The Economic Problem
The fundamental economic problem where human wants are unlimited but resources are limited.
What is scarcity?
This law states that as the price of a good increases, the quantity demanded by consumers decreases.
What is the law of demand?
This three-letter acronym represents the total market value of all final goods and services produced within a country in a year.
What is GDP?
In the simplest version of this macroeconomic model, these two primary economic actors interact with each other.
What are households and firms?
The value of the next best alternative that is given up when making a choice.
What is opportunity cost?
The market condition or point where the quantity supplied exactly equals the quantity demanded.
What is equilibrium?
A general, sustained increase in prices across an economy, which lowers the purchasing power of money.
What is inflation?
Savings, taxes, and imports are collectively known by this term because they remove money from the core economic loop.
What are leakages?
The four factors of production are land, labor, capital, and this risk-taking driving force.
What is entrepreneurship?
When the market price is set above equilibrium, it causes this situation where quantity supplied exceeds quantity demanded.
What is surplus?
A situation where individuals seek, but cannot find work
What is unemployment?
Investment, Government Spending and Exports
What are injections?
A graph that shows the maximum combinations of two goods an economy can produce with its current resources.
What is the possibility production frontier?
If the price of coffee spikes dramatically, the demand for tea (which is this type of related good) will likely increase.
What are substitutes?
The government's use of spending and taxation to influence the performance of the national economy.
What is fiscal policy?
The main interaction between households and firms.
What is consumption?
The inputs required for the production process.
What are the factors of production?
When the market price is set below equilibrum, this will occur.
What is shortage?
A period of temporary economic decline, traditionally defined by two consecutive quarters of falling GDP.
What is a recession?
Households and firms in another country.
What is the overseas sector?