Macroeconomics Unit 1

The study of how individuals and societies choose to allocate resources in order to deal with the problem of scarcity.

term meaning "limited"
there are not enough for everyone to satisfy all of their needs.
** # 1 problem in economics**

Anything used to satisfy wants.

All of the different choices you have to use for resources, you have tons of choices.

The next best use of a resource

The process of analyzing the additional or incremental costs or benefits arising from a choice or decision.

The concept that no matter what you are doing, you are still using some sort of resource such as time.

What are the five things to look at in order to understand
the world in which we live?

Economics on the scale of the individual, individual firm, or indiviual industry.

The study of the "global" economy down into countries, states, and regions.

An approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. (How they can be made better) **VALUE JUDGEMENTS**

Normative economics are also known as:

**tries to gather data and describe situation**
Attempts to understand behavior and the operation of economic systems without making judgements about whether outcomes are good or bad. It strives to describe what exists and how it works.

What two things is positive economics divided into?

**Describes the situation**
Simply the compilation of data that describe phenomena and facts.

Attempts to generalize about data and interpret them. **A statement or set of related statements about cause and effect, action and reaction.

A formal statement of a theory, usually a mathematical statement of a presumed relationship between two or more variables.

A measure that can change from time to time or from observation to observations

The Principle that irrelevant detail should be cut away, or that ou have to take out the variables that don't matter.

A device used to analyze the relationship between two variable while the values of the other variables are held unchanged.
*Isolating the impact of one single factor*

Be careful in casual relationships and whether or not they are connected.
Literally, "after this(in time), therefore because of this." A common error make in thinking about causation: IF event A happens before Event B, it is not necessarily true that A caused B.

The erroneous belief that what is true for the part is necessarily true for the whole. (But it's not)

The collection and use of data to test economic theories.

How we put into practice the ideas we've developed.

An economy that produces what people want at the least possible cost. (Which party leans to this?)

Economic Fairness. (Which party leans toward this?)

An increase in the total output of the economy.

We want to know what is going to happen. The condition in which national output is growing with low inflation and full employment of resources.

What are the 4 economic policies?

What are the 4 Basic economic questions?

What are the 4 Factors of production?

Things that are produced and then used in the production of other goods and services

The process that transforms scarce resources into useful goods and services.

Factor of production not modified by people.

Goods bought to be used up.

When resources are focused on a particular thing

This theory helps us explain how specialization works.

Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be "absolutely" more efficient producers.

Can do something better than someone else.

A producer that has an absolute advantage over another in the production pof a good or service if he or she can produce that product using fewer resources.

Even if you can do 2 things better than someone else, it is still going to benefit you to trade and specialize .

A produceer has a comparative advantage over another in the production over another in production of a good or service if he or she can produce that product at a lower opportunity cost.

What is the gains from trade?

A graph that shows all the combinations of goods and services that can be produced if all of society's resources are used efficiently

PPF includes what 6 things?

The negative slope of the ppf indicates a tradeoff that a society faces between two goods.