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econ final exam
| Question | Answer |
|---|---|
| What are factors of production | land, labor, capital, entrepreneurship |
| opportunity cost definition- | what we give up in order to get something else |
| What is guns vs butter | military vs civilian goods |
| 3 definitions of economics | allocation of scarce resources, to best fit society's needs. Macroeconomics-economy as a whole micro- individual behavior |
| what is market mechanism | the use of market prices and sales to signal desired outputs |
| what is laissez faire | the "leave it alone" of nonintervention of the gov in market mechanism |
| what is the purpose of economic models? | to predict economic behavior, develop economic policy, and explain economic behavior |
| GDP | C+I+G+(x-m). the total market value of all final goods and services produced within a nation's boarders in a given time period |
| GNP/national income | total income earned by current factors of production, plus net income even out of the country for gnp only |
| Per capita gdp | total gdp divided by total population. aka average gdp |
| economic growth percent should be | 3% |
| what is a substitute good | alternative to another product, when the price of good x rises, the demand for good y increases, |
| what is a complementary good | goods consumed in combination, so when the price of good x rises, the demand for y falls |
| what is law of supply | The quantity of a good supplied in a given time period increases as its price increases |
| what is law of demand | The quantity of a good demanded in a given time period increases as its price falls |
| externalities | costs or benefits of a market activity that affect a third party |
| monopoly | A firm that produces the entire market supply of a particular good or service |
| income transfer | payments to people, without exchange of goods or services. ex- social security checks being mailed |
| comparative advantage | someone can produce something at a lower opportunity cost |
| surplus | producing more goods than people can buy meaning prices can drop |
| shortage | aren't enough to meet demand |
| what is a public and private good | public good is basically free anyone can use but a private good is you can prevent people from using it |
| inflation | increase in the average level of prices of goods and services |
| disposable income | after tax income, of households, personal income less personal taxes. money available for spending and saving |
| depreciation | the consumption of capital in the production process, the wearing down of plant and equipment |
| real gdp | the value of final output in a period of time but not only in the countries boarders. |
| personal income | total income received by individuals, households, and non corporate businesses before accounting for personal income taxes |
| how do markets arrive at equilbrilium | trial and error |
| real income | purchasing power, adjusted for inflation |
| price stability percent | 3% |
| 2 causes of inflation | demand pull inflation- cost push inflation- |
| business cycle | unpredictable |
| supply side policy | gov measures aimed at increasing the productive capacity such as tax cuts. no downsides bc lower unemployment and prices. runs off incentives |
| federal open market committee | decides monetary policy, it sets interest rates and manages the money supply. it has 12 members (7 board of gov and 5 presidents of branches) 14 year terms |
| deposit creation | banks use new deposits to make loans and expand the money supply, banks create money this way |
| who is the fiscal agent of the US gov? | US treasury |
| classical economists | stable economy (has flexible wages and prices) |
| Keynes | unstable market, cannot fix itself |
| fiscal policy | gov spending and taxation to influence the economy |
| monetary policy | managing the money supply and interest rates |
| ppc | shows opportunity cost and scarcity when producing two products |
| changes in quantity is | along the curve |
| changes in demand | shifts |
| money- | median of exchange, store of value, and standard of value |
| monetary tools | fed can reserve requirements, discount rates, open market operations |
Created by:
alexisda