-A socio-economic system with the following characteristics:

1-most economic activity is organized through markets

2-means of production are privately owned

3-large wage-earning working class

high income= access

low income= leftovers

Gross Domestic Product

total market value of all final goods and services produced in an economy over a 1 year period

GDP= Consumption +Investment +Government Spending +Net Exports (exp-imp)

GDP= C+I+G+(X-M)

concerned with the behavior of individual economic actors and behavior of particular markets

-how consumers decide to spend

-how businesses make decisions on how much/what to produce and price

-explaining prices on individual goods

-outputs of individual goods

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Continual rise in price level (text)

general rise in prices, decreases value of money (class)

The study of what is, and how the economy works (text)

concerned with deriving scientific insights into how the world actually works (class)

The study of what the goals of the economy should be (text)

Concerned with questions that involve value judgements, ie "How would we like the economy to be configured?" (class)

authored The General Theory of Employment, Interest, & Money (1936)

keysean economics --

unemployment occurs because there isnt enought aggregate demand to sustain a level of output that would provide employment for all workers

therefore policy makers should take steps to stimulate aggregate demand

The Wealth of Nations (1776)

"invisible hand"

tools:

-abstraction: setting aside details that are not relevant to the problem at hand

-Ceteris Paribus: all other factors remain unchanged

-purpose of the model is to illustrate the role of scarcity in an economy

-illuminate or clarify the economist's concept of cost

how markets coordinate the decison of self-interested individual economic actors

According to Smith--- mechanism which manifests itself as a tendency for profit rates to equalize across different lines of production, and cooridinates the decision of economic actors

R= PIE/ K

PIE= Profits capital

K= Production cost

a concept in which opposing dynamic forces cancel eachother out (text)

a position or situation which, if left undisturbed, will sustain itself (class)

long period equalib price

the price that is just sufficient to cover the cost of production -where cost of production is defined to include a normal rate of profit on capital invested in the enterprise

produce means of production

goods that make other goods

GDP= C+Ig+G+(X-M)

**Ig=Net Investments+Depreciation

GDP=

Wages & Salaries +Corp. Profits +Proprietors Income +Interest +Rent +Depreciation +Indirect Business Tax