macroeconomics unit 1
secondary effects
what happens later down the road because of something that happens now.
fallacy of composition
what is good for one may not be good for the group.
fallacy of division
when we mistakenly believe that what is true for the whole economy is also true for each individual.
surplus
quantity supplied is greater than the quantity demanded.
shortage
quantity supplied is less than the quantity demanded.
command economy
An economy where supply and price are regulated by the government rather than market forces.
A direct relationship between two variables exists when ______.
a decrease in the value of one variable causes the value of the other to decrease.
demand
a list of the amounts that consumers are willing and able to purchase at each price
supply
a list that shows the amount that the sellers are willing and able to make available for sale at each price.
entrepreneurship
a person who starts a business and is willing to risk loss in order to make money
An increase in demand is shown demographically by ______.
a shift of the demand curve to the right.
economic model
a simplified explanation of some segment of the economy.
economics
a social science that looks at how we satisfy unlimited needs and wants with limited resources.
pure capitalism
an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations.
An increase in equilibrium price and quantity of a good can be caused by _______.
an increase in demand, and an increase in supply.
All of the following will cause the supply of good A to shift rightward EXCEPT ________.
an increase in the market price of good A.
Which of the following will NOT decrease the demand for a normal good?
an increase in the price of substitute goods.
labor
anyone who is working for someone else.
In every economic system, choices must be made because resources __________.
are limited but human desires and wants are limited.
capital
buildings, equipment, inventories
When the price of the coffee increased in the mid 1970's, restaurants that raised the price of a cup of coffee experienced a decrease in demand for donuts because donuts and coffee are _______.
complementary goods.
complementary goods
complements another good, such as french fries and ketchup.
market economy
controlled by buyers and sellers; self interest.
An increase in the price of coffee, holding other things constant, will _________.
decrease the quantity demanded for coffee.
positive statements
describes what exists in the economy and how it operates.
In the simple circular flow analysis, profits can be regarded as any of the following EXCEPT ______.
equal to household savings.
The combination of computers and televisions shown by point X ______.
is not attainable, given society's current level of resources and production technology.
natural resources
land, trees, water, etc.
scarcity
limited resources; unlimited needs and wants.
normative statements
makes statements about what ought to be or what is right or wrong with the economy.
equilibrium
no more change; balance between 2 forces.
In the election campaign of 1984, presidential candidate Walter Mondale stated that every American should have equal access to quality education. This statement is an example of a ________.
normative statement.
market
place where goods and services are bought and sold.
Points U, V, Y, and Z show _____.
possible combinations of televisions and personal computers.
All of the following will shift the demand curve EXCEPT ______.
prices of the resources used to produce the product.
In the simple circular flow, total output is identical to total income because ______.
profits are defined to be equal to total output less the factor payments of wages, rent, and interest.
production possibilities frontier
shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed
If an economy is operating at a point inside the production possibilities curve, _______.
society's resources are being inefficiently utilized.
substitute goods
takes the place of another good, such as wheat bread and white bread.
Which of the following statement is NOT an assumption underlying the production possibilities curve?
the amount of resources available for production can be changed quickly.
After people started wearing smile buttons, the divorce rate rose. Thus, smile buttons lead to divorce. This statement is an example of ______.
the assumption-causation fallacy.
Which of the following will NOT shift the market supply for a good?
the price of the good increases.
Which of the following statements about movement along the production possibilities curve is NOT correct?
there are no costs involved in choosing one point on the curve over all other points.
law of demand
there is a direct relationship between the price of a product and the quantity supplied- all other remaining the same.
If an item is a free good, then ________.
there is more than people want when its price is zero.