Macroeconomics Chapter 1 Review

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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


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