ECON MIDTERM 1

ECON MIDTERM 1 - ECON MIDTERM 1 Chapters: 1, 2:20-29, 3, 5,...

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ECON MIDTERM 1 Chapters: 1, 2:20-29, 3, 5, 6,7,8, 9, 13:321-326 Economics - How people make choices about how to allocate and coordinate resources to production and output to consumption. Macro - focuses on the economy of a country, not just the sum of the parts of the country Aggregates - all individuals grouped as consumers or producer, all consumption output will be grouped together known as output, all labor will be grouped together and known as employment, all prices grouped together and known as price. economy is a system for allocating resources to production and output to consumption. Efficiency measures the waste of this allocation “equal” different “fair” An efficient allocation is also pricto optimal: full employment, specialize according to comparative advantage. Time abstract - shortrun length of time when at least one variable fixed barriers to entry/ exit, wages cant adjust (years) , medium run- undefined between short and long, longrun – no fixed variables entry exit wages adjust (decades) vs real (days, months, quarters, years) Methods of trade- output from efficient resource allocation, markets use prices, price is a rule of exchange. Barter- direct exchange of goods, inefficient when lots of participants and lots of goods, problem of coincidence of wants- hard to find someone who wants what you have and has what you want. Monetary economy - uses money as form of exchange. Medium of exhange- facilitates trade because readily acceptable by market participants, store of value- holds purchasing power over time, unit of account- common measure of value avoids problem of coincidence of wants. Money supply- Total value of financial assets at particular time and place (same as money aggregate) M1= currency checking travelers cheques, M2= M1 + savings accounts money market accounts short term bonds and certs of deposit, M3= M2+ long term bonds and certs of deposit, (decreasing liquidity) NOT- loans, stocks, credit cards, physical assets (houses) Need to have money supply grow as fast as economy in order to stay functional. Credit cards- not part of supply cause liability not assets Commodity money- until 1850s limit supply to commodity supply, ties up commodities so less is consumable, object used as money has intrinsic value (gold silver vodka cigarettes) Commodity backed money- 1873-1971 roosevelt object no intrinsic value is exchangeable for something of value relies on promise that money is exchangeable for something of value relies on promise that money is exchangeable credibility of bank paper easier to carry than gold, Fiat money- since 1971 object no intrinsic value used as money by government decree no limit to supply relies on stability . Value of money
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This test prep was uploaded on 03/30/2008 for the course ECON 1102 taught by Professor Someguy during the Winter '07 term at Minnesota.

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ECON MIDTERM 1 - ECON MIDTERM 1 Chapters: 1, 2:20-29, 3, 5,...

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