Economics Part 1.2 Flashcards

Questions and Answers

What does the concept of human capital describe?

Human skills, that is, the quality of labor.

What is the result of Ethan continuing his education beyond high school?

Increasing his human capital.

What is the largest component when the total U.S. production of goods and services is divided?

Consumption goods and services.

What is the income earned by entrepreneurs?

Profit or loss. Signup and view all the answers

What does the functional distribution of income measure?

The distribution of earnings by the factors of production. Signup and view all the answers

What are items bought by businesses to help produce other goods and services called?

Capital goods. Signup and view all the answers

What does the charitable organization Creating Hope International aim to reduce?

Human capital differences between advanced and developing economies. Signup and view all the answers

How would Nigeria be classified by the International Monetary Fund?

A developing economy. Signup and view all the answers

What percentage of the world's production value do advanced economies account for?

About 40 percent. Signup and view all the answers

Compared to the developing economies, the advanced economies have human capital and physical capital.

more; more Signup and view all the answers

In the advanced economies, of the factories use advanced capital equipment, and in the developing economies, of the factories use advanced capital equipment.

virtually all; some Signup and view all the answers

What is the percentage of the world's population that lives in the advanced economies?

Less than 20%. Signup and view all the answers

What has happened to income equality?

Increased within countries but has narrowed across countries. Signup and view all the answers

What is a market defined as?

Any arrangement that brings buyers and sellers together. Signup and view all the answers

What is an example of a U.S. export?

A washing machine made in Indiana sold to a buyer in France. Signup and view all the answers

In the circular flow model with the government sector, where do transfers flow?

In the opposite direction as do taxes. Signup and view all the answers

What statement should Terri include in her presentation about the circular flow?

Households choose the amount of the factors of production to provide the firms. Signup and view all the answers

In the factor market, firms and households .

pay rent, wages, interest, and profit; earn rent, wages, interest, and profit Signup and view all the answers

What happens if a product becomes more popular and consumers want more produced?

Wages, rent, interest, and profit increase in that industry, thereby giving factors the incentive to move to that industry. Signup and view all the answers

How will Margo's order of a MacBook Pro be reflected in the circular flow model?

As a flow of factor of production. Signup and view all the answers

What represents a money flow in the circular flow model?

Interest. Signup and view all the answers

Which of the following transactions takes place in the factor markets?

Peter gets a job at a Walmart store. Signup and view all the answers

What represents a real flow of a factor of production in the circular flow model?

Labor. Signup and view all the answers

What represents a real flow?

Capital. Signup and view all the answers

Study Notes

Human Capital

Human capital refers to the quality of labor, emphasizing skills and education.
Continuing education enhances individual human capital, as seen with Ethan pursuing studies beyond high school.
Efforts to reduce human capital disparities, such as Creating Hope International training women in Afghanistan, address gaps between advanced and developing economies.

Production Components

In the U.S., consumption goods and services represent the largest segment when production is categorized into different types.
Capital goods are items purchased by businesses to facilitate the production of other goods and services.

Income and Distribution

Entrepreneurial income is classified as profit or loss based on business performance.
The functional distribution of income looks at how earnings are distributed among various production factors.
Income equality trends show increased equality within countries while narrowing across countries.

Economic Classifications and Global Economy

Nigeria is categorized as a developing economy by the International Monetary Fund.
Advanced economies contribute to approximately 40% of global production value, yet contain less than 20% of the world's population.

Capital Equipment Usage

In advanced economies, nearly all factories utilize advanced capital equipment, contrasting with some factories in developing economies.

Market Fundamentals

A market constitutes any system that connects buyers with sellers.
An example of a U.S. export is a washing machine manufactured in Indiana and sold in France.

Circular Flow Model

In the circular flow model, government transfers counterbalance taxes, indicating a flow in the opposite direction.
Households decide the level of production factors to provide to firms, maintaining a crucial role in the economy.

Factor Market Dynamics

In the factor market, firms are purchasers while households are sellers, earning income through rents, wages, and profits.
Popular products lead to increased wages and profits in that industry, incentivizing the relocation of factors of production.

Flow Representation

Purchasing a MacBook Pro for business purposes reflects a flow of factor of production in the circular flow model.
Interest symbolizes a money flow in economic transactions, while labor represents a real flow of production factors.

Factor Markets Transactions

Transactions such as job acquisition (Peter at Walmart) and business expansion (Apple opening a store) occur in factor markets.
Labor is noted as a real flow of production, emphasizing the transfer of resources in the economy.
Capital, as a representation of wealth used for production, also constitutes a significant real flow in economic interactions.

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Test your understanding of key economic concepts with these flashcards covering human capital and the production of goods and services. Perfect for students seeking to reinforce their knowledge in introductory economics. Ideal for quick revision or study sessions.