Economics Lecture Review

A set of flashcards summarizing key economic concepts and terms for exam preparation.

What is the basic economic problem that economics addresses?

The fundamental economic problem is that there is a scarcity of resources to satisfy all human wants and needs.

Define scarcity in economics.

Scarcity refers to the lack of something, particularly resources, which are limited compared to the unlimited wants of humans.

What is opportunity cost?

Opportunity cost is the next best alternative that is sacrificed in order to satisfy a choice made.

What are economic goods?

Economic goods are those which are scarce in supply and incur an economic cost or can only be consumed with a price.

Differentiate between free goods and economic goods.

Free goods are abundant in supply and do not have a price, such as air and sunlight, while economic goods are scarce and have a price.

List the four factors of production.

The four factors of production are land, labor, capital, and enterprise.

What is the reward for labor?

The reward for labor is wages or salaries.

What does the law of demand state?

The law of demand states that an increase in price leads to a decrease in demand, and a decrease in price leads to an increase in demand.

What is the price mechanism in a market?

The price mechanism refers to the way in which the forces of supply and demand interact to determine prices.

What does PED stand for in economics?

PED stands for Price Elasticity of Demand.

What happens when demand increases without a change in price?

A rise in demand due to changes in other factors (excluding price) causes the demand curve to shift to the right.

What are the consequences of recession?

Consequences of recession include firms going out of business, rising unemployment, falling incomes, and higher poverty levels.

What is a balanced budget?

A balanced budget occurs when government revenue equals government expenditure.

What does the government aim to achieve with fiscal policy?

The government aims to influence the economy through adjustments in government spending and taxation.

What is inflation?

Inflation is the general and sustained rise in the level of prices of goods and services in an economy over a period of time.

What is deflation?

Deflation is the general fall in the price level of goods and services.

Explain what a current account deficit is.

A current account deficit occurs when financial outflows in the current account exceed financial inflows.

What is a fixed exchange rate?

A fixed exchange rate is one that is controlled by the central bank, which intervenes in the market to maintain it.

Name two types of unemployment.

Frictional unemployment and structural unemployment.

What is meant by the term 'real GDP'?

Real GDP is the value of output produced in an economy over a period of time, measured assuming the prices are unchanged over time.

What is the Human Development Index (HDI)?

The Human Development Index is a composite measure that assesses the level of development in countries based on income, education, and life expectancy.