Fundamental Concepts
What term describes a situation where there is no way to improve one person's well-being without reducing another's?
Pareto Efficiency
What market structure is characterized by standardized goods, many buyers/sellers, and well-informed participants?
Perfectly Competitive Market
Which macroeconomic variable is defined as the percentage of the labor force that wants to work but cannot find it?
Unemployment Rate
What 1920s production innovation, exemplified by Ford’s River Rouge plant, drastically reduced unit costs?
Assembly Line (or Production-line technology)
What 1776 book by Adam Smith first outlined the principles of modern economic analysis?
An Inquiry into the Nature and Causes of the Wealth of Nations
Beyond monetary price, what specific term refers to the value of the next best alternative given up in a choice?
Opportunity Cost
What specific "motive" is assumed to drive the behavior of firms in a competitive market?
The Profit Motive
Which type of unemployment is caused by the time it takes for workers to find a job that matches their skills?
Frictional Unemployment
In 1920, what major structural shift did the U.S. Census record for the first time regarding the population?
A majority of the population lived in cities (Urbanization)
What 1930 legislation significantly increased tariffs and is thought to have deepened the global depression?
Smoot-Hawley Tariff
Which branch of economics focuses on identifying cause-and-effect relationships and making "value-free" predictions?
Positive Economics
What is the term for a market failure where a transaction between two parties imposes a cost or benefit on a third party?
Externality
What is the name of the curve that shows the relationship between the overall price level and the quantity of total output?
Aggregate Demand (AD) Curve
By 1929, what percentage of American manufacturing was powered by electricity, up from much lower levels?
78 percent
Which 1933 New Deal policy aimed to increase prices and wages but was later struck down by the Supreme Court?
The National Recovery Administration
What assumption states that people choose the action that produces the greatest benefit by comparing it to opportunity costs?
Rationality (or Rational Decision-Making)
What is the term for an economic interaction (like pollution) that does not take place through a market?
Externality
What is the term for the combination of many different individual economic things into a single variable, like GDP?
Aggregation
What 1924 financial innovation allowed ordinary people to invest in a diversified portfolio of stocks?
The Modern Mutual Fund
What specific decision in 1933 by FDR stabilized real interest rates by ending the expectation of falling prices?
Taking the U.S. off the Gold Standard
Which subfield of economics concentrates on the behavior of individual participants and the operation of specific markets?
Microeconomics
What is the specific term for the loss of economic value (total surplus) that occurs when a tax or price control is applied?
Deadweight Loss (implied by welfare consequences of taxes/monopoly)
What "effect" explains the downward slope of the AD curve because a lower price level increases the real value of money?
Wealth Effect
The consumer debt-to-income ratio doubled between 1919 and 1929, reaching what specific percentage?
9 percent (doubled from 4.5% in 1919)
What 1930s recession resulted from the Fed doubling reserve requirements and the government trying to balance the budget?
The 1937 Recession