Economics Reviewer

Long Quiz Reviewer

Good

Anything from which individuals receive utility or satisfaction

Utility

The satisfaction one receives from a good

Bad

Anything from which individuals receive disutility or dissatisfaction

Disutility

The dissatisfaction one receives from a bad

Land

All natural resources, such as minerals, forests, water, and unimproved land

Labor

the physical and mental talents that people contribute to the production process

Capital

Produced goods that can be used as inputs for further production, such as factories, machinery, tools, computers, and buildings

Entrepreneurship

The particular talent that some people have for : organizing resources, seeking new business opportunities, and developing new ways of doing things

Scarcity

The condition in which our wants are greater than the limited resources available to satisfy those wants

Economics

The science of how individuals and societies deal with the fact that wants are greater than the limited resources

Opportunity Costs

the most highly valued opportunity or alternative forfeited when a choice is made

Scarcity

Because of this, a scarcity rationing device is needed

Marginal

Another term in economics meaning "Additional"

Marginal Benefits

The benefits connected to consuming an additional unit of a good or undertaking one more unit of an activity.

Marginal Costs

The costs connected to consuming an additional unit of a good or undertaking one more unit of an activity/

Decisions at the Margin

Decision making characterized by weighing the additional (marginal) benefits of a change against the additional (marginal) costs of a change with respect to current conditions.

Incentives

something that encourages or motivates a person to take action

Unintended Effects

a positive or negative outcome that was not anticipated

Exchange/Trade

the process of giving up one thing for another

Ceteris Paribus

a Latin phrase that means "all other things held constant"

Abstract

The process (used in building a theory) of focusing on a limited number of variables to explain or predict an event.

Theory

is an abstract representation of the real world designed with the intent to better understand the world

Positive Economics

The study of "what is" in economic matters

Normative Economics

The study of "what should be" in economics

Microeconomics

the study of the economic behavior and decision making of small units, such as individuals, families, and businesses

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Inflation

increase in the price level and is usually measured on an annual basis

Inflation rate

is the positive percentage change in the price level on an annual basis

Real income

is a person's nominal income adjusted for any change in prices

Price Level

a weighted average of the prices of all goods and services

Price Index

a measure of the price level

Consumer Price Index (CPI)

The weighted average of prices of a specific set of goods and services purchased by a typical household; a widely cited index number for the price level.

Base Year

The year chosen as a point of reference or basis of comparison for prices in other years; a benchmark year.

GDP Implicit Price Deflator

is based upon all goods and services produced in an economy

CPI (Consumer Price Index)

is based upon a representative group of goods and services purchased by a typical household

Civilian Noninstitutional Population (CNP)

All persons age 16 and over who are not in prison, not actively serving in the military and not in long term health facility (institutionalized)

Who are the employed?

• All persons who did any work for pay or profit during the survey reference week.

• All persons who did at least 15 hours of unpaid work in a family-operated enterprise.

• All persons who were temporarily absent from their regular jobs because of illness, vacation, bad weather, industrial dispute, or various personal reasons.

Who are the Unemployed?

• All persons who did not have jobs, who made specific active efforts to find a job during the prior four weeks, and who were available for work.

• All persons who were not working and who were waiting to be called back to a job from which they had been temporarily laid off.

Unemployment Rate

the percentage of the labor force that is unemployed

Employment Rate

the percentage of the civilian non institutional population that is employed

Labor Force Participation Rate

the percentage of the civilian non institutional population that is in the civilian labor force

Job loser

a person who was employed in the civilian labor force and was either fired or laid off

Job leaver

a person employed in the civilian labor force who quits his or her job

Reentrant

a person who was previously employed, hasn't worked for some time, and is currently reentering the labor force

New entrant

An individual who has never held a full-time job lasting two weeks or longer but is now seeking employment.

discouraged workers

former workers who are not actively looking for work and are not waiting to be called back to a job or to report for a job

Discouraged workers are/are not counted as unemployed workers

are not

Frictional Unemployment

unemployment due to natural "frictions" of the economy caused by changing market conditions; represented by qualified individuals with transferable skills who change jobs

Structural Unemployment

Unemployment due to structural changes in the economy that eliminate some jobs and create others for which the unemployed are unqualified.

Natural Unemployment

unemployment caused by frictional and structural factors in the economy

Natural unemployment rate

frictional unemployment rate + structural unemployment rate

Full Employment

the condition that exists when the unemployment rate is equal to the natural unemployment rate

Cyclical Unemployment Rate

the difference between the unemployment rate and the natural unemployment rate

Gross Domestic Product

the total market value of all final goods and services produced annually within a country’s borders

Expenditure Approach

Add the amount of money spent by buyers of final goods and services

Income Approach

Add the sum of all incomes earned in producing goods and services

Value-Added Approach

add the value added at each stage of production of all goods and services

1. Chores performed at home by family members

2. Underground activities (unrecorded activities paid for in cash or illegal gambling

3. Sales of used goods

4. Trading of stocks and bonds

5. Government transfer payments (supplied as social security)

6. Leisure time

Not included in GDP

Consumption

The sum of household spending on durable goods, nondurable goods, and services

Durable Goods

Goods that are expected to last for more than three years

Nondurable Goods

Not expected to last for more than three years, such as food

Services

intangible items such as entertainment and car repair

Investment

Sum of all purchases of fixed investment, inventory investment, and purchases of new residential housing

Fixed Investment

Newly produced capital goods, business purchases such as machinery and factories

Inventory Investment

Changes in business inventories (stock of unsold goods)

Government Purchases

Government purchases of goods and services and gross investment in highways, bridges and so on.

Net Exports

Exports Less Imports

Exports

Total foreign spending on domestic gods

Imports

Total domestic spending on foreign goods

National Income

Total income earned by PH citizens and businesses, no matter where they reside or are located.

Compensation of Employees

consists of wages and salaries paid to employees plus employers’ contributions to Social Security and employee benefit plans

Proprietors’ Income

includes all forms of income earned by self-employed individuals and owners of unincorporated businesses

Corporate Profits

include all the income earned by the stockholders of corporations

Rental Income

income received by individuals for the use of their non-monetary assets

Net Interest

interest income received by PH households and government minus the interest they paid out

Net Domestic Product

measures the total value of new goods available in the economy in a given year after worn-out capital goods have been replaced

Peak

Real GDP is at a temporary high at Q1

Contraction

decline in real GDP

Trough

lowest point in Real GDP

Recovery

Real GDP rises from trough and ends at initial peak

Expansion

Increase in Real GDP beyond the recovery

Recession

Two consecutive quarter declines in Real GDP