficit is greater than 0

Front 39

Conservative

Back 39

Trust business more than govt

Front 40

Liberal

Back 40

Trust govt more than business

Front 41

Bonds specify what?

Back 41

1. Face value
2. Interest or discount
3. Maturity date

Front 42

Face value

Back 42

Principal to be repaid

Front 43

Short term bond

Back 43

- 1yr or less
- no interest
- sold @ discount