M01-Macro/Review
Review - Module 1
C 1,2,3,16
C 1,2,3,16
Terms
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- Determinant of Quantity Supplied
- Price of the current item being supplied.
- Specialization
- The division of work into specialized activities or tasks, allowing people to be more productive.
- Invisible Hand
- Phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all.
- Inferior Goods
- A good for which demand will rise (fall) as incomes falls (rises), Examples include generic products, bus tickets, etc.
- US Trade Partners
- Canada is first - followed by Mexico, Japan, Britain, Germany, China, Korea, the Netherlands, France, and Italy (6/2006)
- Economics
- The Social Science studying how to best allocate scarce or limited resources among unlimited wants.
- National Security
- Argument against free trade that states in times of national crisis, a country must not be forced to rely on foreign suppliers to produce and provide goods and services vital to the protection of that country.
- Excess Demand
- At a particular price, the situation where quantity demanded is greater than quantity supplied.
- Excess Supply
- At a particular price, the situation where quantity supplied is greater than quantity demanded.
- Underemployment
- Using resources, but not to their greatest potential.
- Ceteris Paribus
- The Latin phrase meaning
- Free Trade Area
- An organization of nations whose members have no trade barriers among themselves but are free to fashion their own trade policies toward nonmembers
- Complement Goods
- Goods used together so that as price of the first good rises (falls), demand for the second or complement good will fall (rise.) Examples include razors and razor blades, coffee and cream or sugar, etc.
- Diversity-of-Industry
- Argument against free trade that states protection of a few specialized industries provides economic stability for those countries that have yet to diversify their productive capacity.
- Normative Economics
- Judgments about
- Firm
- An economic unit that uses resources to produce a product which it then sells.
- Adam Smith
- 1723-1790. Pioneering economic theorist. Father of economics. Explained how rational self-interest and competition, operating in a social framework which ultimately depends on adherence to moral obligations, can lead to economic well-being and prosperity.
- Positive Economics
- The part of economics involving what are established facts; the analysis of facts or data to establish scientific generalizations about economic behavior
- Capital
- Man made goods used in the production of other goods or services.
- Customs Union
- An organization of nations whose members have no trade barriers among themselves but impose common trade barriers on nonmembers
- Non-renewable Resource
- Resources that cannot be reused or replaced easily (ex. gems, iron, copper, fossil fuels)
- Quantity Supplied
- How many units of a good or service producers are willing and able to offer for sale at one specified price.
- Household
- An economic unit of one person or more that sells resources and buys goods and services
- Free Trade
- International trade which is not bothered by protectionist government polices, such as tariffs and quotas.
- Absolute Advantage
- The ability to produce using the fewest resources.
- Supply
- A schedule showing how many units of a good or service, measured homogenously that producers are willing and able to offer for sale over a series of prices in a specified time frame, ceterius paribus.
- TANSTAAFL Principle
- "There ain't no such thing as a free lunch." For every choice made, an opportunity cost is involved.
- Terms of Trade
- The amount of an exported good that must given up to obtain an imported good - measured by the ratio of a country's export prices to its import prices.
- Gut Rule of Supply
- If an event makes a supplier happy (unhappy), he/she will offer more (less) of his/her product for sale.
- Imports
- Goods and services bought by the people of one country which are produced in other countries. Example - Bananas grown in Honduras and sold in the United States.
- Determinant of Quantity Demanded
- Price of the current item being demanded.
- Production Possibilities
- Various combinations of goods than can be produced in an economy assuming economic efficiency.
- International Specialization
- Using one country's resources to produce specific goods and services, allowing other countries to produce other goods and services.
- Econometrics
- The application of mathematics and statistics to the study of economic and financial data.
- Human Capital
- The knowledge and skills of labor, acquired primarly by education and training.
- Natural Resources
- The renewable and nonrenewable gifts of nature that can be used to produce goods and service, including but not limited to landform and bodies of water.
- Tariff
- A tax on an imported good.
- Retaliation
- Argument against free trade that states those countries that restrict their markets from US exports should have their imports into the US restricted, also.
- Consumer Sovereignty
- Describes the consumer as the
- Entreprenuership
- A person who assumes the risks and uncertainties of doing business.
- Supply Curve
- A curve illustrating the relationship between price and quantity supplied.
- Major League Traders
- United States is first - followed by Germany, Japan, France, Britain, Canada, Italy, the Netherlands, Belgium, and Korea (6/2006)
- Short Run
- A period of insufficient time to alter all factors of production used in the productive process - at least one input is fixed (usually plant and equipment.)
- Reciprocity
- A mutual or cooperative interchange of favors or privileges, especially the exchange of rights or privileges of trade between nations.
- Market Demand
- The sum of all individual demand in the market.
- Long Run
- A period of sufficient time to alter all factors of production used in the productive process - all inputs can be changed.
- Quota
- A numerical limit on the amount of a good or service which can be imported.
- Infant Industries
- Argument against free trade that states it may be unfair to expect a new, fledgling domestic industry to survive free trade competition from its older, more experienced foreign competitors.
- Factor of Production
- Any resource used in the productive process, which includes land, labor, capital, and entreprenuership.
- Change in Quantity Demanded
- Caused by a change in price of the current item and shown by movement along the existing demand curve.
- Economic Efficiency
- Maximum production of goods and services with fullest employment of an economies resources.
- Law of Demand
- There is an inverse relationship between price and quantity demanded, so that as price rises (falls), quantity demanded falls (rises).
- Renewable Resources
- Resources that can be used and replaced over a relatively short time period; ex: trees, beans, bananas, sugar, tea
- Unemployment
- At least one factor of production is unused.
- Substitute Goods
- Goods used in place of each other so that as price of the first good rises (falls), demand for the second or substitute good will also rise (fall). Examples include Coke and Pepsi, butter and margarine, etc.
- Microeconomics
- The branch of economics that focuses on how human behavior affects the conduct of affairs within narrowly defined units, such as individual households or business firms.
- Normal Goods
- A good for which demand will rise (fall) as income rises (falls). Examples include steaks, new clothes, etc.
- WTO
- The World Trade Organization - an international body that enforces agreements that reduce barriers to international trade; successor to the GATT
- GATT
- The General Agreement on Tariffs and Trade - a multilateral agreement that sought to promote freer trade among countries; predecessor to the WTO
- EU
- An economic association, made up of several European countries, whose ultimate goal is for Europe to be a unified economic region
- Comparative Advantage
- The ability to product with the lowest opportunity cost.
- Law of Increasing Costs
- The idea that as we shift factors of production from making one good or service to another, the cost of producing the second item increases
- NAFTA
- A trade agreement between Canada, the United States and Mexico that encourages free trade between these North American countries.
- Antidumping
- Argument against free trade that states exporting a good or service at a price below its cost of production in an attempt to eliminate domestic competition in the US is illegal.
- Land
- Natural resources - water, air, minerals, trees, forests, etc.
- Equilibrium
- The point at which quantity demanded equals quantity supplied and the maretk is cleared. All items offered for sale by producers are bought by consumers; there exists no surplus or shortage of items.
- Determinants of Demand
- Anything other than price of the current item that influences consumer buying decisions, including income, tastes and preferences, price of related items (substitutes and complements), number of consumers in the market, and expected future price.
- Labor
- Human effort, physical or mental, used in the productive process.
- Change in Quantity Supplied
- Caused by a change in price of the current item and shown by movement along the existing supply curve.
- Determinants of Supply
- Anything other than price of the current item that influences production decisions, including cost of raw materials, cost of labor, level of technology used to produce, number of producers in the market, price of related products, and expected future price.
- Market-Day Supply
- A market situation in which the quantity of a good supplied is fixed, regardless of what happens to price.
- Demand Curve
- A curve illustrating the relationship between price and quantity demanded.
- Economic Model
- A simplified explanation of how the economy or part of the economy works - an abstraction of an economic reality.
- Change in Supply
- Caused by a change in a determinant of supply and shown by drawning a new supply curve.
- Exports
- Goods and services produced in one country which are sold in other countries. Example - Wheat grown in Kansas and sold in Europe.
- Cheap Foreign Labor
- Argument against free trade that argues against the injustice of having to compete abroad with firms in foreign nations that employ cheap labor.
- Opportunity Cost
- The best or most valued alternative sacrificed in order to have something else. What is given up in order to have something else.
- Innovation
- An idea that eventually becomes a new, applied technology.
- Circular Flow
- A model that shows the flow of goods and services and the interaction among households, businesses, and government.
- EEC
- European Economic Community; usually called the Common Market, in 1957, six European nations signed the Treaty of Rome, which provided for the gradual abolition of tariffs and import quotas amon the six member nations. (France, West Germany, Italy, Belgium, the Netherlands, and Luxemberg.)
- Macroeconomics
- Looks at the economy as a whole, focusing on issues such as growth, unemployment, inflation, and business cycles
- Law of Supply
- There is a direct relationship between price and quantity supplied, so that as price of an item rises (falls), quantity supplied of that item will rise (fall).
- Change in Demand
- Caused by a change in a determinant of demand and shown by drawning a new demand curve.