macroeconomics chapter 1
Economists often are interested in percentage change from one period to the next. The percentage rate of change of gross domestic product (GDP) is an important macroeconomic variable. If in 2010 GDP was $11,150 billion dollars, and GDP increased to $11,738 billion in 2011, what is the growth rate of the U.S. economy in 2011?
((Value in the second period - value in the first period)/ Value in the first period) X 100 = 5.3%
Mixed Economy
An economy in which most economic decisions result from the interactions of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
Centrally Planned Economies
An economy in which the government decides how economic resources will be allocated.
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when--
Marginal benefits equal marginal cost.
Scarcity
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls --
Equity
The fair distribution of economic benefits.
Opportunity Cost
The highest valued alternative that must be up to engage in an activity.
Market Economies
When the decisions of households and firms determine what is being produced, how it's produced, and how much is produced.
Product Efficiency
Where goods and services are produced at the lowest possible cost.
Allocative Efficiency
Where production is consistent with consumer preferences
Microeconomics is the study of
how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example,
many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.
-- is concerned with what is, and -- is concerned with what ought to be. Economics is about --, which measures the costs and benefits of different courses of action.
positive analysis; normative analysis; positive analysis
Macroeconomics is
the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
three fundamental questions:
three fundamental questions: One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?
