Macroeconomics Test 1

best alternative that we give up when we make a choice or a decision

Limited resources

the process of analyzing the additional, or incremental costs or benefits arising from a choice or decision.

Costs that can't be avoided because they have already been incurred.

A market in which profit opportunities are eliminated almost instantaneously."There's no such thing as a free lunch"

looks at the individual unit—the household, the firm, the industry. It sees and examines the “trees.”

looks at the whole, the aggregate. It sees and analyzes the “forest.”

analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action; also called policy economics. In

Land, Labor, Capital

A producer has an absolute advantage over another in the production of a good or service if he or she can produce that product using fewer r

specialization and free trade will benefit all trading parties, even when some are “absolutely” more efficient producers than others; also c

difference between maximum amount a person is willing to pay for a good at current market price

difference between the current market price and the full cost of production for the firm

The behavior of all households and firms together.

prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.

cycle of short-term ups and downs in the economy.

percentage of the labor force that is unemployed.

an increase in the overall price level.

periods of very rapid increases in the overall price level.

A decrease in overall price level.

Households and the government purchase goods and services from firms in the goods-and-services market. In this market, firms also purchase

Interaction in the labor market takes place when firms and the government purchase labor from households. In this market, households suppl

households purchase stocks and bonds from firms, firms borrow to build new facilities in the hope of earning more in the future, government

refers to the government’s decisions about how much to tax and spend

a policy in which taxes are cut and/or government spending increases.

when taxes are not cut and/or government spending decreases.

tools used by the Federal Reserve Bank (US central bank) to control the quantity of money, which in turn affects interest rates.

a situation in which there is high inflation at the same time there are slow or negative output growth and high unemployment