Economics

• Economics is the social science that examines how individuals, institutions, and society make optimal choices under conditions of scarcity.
• Economics studies how societies use scarce resources to produce valuable commodities and distribute them among different people.
• Economics is the science of making choices.
• Opportunity Cost is the value of the next-best alternative when a decision is made, incurred when people compare between and among alternatives.
• Types of Resources include Land, Labor, Capital, Entrepreneurial Talent.
• The Economic Problem is the problem of making choices arising from limited resources and unlimited needs.
• Causes of Economic Problems include Unlimited Needs and Wants, Limited Resources and Means, Different Priorities, Means Having Alternative Uses, and Multiplicity of Wants.
• The three basic questions of the Economic Problem are: What gets produced?, How is it produced? (Allocation of resources), and Who gets what is produced? (Distribution of output).
• The role of the Government in economics is to increase efficiency, promote equity, provide infrastructure, and foster macroeconomic stability and growth.
• A BOP Deficit occurs when a country's expenditures exceed its receipts.
• A BOP Surplus occurs when a country's receipts exceed its expenditures.
• Balance of Payments is a summary of a country’s economic transactions for a specific period with the rest of the world and serves as an accounting statement of the economic dealings between residents and non-residents of a country.
• Exchange Rate is the price of a unit of foreign currency in terms of the domestic currency.
• Absolute advantage and comparative advantage are concepts in international trade.
• Exchange Rate serves as a basic link between the local and the overseas market for various goods, services, and financial assets.
• Factors Affecting the Supply and Demand for Dollars include relative income changes, relative price changes, relative interest rate changes, and political and external shocks.
• Exchange Rate measures the external value of a country’s currency.
• International Trade allows countries to expand their markets for both goods and services that otherwise may not have been available domestically.
• Exchange Rate establishes the cost of a country’s import and export.
• Studying Economics serves us in managing our personal lives, understanding society, and improving the world around us by providing us with valuable tools and frameworks to think critically, analytically, and creatively about various economic phenomena.
• Economics can help us weigh the costs and benefits of different choices, such as how to spend our time, money, and energy.
• Economics can help us analyze how people interact with each other and their environment.
• Approaches in estimating GDP: expenditure approach, income approach, industrial-origin/value added approach.
• Long-run aggregate supply curve describes the economy's supply schedule in the long-run; vertical upwards.
• Short-run aggregate supply curve (SAS) is upward-sloping because nominal wages are slow to adjust because of the changing economic conditions due to long-term contracts between workers and firms that fix nominal wages.
• Macroeconomics involves the study of the economy as a whole, focusing on aggregate demand and aggregate supply.
• Factors affecting the aggregate demand supply curve: changes in input prices, economic growth, technology.
• Personal Disposable Income (PI) is net national product minus (unemployment compensation plus contributions to social insurance plus government income).
• Gross National Product (GNP) is a related measure of the economy's total output product, which is the market value of all final goods and services produced by a nation in a single year.
• Aggregate supply (AS) is the supply of all individual goods and services in an economy.
• Aggregate demand curve (ADC) represents the total quantity of all goods (and services) demanded by the economy at different price levels.
• Aggregate demand (AD) represents the total quantity of all goods (and services) demanded by the economy at different price levels.
• Aggregate supply curve (ASC) shows the quantity of real GDP or the level of output that is supplied by the economy at different price levels.
• Gross Domestic Product (GDP) is defined as the market value of all final goods and services produced domestically in a single year and the single most important measure of macroeconomic performance.
• Market value (MV) is derived by taking the product of its per unit price and the quantities that were produced.
• Growth rate of GDP is the year-to-year percentage change in the value of GDP.
• Economic goals include economic growth, full employment, price stability, economic freedom, equitable distribution of income, economic security, and balance of trade.
• Reasons for downward-sloping aggregate demand curve: wealth effect/real balance effect, interest rate effect, foreign purchases effect.
• Net National Product (NNP) is GNP minus depreciation.
• Economics can help us explain how markets work, how prices are determined, how resources are allocated, and how incentives affect behavior.