Econ Exam 2 Flashcards

Terms Definitions
Tit for Tat
(Figure 15-3)
Balanced Trade (18)
exports = imports
profit (equation)
total revenue- total cost
goods and services bought domestically but produced in other countries.
Russia and PRC currently recognize this as Korea
Things that affect an individuals resources.
When we do not have enough resources to fulfill our wants
private ownership, competition, profit, little government intervention
4 components of captialism
The federal reserve tries to prevent ____________.
leading indicators
certain variables that predict the course of the economy
producing a bundle different than the bundle you consume
Time required for the market to adjust
Glass Ceiling
An unofficial, invisable barrier that prevents women and minorities from advancing in businesses dominated by white men
Price-taking Consumer
a consumer whose actions have no effect on the market price of the good or service he or she buys
what does Economic Growth increase
the number of transactions
T/F: Labor unions serve as the main political-economic base for Western European social democracies. As such, they often have political parties represent their interests in their parliaments
Borrowing to finance a purchase of a financial asset, creating potential for both larger gain and larger loss
the theory that people invest in education in the same way that businesses invest in machines, by calculating the investment's return, or profit rate
investment-in-human-capital theory
Federal Subsidy for Community Policing
Subsidize municipalities (local governments): Shifts the MC down and increases the q of law enforcement. During the 1990's when crime was in decline steadily. - After 9/11 a large share of resources for cops were sent to homeland security. Prevalence of community policing grew steadily. As crime rates declined attention turned to other pressing issues. 9/11 lead to an emphasis on homeland security. Now violent crimes are rising again and there is public concern that policing is not keeping up--less money available for policing on the street
any firm that takes the market price as given;this firm cannot affect the market price because the market is competitive
renewable resources
resources that can be replenished for future use
Consumer price index
measures changes in the average prices of consumer goods and services
legal tender
the value of money is determined by the amount of goods and services it can buy
A situation in which the long-run average cost curve rises as the firm increases output is called _______.
diseconomies of scale.
Ceteris Paribus
+a latin phrase used to simplify life (and economics)+\"all other things remain constant, everything else remains constant\"
Comparative Advantage
The ability to produce a good or service at a lower opportunity cost than other producers
entitlement and mandatory spending
spending that congress has authorized by prior law, primarily providing support for individuals
Commodity Money (16)
Money that takes the form of a commodity with intrinsic value
Characteristics of a Monopolistic Competitive firm
Many firms, some difference in products, independent, some price seting ability, price higher than MR
last supply shifters for non determinant supply
5) government policies-taxes and subsidies tax(another cost of production!) tax increase--supply decrease tax decreases--supply increases6)expectations future technology, future economic
Marginal revenue
The change in total revenue due to a one-unit increase in quantity sold
Real Exchange Rate 
The rate at which a person can trade the goods and services of one country for the goods and services of another
A production possibilities curve depicts
combinations of goods the economy has the capacity to produce
Marginal product of labor
The change in production due to a one-unit increase in labor input
what is controlled by the market in a market economy?
production, price and distribution
Main characteristics of a markey economy:
+1) self interest: people pursue what it best for themselves +2) incentives: perople respond to incentives +3) market prices and quantities: are detemined in an open market by buyers' and sellers' competion +4) institutions: all activities are largely
legislators in a democracy are more likely to support special interests than the broad interests of citizens generally because
the pay attention to the people paying attention to them

What is the purpose of the Federal Reserve System (Fed)? How many regional federal reserve banks exist?

There are 12 Federal Reserve Banks. The regional bands act as a central band for private banks in its region. The Fed provides private banks with services such as clearing checks, holding bank reserves or deposits, providing currency, and extending loans.
when studying how some event or policy affects the market, elasticity provides information on
the magnitude of the effect on the market
voluntary exchange
GDP: Expenditure approach
Oskar Lange
advocated central planning concept(Barone, Lange, Engles, Hayek, von Mises, Lenin)
Social democrats
Same goals by democratic means
Vladimir Putin is the current President of Russia
In a perfectly competitive industry, assume there is a permanent increase in demand for a product. The process of transition to a new long-run equilibrium will include: a) the exit of firms. b) temporarily lower production costs c)both a and b d) neither
cyclical unemployment
rises during economic downturns and falls when the economy improves.
An implication of scarcity. The necessary sacrifices associated with making any choice.
Small number of firms acting together as a monopoly. Produce less for a higher price.
the differenc between federal gov't spending and federal gov't tax revenue in any one year
budget deficit
aggregate output
total production of goods and services
pertaining to an economic policy that treats consumer demand as the chief determinant of the economy
Asymmetric Information
imbalances in the information when one party knows more than the other
Covered interest arbitrage
Covered interest arbitrage is the samething, accompanied by a forward-market transactionto protect against changes in exchange rates.
people who make the things to satisfy the consumers needs and wants (choose what and how to make and provide it)
In constant Returns to Scale the Lrac ____ the LRMC
technological knowledge
society's knowledge of how to best provide goods/services
Sunk Cost:
costs that ave already been incurred and cannot be recovered
marginal utility
the extra satisfaction derived by a consumer from the consumption of the last unit of a commodity
Private Goods=Excludable
  supplies of the good can prevent people who don’t pay from consuming it. A good is excludable: if the supplier of that good can prevent people who do not pay from consuming it.
an asset used as payment when purchasing goods/services
medium of exchange
a good or service that is used to produce another good or service
a market in which only a few large firms exist
The Demand Curve
A table that shows the relationship between the price of a good and the quantity demanded
What is elasticity?
When one variable changes, how much does another variable change?
What are examples of property, plant and equipment?
Land, building structures (offices, factories, warehouses), and equipment (machinery, furniture, tools).
Perfect Competitive Firm's Profitability and Production Conditions
P> min ATC: firm profits. enter industry in the long runP= min ATC: firm breaks evenP P
The ______ for a perfectly competitive firm is a curve showing the relationship between the price of a product and the quantity supplied in the short run. The individual firm always produces along its marginal cost curve above its intersection with the av
firm's short-run supply curve
A country's standard of living depends on its ability to _____________
Produce goods and services
marginal propensity to import
The fraction of additional income that is spent on imports.
When PPF moves to the left/ right
loss of resources/ gain resources
Factors of production
Are the inputs used to make goods and services4 main categories 1. Labor 2. capital 3. Natural resources 4. entrepreneur
Standard of Value
Ex: a book that costs $12 = 20 candy bars at $0.60 each
George was assigned to read a chapter in economics tonight, bu he has a math exam tomorrow. he chooses to study for the math exam and postpone his economics studies till afte the exam. What is the opp cost of George's decision?
the economics knowledge he sacrificied by not reading the assigned chapter
demand curve intersect price axis
for ne good, there is a price above which no one will buy any of it






of goods that are used together (gasoline and cars, computers and software,
peanut butter and jelly)

Balance of payments on the current account
Balance of all trade in goods and services plus net international transfer payments and factor income
How is the Law of Deminishing Marginal Utility defined?
As we have more units of a product the satisfaction we get from each additional unit decreases.
teenagers UE
The CPI-W1) Measures price-level changes for urban workers2) Is helpful for negotiating wage contracts3) Is most helpful for fixed-income household COLAs4) 1 & 25) 2 & 3
Laissez faire
Doctrine stating government shouldn;t intervene in the marketplace.
When the outcomes of managerial decisions cannot be predicted with absolute accuracy but all possibilities and their associated probabilities of occurrence are known
correlation coefficient is close to 0
neither procyclical nor counter cyclical
capital stock and real GDP
public goods must be (2):
non-rival and non-exclusive
In the chapter incentives matter wheelan argues that fast-food resaurants' policies of given customers who are not offered a reciept a free meal are in fact designed to
police employees
To be useful, a theory must
predict well
taking a larger percentage of lower incomes than of higher incomes
goods that have an income elasticity greater than one
-->their percentage increase in demand in greater than their percentage increase in income
the phase of economic activity during which the economy's total output increases
when supply is inelastic who bears the tax?
world trade organization (WTO)
an international organization that oversees international trade agreements
if the price elasticity of demand is more than 1
The value of all assets owned, both monetary and nonmonetary.
Price floor with price support
Governtment buys deadweight loss
A group of buyers and sellers with potential to trade with each other
the share of the products of industry received by labor for its work, distinct from the share going to capital
Change in demand
As price is lowered, total revenue rises; vice-versa.
Gross National Product
The value, measured at market prices, of all final goods and services produced in an economy in one year.
Bank for International Settlements
(Agencies that Facilitate International Flows)
BIS to facilitate cooperation among countries with regard to international transactions. Provides assistance to countries experienceing a financial crisis.

"central banks' central bank" or the "lender of last resort"
Define Elasticities.
They show the extent to which one variable responds to another.
Fed Funds Rate
2% + current inflation + 0.5(actual inflation) + 0.5(% deviation)
demand curve
a graph of demand showing the downward sloping relationship between price and quantity demanded
Opportunity Costs
The trade-off of the value of one good service for the value of another
the demand curve that a monopolistically competitive firm faces is
downard sloping but fairly elastic
Dimensional Factor (define)
one of two explination of economies of scale. As output increases, firms can upgrade, thereby allowing output to increase
reduce its money supply
To expand money supply, the feds will______
population pyramid
type of bar graph that shows that the breakdown of population by age and gender
the branch of knowledge that deals with the creation and use of technical means and their interrelation with life, society, and the environment
does marginial benefit increase or decrease?
decrease (first chocolate bar is better than the second)
when a country allows trade and becomes an importer of a good this happens to producers and consumers
domestic producers become worse off, and domestic consumers become better off
the textbook argues that goverment supplies police protection because
it is difficult to supply police protection exclusively to those who pay for it
When looking at prices when does surplus or shortage begin to occur?
.01 above or below the original price
When a profit-maximizing monopolist sells output in two distinct markets, which of the following is true
A) Price will be higher in the market in which demand is unit-elastic.B) * Price will be lower in the more elastic market.C) Price will be equal in each market, as long as there is a constant marginal cost.D) Price will be lower in the market for which there are fewer substitute goods
Which of the following will NOT shift the demand curve for a good?
An increase in the price of a good
Negative Externalities 
External Costs
Focuses on consumer behavior
new, reunified Germany
is in EMU
Economics concerned with how people deal with _______
the particular talent that some people have for orgainizing the resources of land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing things
in economics, spending for the production and accumulation of capital and additions to inventories.
producer surplus
the benefit producers reveive from selling a good or service, measure by the price producer actually received minus the price the producer would have been willing to accept
In those industries in which labor productivity in the U.S. was higher relative to the U.K., the U.S. exports should be higher relative to UK exports.
Both Japan (review) and Germany
in the G8
Newly Independent states
Includes Armenia, Azerbajin, Belarus, Estonia, Georgia, Kazakhstan, the Kyrgz Republic, Latvia, Lithuania, Moldova, Russia, Tajikstan, Turkmenistan, Ukraine, and Uzbekistan
Marginal Cost
the increase/decrease in total cost from increasing/deacreasing the level of output by one unit
opportunity cost
best other thing could have done
inferior goods
good where the quantity demanded alls as income rises.
caused by changes in demand or supply are self correcting due to the “stable” and “self enforcing” properties of market equilibrium
property rights
the rights of owners of valuable items, whether resources or goods, to dispose of those items as they choose
financial system
the group of institutions in the economy that help to match one person's saving with another person's investment.
how is UE measured?
BLS surveys 60,000 HHS monthly
A type of economic system in which most resources are owned privately
to expand unduly in amount, value, or size

Define Embargo

An embargo is basically a quota of zero. This is when one country restricts all imports of another country.
Comparative advantage vs. Absolute advantage
Comparative advantage is when opportunit cost of producing the good or service is lower for that individual than for other people. Absolute advantage is an activity that an individual can do better than other people.
Marx is known as the founder of what economic and political system?
Income effect
the portion of the change in the quantity demanded of a good that is attributal to a change in real income (brought about by a change in absolute price)
standard deduction
set amount on which no taxes are paid
medium of exchange
and item sellers generally accept and buyers generally use to pay for a good or servce; money; a convenient means of exchanging goods and services without engaging in barter.

What is dumping?

Dumping is the act of charging a lower price for a good in a foreign market than one charges for the same good in a domestic market. Most dumping occurs during recessions when international producers find themselves with surpluses that cannot be sold at home. 
normal good
a good in which an increase in income leads to increase in demand
What're four reasons that the SRAS curve is upward sloping?
-Sticky wages-Sticky prices-Producer misperceptions-Worker misperceptions
In a market economy the distribution of output will be determined primarily by:
consumer needs and preferences.
What is a nonreciprocal transfer? Describe the accounting effects.
Transfer of assets in one direction.
Marginal Propensity to Save =
ΔSv / Δ(Y - Tx)1 - MPC
Why might the long-run aggregate-supply curve shif
1. Changes in Labor2. Changes in Capital3. Changes
what is the law of supply?
the quantity supplied for an economic product varies directly with its price
2 factors that strain the environment (dealing with overpopulation)
1. more people than available resources2. too much output and consumption of goods
An example of a government-imposed barrier is...
The granting of a patent to a particular firm
there are two sources of demand for loanable funds:
people wishing to buy houses, and businesses wishing to buy capital stock
What are 3 arguments FOR a trade barrier
1) no trade barrier hurts our economy because jobs are lost due to lower labor wages 2) prevents businesses moving to places with more relaxed environmental laws 3) aircrafts and weapons that are imported, may not be available at times of war
International Trade Organization
firm is producing too much
pay part of the cost
125.Fascism appeals to submissive people that like to be dominated.A) TrueB) False
A) True
(True/False) Profit maximization for a PC firm occurs at an output where marginal cost is = to the market price and the firm's marginal cost = to the firm's marginal revenue.
Adverse Selection
Asymmetric information prior to entering into the market transaction. Whenconsumers self‐sort themselves in their market decisions based on knowledge they have but producers don’t. (e.g., moving to a state because it offers higher welfare assistance, moving to a new school district because special education services are better, buying insurance because you know you will need it) P. 36, 105, 108
productive efficiency
good/service produced at lowestr possible cost--- ch. of perfect competition
95.For Marx, culture, law and government are elements of societys ________________.A) superstructureB) substructure
A) superstructure
utopian socialism
this form advocated society be rationally ordered, usually in small-scale communities, to the benefit of the least well-off
zaibatsu and kombinaten
disallowed in American occupation areas, post WWII
Economic Growth
shifts in the production possibility frontier. ultimatly raising the standard of living
a peiof of declining real GED, accompanied by lower real income and higher unemployment.
Treasury bonds
maturities ranging from more than 10-30years
1.Great Britian took the lead in designing the postwar institutions that would mold interntional economic relations.A) TrueB) False
A) True
both Japan (review) and Germany??
practices state-directed capitalism using input from a national alliance of government, banking and industry
Define income effect.
(assuming income is constant) when prices rise a consumer can't afford to buy as much, but when price declines a consumer can afford to buy more
Budget Deficit
a shortfall of tax revenue from government spending.
Describe the Grangers.
Grangers were somewhat successful in lobbying state legislatures to create regulatory agencies that set the max rates that RR's and grain elevator operators could NOT charge. created farmers cooperatives that offered members reduced prices on farm equipment, supplies, and even consumer goods.
income transfers
payments to individuals for which no current goods or services are exchanged, such as social security, welfare, unemployment benefits
produced in order to be used in the production of other goods/services
margin/ marginal change
small incremental adjustment to a plan of action
Terms of trade
The relative price of a country's exports, compared to its imports (Px/Py)
Economic Growth
The ability of the economy to produce increasing quantities of goods and services.
elasticity in demand
measure of how consumers react to change in price
the quantity of a commodity that is in the market and available for purchase or that is available for purchase at a particular price
129.The term used to describe fascist economics is __________A) the corporate stateB) the German Volk
A) the corporate state
refer to table 9.1 at an output level of 1200 billion, the level of aggregate expenditures is a.1,400 bilb.1,300 bilc.1,200 bild.1,000 bil
1,300 billion
From which of the following goods is it most difficult to exclude free riders
a radio program
A good that can be used in place of another good that fulfills more or less the same purpose
117.In 1958, Mao Zedong initiated a plan that called for decentralized decision-making, agricultural communes, cheap labor instead of expensive technology, and self-reliance rather than dependence on foreigners. This plan was known as ________.A) The Cult
B) The Great Leap Forward
The sum of total fixed cost and total variable cost at each level of output is called _______.
total costs (TC)
Total Fixed Cost
Total of inputs that are fixed in the short run
President of ROC(Political Party = Kuomintang)
What is the title of Ma Ying-jeou
The Optimal Mix of Crime
Allocate resources in such a way that the ratio of MB/MC across all crimes is equal, or the ratio of MB is equal to the ratio of MC. -Decisions are made at the margin. - The empirical magnitudes of costs and gains is likely to be such that some positive quanitity of crime is optimal
Determinants of the price elasticity of demand
1. More price elastic when there are substitute goods available for a product. 
2. More price elastic when a consumer's expenditure on the product is large
3. Less price elastic when the product is seen by consumers as being a necessity.
If demand is _____ a rise in price (raises/lowers) total revenue:a. elasticb. unit elasticc. inelastic
a. lowers
b. unchanged
c. increases
A cost that has already been committed and cannot be recovered
When does a firm exit a market?
What are assets that do not qualify for interest capitalization?
1. Assets that are in use or ready for their intended use
2. assets that the company does not use in its earnings activities and that are not undergoing activities necessary to get them ready for use. (Land remaining undeveloped and assets not used because of obsolescence, excess capacity, or need for repair)
scare resources
landlaborcapitalentrepreneurial ability
37.Neoconservatives have generally been less likely to embrace internationalist prescriptions for world problems.A) TrueB) False
A) True
Fixed exchange rates, capital mobility
the uncompensated impact of one person's actions on the well-being of a bystander; could be positive or negative(204, 10)
Mao Zedong
campaigned against the "Four Olds"
Microeconomic assumptions
1. households maximize utility
2. firms maximize profits
3. prices are flexible (vs sticky) wages didn't fall in Great Deppression
Marginal Propensity to Save; the fraction of each additional (marginal) dollar of disposable income not spent on consumption; 1-MPC
study of how people make decisions regarding the allocation of resources over time and the handling of risk (597, 27)
Calculate government purchases
Government purchases = consolidated gov. purchases + gov. income - transfers
(where gov. income = taxes + ss contributions + fines and fees) 
leftward shift
decrease in demandless will be demanded at all possible prices
a group of people who associate closely.
Consumption possibilities
The combination of goods and services that a country's citizens might feasibly consume.
Economists normally assume that a goal of a firm is to do this with its profits
maximize profits
Assumption 5Factor Endowments
Factor endowments are fixed. (land, labor, capital and technology)
this nation is trying to limit its steel exports
The central problem for economizers is always
scarcity of resources
A firm shuts-down when the total revenue is less than the variable costsor, when the price is less than the average variable cost
Sunk Cost
the ratio of a change in the equilibrium GDP
Define: Capital Resources
buildings, tools, and machines people to create and use to produce final goods and services
Two goods are compliments if a decrease in the price of one good does this to demand
increases the demand

Market dimension characterization:
3. Time
the period of time during which transactions are occurring
population of US and GDP per capita
300 million$ 46,000
Imperfect Competition
A market structure in which there is more than one firm but one or more of the requirements of perfect competition is violated
dominant strategvy
strategy best for a firm no matter what the other strategies other firms use
Mill's stationary state
critical view of his own society where individual happiness was low. might be a desirable place if economic activity decreased and more attention paid to well being of the individual
When AD is moved to SR Equilibrium, Inflation type?
Demand Pull Inflation
What are three different types of unemployment?
Frictional, Structural, and Cyclical
Three Properties of Consumer Preference
more is preferred to less
consumers like diversity
two types of normal goods, consumption and leisure
Abstinence theory of interest
the money used for lending purposes is the money not used for should be allowed to earn interest since a person has to "abstain" from products now for products later. makes funds available for borrowers.Nassau Seniordisutility as a real cost of production (not utilizing and saving)to produce capital goods, someone must abstain from consumption and capitalist will not abstain unless he is rewarded for his pain.
The horizontal part of the LRAC that just touches the minimum points of the SRAC curves is called
constant returns to scale.
Farmer's perceptions about the source of their problems in the last half of th 19th c.
farmers did not fully understand market forces. Instead, they blamed problems on conspiracies and monopolies. Unfair mortgage/lending rates by banks. "eastern bank conspiracy" farmer's debt burdens were increased due to purchases of capital and land. They claimed that the interest/mortgage rates charged were too high/unfair. Excessive freight rights. Manufacturers high prices on farm equipment.
shift of the demand curve
a change in the quantity demanded at any given price, represented by the change of the original demand curve to a new position, demanded by a new demand curve
New Product Bias and Outlet BIasboth imply that the CPI measures too much inflation
NEW are not included immediately (prices typically drop quickly but CPI doesnt catch this effect)

OUTLET-consumers shopping at stores with cheaper prices
Economics is a study of how
We use our resources to satisfy our wants
How does consumer's preference change demand?
We may still want vegetables but we might like organic more
why is MR curve downard sloping in mon. comp
bc dont charge allt he same price?
In comparing a PC firm to a MC firm1) A PC firm will operate at capacity in the long run, a MC firm won't2) A MC firm will operate at capacity in the long run, a pc firm won't3) Neither PC firms nor MC firms will operate at capacity in the long run4) Both
1) A PC firm will operate at capacity in the long run, a MC firm won't
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