Chapter 1: Welcome to Economics - Vocabulary Flashcards

Vocabulary flashcards covering key terms from Chapter 1: Welcome to Economics.

Economics

The study of how humans make decisions in the face of scarcity.

Scarcity

Wants for goods, services, and resources exceed what is available.

Microeconomics

Focuses on the actions of individual agents within the economy, like households, workers, and businesses.

Macroeconomics

Focuses on broad issues such as growth, unemployment, inflation, and trade balance.

Monetary policy

Policy that involves altering interest rates, the availability of credit, and borrowing; determined by a central bank.

Fiscal policy

Economic policies involving government spending and taxes; determined by a nation’s legislative body.

Division of labor

The way in which different workers divide required tasks to produce a good or service.

Specialization

Focusing on particular tasks for which workers or firms are well-suited within the production process.

Economies of scale

As production increases, the average cost of producing each unit declines.

Circular Flow Diagram

Shows how households and firms interact in the goods/services market and the labor market.

John Maynard Keynes

argued that economics teaches you how to think, not what to think.

Theory

A simplified representation of how two or more variables interact with each other.

Model

A tool used to test theories; in this course, model and theory are used interchangeably.

Traditional economy

An agricultural economy where activities are done as they have always been, often family-based.

Command economy

An economy where government authority makes economic decisions and owns resources.

Market economy

An economy with decentralized decisions, private ownership, and production based on demand.

Private enterprise

A system where private individuals or groups own and operate the means of production.

Mixed economy

An economy that combines elements of command, traditional, and market systems; the U.S. is toward the market end.

Regulation

Rules that define the 'rules of the game' in the economy; no such thing as a completely free market.

Underground economy (black market)

Markets where buyers and sellers transact without government approval.

Globalization

The trend of buying and selling in markets across national borders.

Exports

Goods and services produced domestically and sold abroad.

Imports

Goods and services produced abroad and sold domestically.

GDP

Measures the size of total production in an economy.

New York Stock Exchange (NYSE)

A symbol of private enterprise and market-based activity in the economy.

The Wealth of Nations

Adam Smith’s 1776 book that introduced the idea of dividing labor into discrete tasks.

Market

Interaction between buyers and sellers; a framework of demand and supply.