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Essential_Questions - Melissa Rachelle Sellam Intro Macro...

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Melissa Rachelle Sellam Intro Macro - Sheflin Essential Questions in Intro Macroeconomics – SUMMER 2009 Many/most Final Exam questions will deal with these issues (as did the HW assignments in one form or another). Graph means show the appropriate graphical analysis – aggregate Supply and Demand, Money Supply and Demand, Yield Curve, etc. Arrow diagram means be able to trace out steps - M ↑→ i ↓→ I ↑→ D ↑→ P ,Y Equation means be able to write out a related equation BACKGROUND AND MICRO 1. How do economists measure the value of anything? -Opportunity costs help economists measure the value of something by what you have to give up to get it. 2. What determines the price and quantity of any good or service? Graph -Aggregate Supply & Demand 3. What is opportunity cost and why is there no free lunch? -Opportunity cost – Every action requires giving up the next best alternative. -“There is no free lunch” because of the opportunity cost. To obtain one thing you had to give up something else whether it was time, money etc. 4. What does the invisible hand mean, and why does it suggest laissez-faire? -“Invisible hand” – is that people interact in a free market in their own self –interest which tends to produce a socially efficient result guided by the “invisible hand”. This is often not equitable. -“Laissez-faire” is suggested because free market trade leads to more efficiency because people are motivated by their own self-interest. 5. What are the three questions answered by any economic system and how are they answered under a market-based system? -What – allocation of resources, How – input mix, Who – income distribution 6. What is the difference between capitalism, socialism, communism? Capitalism – is no government , ppl are motivated by their own Socialism – little gov. intervention Communism – all government intervention, little motivation to produce more 7. What is the definition of Microeconomics? Macroeconomics? Economics? Microeconomics – the study of how households and firms make decisions and how they interact in markets.
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Macroeconomics – is the branch of economics which studies the determinants of aggregate output and prices, GDP, overall level of prices, economic growth, inflation, monetary & fiscal policy. Economics - is the study of how society manages its scarce resources CIRCULAR FLOW AND NATIONAL INCOME ACCOUNTS AND OTHER MEASUREMENTS: 1. 2 Important punch lines of the Circular flow model 1. Aggregate production must equal aggregate income (after technical adjustments) Real flows of factors of production = factor payments Firms = give households wages, interest, rent and profit Households give firms = land, labor, and capital 2. What are 5 key points in the definition of GDP? Gross Domestic Product
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Essential_Questions - Melissa Rachelle Sellam Intro Macro...

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