Macroeconomics: Midterm Study Guide

Front 1

Define economics

Back 1

Economics is the study of how humans coordinate their wants and desires given decision making mechanisms, social customs, and political realities of the society. It is practicing a reasonable approach to economic issues. It examines production, distributi

Front 2

Scarcity: Why it occurs and why it matters

Back 2

Scarcity occurs because people demand more than can be produced

Front 3

What is the difference between scarcity and resource allocation

Back 3

Resource allocation is delegate where and how to use available resources and scarcity is when there is more being demanded than is able to be produced.

Front 4

Economic model

Back 4

A framework that places generalized insights of theories in to context

Front 5

What are the three central coordination problems in economics?

Back 5

How to produce, how much, and for whom

Front 6

Why must every economy answer the three coordination questions?

Back 6

To have an organized and non-chaotic society and to prevent scarcity.

Front 7

Marginal cost

Back 7

The additional cost to you over and above the costs you have already payed. Going to class- already payed tuition, thats a sunk cost.

Front 8

Marginal benefit

Back 8

the additional benefit above the one you have already derived- reading a chapter, marginal benefit is the additional knowledge you gain that you didn't already know

Front 9

Opportunity cost

Back 9

the benefit you might have gained from choosing the next best alternative.

Front 10

Positive economics

Back 10

what is

Front 11

normative economics

Back 11

what should be

Front 12

art of economics

Back 12

using positive to achieve goals determined by normative

Front 13

Production possibilities curve

Back 13

Illustrates opportunity cost by showing trade offs that we make. It measures the maximum amount of outputs we can make from a given amount of inputs

Front 14

Law of increasing opportunity costs

Back 14

In order to get more of something, you must give up increasing quantities of something else

Front 15

What are the three forces that govern economic reality?

Back 15

Economic forces- the necessary reactions to scarcity, a market force- an economic force that is given relatively free rein by society to work through the market, and the invisible hand, which is the price mechanism, the rise and fall of prices that guides

Front 16

What are 3 economic factors?

Back 16

collecting money in taxes and spending that money on defense and education.

Front 17

law of demand

Back 17

Q demanded rises as price falls, vice versa

Front 18

Change in quantity demanded vs. demand on graph

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quantity demanded deals with price and movement along demand line, demand shifts

Front 19

what are shift factors of demand

Back 19

societies income, prices of other goods, tastes, expectations, taxes

Front 20

law of supply

Back 20

supply rises as price rises, supply falls as price falls

Front 21

shift factors of supply

Back 21

price of inputs, technology, expectations, taxes

Front 22

equilibrium price

Back 22

the price toward which the hand drives the market

Front 23

equilibrium quantity-

Back 23

the amount bought and sold at equilibrium price

Front 24

price ceiling/ floor

Back 24

government imposed limit on how high a price can be charged/ low

Front 25

what does the long run framework focus on

Back 25

supply and growth

Front 26

what does the short term framework focus on

Back 26

business cycles and demand

Front 27

real gdp

Back 27

the market value of final goods and services produced in an economy, stated in a given year

Front 28

per capita real output is

Back 28

gdp divided by population

Front 29

what are the 4 phases of business cycle

Back 29

boom peak trough upturn

Front 30

cyclical unemployment

Back 30

results from fluctuations in economic activity

Front 31

structural unemployment

Back 31

caused by economic restructuring, making some skills obsolete (sewing machine replacing sewer)

Front 32

how do you calculate the unemployment rate

Back 32

# unemployed divided by labor force time 100

Front 33

inflation/deflation

Back 33

continual rise/fall in the price level

Front 34

calculate cpi

Back 34

to find market basket- quantity times price.

then divide later year price by base year price and multiply by 100.

inflation is then the percent change between years. take price index minus 100 div. by 100 times 100

125-100/100 times 100

Front 35

how is inflation both good and bad

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people paying its bad, people making the money its good

it doesn't make economy poorer, it just redistributes the money

Front 36

national income accounting

Back 36

a set of rules for measuring economic activity in the economy as a whole

Front 37

gdp equation

Back 37

consumption, net exports, gov. spending, investments

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value added

Back 38

calculated by subtracting intermediate goods from sales

Front 39

ndp

Back 39

gdp-depreciation

Front 40

gnp

Back 40

the aggregate final output of citizens and businesses in a given year- output produced by a countries citizens

= GDP+ net foreign factor income (money made by citizens of us. in other countries minus money made by non us citizens in the us)

Front 41

aggregate income and gnp are same

Back 41

aggregate income consists of :

wages, profit, interest, rent

Front 42

real gdp equation

Back 42

nominal div. by gdp deflator times 100