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?