Macroeconomics

Front 1

Economics

Back 1

The study of the use of scarce resources to satisfy unlimited human wants

Front 2

Factors of Production (and divisions)

Back 2

Resources used to produce goods and service. Divided into three broad categories of: land, labour and capital.

Front 3

Scarcity

Back 3

Implies that choices must be made and making choices implies the existence of cost.

Front 4

Opportunity Cost

Back 4

The value of the next best alternative that is forgone when one alternative is chosen.

Front 5

Production Possibilities Boundary illustrates what 3 concepts?

Back 5

1. Scarcity: unattainable combinations outside boundary

2. Choice: the need to choose among the alternative attainable points along the boundary.

3. Opportunity Cost: the negative slope of the boundary implies increasing or constant opportunity cost.

Front 6

4 key economic problems:

Back 6

Resource allocation:

What is produced and how?

What is consumed and by whom? (Distribution)

Why are resources sometimes idle?

Is productive capacity growing?

Front 7

Microeconomics

Back 7

The study of the causes and consequences of the allocation of resources as it is affected by the workings of the price system.

Front 8

Macroeconomics

Back 8

The study of the determination of economic aggregates such as total output, employment and growth.

Front 9

The nature of market economies

Back 9

Self organising, efficiency, incentives and self interest.

Front 10

Decisions makers in markets

Back 10

Consumers(households), producers(firms) and governments.

Front 11

Maximizing decisions

Back 11

People are maximizers. Selling labour and buying product making choices to maximize their utility (well being)

Front 12

Marginal decisions

Back 12

Comparing the marginal cost of something (ex. Price of shirt) with the marginal benefit you'll receive (extra satisfaction of having new shirt) "at the margin"

Front 13

Factor Markets

Back 13

Individuals sell the services of the factor that they own. Including labour and goods market.

Front 14

Specialization of Labour

Back 14

The specialization of individual workers in the production of particular goods and services.

Front 15

Division of Labour

Back 15

The breaking up of a production process into a service of specialized tasks, each done by a different worker. (Specialization within the production of a product)

Front 16

Barter

Back 16

An economic system in which goods and services are traded directly for other goods and services. Requires a double coincidence of wants for successful barter transaction.

Front 17

Types of economic system

Back 17

Traditional Economy, Command (Centralized) Economy, Free-Market Economy and Mixed Economy

Front 18

Quantity Demanded

Back 18

The amount of a good or service that consumers want to purchase during some time period

Quantity bought: actually bought

Front 19

Flows

Back 19

Q of __, expressed as so much per time period.

Front 20

Ceteris Paribus

Back 20

Hold all variables constant when testing 1 variable. "Other things being equal"

Front 21

Stock

Back 21

Variable has a meaning at a point in time

Front 22

Law of Demand

Back 22

For any general need, there are almost always many different products

Front 23

Demand Schedule

Back 23

A table showing the relationship between quantity demanded and the price of a commodity, ceteris paribus

Front 24

Demand Curve

Back 24

The graphical representation of the relation between quantity demanded and the price of a commodity ceteris paribus

Front 25

Price and demand are related

Back 25

Negatively

Front 26

Demand

Back 26

The entire relationship between the quantity of a commodity that buyers want to purchase and the price of the commodity ceteris paribus.

Front 27

How to shift demand curve?

Back 27

A change in any of the variables (other than the products own price) that affect the quantity demanded will shift the demand curve to a new position.

Consumer income change >> purchasing of normal and inferior goods, substitute and complement product price changes

Front 28

Normal goods

Back 28

demand increases when income rises

Front 29

Inferior goods

Back 29

Demand falls when income rises

Front 30

Excess Demand

Back 30

A situation in which at the price given, quantity demanded exceeds quantity supplied

Front 31

Excess Supply

Back 31

A situation in which, at the given price, quantity supplied exceeds quantity demanded.

Front 32

3 conditions for a model to apply to a product (apples not i phones)

Back 32

1. Many consumers of product

2. Many producers of product

3. Homogenous versions of product

Front 33

Equilibrium Price

Back 33

The price at which quantity demanded = quantity supplied. "Market clearing price"

Once established it will persist until disturbed.

Front 34

Disequilibrium Price

Back 34

Quantity demanded doesn't equal quantity supplied

Front 35

Disequilibrium

Back 35

A situation in a market in which there is excess demand or supply

Front 36

4 possible changes in demand & supply curvee

Back 36

Increase in demand (right) decrease in demand (left)

Increase in supply (right) decrease in supply (left)

Front 37

Comparitive Statistics

Back 37

The derivation of predictions by analyzing the effect of a change in a single exogenous (independent) variable on the equilibrium.

Front 38

Absolute price

Back 38

The amount of money that must be spent to acquire 1 unit of a commodity. "money price"

Front 39

Relative Price

Back 39

The ratio of the money price of one commodity to the money price of another commodity; the ratio of 2 absolute prices.

Front 40

Income claims

Back 40

All economic value that's produced belongs to someone in the form of an income claim on that value

Front 41

Nominal national income

Back 41

Total national income measured in current dollars "current dollar national income"

Front 42

Real national income

Back 42

National income measured in constant (base period) dollars. It changes only when quantities change. Real = adjusted for inflation

Front 43

Recession

Back 43

A fall in the level of real GDP. Often defined precisely as 2 consecutive quarters of negative growth in real GDP.

Front 44

Business Cycle

Back 44

Fluctuations of real national income around its trend value that follows a wavelike pattern. Ebb&Flow.

Front 45

Potential Output (Y*)

Back 45

The real GDP that the economy would produce if its productive resources were fully employed and operated normally.

Front 46

Output gap

Back 46

Actual output minus potential Output. Y-Y*

Front 47

Recessionary Gap

Back 47

A situation in which actual output is less than potential output.

Front 48

Inflationary Gap

Back 48

A situation in which actual output exceeds potential output

Front 49

Potential GDP Growth =

Back 49

Long term economic growth

Front 50

Points of business cycle over time

Back 50

Recessions/contraction

Trough

Recovery)expansion

Peak

Front 51

Employment

Back 51

The number of persons 15+ who have jobs

Front 52

Unemployment

Back 52

Number of persons 15+ who are not employed and actively searching for work

Front 53

Labour Force

Back 53

Number of persons employed + unemployed

Front 54

Unemployment Rate

Back 54

Unemployment expressed as a % of labour force. Unemployed/labour force X 100%

Front 55

Frictional Employment

Back 55

Normal turnover

Front 56

Structural Employment

Back 56

Mismatch between the structure of the suppliers of labour and the structure of the demand for labour

Front 57

Full employment

Back 57

When economy is at potential GDP

Front 58

Cyclical Unemployment

Back 58

Rises and falls with ebbs and flows of business cycle

Front 59

Seasonal fluctuations

Back 59

Unemployment rate adjusted for regular season fluctuations in unemployment

Front 60

Labour productivity

Back 60

Level of real GDP divided by the h level of employment (or total hours worked)

Front 61

Price Level

Back 61

The average level of all prices in the economy expressed as an index #

Front 62

Inflation

Back 62

A rise in the average level of all prices (price level)