Chapter 1: Introduction to Economics
The purpose of an economy is to produce goods and services that satisfy peoples wants
using the limited resources available.
There are three core choices that confront every nation:
WHAT to produce
Chapter 3: Supply and Demand Continued
Supply: the ability and willingness to sell specific quantities of a good at alternative
prices in a given time period, ceteris paribus.
Demand: the ability and willingness to buy specific quantities o
Ch.1: The Market and Government
Mechanisms of Choice
There are three basic ways to make the necessary choices:
The market mechanism.
A mixture of both.
Adam Smith called it the invisible hand.
It is as i
Chapter 3: Supply and Demand
All participants, for the most part, are trying to obtain the maximum return from the scarce
resources they have.
Consumers: maximize the utility (satisfaction of unmet wants) they can get f
Chapter 4: The Role Of Government
Decisions must be made about what to produce.
In a market-based system, buyers and sellers make these decisions.
In a state-run system, those in power make these decisions.
Can either of these systems, or
Chapter 4: The Role Of Government Continued
Each level of government (federal, state, and local) creates a budget of fund inflows and
Inflows (sources of funds).
Taxes (and fees/user charges).
Chapter 5: National Income Accounting Continued
Computing Real GDP
Base year: the year used for comparative analysis; the basis for indexing price changes.
We arbitrarily set a price index in the base year to equal 100.
The GDP for any o
Chapter 2: Output and Capital
The Changing Mix of Output
The transformation of the United States into a service economy reflects our increasing
In poorer countries, resources must be devoted to producing food and goods, not servi
Chapter 5: National Income Accounting
In order to formulate a policy to fix a problem, decision makers need to identify the
extent of the problem.
To measure economic performance.
National income accounting was created to provide answers
Chapter 2: The U.S Economy, A Global View
Nations Have Different Economic Outcomes
Every country must answer the three basic questions:
WHAT to produce?
HOW to produce?
FOR WHOM to produce it?
Since each country has vastly different pr