Physical capital
________- Human- made equipment like machinery as well as buildings, roads, vehicles, and computers.
entire curve
Changes in demand are when the ________ would shift upwards or downwards.
Economic growth
________- The ability to produce a larger total output over time.
price movement
Change in the quantity demanded only occurs due to change in ________ along the curve.
Opportunity cost
________- The value of what was given up.
Demand
________ is the entire line with all of the points that make it up.
Command
________- Consists of the central planning of the economy which differed in different regions of the world depending on the political regime.
inverse impact
The cost of production (land, labor, capital) has a(n) ________ on the supply.
PPC curves
Realistically, ________ are not straight lines and tend to be concave- shaped.
Macroeconomics
_: with _, we consider the big picture- the nations economy as a whole.
Entrepreneurial ability
________- The effort and know- how to put the other resources together in a productive venture.
Consumer expectation
________ plays a major role in the determination of the price.
Tradition
________- Tied to the evolution of economics, and it is related to subsistence and tribal life.
Increase flexibility
________ by adapting quickly to changing circumstances and being open to new ideas.
Shift
________ in supply is due to the determinants of supply.
equilibrium price
When supply is constant and only demand increases, ________, and quantity increase.
Microeconomics
microeconomics filters our scope to individuals in an economy while keeping the overall economy in mind
Labor
Human effort and talent, physical and mental
Land or natural resources
Any resource created by nature
Physical capital
Human-made equipment like machinery as well as buildings, roads, vehicles, and computers
Entrepreneurial ability
The effort and know-how to put the other resources together in a productive venture
Tradition
Tied to the evolution of economics, and it is related to subsistence and tribal life
Command
Consists of the central planning of the economy which differed in different regions of the world depending on the political regime
Market
Essentially, it is the place in the economy where buyers and sellers perform transactions
Opportunity cost
The value of what was given up
Productive efficiency
When the economy is producing the maximum output for a given level of technology and resources
Allocative efficiency
The economy is producing the optimal mix of goods and services
Optimal
The combination of goods and services that provides the most net benefit to society
Market failure
When a market fails to produce the allocative efficient quantity
Economic growth
The ability to produce a larger total output over time
Economic contraction
It is when a country's economy shrinks due to factors such as reduced spending by consumers, businesses, or the government
Law of demand
Holding all else equal, when the price of good rises, consumers decrease the quantity demanded of that good
GDP
________ is used to measure the economic growth of a country.
Gross
________ domestic product (GDP)- The market value of the final goods and services produced within a nation in a given period.
Trough
________- The bottom of the cycle where a contraction has stopped.
CPI
The ________ is based on a market basket of goods bought by consumers, including the ones produced abroad.
Peak
________- The top of a business cycle where an expansion has ended.
Firm
________ is any business that produces goods and supplies them to the product market and then receives the payment for those goods.
Market basket
________- A collection of goods and services used to represent what is consumed in the economy.
Goods
________ evolve- The emergence of new products (smartphones) and the extinction of others (manual typewriters) is understood by firms and consumers, but the market basket must reflect this or it risks becoming irrelevant.
Recession
________- Unofficially defined as two consecutive quarters of falling real GDP.
Business cycles
________ refer to the fluctuations in economic activity over time.
individual dollar
It occurs because inflation causes the value of the ________ to decrease over time.
Consumers
________ are the people who buy the goods /services in an economy.
GDP deflator
The ________ includes all items that make up domestic products.
real GDP
Contraction- A period where ________ is falling.
Deflation
________: the general decrease in prices.
foreign sector
Closed economy- A model that assumes there is no ________ (imports and exports)
Circular flow of economic activity
A model that shows how households and firms circulate resources, goods, and incomes through the economy
Closed economy
A model that assumes there is no foreign sector (imports and exports)
Gross domestic product (GDP)
The market value of the final goods and services produced within a nation in a given period
Aggregate spending (GDP)
The sum of all spending from four sectors of the economy
GDP = C + I + G + (X
M)
Consumer spending (C)
Spending done by customers
Investment spending (I)
Investment is defined as current spending to increase output or productivity later
Government spending (G)
Purchases made by the government for final goods and services and investments in infrastructure
Aggregate income (AI)
The sum of all income-Wages + Rent + Interest + Profit-earned by suppliers of resources in the economy
Value-added approach
A third approach to calculating GDP that considers all stages of production of a final good and the value that was added to the final good along the way
Employed
A person is employed if they have worked for pay at least one hour per week
Unemployed
A person is unemployed if they are not currently working but are actively seeking work
Labor force
The sum of all individuals 16 years and older who are either currently employed (E) or unemployed (U)
Out of the labor force
A person is classified as out of the labor force if they have chosen to not seek employment
Labor force participation
The ratio of the size of the labor force to the size of the population 16 years and older
Unemployment rate
The percentage of the labor force that falls into the unemployed category
Discouraged workers
Citizens who have been without work for so long that they become tired of looking for work and drop out of the labor force
Frictional unemployment
A type of unemployment that occurs when someone new enters the labor market or switches jobs
Seasonal unemployment
A type of unemployment that is periodic, predictable, and follows the calendar
Structural unemployment
A type of unemployment that is the result of fundamental, underlying changes in the economy such that some job skills are no longer in demand
Cyclical unemployment
A type of unemployment that rises and falls within the business cycle
Full employment
Exists when the economy is experiencing no cyclical unemployment
The natural rate of unemployment
The unemployment rate associated with full employment, somewhere between 4 to 6 percent in the United States
Consumer price index (CPI)
The price index that measures the average price level of the items in the base year market basket
Deflation
the general decrease in prices
Inflation
the general increase in prices
Disinflation
a decrease in the rate of inflation
Inflation rate
the percentage change in aggregate price level across an entire economy in a year
Market basket
A collection of goods and services used to represent what is consumed in the economy
Inflation
The percentage change in the CPI from one period to the next
The annual rate of inflation on goods consumed by the typical consumer
The percentage change in the CPI from one year to the next
Nominal income
Todays income is measured in todays dollars
Real income
Todays income is measured in base year dollars
Consumer substitute
As the price of goods begins to rise, we know that consumers seek substitutes
Goods evolve
The emergence of new products (smartphones) and the extinction of others (manual typewriters) is understood by firms and consumers, but the market basket must reflect this or it risks becoming irrelevant
Quality differences
Some price increases are the result of improvements in quality
The real rate of interest
The percentage increase in purchasing power that a borrower pays a lender
Nominal GDP
The value of current production at the current prices
Real GDP
The value of current production but using prices from a fixed point in time
Base year
The year that serves as a reference point for constructing a price index and comparing real values over time
Price index
A measure of the average level of prices in a market basket for a given year, when compared to the prices in a reference (or base) year
GDP price deflator
The price index that measures the average price level of the goods and services that make up GDP
The business cycle
The periodic rise and fall in 4 phases present in economic activity
Expansion
A period where real GDP is growing
Peak
The top of a business cycle where an expansion has ended
Contraction
A period where real GDP is falling
Recession
Unofficially defined as two consecutive quarters of falling real GDP
Depression
A prolonged, deep contraction in the business cycle
Trough
The bottom of the cycle where a contraction has stopped
Macroeconomic equilibrium
________- Occurs when the quantity of real output demanded is equal to the quantity of real output supplied.
Marginal propensity
________ to consume (MPC)- How much people consume rather than save when there is a change in income.
Supply shocks
________- An economy- wide phenomenon that affects the costs of firms and the position of the SRAS curve, either positively or negatively.