Macroeconomics Exam 1 Flashcards

Flashcards from Macroeconomics Exam 1

Why must choices be made about resources (anything that can be used to produce something else)?

Scarce

Because you must choose among limited alternatives, the true cost of anything is what you must give up to get it- all costs are:

Opportunity Costs

Rational People Think at the:

Margin

Firms sell goods and services that they produce to households in __ for goods and services.

Markets

__ economics prescribes how the economy should work.

Positive

__ advantage is an ability to produce a particular good or service better than anyone else (i.e. with less total inputs).

Absolute

One important economic model is the __ that illustrates several important economic concepts.

Production Possibilities Frontier

When a rise in income increases the demand for a good, the good is called a __.

Normal Good

Two goods are __ if a rise in the price of one of the goods leads to an increase in the demand for the other good.

Substitutes

A __ in the Circular Flow Diagram is an organization that produces goods and services for sale.

Firm

The __ in the Circular Flow Diagram is the place where firms sell goods and services that they produce to households.

Markets for Goods and Services

Economic Models are __ representations of reality—and play a crucial role in economics.

Simplified

In the Circular Flow Diagram the Main Factors of Production include:

Land, Labor and Capital (Physical and Human)

Comparative Advantage involves the question of who has the lower overall __ costs.

Opportunity

Refer to figure A. What is represented by the dot "F"?

Inefficient Production

Refer to figure A. What is represented by the dot "G"?

Impossible Production

Refer to figure A. What is represented by the dots A, B, C or D?

Efficient Production

_______ _______explains the source of gains from trade between individuals and countries. Everyone has a ______ _______in something-some good or service in which that person has a lower opportunity cost than everyone else.

Comparative Advantage, Comparative Advantage

Because people usually exploit opportunities to make themselves better off, _______ can change people's behavior.

Incentives

__ is the branch of economics that is concerned with the overall ups and downs in the economy.

Macroeconomics

Economics is a ________science that studies the production, distribution, and consumption of goods and services.

Social

Principle #10 in the textbook is that society faces a short run trade-off between: _______, ________

Inflation, Unemployment

Principle #1 in the textbook is that people face _______.

Tradeoffs

Trade (Presuming it's Fair and Honest) almost always makes both countries:_____ ______

Better Off

According to the Authors of your book and the Video we watched, The Production Possibilities Frontier Shows that one goal of any economy is the expansion of the economy's production possibilities or to put it more simply the goal is:

Economic Growth

The point of intersection between Supply and Demand is called:

Equilibrium

Demand Curves generally slope in what direction?

Down

An increase in demand leads to a ______ shift of the demand curve.

rightward

There are five main factors that shift the demand curve. Please pick them from the following list:

change in: tastes, expectations, number of consumers, income, prices of related goods or services.

There is a _______ of a good or service when the quantity supplied exceeds the quantity demanded, the price is above its equilibrium level.

Surplus

A change in the quantity demanded at any given price, represented by the shift of the original demand curve to a new position, denoted by a new demand curve is a shift of the _____ curve.

Demand

The Law of _______ says that a higher price for a good or service, other things being equal, leads people to demand a smaller quantity of that good or service.

Demand

A movement along a supply curve is a change in the quantity supplied of a good arising from a change in the goods ______.

Price