AI flash cards

Scarcity

A condition that arises when human wants exceed the resources available to satisfy them.

Microeconomics

The branch of economics that studies individual units, such as households and businesses, and their choices.

Macroeconomics

The branch of economics that analyzes the total effect of choices made by individuals, businesses, and governments on the economy.

Opportunity Cost

The highest value alternative that must be forgone when making a choice.

Marginal Benefit

The additional benefit gained from consuming one more unit of a good or service.

Marginal Cost

The opportunity cost incurred when increasing the level of an activity by one more unit.

Incentive

Something that motivates or encourages an action.

Capital Goods

Goods purchased by businesses to increase productivity.

Factors of Production

Resources used in the production of goods and services, including Land, Labor, Capital, and Entrepreneurship.

Demand

The quantity of a good or service that buyers are willing and able to purchase at various prices.

Law of Demand

As the price of a good falls, the quantity demanded increases, and vice versa.

Equilibrium

A state in which the quantity supplied equals the quantity demanded at a certain price.

GDP (Gross Domestic Product)

The market value of all final goods and services produced within a country in a given time period.

Real GDP

GDP adjusted for inflation, reflecting the value of goods and services in constant dollars.

Nominal GDP

GDP measured using current prices, not adjusted for inflation.

CPI (Consumer Price Index)

A measure that examines the average of prices paid by urban consumers for a fixed market basket of consumer goods and services.

Unemployment Rate

The percentage of the labor force that is unemployed but actively seeking employment.

Natural Rate of Unemployment (NRU)

The level of unemployment that exists when the economy is producing at full capacity; typically between 4.5% and 5.5%.

Fiscal Policy

Government decisions regarding spending and taxation to influence the economy.

Monetary Policy

Actions taken by a central bank to control the money supply and interest rates to influence the economy.

Loanable Funds

The market where borrowers and lenders exchange funds to finance investment.

Federal Reserve

The central bank of the United States, responsible for regulating the banking system and monetary policy.

Demand-Pull Inflation

Inflation that occurs when demand for goods and services exceeds their supply.

Cost-Push Inflation

Inflation caused by an increase in prices of inputs, leading to a decrease in supply.

Investment

The purchase of goods that will be used to produce other goods and services.

Trade-off

The act of giving up one benefit in order to gain another at a greater cost.

Consumer Income

The income available to spend on goods and services after taxes.

Fiscal Imbalance

The difference between the government's total commitments to pay future benefits and its future expected tax revenues.

Economic Growth

An increase in the production of goods and services over a specific period.

Aggregate Demand

The total demand for final goods and services in the economy at a given time and price level.

Aggregate Supply

The total supply of goods and services that firms in an economy plan to produce during a specific time period.

Crowding Out Effect

When government spending leads to a reduction in private sector spending.

Social Interest

Choices that are made for the benefit of society as a whole.

Self-Interest

Choices made that are best for the individual who makes them.