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Ch.1 Think Like An Economist
Ch.1 Think Like An Economist
Cost-benefit principle
Marginal benefit
Marginal cost
Rational decision
Economic surplus
Benefit cost
Decision pitfall
Absolute amount
Implicit cost
Sunk cost
Normative economic
Should behave
Will behave
Comparative advantage
Absolution advantage
Unattainable
Attainable
Inefficient
Efficient
Specialization
Central planning
Increased price
Substitution effect
Income effect
Total surplus
Sellers surplus
Buyers surplus
Inferior good
Normal good
Efficiency principle
GDP
Y = C + I + G + NX
Spend by household
Investment (I)
Inventory
Government purchase
Social security
Food stamp
Export import
Real GDP
Nominal GDP
CPI
Price index
Inflation
% change in CPI
Deflation
Real wage
-ve inflation
Hyperinflation
R = Ipi
Labor force
Reservation wage
Employed + unemployed
Unemployment rate
unemployed
labor force
population16 +
labor force
Discouraged workers
Frictional unemployment
Between job
Short
Cyclical unemployment
Short
Structural unemployment
Long
Lack of skills
Seasonal
High cost
Output/worker
Y
N
( POP
)=( YN )( POP
)
Human capital
Physical capital
Limitation exits
Technology
Most important
Saving
Saving rate
Wealth
Asset
saving
income
Liabilities
Balance sheet
Change in wealth
Unit of time
Stock
Flow
-ve
+ve
A point of time
National saving
S = YCG
Private saving
Sprivate = YTC
Public saving
Surplus
Balanced
Deficit
Spublic = TG
Government budget
Household saving
Life-cycle
Precautionary
Bequest saving
Purchasing power
MB of extra saving
Bond
Principal amount
Maturation date
length
Coupon payment
Amount lent
Interest payment
Coupon rate
Interest rate
Higher risk
Stock
Partial ownership
Receive dividend
Risk premium
Money
Higher rate
Medium of exchange
Unit of account
Store of value
Bank reserve
Reserve-deposit ratio
Fed
Monetary policy
reserve
deposit
Money supply
V =( P Y )/M
Quantity equation
M V =P Y
Business cycle
Recession
Peak
Trough
Depression
Significant recession
Expansion
Boom
Full-employment output
Output gap
Y 100
Y
Y
Recessionary gap
Expansionary gap
Y < Y*
Y > Y*
Okuns law
uu
Output gap=2
Cyclic unemployment
Banking panics
Factors
Output
Price levels
Technological
Financial
Supply of money
Vertical
Wealth effect
Increase in MD
Increase MD
Decrease in NX
Demand shocks
Change AD
Factors
Consumer confidence
Consumer wealth
Business confidence
Stabilization policy
Government policy
Fiscal policy
Monetary policy
Price shock
Shift AS
-ve
left
+ve
Interest rate
Right
Self-correcting economy
Long-run
Slow speed
Fast speed