Econ 201 Macroecomonics with Prof Kurt - Exam 1 Review

durable goods

goods that last for a relatively long time, such as refrigerators, cars, and DVD players (typically longer than 3 years)

GDP per capita

GDP/population

GDP

the total market value of all final goods and services produced in a given time period in an economy

Double Counting

the mistake of including both the value of intermediate products and the value of final products in calculating gross domestic product; counting the same production more than once

increasing opportunity cost

a situation in which producing more of one good requires giving up an increasing amount of production of another good

Constant Opportunity Cost

An opportunity cost that remains the same as consumers shift purchases from one product to another along a straight-line budget line.

Value Added

Gross value of the product minus the cost of raw materials and energy

non-durable goods

goods that last a short period of time, such as food, light bulbs, and sneakers

Income Approach

A method of computing GDP that measures the income-wages, rents, interest, and profits-received by all factors of production in producing final goods and services.

Goals for Macroeconomy

Increasing GDP, low unemployment, low inflation

Final Goods & Services

goods and services sold to the final, or end, user

Fallacy of Composition

the incorrect belief that what is true for the individual, or part, must necessarily be true for the group, or the whole

Investment

when firms buy new capital to produce goods & services (ex. factories) also the addition to a country's capital stock over the course of a year

Services

acts or uses for which a consumer, company or government is willing to pay (ex doctor's healing, lawyer's representation)

Economic growth

a steady, long-term increase in real GDP

MRT

Marginal Rate of Transformation - The slope of the PPF, it represents the opportunity cost of producing one additional unit of the good on the x-axis.

Prod. Approach

Sums the “value-added” at each stage of production

Goals for Macroeconomy

Increasing GDP, low unemployment, low inflation

Final Goods & Services

Goods + Services sold to the final/end user

Fallacy of Composition

The idea that something good for the part is good for the whole (wrong)

Services

An act or use for which a consumer, company or govt is willing to pay (ex. doctor healing, lawyer rep)

PPF

A diagram that shows the productively efficient combinations of 2 products that an economy can produce given the resources it has available

Specialization

Individuals who are better at one job should focus on that job (Group work?)

Division of Labor

The way in which different workers divide required tasks to provide a good or service (fordist vs artisanal)

Normative Statement

• Analytical

• Judgemental

• Evaluated as good or bad

an unemployment rate of 7.8% is too high

Positive Statement

• fact

• no judgement

unemployment rate is 7.8%

Opportunity Cost

A measurement of what is given up in exchange OT COST measures the value of the best foregone alternative

Circular flow diagram

A model that shows how firms and households interact in the labor and goods + services markets. More complicated circular flow diagrams can include the government, world, and financial intermediaries.

Model

A formal statement of a theory, usually a mathematical statement of a presumed relationship between 2 or more variables

Ockham’s razor

The principle that irrelevant detail should be cut away

Macroeconomics

The branch of economics that examines the economic behavior aggregates - income, unemployment, output, etc. on a national scale

Microeconomics

The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units - that is, firms & households

Intermediate good

a product used in the production of a final good or finished product (ex. tire or salt from a bakery)

Economics

study of choice in the face of scarcity