Macroeconomics Chapter 1 Review
the statement that the United States has a lower unemployment rate than Spain is a ...... statement since it describes what people ......
positive/ actually do
When economists test their theories using evidence-based analysis, they are most likely using __________.
empiricism through the use of data.
Normative
- Should the government require restaurants to post calorie information? - Should the government require all individuals to purchase insurance?
When deciding whether to install visible countdown timers for pedestrians at crosswalks, which of the following would be considered in the cost-benefit analysis?
- The value of the lives lost by drivers who watch the countdown timers and try to make it through a light. Your answer is correct. - The cost in terms of dollars of installing these new timers all over the city. Your answer is correct. - The higher maintenance bill associated with fixing these more complex signals when they break down. Your answer is correct. - The value of the pedestrians' lives saved by having the timers to assist in crossing the street.
In which of the following areas will taking an economics course help benefit you throughout your life?
A. It will give you the logic behind using cost-benefit analysis when evaluating decisions. B. It will instill the concept that what activity is given up by a decision plays an important role when making choices. C. It will help you analyze and predict human behavior in a variety of situations.
Economic agents
Any group or individual that makes choices, such as consumers, firms, parents, politicians, etc.
Which of the following is true regarding the concept of causation?
It describes how one event can bring about change in another.
Which of the following is not an example of a causal claim?
It rains more often on days you wash your car.
__________ is the study of how households and businesses make choices, how they interact in markets, and how government influences their choices.
Microeconomics
normative economics
The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.
If the president of Colombia commented that "we should do something to reduce inflation in Colombia," this would be an example of:
a normative statement
microeconomics studies.... , while macroeconomics studies .......
a small piece of the overall economy; the economy as a whole
The definition of economics states that it is the study of how....
agents choose to allocate scarce resources and the impact of those choices on society
When a cost-benefit analysis is done:
all relevant options must be considered.
suppose that you allocate $20 each week for your entertainment budget. this money is spent on two items; either renting movies for $1 each at the Redbox or downloading songs form iTunes at $1 each. given this information, which of the following would represent your budget constraint for entertainment?
amount spent on iTunes + amount spent at Redbox = $20
identify the cause and effect in the following examples: lower infant mortality is .... and an improvement in nutrition is ..... a surge in cocoa prices is ....... and a pest attack on cocoa crop is ........
an effect / the cause an effect/ the cause
Trade-offs
arise when some benefits must be given up to gain others. Ex. Time spent on Facebook / what could you have done instead?
when making your decision abt which activity to choose, you should consider the monetary cost ...... the opportunity cost of the activities. the goal is to choose the option that offers the greatest ...... benefit
as well as/ net
policy decisions made by the government are analyzed by ....
both microeconomics and macro
comparing a set of feasible alternatives and picking the best one is an optimization process called......
cost benefit analysis
suppose your New Year resolution is to get back in shape. How would you evaluate your options and choose an optimal one?
do a cost-benefit analysis to compare alternatives
Empiricism describes a situation where
economists use data to analyze what is happening in the world
Opportunity cost
for each option chosen, there is a runner up choice; referred to as the best alternative forgone; best alternative use of a resource; sometimes economists try to put a monetary value on opportunity cost
normative analysis and public policy
generates advice to society in general
economics
how agents makes choices among scarce resources/ how choices affect society
positive
how does behavior change when restaurants post calories? Does mandatory insurance affect the price of health care?
economists study
human behavior
Sunk cost
is a cost that has already been incurred and cannot be recovered, since they cannot be recovered they are not included in the cost-benefit analysis
scarcity
is the situation of having unlimited wants in a world of limited resources
a policy such as reducing government spending to control national debt would be studied under ..... since it deals with .......
macro/ the economy as a whole
Optimization-
making the best choice possible with given information. While optimizing we should take our constraints into account. / in real world people don't always succeed in optimizing - we are not calculating machines - but people generally try to optimize.
equilibrium describes a situation where
no one would benefit from changing his or her behavior
the ethical implications of a hotly debated government policy would best be considered a
normative question, since it deals with a subjective issue based on personal preferences
the statement that the United States has too many illegal immigrants is a .... statement since it describes what people.....
normative/ ought to do
3 principles of economics
optimization, equilibrium, empiricism
the goal of optimization for an individual is to maximize ......
overall well-being
optimization describes a situation where
people weigh costs and benefits when making a decision
The principle of opportunity cost evolves from the concept of:
scarcity
positive economics
the branch of economic analysis that describes the way the economy actually works
Which of the following is not a possible opportunity cost of attending college?
the cost of housing becuase you would have to live somewhere no matter attending college
during the process of optimization economist believe that people are considering .....
the feasibility of a choice, given the information available at the time
Let's say that you are trying to decide what to do on Friday at 11 a.m. You rank your possible options from the one you value the most to the one that you value the least in the following order: going to class, sleeping in late, going to work early, getting lunch, going to the gym to exercise, and watching television. If you decide to go to class, then what do we know about the opportunity cost of your decision?
the opportunity cost would be sleeping in late, since it was your next-best option
Budget constraints:
the set of things a person can do without breaking her budget. Ex. Free time outside of class= socializing + studying + working
scarce resources
things that people want, where the quantity that people want exceeds the quantity that is available
your budget constraint fro entertainment illustrates the concept of ....... since as you increase your purchase of one item, you ........
trade-offs/ must decrease your purchase of the other item
Empiricism
using data to figure out answers to interesting questions; the main aim is to determine what is causing things to happen in real world; economists test their ideas with data; evidence based analysis; use data to determine whether our theories about human behavior - like optimization and equilibrium - match up with actual human behavior.
the opportunity cost of an activity is a measure of ......... when you do that activity
what is given up
Equilibrium
when everyone is optimizing; no one would be better off with a different choice; a situation in which no one benefits by changing his/her behavior