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| used to produce something else |
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| economic activitities involve individual choice because resoures |
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| making sacrifices on one alternative to increase another |
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| which is Not studied in macro |
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| Impact of tax cuts on specific firms |
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| resources are privately owned and individuals make decisions over their use |
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| economy cannot make one person better off w/o making another person worse off the economy is |
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| increase in price of the good |
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| decreases the amount demanded |
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| according to supply, a decrease in the price of little toys will cause |
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Definition
| a decrease in the amount supplied |
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| if the Qs if less than the Qd by the market the existing price |
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Definition
| is below equilibrium price and will rise to clear the market |
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| II. The Smallest component of spending in GDP |
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Definition
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| II.RGDP is GDP in a given year valued in |
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| II. How is one considered Unemployed |
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Definition
| a person must not be working, but is available and actively seeking employment |
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| II. natural rate of unemployment is equal to the sum of _____ and occurs when _____ is equal to zero |
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| structural unemployment and frictional unemployment; cyclical |
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| II. what causes official unemployment figures to underestimate true unemployment rate |
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| People get discourages and quit looking for jobs |
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| Avg of prices of the goods and services purchased by a typical family of four |
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| II. CPI of 160in 1996 with base year of 1982-1984 would mean that the cost of the market basket |
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Definition
| rose 60% from the cost of the market basket in the base year |
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| II. If your nominal wage rises faster than the price level, we can say your real wage has _____ and the purchasing power of your income has _____ |
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Definition
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Term
| II. real rate of interest is |
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Definition
| nominal interest rate minus inflation rate |
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| II. If an economy experiences deflation, real interet rate |
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Definition
| will be greater than nominal interest rate |
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Term
| III. a decrease in the price level leads to |
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Definition
| An increase in the quantity demanded of real GDP |
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| III. Increase in domestic price level causes |
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Definition
| an increae in the QD of imports and a decrease in the Qd of exports |
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| III. what will cause and increase in SRAS |
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Definition
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| III. Expectations by businesses of a future decrease in sales and profits will shift ____ to the ____ |
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Definition
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| III. When SRAS curve is upward-sloping, an adverse supply shock leads to a(n) |
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Definition
| increase in the price level and a decreae in RGDP |
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| III. LRAS curve assumes thst wages and other resource prices |
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Definition
| eventually rise and fall to match changes in price level |
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| III. if the short run equilibrium level of rGDP is lss than Full employment rGDP then the economy is in a_____ gap with unemployment ____ the natural rate |
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Definition
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| III. the speed in which a market economy self corrects depends on |
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Definition
| how quickly prices, wages, and interest rates change to clear markets of shortages and surpluses |
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| III. _____ which states supply creates its OWN demand, suggests that a general period of overproduction of goods and services ____ |
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Definition
| Say's law; is unlikely to occur |
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| III. Economists that advocate a macro policy of Laissez-faire |
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Definition
| believe he economy is self regulating and will automatically move equilibrium to natural rGDP |
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| III. keynesian theory focuses |
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Definition
| on where policy should be on the short run not the long run |
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| III.the essence of keynesian theory of unemployment is that |
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Definition
| unemployment results from inadequate demand for goods and services throughout the economy |
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| III. in the keynesian model the primary determinant of consumption is ______ and the primary determinant of savings is ____ |
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Definition
| disposible income; disposible income |
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| III.Equilibrium occurs in the economy when |
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Definition
| total expenditures of the economy are equal to the total production in the economy |
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| III.If the total expenditures in the econonmy are less than total production |
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Definition
| inventories are increasing signaling firms that they have overproduced and thus should cut back production |
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| III. At the equilibrium GDP for an open economy net exports |
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Definition
| may be positive or negative |
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| III. Ceteris paribus a decrease in the interest rate will generally |
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Definition
| increase investment spending |
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