Chapter 1 - Ten Principles of Economics

Policymakers

Policymakers

________ have the ability to influence the demand for goods and services by altering how much the government spends, how much it taxes, and how much it prints.

Central planning

________ meant that the government could organize an economic activity that was beneficial for the country.

Externality

________: the impact of one person's actions on the well- being of a bystander.

Rational people

________ respond to incentives because they make it easier to make a decision.

Productivity

________: the number of goods and services produced from each unit of labor input.

Incentive

________: something that induces a person to act.

Adam Smith

________ observed that households and firms are guided by an "invisible hand "while interacting in markets, leading to a desirable market outcome.

Incentives

________ are the key to knowing how markets work.

President Gerald Ford

________ called inflation "public enemy number one "during the 1970s.

Marginal change

________ is used by economists to describe a small adjustment to an action plan.

U.S.

The ________ and China compete for the same customers when it comes to market goods.

fuel efficient

Taxes on gas lead people to drive more small and ________ vehicles.

Business cycle

________: fluctuations in economic activity, such as employment and production.

Scarcity

________: the limited nature of society's resources.

variety of options

People make better decisions when they have a(n) ________ to analyze.

Sam Peltzman

________ argued that seat belt laws led to fewer deaths per accident but more accidents.

Rational decisions

________ are made when an action's marginal benefits are larger than its marginal cost.

Property rights

________: the ability of an individual to own and exercise control over scarce resources.

Inflation

________: an increase in the overall level of prices in the economy.

Government Prints

Principle 9: Prices Rise When the ________ Too Much Money.

Opportunity cost

________: whatever must be given up to obtain some item.

Efficiency

________: the property of society getting the most it can from its scarce resources.

Higher market prices

________ result in less consumerism but an incentive for more production.

Wealth of Nations

An Inquiry into the Nature and Causes of the ________ was written by Adam Smith, an economist, in 1776.

Decision makers

________ should go over each possible action before making a decision.

Market failure

________: a situation in which a market left on its own fails to allocate resources efficiently.

Equality

________: the property of distributing economic prosperity uniformly among the members of society.