Chapter 2 & 4 MacroEconomics Spring2025

What are the 4 Limited Resources and the 4 factor of payments that go along with them?

Capital: Man made which businesses purchase to increase productivity —> Interest

Land: Natural resources —> Rend

Labor: workers —> wages

Entrepreneur/ Enterprise: risk taking, Managing —> Profit

What are the benefits of Trade?

consumer surplus and producer surplus: a benefit of trade to both parties

What is the Production Possibility Frontier?

With the limited resources that you have, you choose to make more of one good than another. For example during was times guns are made more then butter.

What is the Law of increasing Opportunity Cost?

Production of a certain good increases therefore the opportunity cost of producing that good increases.

When is an Economy Efficient?

When it is producing the maximum output with the available resources. It can also produce more of one good by producing less of another good.

What are sources of economic growth?

1. An increase in quantity of resources

2. Technological advances - if it produces more output per resource. Also something to not abt tech is that it may leave some without work for some time.

What does a Capitalist Vision look like?

1. Privately property is economically more desired

2. Market Prices contribute to the economy

3. Limited government

What is the Socialist Vision?

1. Property owned by government any private is harmful economically

2. Price control

3. Government promotes the best public interest

What are the 3 Economic questions

1. What to produce

2. How to produce

3. For whom to produce

What are the 3 Goals of Macroeconomics?

1. Inflation Stability or Stable prices

2. Full or natural unemployment

3. Efficiency/ economic growth

What is Inflation?

An increase in the price level

What is the Consumer Price Index?

The Consumer Price Index (CPI) measures the average change over time in the prices paid by consumers for a basket of goods and services.

What has the biggest percentage in CPI?

1. Shelter

The others it accounts for are food and energy

What is the Formula for Calculating Rate of Inflation?

Inflation Rate = NewCPI - OldCPI / OldCPI x 100%

What is the Nominal Values to Real Values formula?

Real Valuesx = Nominal Valuesx / (CPIx/CPIy)

What contributes to income?

Wages + interest + profit + rent = income

What are the 3 factors to measuring unemployment?

1. Employed are those with paying jobs

2. Unemployed are those actively seeking employment for the previous four weeks

3. 16 year and older or no longer in the labor force

How do you compute the unemployment rate?

Unemployment Rate = unemployment / Labor force x 100%

How do you calculate the labor force?

Employed + unemployed = Labor force