Macro Economics Chapter 02 Power Point

Question 2

What will I learn in this chapter?

Answer 2

•Having learned that scarcity forces choices, here you will study the choices people make in more detail

Question 3

What are the three fundamental economic questions?

Answer 3

1.What to produce?2.How to produce?3.For whom to produce?

Question 4

What are two key concepts in this chapter?

Answer 4

•Opportunity costs•Marginal analysis

Question 5

What is opportunity cost?

Answer 5

•The best alternative sacrificed for a chosen alternative

Question 6

What opportunity cost am I experiencing now?

Answer 6

•The most money that you could be making if you were somewhere else instead of studying these slides

Question 7

Can opportunity cost be something other than money?

Answer 7

•Yes, that most desired activity that you are presently giving up is considered an opportunity cost

Question 8

What is marginal analysis?

Answer 8

•An examination of the effects of additions to or subtractions from a current situation

Question 9

What is an example of marginal analysis?

Answer 9

•When your benefit of studying these slides exceeds the opportunity cost, you will spend time studying these slides

Question 10

What is a production possibilities curve?

Answer 10

•A curve that shows the maximum combinations of two outputs that an economy can produce, given its available resources and technology.

Question 11

What is technology?

Answer 11

•The body of knowledge and skills applied to how goods are produced

Question 12

What assumptions underlie the production possibilities model?

Answer 12

1.Fixed resources2.Fully employed resources3.Technology unchanged

Question 13

What is the conclusion of the production possibilities curve?

Answer 13

•Scarcity limits an economy to points on or below its production possibilities curve

Question 14

What are efficient points?

Answer 14

•Because all the points along the curve are maximum output levels with given resources and technology, they are called efficient points

Question 15

What happens when we move between two efficient points?

Answer 15

•A movement between any two efficient points on the curve means that more of one product is produced only by producing less of the other

Question 16

What is the law of increasing opportunity costs?

Answer 16

•The principle that the opportunity cost increases as production of one output expands

Question 17

What is economic growth?

Answer 17

•The ability of an economy to produce greater levels of output, an outward shift of its production possibilities curve

Question 18

What makes possible economic growth?

Answer 18

•Research and development of new technologies•Increase production in excess of worn out capital

Question 19

What happens when a country does not invest in new technology?

Answer 19

•Everything else being equal, the country will not grow

Question 20

What is investment?

Answer 20

•The accumulation of capital, such as factories, machines, and inventories, that is used to produce goods and services

Question 21

What is the opportunity cost of investment?

Answer 21

•The consumer goods that could have been purchased with the money spent for plants and other capital

Question 22

What does an increase in investments make possible in the future?

Answer 22

•Economic growth and more goods and services

Question 23

What conclusion can we make about investments?

Answer 23

•A nation can accelerate growth by increasing production of capital goods in excess of the capital being worn out