{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Macro Final Review

Macro Final Review - Macro Final Review Background and...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Macro Final Review Background and Micro 1. How do economists measure the value of anything? -market price is determined by supply (reflecting costs and scarcity) and demand (reflecting tastes) 2. What determines the price and quantity of any good or service? -the intersection of the supply/demand graph (shifts/movements) 3. What is opportunity cost and why is there new free lunch? -opportunity cost - what you give up to get something -there is no free lunch because everything has its own opportunity costs 4. What does the invisible hand mean, and why does it suggest laissez-faire? -invisible hand - self-guided interest, no government involvement, free market -laissez-faire - hands off 5. What are the three questions answered by any economics systems and how are they answered under a market-based system? -What - determined by dollar votes of consumers in their daily purchase decisions (demand) -How - determined by competition among producers (goal is to keep costs at minimum, profit maximizing) -For whom - supply and demand in the markets for factors of production 6. What is the difference between capitalism, socialism, communism? -Capitalism - self-guided interest, decisions made by firms, limited government control, market systems -Socialism - means of production (other than labor) should be owned by community -Communism - complete government control, state owns and controls means of production, particularly industrial capital 7. What is the definition of Microeconomics? Macroeconomics? Economics? -Microeconomics - how people, firms, households, make decisions -Macroeconomics - the aggregate of microeconomic principles interacting causing fluctuations in the economy as a whole (unemployment, price level, output, foreign trade, etc.) 1
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Circular Flow and National Income Accounts and Other Measurements 1. 2 Important points of the Circular flow model. -Flow of final products - spending -Flow of total costs or incomes of inputs - received by workers -(both approaches yield exactly the same measure of GDP) 2. What are 5 key points in the definition of GDP? - C onsumption (largest component, 2/3 of GDP in recent years) - spending on: durable goods (automobiles), nondurable goods (food), services (medical care) - I nvestment - consists of the addition to the nation’s capital stock of buildings, equipment, software, and inventories during a year, etc. -Gross investment is NOT adjusted for depreciation, which measures the amount of capital that has been used up in a year -NET investment = gross investment - depreciation - G ov. spending - some are consumption-type goods (food, military), some are investment-type (schools, roads) -excludes transfer payments (payments to individuals that are not made in exchange for goods or services supplied - unemployment insurance, veterans’ benefits, old-age/disability payments) -taxes - must take them into account when using the earnings or cost approach to GDP -(Y-T) = (Income - taxes) = disposable income (when goes up, consumption goes up) - N et Exports (exports minus imports of goods and services) - open economy ________________________________________ GDP vs. GNP -GDP - depreciation = NDP (National Domestic Product)
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern