Macroeconomics
Terms
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- Structural policy
- government policies aimed at changing the underlying structure/institution of money
- Normative statement
- states how the current condition should be but cannot be measured
- The law of demand
- if the price of a good rises, the quantity demanded for that good decreases
- Law of increasing marginal cost
- as you get closer to the peak production of good A, the marginal cost of good B will increase
- Scarcity principle
- boundless needs, limited resources = tradeoff = scarcity forces people to make rational choices
- Microeconomics
- study of individual behavior under scarcity and their implications for the behavior of prices and quantities in individual markets
- Income effect
- the change in the quantity demanded of a good because the change in the price of the good changes the buyer's purchasing power
- Absolute advantage
- the ability of a person/country to perform more of an activity/good with the same amount of resources as someone else
- Factors that shift the demand curve
- change of preferences, people's wealth/income, price of related goods, and number of potential buyers
- output per capita
- productivity per person in the country
- Sunk cost
- cost that is beyond recovery at the moment a decision is made and should not be included in the cost/benefit analysis
- Law of supply
- if the price of a good rises, the quantity supplied, for that good increases
- Aggregation
- adding up of individual economic values to obtain economy wide totals
- Cost
- for a given activity x, its cost can be measuring in dollars by adding up the out-of-pocket costs to do x and the benefits of the best alternative to x ==== c(x)=opc(x)+oc(x)=opc(x)+b(y)
- Marginal cost
- the cost (out-of-pocket plus opportunity cost) resulting from a one unit increase in the level of that activity
- Benefit
- for any given activity x, its benefit can be measured in dollars by adding up revenue (in case you get paid to do x) and the maximum you'd be Willing to pay to do x
- Economic cost
- opportunity cost + out of pocket cost
- Positive statement
- states the current condition and can be measured
- Indeterminacy
- when supply and demand change contemporaneously, (at the same time), we always face indeterminacy
- Comparative advantage
- the ability of a person to perform an activity/good at a lower opportunity cost
- Economic growth
- a process of steady increases in the quantity and quality of the goods and services the economy can produce
- Cost/benefit principle
- you should take action x if and only if the extra benefit from taking x is at least as great as the extra cost
- Monetary policy
- determination of the national money supply controlled by US Central Bank - fed
- standard of living
- the degree to which people have access to goods and services that make their lives easier, healthier, safer
- output per worker
- productivity per working person in the country excluding those not in the workforce
- Quantity supplied
- amount of a good, service, or resource that sellers are willing and able to sell during a specified period and a specified price
- Opportunity cost
- highest value option that you gave up
- Substitution effect
- the change in the quantity demanded of a good that results because buyers switch to relatively cheaper substitutes when the price of the good increases
- Factors affecting market equilibrium
- people's income/ preferences
- Production possibilities frontier
- the boundary displaying the combinations of goods and services that can be produced
- Equilibrium price
- at which price quantity demanded matches quantity supplied
- Economics
- social science that investigates the behavior and choices of individuals when trying to satisfy infinite needs and cope with the scarcity of Some available resources
- Economic surplus
- the difference between benefit and cost --the goal of an economist is to maximize economic surplus
- Factors that shift the supply curve
- costs of production/technology, price of related goods, number of potential sellers, expectations about future
- Macroeconomics
- the study of the performance of national economies and of the policies of governments, inflation, etc
- Production efficiency
- full employment of the factors of production when the only way to produce more of one good/service is to make less of another
- Fiscal Policy
- government budget, taxes, revenue, etc
- Demand schedule
- the list of all possible prices of a good and the corresponding quantity demanded, ceteris paribus