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Macro First Partial

First Partial Exam Flashcards

What is the Etymological definition of economics? Oikos; home, Nomos; management, Management of home.
What is the definition of Microeconomics? Studies how producers and consumers determine the price and quantities at which inputs and outputs are exchanged.
What is the definition of Macroeconomics? Studies the economy as a whole and seeks to determine how strategies like fiscal, monetary, and commercial policies are used to determine things like inflation, national income, output, unemployment, economic growth etc.
What to produce? That for which there is demand.
When to Produce? When the most important input is abundant
How to produce? Least costly input combination while maintaining same quality.
Whom to Produce for? For those with monetary votes.
Where to Produce? Closest to your input resources, wherever its cheapest.
How much to produce? Almost enough to satisfy demand but not quite.
Full Employment when 5% or less of the labor force is unemployed
Economic Security every member in society should have the following basic needs satisfied: food, clothing, shelter, water and sanitation, education, health care, (internet optional)
Economic Stability avoid unexpected ebbs and flows in the economy
Economic Justice every member in society should have equal opportunities for success regardless of: gender, ethnicity, religion, political persuasion, disability, sexual orientation, height, weight etc.
Economic Progress (prosperity) economic growth plus economic development
Economic Growth quantitative- pursuit of more
Economic development qualitative- pursuit of better
Theory of Demand states ceteris paribus, that a rise in P conveys a decrease in Qd, and vice versa
Theory of Supply states ceteris paribus, that a rise in P conveys an increase in Qs, and vice versa
Socialism economy with collective ownership of means of production, and a large role of the government running the economy with widespread public ownership of key industries.
Capitalism (Market Economy) economy where means of production, distribution and exchange are privately owned and operated for private profit
Communism economy where means of production, distribution, and supply are owned by the proletariat, with wealth distributed based on ones needs. Get based on your needs and give based on your ability.
Barter exchanging goods without the use of money
Scarcity a commodity is scarce if it has a p > 0
Land (T) natural resources used in production process
Labor (L) all human participation in the prod. Process
Capital (K) Financial- cash, bonds, investments, Physical capital- assets
Goods produced, tangible, and of objective quality
Services performed, intangible, of subjective quality
Opportunity Cost Principle (Alternative) the benefit given up by using a resource for a certain purpose, rather than using it for its alternative use
Complementary describes commodities that are consumed together, ex. Peanut butter and jelly
Complimentary a commodity that is given for free with the purchase of another commodity, ex. Free peanuts with the purchase of an airline ticket
The Production possibility boundary (curve, frontier, transformation) shows all possible combinations of commodities that can be produced in an economy, given the available resources, their use efficiency, and the existing state of technology
Political System rules and regulations enacted by governments to pursue social peace and public order
Economic System rules and regs. Enacted by govs. To pursue economic prosperity and higher standards of living
Economic Policies steps and actions undertaken by governments to achieve economic objectives
Gerontocracy old men
Paedocracy young people
aristocracy small privileged, hereditary class, from leading families bearing titles of nobility
Theocracy priests or men claiming to know the will of God
Autocracy single absolute ruler (aka dictatorship)
democracy by the people, usually through elected representatives
Bureaucracy by officials and their cumbersome regulations
Technocracy by technical experts, administrators with university degrees
oligarchy few influential families
Plutocracy the rich
Market any place that brings together buyers and sellers to exchange commodities
Division of Labor (labor specialization) prevents “jack of all trades”, through specialization, people become ignorant of many trades so they go into markets searching for experts
Resource allocation how to allocate land, labor, and capital, to all competitive ends
Elimination of Barter the use of money will eliminate barter because there is no need for a “coincidence of wants”, money can buy anything.
Market Sector (M) (economic) Pricing of commodities based on covering costs of production
Non Market Sector (NM) (economic) price not related to costs
Private Sector (PR) (legal) owned by members of household or business sector
Public Sector (PB) (legal) owned by government
Agents [Sectors] of the economy (Aggregate expenditure= C + I + G + NX)
Agent: Households (Consumers) (C) 1. owners of factors of production (land, labor, capital) 2. decision making processes are logical and consistent 3. main reason for actions is satisfaction
Agent: Firms or Businesses (Producers) (I)- investment is the consumption of businesses 1.decisions are rational and logical 2. purchasers of factors of production 3. main reason for actions is profitability
Agent: Government (G) 1. decision making processes are not logical or consistent 2. main reason for actions is 4 P’s: Promotion, Power, Prestige, Personal aggrandizement
Agent: Foreign Sector (NX= X-M) 1.Main reason for actions is National interest
Characteristics of Capitalism: Private Property members of the household and of business sectors, not the government, own most of the productive resources.
Characteristics of Capitalism: Self- Interest is the motivating force of all economic units as they express their free choices. Each economic unit tries to do what is best for itself
Characteristics of Capitalism: Freedom of Enterprise ensures that entrepreneurs and businesses are free to get and use economic resources to produce and sell their choice of goods and services in whatever markets they want
Virtues of Capitalism: Consumer Sovereignty Consumers exercise command by determining, through monetary votes, the types and quantities of commodities produced. (its your money, spend it how you want to spend it)
Virtues of Capitalism: Market Restraints on Output Decisions the buying decisions of consumers determine what is profitable to produce and what isn’t, therefore, producers are not free to produce
Virtues of Capitalism: Guiding Function of Prices changes in prices indicate changes in consumers tastes, preferences, and necessities, thus allowing changes in production patterns
Vices of Capitalism: Promotes Elitism View that some are elite and other are nor, in-groups and out-groups
Vices of Capitalism: Competition competition kills businesses and livelihoods because of “survival of the fittest”
Vices of Capitalism: Promotes economic inequality capitalist economies increase the gap between the income of the rich and the income of the poor, unequal because society perceives the world as divided between “winners” and “losers”
Created by: 583583143



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