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Test Bank for Macroeconomics Exam 1 Study Guide 11th Edition by N. Gregory Mankiw
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Test Bank for Macroeconomics Exam 1 Study Guide 11th Edition by N. Gregory Mankiw
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Test Bank for Macroeconomics Exam 1Study Guide 11th Edition by N. Gregory
Mankiw
Microeconomics - ANSstudy of the individual units that make up the economy
Macroeconomics - ANSthe study of the overall aspects and workings of an economy- inflation,
growth, employment, interest rates, and the productivity of the economy as a whole
Scarcity - ANSrefers to the limited nature of society's resources, given the society's unlimited
wants and needs.
The Five Foundations of Economics - ANS1) Incentives
2) Trade-offs
3) Opportunity cost
4) Marginal thinking
5) Trade creates value
Economics - ANSis the study of how people allocate their limited resources to satisfy their
nearly unlimited wants.
Fiscal Policy - ANSthe government takes an active role in managing the economy
Incentives - ANSare factors that motivate a person to act or exert effort
Positive Incentives - ANSencourage action. End of year bonuses motivate employees to work
hard throughout the year.
Negative Incentives - ANSalso encourage action. The fear of receiving a speeding ticket keeps
motorists from driving too fast.
Direct Incentives - ANSCut my grass and I'll pay you $30 dollars.
Indirect Incentives - ANSIf the gas station lowers its prices this could be indirect because lower
prices might encourage consumers to use more gas.
Trade Off - ANSBecause of scarcity every decision has a cost. Deciding to do something now
means you wont be able to do something else till later
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