Principles of Macroeconomics Chapter 1-4 terms

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the limited nature of society’s resources
the study of how society manages its scarce resources
the property of society getting the most it can from its scarce resources
the property of distributing economic prosperity uniformly among members of society
Opportunity Cost
whatever must be given up to obtain some item
Rational People
people who systematically and purposefully do the best they can to achieve their objectives
Marginal Change
a small incremental adjustment to a plan of action
something that induces a person to act
Market Economy
an economy that allocates resources through decentralized decisions of many firms and households as they interact in markets for goods and services
Property Rights
the ability of an individual to own and excercize control over scarce resources
Market Failure
a situation in which a market left on its own fails to allocate resources efficiently
the impact of one person’s actions on the well-being of a bystander
Market Power
the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
the quantity of goods and services produced from each unit of labor input
an increase in the overall level of prices in the economy
Business Cycle
fluctuations in economic activity, such as employment and production
Scientific Method
dispassionate development and testing of theories about how the world works
highly simplified representation of a more complicated reality
Circular-Flow Diagram
a visual model of the economy, shows how dollars flow through markets among households and firms
Factors of Production
the resources the economy uses to produce goods and services including: labor, land, capital
Production Possibilities Frontier (PPF)
a graph that shows the combinations of 2 goods the economy can possibly produce given the available resources and available technology
the study of how households and firms make decisions and how they interact in markets
the study of economy-wide phenomena including inflation, unemployment and economic growth
Positive Statements
attempts to describe how the world should be
Categories: Macroeconomics