VCC Economics Test 1 Study Guide

VCC Economics Test 1 Study Guide - Macro Economics Test 1...

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Macro Economics Test 1 Study Guide 74 questions on test Economics – deal with scarcity and choice. Micro-economics – economic analysis of the individual . Individual market, etc. Macro-economics – pure Keynesian economics. Deals primarily with aggregates. Aggregate expenditure model. Models, theories – abstracts. Do not bare resemblance to real life, real world, situations. Idealized situations. Keynesian economics – macro economics. Production – conversion of resources into consumer products. Labor and technology – considered to be substitute goods. Production possibility curve – depicts total possible outputs with two inputs. Demonstrates allocated efficiency. Next 3 linked together: Division of labor – leads to specialization. Specialization – specialization is comparative advantage. Comparative advantage – see specialization above. Absolute advantage – ability to produce a product or service at a lower opportunity cost compared to other producers. Inferior goods – second tier of goods. Not necessarily inferior in quality. “knock offs.” Not necessarily the name brand. Normative economics – Keynesian economics. Makes value judgments. Positive economics – classical or Austrian economics. Function of price on the market – organizes the market. Rations scarce goods. Steers resources into their most efficient or profitable use. Profit – drives the market. Price floor – the minimum/lowest price that can be charges. Price is above market price. Creates a surplus. Can only be established by the government.
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