Econ Study Guide - Econ205 Midterm#1 Review 2:30:00 PM Test...

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Econ205 Midterm #1 Review 07/02/2007 17:30:00 Test Insight: Know Inflation and Unemployment relationship well Essay on Savings, Interest, Import/Export relationships in Circular Flow Model No Multiple choice, Fill in the Blank VERY similar to HW #1, Also 2 Short  Essay Questions Important to Review Ch. Information on wage and monetary/Fiscal Policies No Questions regarding GDP Calculations Nothing on Okun’s Law  Key Equations    Chapter 1 (What is Economics  and Basic Definitions) Definitions: o Economics: The allocation of limited resources among unlimited wants o Macroecononics: Study of the economy as a whole or at the aggregate  level. The topics of interest in macroeconomics are inflation,  unemployment, GDP growth and the roll of gov’t and the fed Economic Resources: o Land: the land and all the resources on the land and under the land o Labor: includes skilled and unskilled workers o Capital: Physical tools of production Money, bonds, and stocks are NOT Capital o Entrepreneur We study economics because resources are limited o Limited (scarce) resources are those that we pay a price for. o Price of Land = Rent, Price of Labor= Wages, Price of Capital=  Interest, Price of Entrepreneur= Profit Economic Systems: decides what to produce, How to produce and for whom  to produce o Free Market Economy: Market (Demand and Supply) decide resource  allocation
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