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Macro Economics
Terms Pearson Chapter 1
| Term | Definition |
|---|---|
| Incentives | Rewards for engaging in a particular activity |
| Economics | The study of how people allocate their limited resources to satisfy their unlimited wants. |
| Resources | Thins used to produce goods and services to satisfy people's wants |
| Wants | What people would buy if their incomes were unlimited |
| Microeconomics | The study of decision making undertaken by individuals (or households) and by firms |
| Macroeconomics | The study of the behavior of the economy as a whole |
| Aggregates | Total amounts of quantities, aggregate demand, for example, is total panned expenditures throughout t a nation |
| Economic system | A society's institutional mechanism for determining the way in which scarce resources are used to satisfy human desires |
| Rationality assumption | The assumption that people do not intentionally make decisions that would leave them worse off |
| Model or Theories | Simplified representations of the real world used as the basis for predictions or explanations. |
| Ceteris paribus assumption | The assumption that nothing changes except the factors being studied |
| Empirical | Relying on real-world data in evaluating the usefulness of a model |
| Behavioral economics | An approach to the study of consumer behavior that emphasizes psychological limitations and complications that potentially interfere with rational decision making |
| Bounded-rationality | The hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them bu instead use simple rules of thumb to sort among the alternatives that happen to occur to them. |
| Positive economics | Analysis hat is strictly limited to making either purely descriptive statements or scientific predictions. If A, the B. A statement of WHAT IS |
| Normative economics | Analysis involving value judgments about economic policies; relates to whether outcomes are good or bad. A statement of WHAT OUGHT TO BE |
| Direct relationship | A relationship between two variables that is positive. An increase in one is associated with an increase in the other. |
| Inverse relationship | A relationship between two variables that is negative. an increase in one variable is associated with a decrease in the other |
| Independent variable | A variable whose value is determined independently of the equation under study. |
| Dependent variable | A variable whose value changes according to changes in the value of one or more independent variables. |
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