Macroeconomics: Midterm study guide Flashcards

Terms Definitions
Physical Capital
Macinery, equipment, etc.
normative economics
what should be
Implicity costs
value of something sacrificed
Bowed Out PPF
Increasing Slope/Increasing Opportunity Costs
Intensive Growth
Existing Resources become betterTechnological Change
Determinants in Supply
TechnologyInput PriceExpectation of future priceNumber of sellers in the marketLaw and regulationPrice of related goods
Substitution Effect
Price increases, buy more substitutes, buy less of the product, quantity demanded decreases
Human Capital
Skills and training of workers
gdp equation
consumption, net exports, gov. spending, investments
structural unemployment
caused by economic restructuring, making some skills obsolete (sewing machine replacing sewer)
Three Important Macroeconomic Goals
Economic GrowthHigh Employment/Low UnemploymentStable Prices
Markets can only work when...
Property rights exist
Traditional Economy
Resources are allocated according to long-lived practices from the past
period of significant decline in real GDP for at least two consecutive quarters (6 months)
represents the end of contraction and the beginning of expansion
cyclical unemployment
results from fluctuations in economic activity
Production possibilities curve
Illustrates opportunity cost by showing trade offs that we make. It measures the maximum amount of outputs we can make from a given amount of inputs
Two Kinds of Capital
1. Physical Capital2. Human Capital
Government Budget Surplus
Government collects more in taxes than it spends
Factors of Production
resources that businesses use to produce goods and servicesLand, Labor, Capital, Entrepreneurship
Okun Gap
the gap between real GDP and potential GDPoutput gapsource of loss from economic fluctuations
the value of the total production of all final goods and services produced within a country during a given year
Change in price
does not shift the demand curvechanges the quantity demanded
What is necessary in order to specialize in a particular task?
Comparative Advantage
Lucas Wedge
the accumulated loss of output that results from a slowdown in the growth rate of real GDP per person.measures the cost of slower productivity growth
per capita real output is
gdp divided by population
aggregate income consists of :
wages, profit, interest, rent
calculate cpi
to find market basket- quantity times price.
Marginal benefit
the additional benefit above the one you have already derived- reading a chapter, marginal benefit is the additional knowledge you gain that you didn't already know
Relative Price
number of other goods that must be given up in exchange for a productRatio of one price to anotherOpportunity Cost
Money Price
number of dollars that must be given up in exchange for a product
Fiscal Policy
making changes in tax rates and in government spending programsfederal government
equilibrium price
the price toward which the hand drives the market
law of supply
supply rises as price rises, supply falls as price falls
Define economics
Economics is the study of how humans coordinate their wants and desires given decision making mechanisms, social customs, and political realities of the society. It is practicing a reasonable approach to economic issues. It examines production, distributi
Opportunity cost
the benefit you might have gained from choosing the next best alternative.
Change in Price (Supply)
will not shift the entire supply curve.will change the quantity supplied
what does the short term framework focus on
business cycles and demand
what does the long run framework focus on
supply and growth
price ceiling/ floor
government imposed limit on how high a price can be charged/ low
What is the difference between scarcity and resource allocation
Resource allocation is delegate where and how to use available resources and scarcity is when there is more being demanded than is able to be produced.
What must the acceptable price of trade be?
Higher than the opportunity cost of the seller.Lower than the opportunity cost of the buyer.*Between the two opportunity costs*
Scarcity: Why it occurs and why it matters
Scarcity occurs because people demand more than can be produced
Change in quantity demanded vs. demand on graph
quantity demanded deals with price and movement along demand line, demand shifts
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