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Macro CMU study guide 1
Terms in this set (39)
What is the translation of the original greek term for economics?
Skilled in household management
What are the 10 principles of economics 1
People face trade-offs
What are the 10 principles of economics 2
Cost of something is what you give up to acquire it
What are the 10 principles of economics 3
Rational people think at the margin
What are the 10 principles of economics 4
People respond to incentives
What are the 10 principles of economics 5
Trade improves our lives
What are the 10 principles of economics 6
Markets are a good way to organize economic activity
What are the 10 principles of economics 7
Government may improve market outcomes enforcement of property rights
What are the 10 principles of economics 8
Standard of living equates to production of goods and services
What are the 10 principles of economics 9
Price rise when government prints too much money
What are the 10 principles of economics 10
Society faces a short-run trade off between inflation and unemployment
What are the basic government-related economics policies and who controls them?
Fiscal Policy- Taxation and spending by Congress
Monetary policy- Money supply and interest rates by Federal Reserve
According to most free-market economics, When should the government get involved in the economy?
Only when there is a market failure
What is the business cycle and who controls it?
Market force and the government always involved
What is the elements/patterns of the business cycle?
Is economics the science of scarcity? Does it include the study of human behavior?
Scarcity: Limited amount of resources
What are the significance of these terms?
Real terms- adjusted for inflation
Nominal terms- a current rate
Normative statements- how things could/should be
Positive statements- How they are
What is the scientific method?
Systemic detached observation, theory and continued observation
What are the following as they relate to economics?
2. Supply and demand: driving force
3. Elasticity VS Inelasticity
a. Elasticity: change of greater than 1
b. Inelasticity: change of less than 1
4. Comparative advantage: there is always
5. Absolute advantage
6. Deadweight loss: Economy loses from monopolies and lack of innovation
What happens with changes in supply and demand?
Consider the relationship of the two
Consider relationship of price
Consider the business cycle
Consider changes in income
How does demand move with price?
Demand opposite direction of price
How does supply move with price?
Supply moves with price
What factors influence the demand curve?
2. Prices of related goods (substitutes and complementary)
5. Number of buyers
6. Natural disasters
What factors influence the supply curve?
1. Cost of inputs
4. Number of sellers
What role does equilibrium play in economics?
Equilibrium- Market price reached level where supply equals demand
Equilibrium price- balance supply and demand
Equilibrium quantity- quantity of supply equals that of demand
Surplus and Shortages- Equilibrium factors of supply and demand
Where do price ceilings and floors fit in?
Price ceilings: as high as you can go
Price floors: as low as you can go
What is GDP?
Goods and services in a country
Measuring of inflation?
Consumer Price Index
What is the consumer price index?
Basket of goods and services that households buy
What are the essential factors of production?
1. Natural resource
2. Human capital
3. Financial capital
5. Knowledge of the industry
What are the relationships between public policy and economic growth?
2. Health care
3. Public works expenditures
What are the major international trade agreements of the 20th century?
1. General agreement on tariffs and trade
2. Would trade organization
3. North American free trade agreement
4. European Union
5. Central American free trade agreement
What are some key financial market/significance?
1. Bond market
2. Commodities: unbranded products
3. Stock: NY stock exchange
4. Currency: Unregulated market
National income accounting?
Basic measure of the level of the country's economic activity
Key measure of National income: GDP
What agency of the United States government measures unemployment?
Bureau of labor statistics, Department of labor
What is the labor force?
Every adult that is looking for work or working
What is participation rate?
Labor force divided by adult population
What are the three primary types of unemployment measures?
1. Cyclical- counter of business cycle
2. Frictional- Individually induced
3. Structural- major changes in economic activities/structure
What significance does unemployment/employment play in economics?
Working economy is going up
Not working economy is going down
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