chapter 1

Question 1

role of economics

Answer 1

conservatives: economic stability
progressives: homogeneity in distribution of wealth

Question 2

wealth

Answer 2

a store of value

Question 3

economy

Answer 3

a system for coordinating society’s productive activities

Question 4

microeconomics vs. macro

Answer 4

micro: branch that studies how people make decisions and how those decisions interact (maximize profit and utility by allocating scarce resources) –> supply, demand, elasticity, opp. cost, labour market …
macro: study of the behaviour of the economy as a whole –> monetary fiscal policies, growth, unemployment, inflation, deflation, gdp …

Question 5

market

Answer 5

where supply and demand meet, involving money exchange

Question 6

4 principles of individual choice

Answer 6

• resource are scarce, so we must choose
• opportunity cost
• trade-off (how much) and marginal decisions (to do a bit more or less?)
• ppl respond to incentives

Question 7

4 principles of economics of interaction

Answer 7

• gains from trade: providing goods to each other in return of something (specialization)
• market moves toward equilibrium
• efficiency: best allocation of the scarce resources without making ppl worse off
• governments interventions

Question 8

3 economy-wide interactions

Answer 8

• one’s spending is another person income
• gov. policies on spending can balance the economy (inflation or deflation)
• economy’s potential leads to a long-run growth