MacroEconomics Chapter 1

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Drizzle
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280879
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MacroEconomics Chapter 1
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2014-08-19 15:02:16
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Economics Macro
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Chapter 1
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  1. Economics
    The study of how people use their scarce resources to satisfy their unlimited wants
  2. Resources
    The inputs, or factors of production, used to produce the goods and services that people want; resources consist of labor, capital, natural resources, and entrepreneurial ability
  3. Labor
    The physical and mental effort used to produce goods and services
  4. Capital
    The buildings, equipment, and human skills used to produce goods and services
  5. Natural resources
    All gifts of nature used to produce goods and services; includes renewable and exhaustible resources
  6. Entrepreneurial ability
    The imagination required to develop a new product or process, the skill needed to organize production, and the willingness to take the risk of profit or loss
  7. Entreprneur
    A profit-seeking decision maker who starts with an idea, organizes an enterprise to bring that idea to life, and assumes the risk of the operation
  8. Wages
    Payment to resource owners for their labor
  9. Interest
    Payment to resource owners for the use of their capital
  10. Rent
    Payment to resource owners for the use of their natural resources
  11. Profit
    Reward for entrepreneurial ability; sales revenue minus resource cost
  12. Good
    A tangible product used to satisfy human wants
  13. Service
    An activity, or intangible product, used to satisfy human wants
  14. Scarcity
    Occurs when the amount people desire exceeds the amount available at a zero price
  15. Market
    A set of arrangements by which buyers and sellers carry out exchange at mutually agreeable terms
  16. Product market
    A market in which a good or service is bought and sold
  17. Resource market
    A market in which a resource is bought and sold
  18. Circular-Flow Model
    A diagram that traces the flow of resources, products, income, and revenue among economic decision makers
  19. Rational self-interest
    Each individual tries to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit
  20. Marginal
    Incremental, additional, or extra; used to describe a change in an economic variable
  21. Microeconomics
    The study of the economic behavior in particular markets, such as that for computers or unskilled labor
  22. Macroeconomics
    The study of the economic behavior of entire economics, as measured, for example, by total production and employment.
  23. Economic fluctuations
    The rise and fall of economic activity relative to the long-term growth trend of the economy; also called business cycles
  24. Economic theory, or Economic model
    A simplification of reality used to make predictions about cause and effect in the real world
  25. Variable
    A measure, such as price or quantity, that can take on different values at different times
  26. Other-things-constant assumption
    The assumption, when focusing on the relation among key economic variables, that other variables remain unchanged; in Latin, ceteris paribus
  27. Behavioral assumption
    An assumption that describes the expected behavior of economic decision makers, what motivates them
  28. Hypothesis
    A theory about how key variables relate
  29. Positive economic statement
    A statement that can be proved or disproved by reference to facts
  30. Normative economic statement
    A statement that reflects an opinion, which cannot be proved or disproved by reference to the facts
  31. Association-is-causation fallacy
    The incorrect idea that if two variables are associated in time, one must necessarily cause the other
  32. Fallacy of composition
    The incorrect belief that what is true for the individual, or part, must necessarily be true for the group, or the whole
  33. Secondary effects
    Unintended consequences of economic actions that may develop slowly over time as people react to events
  34. Origin
    On a graph depicting two-dimensional space, the zero point
  35. Horizontal axis
    line on a graph that begins at the origin and goes to the right and left; sometimes called the x axis
  36. Vertical axis
    Line on a graph that begins at the origin and goes up and down; sometimes called the y axis
  37. Graph
    A picture showing how variables relate in two-dimensional space; one variable is measured along the horizontal axis and the other along the vertical axis
  38. Dependent variable
    A variable whose value depends on that of the independent variable
  39. Independent variable
    A variable whose value determines that of the dependent variable
  40. Positive relation (Direct relation)
    Occurs when two variables increase or decrease together; the two variables move in the same direction
  41. Negative relation (Inverse relation)
    Occurs when two variables move in the same direction
  42. Slope of a line
    A measure of how much the vertical variable changes for a given increase in the horizontal variable; the vertical change between two points divided by the horizontal increase
  43. Tangent
    A straight line that touches a curve at a point but does not cut or cross the curve; used to measure the slope of  a curve at a point

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