Principles of Macroeconomics - Chapter 2 Terms

Opportunity cost

The next best alternative that was sacrificed when making a choice.

Marginal analysis

An examination of the effects of incremental additions to or subtractions from a current situation.

Production possibilities curve

A curve that shows the maximum combinations of two outputs an economy can produce in a given period of time with its available resources and technology.

Technology

The body of knowledge applied to how goods are produced.

law of increasing opportunity costs

The principle that the opportunity cost increases as production of one output expands.

Economic growth

The ability of an economy to produce greater levels of output, represented by an outward shift of its production possibilities curve.

Investment

The accumulation of capital, such as factories, machines, and inventories, used to produce goods and services.