macro midterm

Factors of production

Resource inputs used to produce goods and services, including land, labor, capital, and entrepreneurship.

Scarcity

Lack of enough resources to satisfy all desired uses of those resources.

Opportunity cost

The most desired goods and services that are foregone to obtain something else.

Invisible hand

The notion that market sales and prices convey messages that guide the market.

Laissez-faire

The doctrine of 'leave it alone,' advocating nonintervention by the government in the market mechanism.

Market failure

A situation in which the market mechanism generates suboptimal economic outcomes.

Government failure

Occurs when government intervention fails to improve economic outcomes.

Ceteris paribus

The assumption that nothing else changes.

GDP (Gross Domestic Product)

The total value of final goods and services produced within a nation’s borders in a given time period.

Nominal GDP

The total value of goods and services produced within a nation’s borders, measured in current prices.

Real GDP

The inflation-adjusted value of GDP; the value of output measured in constant prices.

Income mobility

The frequency with which people move up and down the income ladder.

Free rider dilemma

An individual who benefits from a public good without contributing to its cost.

Price floor

A minimum price set by the government for a good or service.

Price ceiling

A maximum price set by the government for a good or service.

Market failure causes

Public goods, externalities, market power, and inequity.

Unemployment

The inability of labor force participants to find jobs.

Types of unemployment

Seasonal, frictional, structural, and cyclical unemployment.

CPI (Consumer Price Index)

A measure of changes in the average price of consumer goods and services.

Inflation rate

The annual rate of increase in the average price level.

Demand-pull inflation

Inflation resulting from excessive demand pressures in the economy.

Cost-push inflation

Inflation caused by higher production costs pushing suppliers to raise prices.

Full employment

The level of employment where all who are willing to work at prevailing wage rates can find employment.

seasonal unemployment

refers to unemployment due to seasonal changes in employment or labor supply. a ski instructor unemployed in the summer

frictional unemployment

refers to brief periods of unemployment experienced by people moving between jobs or into labor market. a recent graduate job hunting.

structural unemployment

is caused by mismatch between the skills (or location) of job seeks and the requirements (or location) of available jobs. a retail worker loses their job as more consumers shop online

cyclical unemployment

is attributable to a lack of job vacancies- that is, to an inadequate level of aggregate demand. a construction worker laid off during a recession. (less Demand for new housing)