Ch. 1-5

What does it mean that trade-offs are everywhere?

Every decision involves giving up one option to choose another because resources (time, money, effort) are limited.

What is opportunity cost?

The value of the next best alternative you give up when you make a decision.

What does it mean to think at the margin?

Making decisions by comparing the additional (marginal) benefits and costs of a small change

How do people respond to incentives?

People change their behavior when costs or benefits change (higher rewards encourage action; higher costs discourage it).

Why can trade make everyone better off?

Trade allows people to specialize in what they do best and exchange goods, increasing total gains for all parties.

Why are markets usually a good way to organize economic activity?

Markets use prices to coordinate decisions, allocate resources efficiently, and reflect supply and demand.

When can governments help markets?

When markets fail—such as with externalities, public goods, monopolies, or unequal information.

Which big ideas explain individual decision-making?

trade-offs, opportunity cost, marginal thinking, and incentives.

Which big ideas explain interaction between people?

trade, markets, and government intervention.

What does it mean that economic booms and busts are inevitable but can be mitigated?

Economies naturally go through expansions and recessions, but government policies and programs can reduce how severe these cycles are.

How can governments mitigate economic fluctuations?

Through fiscal policy (government spending and taxes), monetary policy, and stabilizers like Employment Insurance

Why do prices rise when too much money is printed?

When the money supply grows faster than the economy, each dollar loses value, leading to inflation.

Who controls the money supply in Canada?

The Bank of Canada, which manages inflation and economic stability through monetary policy.

What happens if the money supply is poorly controlled?

It can cause high inflation or hyperinflation, harming economic stability and purchasing power.

What is the tradeoff between inflation and unemployment?

Policies that reduce unemployment may increase inflation, while policies that reduce inflation may raise unemployment.

Why must policymakers manage inflation and unemployment carefully?

Because pushing too hard on one can worsen the other, especially during recessions or economic shocks

What do the macroeconomic big ideas focus on?

The economy as a whole—growth, inflation, unemployment, and stabilization over time.