Macroeconomics Chapter 1

Learning the Terms

What is land?

Any natural resources provided by nature that is used to produce a good or service.

What are non- renewable resources?

Basic input that nature cannot automatically replaces, such as soil, oil, and natural gas.

What is Labor?

The mental and physical capacity of workers to produce goods and services/ also called labor force.

What is entrepreneurship?

The creative ability of individuals to seek profits by taking risks and combining resources to produce innovative.

What is an entrepreneur?

an individual who identifies an unmet need in the marketplace and establishes a business to provide a new product, service, or idea to meet that need, accepting the significant financial risks and potential for rewards that come with it

What is a capital?

A human-made good used to produce other goods and services.

What is a private capital?

Capital that is opened by private companies; consist of factories, office budlings, warehouses, robots, trucks and distribution facilities.

What is a public capital?

Capital that is provided by government through taxes and is collectively owed; consist of roads, bridge’s, dams, airports, harbors, and public universities and other government budlings.

Why is money not a resource?

Money by itself does not produce goods or services; instead, it is only a means to facilitate raw purchase and sale of resources and consumer products.

What is economics?

The study of how society chooses to allocate its scare resources to the production of goods and services to satisfy unlimited wants.

What is macroeconomics?

The branch of economics that studies decisions making for the economy as a whole

What is the methodology of economics?

Identify the problem; develop a model based on simplified assumptions; collect data; test model; and formulate a conclusion.

What is a model?

A simplified description of reality used to understand the predict the relationships between variables

What is scarcity?

Scarcity is the condition in which humans wants are forever greater than the visible supply of time, goods, and resources.

What is microeconomics?

Microeconomics is the branch of economics that studies decision making by an individual household, firm, industry or level of government.

What is resources?

they are the basic of inputs used to produce goods and services. Also called factors of production.

What are two of the most common pitfalls to clear thinking?

1) Mailing to understand the cetreis paribus assumption @0 Confusing association and causation

What does association mean?

Association means there is no real facts that a causes b.

What does causations mean

Means that a causes b

What is ceteris paribus?

A Latin phrase that means while certain variables changes, “ all other things remain

How can ceteris paribus be used?

It holds everything else constant and therefore allows us to concentrate on the relationship between two key variables

What is the law of Demand?

Quality of price- If price goes down we want more of that product.

What conclusion can we make regarding ceteris paribus?

A theory cannot be tested legitimately unless its ceteris paribus assumption is satisfied.

What is positive economics?

An analysis limited to statement that are verifiable

Why do economics disagree?

When disagreements exist, the reason can often be explained by the difference between positive economics and normative economics.

What conclusion can we make regarding positive economics?

Economist can agree that event X causes event Y, but disagree over the assumption that event X will occur.

What conclusion can we make regarding normative economics?

When opinions or points of view are not based on facts, they are scientifically untestable- When they say should they are normative.

What is a direct relationship?

A positive association between two variables. When one variable increases, the other variable increases, and when one variable decreases, the other variable decreases.

What is a positive association ?

A positive association between two variables. When one variable increases, the other variable increases, and when one variable decreases, the other variable decreases.