Key Vocabulary
1. Define Macroeconomics.
2. Define Microeconomics.
3. True or False: Microeconomics focuses on issues such as GDP and National Unemployment.
1. The study of economy-wide phenomena, including inflation, unemployment, and economic growth
2. The study of how households and firms make decisions and how they interact in markets
3. False => Individuals, Family Households, Individual Firms/Businesses
1. Define Elastic Demand.
2. In-Elastic Demand.
3. Define Demand.
1. Demand in which changes in price have LARGE EFFECTS on the amount demanded
(higher the price => the lower the demand)
(lower the price) => the higher the demand)
2. A situation in which an increase or a decrease in price WILL NOT significantly affect demand for the product (Diabetics will always buy insulin no matter the fluctuation in price)
3. Consumer willingness and ability to buy products.
1. Which Economic system endorses Governmental Control of all aspects of the Factors of Production?
2. ________________ is the name of the economic system that most directly reflects the principles expressed/articulated in #1's description.
3. True or False: Denmark is a Communist nation.
1. Command Economy
2. Communism
3. False - Socialist (Mixed Economic - Democratic Socialism)
1. Who is Carl Menger?
2. What were his major economic theories?
3. True or False: Menger's Water-Diamond Paradox established that the value of a good/service is intrinsic.
1. Austria Journalist who studied economics and later established the Austrian School of Economics
2. 1. Principles of Economics (based on human/individual choices) 2. There is no "one economic" value for each good (everything is in flux or flexible based on context)
3. False - value is subjective
1. Define Keynesian Economics.
2. Define Gross Domestic Product.
3. Define Real GDP.
4. Define Nominal GDP
1. A ideology that government spending should increase during business slumps and be curbed during booms.
2. A measurement of the total goods and services produced within a country.
3. The production of goods and services valued at CONSTANT prices
4. The production of goods and services valued at CURRENT prices
1. Define Inferior Goods.
2. Define Normal Goods.
3. Define Complementary Goods.
1. Goods for which demand tends to FALL when income RISES.
2. Goods for which demand goes UP when income is higher and for which demand goes down when income is lower.
3. Goods that are commonly used with other goods
(Car => Gas, Tires, Oil, etc.)
1. What are the four factors of Production?
2. Which of the following would an economist not consider an example of Land? (Yes... I'm giving you one of the 4.F.P.)
a. Wheat
b. Oil
c. Machinery
1. Land, Labor, Capital, Enterprise or Entrepreneurship
2. c. Machinery (man-made - tool => Capital)
1. Who is John Maynard Keynes?
2. What were his major economic theories?
3. True or False: Keynesian economics endorses limited governmental intervention in the form of fiscal policy.
1. 1. English economist. 2. He is most famous for The General Theory of Employment, Interest and Money (1936)3. Judged most of the classical economic analysis to be a special case (hence "General Theory") 4. Supported/Encouraged massive Government intervention in the Economy
2. Keynesian Economics (high levels of Federal Government intervention - Expansionary Fiscal Policy)
3. False
1. Define the Austrian School of Economics.
2. Define Market Economy.
3. Define Classical Liberalism
1. It is a school of economic thought that rejects opposing economists' reliance on methods used in natural science for the study of human action, and instead bases its formalism of economics on relationships through logic or introspection called "praxeology".
2. An economic system in which decisions on the three key economic questions are based on voluntary exchange in markets (Capitalistic)
3. A term given to the philosophy of John Locke and other 17th and 18th-century. Advocates for the protection of individual rights and liberties by limiting government power.
1. Define Price Ceiling.
2. Define Price Floor.
3. Define Supply.
1. Local government places a ceiling on rents
OBJECTIVE: to help the poor by making housing more affordable CRITIQUE: A highly inefficient way to help the poor raise their standard of living (kills markets)
2. 1. A legally determined minimum price that sellers may receive 2. A barrier intended to prevent the prices of those items from falling below the market prices
3. The amount of goods available.
1. Who is Henry Hazlitt?
2. What was the title of Hazlitt's economic parable that references the throwing of a brick?
3. What was the key economic principle gleaned from this story/example?
1. American Journalist and author of Economics in One Lesson - examines the consequences of political policies and governmental intervention in a nation's economy.
2. The Broken Window Fallacy
3. The danger/reality of "hidden costs"
1. Who is Ludwig Von Mises?
2. What were his major economic theories?
3. True or False: Von Mises endorsed Socialism and Communism as the most effective mediums of economic expression in a society.
1. Austrian - Austrian Economic School and rejected Keynesian Economics
2. 1. Endorsed limited Government Intervention in the Economy 2. Socialism must fail and the theory of business cycle
3. False
1. Define Aggregate.
2. Define Aggregate Demand.
3. Define the Crowding Out Effect
1. Gathered into a whole; total
2. The amount of goods and services in the economy that will be purchased at all possible price levels
3. The offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending
1. Define Equilibrium
2. Define Market Equilibrium Price.
3. Define Equilibrium Point.
1. A state of balance
2. 1. The price corresponding to the intersection of an item's supply and demand curves 2. The price at which consumers are willing to buy the same quantity that suppliers are willing to produce
3. The point at which the demand curve and the supply curve for an item intersect
1. True or False: William S. Jevons composed the theory of "Diminishing Returns."
2. True or False: The following statement is an example of Positive Economics, "Unemployment is worse than inflation."
3. True or False: Unlimited wants and limited resources are the two basic economic principles that create the need for choice.
1. False
2. False
3. True
1. Who is Alfred Marshall?
2. What were his major economic theories?
3. True or False: Marshall would agree that Marginal Utility can be defined as positive, zero, or negative based on context.
1. English Economist who authored the text, Principle of Economics (Neoclassical Economics - approach that advocates that the production, consumption, and valuation of goods and services are observed as driven by the supply and demand model.)
2. His Principles of Economics brought the ideas of:
1. Supply and Demand
2. Marginal Utility
3. The costs of Production into a coherent whole.
4. Developed the concepts of consumer surplus, producer surplus, and diminishing returns.
3. True
1. Define the "Water-Diamond Paradox."
2. Define Subjective Value.
2. Define Intrinsic Value.
1. (1) the things with the greatest value in use frequently have little or no value in exchange
(2) the things with the greatest value in exchange frequently have little or no value in use.
2. The worth of a good or service as determined by its usefulness to the buyer (based on context)
3. A thing is valuable because of the nature of the product
1. Define Deficit.
2. Define Surplus.
3. Define Shortage.
1. The amount by which something, especially a sum of money, is too small.
2. A situation in which quantity supplied is greater than quantity demanded
3. A situation in which quantity demanded is greater than quantity supplied
1. True or False: The Law of Diminishing Return states: "People tend to receive less and less additional satisfaction from any good or service."
2. True or False: A rational/logical person will always make the choice in which the opportunity cost is greater than the opportunity benefit.
3. True or False: To an economist, the scarcity of a natural resource, such as bananas or broccoli, means that the supply has run short.
4. True or False: Domestic or National Unemployment is one major topic of study in Macroeconomics.
1. True
2. False
3. False
4. False
1. Who is William Stanley Jevons?
2. What were his major economic theories?
3. True or False: Jevon penned The Coal Question, in which he questioned the sustainability of Great Britain's reliance upon coal to fuel its industrialization.
1. English Economist, advanced the marginal revolution (broke with traditional economist -introduction of utility and its impact on the "usefulness/value/benefit" of goods and services)
2. The KEY principle is that of diminishing marginal utility
3. True