Macro 1
Terms
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- shoeleather costs
- the resources wasted when inflation encourages people to reduce their money holdings
- business cycle
- fluctuations in economic activity, such as employment and production
- other things equal
- if in all other ways two situations are the same or similar
- scarcity
- the reason why management of society's resources is important, the limited nature of said resources
- equity
- property of distributing the economic prosperity of a society fairly among its members
- supply schedule
- a table that shows the relationship between the price of a good and the quantity supplied
- productivity
- quantity of goods and services produced from each hour of a worker's time, connected to standards of living
- imports
- goods produced abroad and sold domestically
- collective bargaining
- the process by which unions and firms agree on the terms of unemployment
- complements
- two goods for which an increase in the price of one leads to an increase in the demand for the other
- menu costs
- the costs of changing prices
- quantity equation
- the equation MxV=PxY, which relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services
- law of diminishing returns
- a law affirming that to continue after a certain level of performance has been reached will result in a decline in effectiveness
- Fisher effect
- the one-for-one adjustment of the nominal interest rate to the inflation rate
- quantity theory of money
- a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate
- input
- Land, labor, capital, entrepreneur
- microeconomics
- study of how households and firms make decisions and how they interact in markets
- strike
- the organized withdrawal of labor from a firm by a union
- normative statements
- prescriptive claims that attempt to suggest how the world should be, involves morality
- market power
- the ability of a single economic actor (or a small group of actors) to have a substantial influence on market prices
- fallacy of consumption
- the human desire to acquire consumer goods (i.e. seasonal shopping)
- surplus
- a situation in which quantity supplied is greater than quantity demanded
- labor force
- the total number of workers, including both the employed and the unemployed
- real variables
- variables measured in physical units
- output
- the total market value of all final goods and services produced annually in an economy
- efficiency wages
- above-equilibrium wages paid by firms to increase productivity
- frictional unemployment
- unemployment that results because it takes time for workers to search for jobs that best suit their tastes and skills
- equilibrium price
- the price that balances quantity supplied and quantity demanded
- incentive
- something that induces a person to act
- substitutes
- two goods for which an increase in the price of one leads to an increase in the demand for the other
- monetary neutrality
- the proposition that changes in the money supply do not affect real variables
- absolute advantage
- the ability to produce a good using fewer inputs than another producer
- equilibrium quantity
- the quantity supplied and the quantity demanded at the equilibrium price
- controlled experiment
- used to test a hypothesis by changing only one variable at a time
- union
- a worker association that bargains with employers over wages, benefits, and working conditions
- normal good
- a good for which, other things equal, an increase in income leads to an increase in demand
- quantity supplied
- the amount of a good that sellers are willing and able to sell
- inflation tax
- the revenue the government raises by creating money
- comparative advantage
- the ability to produce a good at a lower opportunity cost than another producer
- natural rate of unemployment
- the normal rate of unemployment around which the unemployment rate fluctuates
- competitive market
- a market in which there are many buyers and sellers so that each has a negligible impact on the market price
- economics
- the study of how society manages its scarce resources (i.e. financial decisions of gov'ts/businesses/households)
- unemployment rate
- the percentage of the labor force that is unemployment
- equilibrium
- a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
- production possibilities frontier
- graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
- inflation
- an increase in the overall level of the prices in the economy, associated with the quantity of money
- macroeconomics
- the study of phenomena that are relevant to the economy as a whole, such as inflation, unemployment, and economic growth
- law of supply and demand
- the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
- marginal changes
- small incremental adjustments to a plan of action
- property rights
- the ability of an individual to own and exercise control over scarce resources
- shortage
- a situation in which quantity demanded is greater than quantity supplied
- Philips curve
- a curve (graph) that shows the short-run trade-off b/t inflation and unemployment, published in 1958 by A.W. Philips
- velocity of money
- the rate at which money changes hands
- opportunity cost
- whatever must be given up to obtain some item (including time/resources)
- supply curve
- a graph of the relationship between the price of a good and the quantity supplied
- demand curve
- a graph of the relationship between the price of a good and the quantity demanded
- circular-flow diagram
- visual model of the economy that shows how dollars flow through markets among households and firms
- externality
- the impact of one person's actions on the well-being of a bystander
- market
- group of buyers and sellers of a particular good or service
- positive statements
- descriptive claims that attempt to describe the world as it is, involves matter of fact
- law of supply
- the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
- scientific approach
- dispassionate (fair) development and testing of theories about how the world works
- efficiency
- property of society getting the most from scarce resources
- rational people
- people who systematically and purposefully do the best they can to achieve their objectives
- law of averages
- a law affirming that in the long run probabilities will determine performance
- labor-force participation rate
- the percentage of the adult population that is in the labor force
- inferior good
- a good for which, other things equal, an increase in income leads to a decrease in demand
- classical dichotomy
- the theoretical separation of nominal and real variables
- job search
- the process by which workers find appropriate jobs given their tastes and skills
- market failure
- a situation in which a market left on its own fails to allocate resources efficiently, cause for gov't intervention
- alternative economic systems
- different ways of allocating resources in a society
- nominal variables
- variables measured in monetary units
- exports
- goods produced domestically and sold abroad
- market economy
- an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
- post hoc fallacy
- fallacious reasoning that mistakenly assumes that one event causes another because they occur sequentially
- demand schedule
- a table that shows the relationship between the price of a good and the quantity demanded
- structural unemployment
- unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
- cyclical unemployment
- the deviation of unemployment from its natural rate
- discouraged workers
- individuals who would like to work but have given up looking for a job
- uncertainty
- state of being unsure or uneasy about the state of the market
- law of demand
- the claim that, other things equal, the quantity demanded of a good falls when the price of a good rises
- unemployment insurance
- a government program that partially protects workers' incomes when they become unemployed