Economics Flashcards

Flashcards covering key economic concepts like micro and macroeconomics, scarcity, supply and demand, production possibilities, fiscal and monetary policy, unemployment, and inflation.

Microeconomics

Studies individuals and business decisions.

Macroeconomics

Analyzes the decisions made by countries and governments.

Opportunity Cost

The value of the best alternative that is not chosen when making a decision.

Scarcity

The gap between limited resources and unlimited wants.

Incentives

Rewards or stimuli provided to encourage specific actions.

Sunk Cost

Costs that have already been incurred and cannot be recovered.

Land

Natural resources, food, raw materials.

Labor

Workers, human capital.

Buildings

Man/handmade stuff.

Technology

Software, liquid Capital for the purposes of inventing.

Aggregate Demand (AD)

Total demand for all goods and services in an economy.

Aggregate Supply (AS)

Total supply of goods and services that firms are willing to produce at different price levels.

Goods

Items that satisfy human needs.

Specialization

Focusing on a specific task to increase efficiency.

Supply and Demand

The amount of stuff that exists and how much consumers are willing to pay for it.

Demand

The relationship between the quantities of goods and services that consumers desire and the prices they are willing to pay.

Substitution Effect

When a consumer reacts to a rise in the price of something by consuming less of that thing and more of a similar alternative.

Income Effect

When you buy less of something without increasing your purchase of other things.

Equilibrium

The point at which the quantity demanded equals the quantity supplied.

Production Possibilities Curve (PPC)

Shows all the possible combinations of two goods that can be produced by an economy, assuming all resources are fully and efficiently utilized.

Point within PPC

Output attainable; resources not fully and efficiently utilized.

Points on PPC

Output attainable; resources fully and efficiently utilized.

Points outside PPC

Output not attainable; insufficient resources to produce indicated output.

Shift PPC outwards

Increasing quantity of factors of production; increase levels of technology.

Fiscal Policy

Controlled by the President and Congress; changes in taxes and government subsides.

Monetary Policy

Controlled by the Central Bank (used in crisis); changes in interest rates and money supply.

Recession

Economy falls down.

Unemployment

The number of people who are actively looking for a job that are not employed.

Structural Unemployment

Changes in skills are needed in order for people to get re-hired.

Cyclical Unemployment

Unemployed due to an economic downturn, seasonal unemployment, or a natural disaster.

Frictional Unemployment

Normal periods of unemployment, usually when people change jobs.

Business Cycles

Natural occurring ups and downs in the economy which can temporarily put people out of work.

Inflation

The measure of prices raising over time.

Phillips Curve

A relationship between unemployment and inflation that shows they are typically inversely related.

Types of Capital

Land, Capital, Labour, buildings, Technology

Supply and demand

The amount of stuff that exists and how much consumers are willing to pay for it

What can influence Demand?

The substitution effect and the income effect

how can we shift the PPC outwards?

Resources: Land, Labour, Buildings, Technology, financial.

New inventions, education, trade, healthcare, population growth, new knowledge, technological advancement

Macroeconomics Policiy Goals

Growth economy, Promote trade. Reduce the income inequality, decreased the unemployment. Stabilize the business cycle, Keep inflation, low unstable.

Interest rate

What the bank says to you to pay something with interest. They will say the amount.

Liquidity

Not Cash Money

Ways of measuring inflation

CPI consumer price index and PPI Producer Price index

Causes of inflation

Cost push inflation and demand pull inflation

Cost push inflation

The AS Curve shifts Left pushing up prices

Demand pull inflation

The AD CURVE shifts right pushing up prices

Targets of unemployment and inflation

2% inflation. And 5% unemployment