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| Economics can best be described as the science that studies |
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Definition
| how individuals and societies deal with the problem of scarcity. |
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| Scarcity can be eliminated by eliminating poverty. |
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| obtain the greatest benefit for the least cost |
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| people in society will have a strong incentive to be productive and earn income when |
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| price is the rationing mechanism for scarce goods |
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| Individuals should exhaust all possible sources of information before making a decision |
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| the president promised to provide government funded health insurance for everyone but over long run the program will be costly with larger taxes and deficits. the president failed to consider: |
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| research based on one factor alone is wrong because |
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| it violates ceteris paribus and failed to hold constant all other factors that could explain it |
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| when buying a second car, the economic way of thinking indicates the purchaser should compare |
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| the additional benefits with the additional cost |
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| "winters in North Dakota are long and cold" is what kind of statement |
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| sistes like e-bay and amazon make it easier for sellers to find buyers and vice versa, what can we expect? |
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transition costs will fall
gains from trade will rise |
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Definition
| provide incentives for creators of music, litature, and other intellectual property to be creative and productive |
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| using a production possibilities curve, a technological advance that increases the economys potiential output would cause |
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| an outward (to the right) shift of the curve |
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| Private Property rights would cause |
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Definition
| resource owners to conserve viral resources for the future particularily if they expect the resource to increase in value |
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| Ticket scalping actually creates economic value by moving goods from people who value them least to those who value them most |
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| Are the 8 guideposts to economic thinking just theories with no real application? |
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Definition
| No, these theories are used by economists to build models that help accurately perdict the outcomes of various decisions and actions |
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| gains from trade will occur if the buyer and the seller have the same valuations for the good being exchanged |
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| what does the "market is efficent" mean |
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Definition
all gains of trade have been realized
quantity supplied is equal to quantity demanded
market is equilibrium |
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| economic activity is directed by the "invisible hand" refers to |
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Definition
| when economic activity is directed by competitive markets the actions of self-interested individuals will generally serve the public interest |
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| the quantity supplied is not very sensitive to changes in price |
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| what is necessary for the invisible hand of market prices to work properly |
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| competitive markets and property rights that are well defined and enforced |
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| why are economists concerned about transaction costs and how they can be miniimzed |
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Definition
| because high transaction costs can reduce the gains from trade and slow economic growth |
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| apple juice (a substitute for orange juice) price falls. what will happen to orange juice and the quantity purchased? |
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| the price of a good will tend to fall when |
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| there is an excess supply of the good |
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| how is producer surpuss created in the market? |
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Definition
| when the opportunity costs of production of each unit is less than the market price |
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| the quantity demanded is exactly equal to the quantity supplied and the market is in equilibrium |
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| if consumers and producers dont communicate directly how do producers know what consumers value most? |
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| signals sent by price system inform producers what they value |
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| a study showed that soybeans make one look younger. what would be the effect of the marker of soybeans after the study? |
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Definition
demand- shift to the right
price an quantity will rise |
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subjective
not having sufficent income to maintain a lifestyle with adequet nutrition |
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objective
cannot be eliminated
less goods or resources than people would like
even if there are large amounts produced there is not as much avilable in nature as people would want |
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Term
| Gross domestic product is a measure of both |
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Definition
| the marekt value of the ouput produced during a period and the cost of producing that output |
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Term
| what is something that would be included in this years GDP |
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Definition
| renting a 5 year old house from smith |
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| what would be a activity not counted in GDP |
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Definition
| the labor services of a volunteer group |
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Term
| when the expenditure approach is used to measure GDP the major components of GDP are waht? |
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Definition
| consumption, governemtn spending, gross private investment, and net exports |
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Term
| if you wanted to measure whether the output of an economy was increasing or decreasing across time periods, you would use the real GDP and not nominal GDP beacase? |
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Definition
| real GDP adjusts for changes in the general level of prices when nominal GDP does not |
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| youre car is damaged and you hire someone to fix it |
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| if the underground economy is sizable then GDP will |
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| underestimate the economys performance |
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Term
| hatis GDP would be affected by the hurricane |
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Definition
| the reconstruction value would be the only affect |
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Term
| the science of macro economics focuses primarily on |
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Definition
| business cycle and economic growth |
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Term
| if a country is going to achieve and sustain high rates of economic growth what would they need? |
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Definition
investment in physical and human capital
improvements in technology
institutional and policy arrangements consistent with economic efficiency |
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Term
| when indivivuals and businesses are permitted to rade freely over a larger market area... |
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Definition
| they will not be able to produce a larger output and consume a more divere bundle of goods |
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Term
| why would political instability and insecure property rights retard economic growth |
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Definition
fear that private property will be confiscated reduces the incetive to invest and create wealth
when property rights are insecure foreign investors will be reluctant to invest in the country
savings will tend to flow out of a country if they fear their property is not secure |
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Term
| in order to achieve a high economic freedom rating a country must? |
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Definition
provide secure protection of provatel owned property and evenhanded enforcement of contract
refrain from creating barriers that limit domestic and international trade
rely more fully on markets rather than governemtns to allocate goods and resources |
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Term
| the united states has the higest economic rating |
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Definition
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| when money supply is expanding and prices rise rapidly, economic growth.. |
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Definition
| is slowed by the resulting unpredictability of the future level of prices |
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| records show that foreign aid has |
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Definition
| reinforced corrupt governemnt and policies that stifle productive activities |
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Term
| which countries have had the highest per person income levles in recent years |
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Definition
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Term
| purchasing power parity (PPP) method |
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Definition
| calculate the cost of purchasing a specific bundle of goods and services in each country and uses this measure to conver he incomes of different countres to a common currency so that they may be more accurately compared |
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| the income per person in the US is approx ___ that of three of the worlds poorest countries |
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| which country has the most rapid gowth rate of real income per person during 1980-2005 |
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| according to data on GDP growth between 1980-2005 |
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Definition
| many poor nations grew more rapidly than wealthy countries while other continued to be stagnate |
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| where are countries with the lowes economic freedom index located? |
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| which country was the most economically free during 1980-2005 |
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Definition
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Term
| the per capita incomes of countries in the quartile with the most economic freedom were |
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Definition
| 8 times those of the quartile of countries with the leas economic freedom |
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Term
| according to theminiser of nigria |
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Definition
| conditions with respect to goverance, public sector financial managmnt, monetary stability and economic gowth are improving rapidly |
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| countries with more economic freedom tend to save and investe a ___ share of their income and theproductivity of that investent is ___ than for other countries that are less free |
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Definition
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Term
historically countries with colonial settlers who planned on staying for long periods of time set up sound economic institutions
countries that were colonized for the purpose of extracting natural resources resulted in colonial setlers adopting weaker and less productie economic institutions |
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| why is an institutional change more likely now that in the past |
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Definition
the colonial era is over and their making their own decisions
the collasp of communism has expanded the oppurtunity for institutional change
reductions in transportations and communication costs have increased the importance of institutional policies |
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Term
| why do low income conutries remain poor |
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Definition
| their institutional arrangement and policies discourage productive activity and reduce th potiential gains from specialzaion and exchang |
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