Final exam review part 1

Final exam review part 1 - EC202 Final Review Sheet Chapter...

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EC202 Final Review Sheet Chapter 1 Unemployment rate: number of workers who are involuntarily out of work expressed as a percentage of the labor force. Lower the output, higher the unemployment. GDP: dollar value of all final goods and services produced in one year Inflation: rising price level Rate of inflation: average rate of price increase Deflation: decrease price level Real GDP: GDP – inflation Rise in GDP a) Inflation b) Increase in the physical volume or quantity of goods and services produced Recession: a period of two or more successive quarters of decline in real GDP. Stagflation: coexistence of unemployment and inflation at the same time Three important questions in economics a) What goods and services shall be produced and in what qualities b) How shall each goods be produced c) How shall income be distributed Macroeconomic: concerned with consumers, firms, resources owners Microeconomics: concerned with sectorial composition of output and employment Macroeconomics views the economy in its totality; microeconomics views the composition and distribution. Transformation curve (opportunity cost): its slope indicates the ratio at which one good can be transformed into the other in the sense of resource transfer. Capitalism: production are privately owned, and the coordination of economics activity is done through markets and prices Communism: production owned by states, and a state planning authority coordinates economics activity. Democratic socialism: combine of both capitalism and communism Mixed economy: mixed system of private and public ownership of resources, governed somewhat by markets but modified by government intervention. Chapter 2 Capital goods: structures, machinery, equipment Primary factors of production: labor, land, capital and natural resources Profit: a return to a fourth factor of production, known as entrepreneurship Firm: productive unit within which production takes place Income: generated in the productive process as compensations for the services provided by the factors Raw material: material in their natural state (coal or iron ore) Intermediate products: processed goods that are sold to other producers for further fabrication (steel)
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Final products: output sold to final consumers Output: goods and services produced in the economy Transactions: sales or purchases of goods and services Money: payment or medium of exchange Barter: the exchange of goods for other goods Price: good or service is the number of dollars paid for one unit Markets: any situation where buyers and sellers come together Specialization: each person, region, or country specializes in the activity it can do best In any productive activity, the dollar value of any product or service produced equals the total income—in the form of wages and salaries, rent, interest, and profit— generated in the production process The dollar value of all final goods and services produced equals the income generated in the production process Income and output are equal
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This note was uploaded on 02/08/2012 for the course EC 202 taught by Professor Obst during the Fall '08 term at Michigan State University.

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Final exam review part 1 - EC202 Final Review Sheet Chapter...

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