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ECON 110 Final Review
ECON 110 Final Review
151
Economics
Undergraduate 2
12/14/2010

Additional Economics Flashcards

 


 

Cards

Term

Positive Economics

Definition

  • (positive economics)- U.S. GDP approx $14 trillion, unemployment =9.5%, little or no disagreement, Test Question: Ernie the economist told me that “the Unemployment rate is currently 9.7%. Ernie is making a an (Positive) economic statement
Term

Sunk Costs

Definition

  • “I paid for it”, time and money, shouldn’t factor into future decisions. You go to a movie and you don’t like it but you stay because that money is gone
Term

Normative Economics

Definition

  • (Normative economics)- “health care plan will…”, we should or should not
Term
Utility
Definition

·         the value or satisfaction that people derive from the goods and services they consume and the activities they pursue

Term

Nominal variables

Definition
(nominal variables)- are not adjusted for inflation and can be misleading
Term

Real variables

Definition

  • (Real variables)- inflation adjusted, Test Question: If I want to know about the purchasing power of my income relative to ten years ago I should study how my real wage has changed as opposed to studying what my nominal wage has change (True)  
Term

Markets

Definition
collection of buyers and sellers, some markets are defined locally (groceries, gas, dining out), some markets have buyers and sellers around the world (internet, valuable rare painting)
Term

Opportunity Cost

Definition

  • what you give up to do something buy something or make something
Term
Concerns with Scarcity
Definition

·         is the condition of having to choose among alternatives, 1. What should be produces, 2. How should goods and services be produced, 3. For whom should goods and services be produced

Term

Ceteris Paribus

Definition

·         All other things equal (an increase in the price of peanut butter will decrease the demand for jelly

  • Test Question: Ceteris Paribus means that we should (Hold all relevant factors constant when looking at how one economic variable affects another)
Term
Efficiency
Definition
(efficiency)-you are at the equilibrium point
Term
Equity
Definition

  • (equity)-distribution who ends up with it
Term

What does it mean to think at the margin?

(All you can eat buffet?)

Definition

  • is a decision to do a little more or a little less of something
  • This does not figure into future decisions, $8 Buffet is a sunk cost, cost of benefits marginal cost vs. benefits           
Term

Understand the “fallacy of false cause”

Definition

  • the incorrect assumption that one event causes another because the two events tend to occur together
  • Test Question: The incorrect presumption that because two events tend to occur together, one must cause the other is that (fallacy of false cause)
Term

types of jobs economists may perform

Definition

government agencies, business firms, colleagues and universities

Term

What is the current unemployment rate in the U.S.? 

Is that high or low relative to the last twenty years?

Definition

  • Overall (9.8% from October 2010)
  • That is high
Term

Productive Efficiency

Definition

 

  • (productive)-shows the combination of output a society can effectively produce given the factors of production
Term

Allocative Efficiency

Definition

  • (allocative)-all the points are on the line
  • Test Question: Any point on the PPF represents an output combination that achieves allocative efficiency but not necessarily productive efficiency (False)
  • (Only one point achieves Allocative efficiency, many points may achieve productive efficiency)

    PPF and Opportunity Cost (As slope of PPF and in general)

Term
Points inside, on, outside PPF/showing growth and inefficiency
Definition
points on the outside efficient on the inside are inefficient
Term

Why does the PPF shift?

  When does it NOT shift?

Definition

  • is shifts because of a natural disaster or something else that is economy changing, Test Question: If you are in charge of Econland and you want to create the best situation for the economy to grow in the long term what situations would you like to see occur, You must choose the best option, think about the importance of the PPF (Have a new discovery of fertile land in Econland)
  • it doesn’t shift because there were no disasters
Term

Understanding what the factors of production are and why they are important

Definition

  • they are land, labor, capital and entrepreneurial ability
Term

What are externalities?   

Definition

  • Effects that happen outside of the market pollution
Term

Goals of Macroeconomics (Efficiency, Equity, Stability and Growth)

Definition

  • (Efficiency)-that we produce on the frontier
  • (Equity)-fairness
  • (Stability)-price levels that are predictable, market economies do well with it, no inflation
  • (Growth)-free markets do better than command because we save more
    • Test Question: Economic evidence suggests that over the (Free market) economies tend to experience the most economic growth and that (Free market) economies tend to have greater economic stability (well defined property rights, stable currencies etc.)
    • Test Question: Which of the following will not lead to economic growth? (restrictions on international trade)
Term

Types of Economic Systems:

Definition

  • (Market)- United States is not a pure economy, what should you produce: interaction of supply and demand: how to produce: low cost most efficient, how to divide well: people keep what they earn
  • Command Economy (centrally planned or socialist)- what to produce: what the economy wants to, how to produce: full employment, how to divide well: equally, everyone gets something,
  • Test Question: In a command economy the question of “what to produce” is answered by (a central planner) and in a market economy it is answered by (the interaction of supply and demand)
Term

Laissez Faire

Definition