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Macroecon 1
Because I am coolah than you
58
Economics
Undergraduate 1
01/31/2012

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Term
economics came about from
Definition
scarcity
Term
scarcity
Definition
limited nature of societys resources
Term
economics
Definition
how society manages its scarce resources (what to produce how to produce etc.)
Term
Name the ten principles
Definition
1. people face tradeoffs
2.the cost of something is what you give up to get it
3. rational people think of the margin
4. People respond to incentives
5. trade can make everyone better off
6. markets are usually a good way to organize economic activity
7. governments can sometimes improve market outcomes
8.a country's standard of living depends on its ability to produce goods and services
9. prices rise when the governemnt prints too much money
10. society faces a short run tradeoff between inflation and unemployment
Term
Tradeoff in economics
Definition
to acheive equality, one must resdistribute goods
Term
opportunity cost
Definition
whatever must be given up to obtain a good
Term
monetary is synonymous with..
Definition
direct and explicit
Term
non monetary is synonymous with
Definition
indirect or implicit
Term
#3 marginal changes
Definition
incremental adjustments to an existing plan
Term
instead of being self-sufficient
Definition
specialize in one good or service
Term
#6 economic activity
Definition
what to produce how to produce how much and for whom
Term
#6 market
Definition
any arrangement that briings a group of buyers and sellers together
Term
#6 market economy
Definition
allocates resources through the decentralized deecisions of many households and firms as they interact in markets
Term
interaction of buyers and sellers determine
Definition
prices
Term
prices help to maximize
Definition
society's well-being
Term
government can improve outcomes when
Definition
the market fails to allocate resources efficiently
Term
market failure
Definition
when the market fails to allocate society's resources efficiently
Term
externalities
Definition
when the production or consumption of a good affects bystanders
ex. pollution
Term
#7 market power
Definition
single buyer or seller has substantion influence on market price
Term
us standard of living is ____ times higher than it was 100 years ago
Definition
8
Term
most important determinants of living standards
Definition
productivity, the amount of goods and services produced per unit of labor
Term
productivity depends on
Definition
equipment, skills, and technology available to workers
Term
in short run economic policies push inflation and unemployment in same or opposite directions?
Definition
oppostive
Term
GDP
Definition
measures total income of everyone in the economy.total expenditure of the economy's output of goods and services
Term
income must equal
Definition
expenditure
Term
labor land and capital are...
Definition
inputs
Term
goods and services equal
Definition
outputs
Term
measuring GDP
Definition
market value of all final goods and services produced within a country in a given period of time
Term
nominal GDP
Definition
production of goods and services valued at current prices
Term
real GDP
Definition
production of goods and services at constant prices
Term
Problems iin measuring cost of living
Definition
Substitution bias
Introduction of new goods
Unmeasured quality change
Term
GDP is not perfect because it does not include
Definition
leisure, shadow economy, value of activity oustide of market, or quality of environment
Term
CPI
Definition
measure of the overall cost og goods and services bought by a typical consumer

household survey
Term
calculate cpi
Definition
current price/base price
Term
PPI
Definition
measure of the cost of a basket of goods and survices bought by firms
Term
substitution
Definition
when prices change, households make substututions for the bureau of labor
Term
PPI must watch out for
Definition
introduction of new goods. unmeasured quality chagnge, upgrade to signal work
Term
indexation
Definition
automatic correction by law or contract of a dollar amount for the effects of inflation
Term
COLA
Definition
cost of living allowance: a partial or complete indexation of the wage to the CPI
Term
Making decisions requires
Definition
comparing the costs and benefits of alternative choices.
Term
Rational People
Definition
systematically and purposefully do the best they can to achieve their objectives. Does so by evaluating costs and benefits of marginal changes
Term
When Market Failure occurrs
Definition
Government can alter it to promote equity and efficiency
Term
In a Perfect Market
Definition
goods offerred are exactly the same

therea re numerous buyers and sellers
No single one has any influence over the parket price

Buyers buy all they want

sellers sell all they want
Term
Law of Demand
Definition
other things equal, when price of goods rises quantity demanded of goods falls
Term
Market Demand Curve
Definition
horizantal summation of individual demand curves, totall quantity demanded of a good variesas the price varies
Term
change increasing demand moves
Definition
right
also demand down
Term
Variables that can shift demand
Definition
income, price of related goods, tastes, expectations, number of buyers
Term
regarding demand, when income increases...
Definition
demand for normal goods increase and demands for inferior goods decrease
Term
increase in buyers
Definition
increase in market demand
Term
demand shift vs. movemtn
Definition
shift=policy discouraging smoking will move curve left

movement-tax raising price of cigs will move the demand point backwards but the curve does not move
Term
Law of Supply
Definition
all things equal, when price of good rises, quantity supplied rises
Term
Variables that can shift supply curve
Definition
input prices (negative relation), technology (supply increase), future expectations affect current supply
Term
excess demand puts a
Definition
upward demand on price
Term
government purchases do not include
Definition
transfer payments
Term
consumption does not include
Definition
purchase of new housing
Term
GDP Deflator
Definition
reflects prices of all goods and services produced domestically
Term
CPI
Definition
reflects prices of goods and services bought by consumers
Term
GDP Vs. CPI
Definition
GDP affected by domestically and non domestically produced domestic goods,

CPI affected by domestically produced consumer goods and consumer goods produced elsewhere

non consumer goods produced elsewhere have no weight
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