scarcity
not having enough resources to produce all of the things we would like to have
economics
the study of how people seek to satisfy their needs and wants by making choices
utility
ability or capacity of a good or service to be useful and give satisfaction to someone
land
a usable area that contains potential resources
labor
human effort used to make/provide goods and services
opportunity cost
what you have to give up in order to get something (most likely desirable)
marginal cost
the cost of producing one more unit of a good
efficiency
using resources to maximize the output of goods and services
marginal benefits
additional benefits received when one more unit of a product is produced
productive efficiency
when a good or service is produced at the lowest possible cost
comparative advantage
to produce something better than another producer (in term's of opportunity cost)
law of increasing opportunity costs
as a good's production increases, the opportunity cost of each additional unit also increases
PPF (Production Possibilities Frontier)
a curve that shows the maximum combination of two goods that can be produced during a specific time period
demand
the ability and desire to purchase goods and services
law of demand
consumers buy more of a good when its price decreases and less when its price increases
law of diminishing marginal utility
as the quantity of a good consumed increases, the extra satisfaction gained decreases
demand schedule
table showing quantities demanded at different possible prices
demand curve
a graph of a demand schedule
substitutes
goods used in place of one another
supply
offering goods and services for sale
law of supply
tendency of suppliers to offer more of a good at a higher price
equilibrium price
the price balancing quantity supplied and quantity demanded
price ceiling
a maximum price that can be legally charged for a good or service
equilibrium
when markets don't change the quantities demanded or the current price
price floor
a good's legal minimum price
absolute price (money price)
the amount of money that must be spent to a get a good
relative price
the price of one good/service in comparison with the price of other goods/services
consumer price index
a measure of inflation (the overall cost of the goods and services bought by a typical consumer)
inflation
increase in the price of goods/services
real income
income adjusted for inflation
unemployment rate
the percentage of the civilian force that is unemployed
full employment rate
when the unemployment rate is equal to the natural unemployment rate
structural unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
frictional unemployment
unemployment that occurs when people take time to find a job
natural unemployment
4/5 percent (frictional + structural unemployment; is consistent with price stability)
nominal income
money income (actually receive)
labor force participation
percentage of population that is working or looking for work
gross domestic product
the total value of all the goods and services produced in a country
final good
a good sold to its final user
intermediate good
good that is not final; will become part of another good
government transfer payments
cash or benefits not in exchange for goods or services
net exports
exports minus imports
personal income
the income received by an individual
disposable income
income (after taxes) that is available to you for saving or spending
business cycle
a period of macroeconomic expansion followed by a period of contraction (fluctuates)
government transfer payment
when the government gives a payment and does not get a good or service in exchange
consumption
sum of spending on durable/nondurable goods and services
investment
sum of all purchases of newly produce capital goods, changes in business inventories, and purchases of new residential housing
government purchases
spending on goods and services by local, state, and federal governments
imports
goods/services brought into a country
exports
goods/services sold to other countries
net exports
exports minus imports
economic growth
increases in Real GDP
aggregate demand
total demand for goods and services in an economy
purchasing power
being able to purchase goods and services
wealth
the value of all things owned (moneywise and propertywise)
exchange rate
the price of a currency in another's currency (countries: US [dollars] = ? Mexico [pesos])
appreciation
an increase in price or value
depreciation
a decrease in price or value
short-run equilibrium
when the quantity of aggregate output supplied is equal to the quantity demanded (quantity supplied = quantity demanded)
long-run equilibrium
when the short-run equilibrium is on the LRAS Curve, where prices have adjusted to their (final) equilibrium
Consumer Price Index
(Updated cost/base year cost)x100
Calculating new price for an item from CPI
CPI1/CPI2=Price1/Price2
At a price for which quantity supplied exceeds quantity demanded a _________ is experienced, which pushes the price _______ towards its equilibrium value.
surplus; downward
Economic growth has occurred if...
Real GDP this year exceeds Real GDP of last year.
There is a technological improvement in the production of good X. As a result, the ______ curve for good X will shift _______ resulting in a(n) __________ in the equilibrium price of X and a(n) ________ in the equilibrium quantity of X.
supply; to the right, decrease, increase
The dollar appreciates in value. This makes foreign-produced good _______ for Americans and U.S. produced goods _______ for foreigners. As a result U.S. ______ fall and U.S. ______ rise.
Cheaper, expensive, exports, imports.
The expenditure approach to measuring GDP sums
Consumption, investment, government purchases and net exports.
Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point inside that PPF. Assuming that the PPF has not shifted, this could be due to.
(inefficiency) an increase in the unemployment of some resources.
Changes in which of the following will not cause the SRAS curve to shift?
Price level, or anything that affects demand.
The opportunity cost of attending college is...
the highest valued alternative one forfeits to attend college.
A lower income tax rate _______ consumption, causing a _____ the AD curve.
stimulates; shift right
Full employment is said to exist when the unemployment rate equals....
the natural unemployment rate.
natural unemployment rate =
structural+frictional
Starting from short-run equilibrium, the following occurs: the US dollar depreciates and wage rates rise. Moreover, the effect on the economy from the dollar depreciating is stronger than the effect on the economy from rising wage rates. What is the effec
The price levels rises, Real GDP falls, and the unemployment rate falls.
Starting from short-run equilibrium, the following occurs: labor productivity rises, and individuals expect higher (future) incomes. What is the effect on the price levels, Real GDP, and unemployment rates?
Real GDP rises, unemployment falls, and price cannot be determined.
Points outside (or beyond) the PPF are...
unattainable
Good X is a normal good. If the income of those who buy good X rises, the ______ curve for good X will shift _____, resulting in a(n) _____ in the equilibrium price of X and a(n) ______ in the equilibrium quantity of X.
demand, right, increase, increase
Resource X is necessary to the production of good Y. If the price of resource X rises, the _____ curve for good Y will shift ____ resulting in a(n) _______ in the equilibrium price of Y and a(n) _____ in the equilibrium quantity of Y.
supply, left, increase, decrease.
Points inside or below the PPF are
attainable and inefficient
The real balance effects is one of the ...
reasons why an AD curve is downward sloping.