ECON 2305 PRINCIPLES OF MACROECONOMICS & KEY TOPICS EXAM PREPARATION (BEST FOR SEPTEMBER 18TH 2025 EXAM PREP) University of Texas at Arlington
Chapter 1: The Nature of Economics Everything highlighted in blue - for exam!! (8 questions & appendix)
I: The Power of Economic Analysis: Defining Economic Terms: • Economics - The study of how limited (or scarce) resourced are used to produce goods & services to satisfy our unlimited wants; study of how people make choices • Resources - inputs used to produce goods & services (all resources are limited/scarce) ○ Oil: a resource, can think that it can be limited & scarce, every resource you can use to produce is scarce/limited = what choice do you want to make when using different resources • Wants - what people would buy if their incomes were limited
Microeconomics vs. Macroeconomics: • Microeconomics - study of decision making by individuals, groups, & firms • Macroeconomics - study of the economy as a whole; it is focused on aggregate measurements of the economy such as unemployment, price level, & national income • Aggregate - total amount or quantity
II: The Three Basic Economic Questions & Two Opposing Sets of Answers: The Three Basic Questions: • Economic System - mechanism for determining how scarce resources are used to satisfy wants or desires • Because all resources are scarce (limited), every economy must answer 3 questions (choices): ○ What and how much will be produced? ○ How will items be produced? ○ For Whom will items be produced?
Two Opposing Sets of Answers: • Each country determines how it will answer the 3 basic economic questions: ○ Centralized Command & Control (central planning) ▪ A central authority makes the decisions (government, dictator, king/queen, Monarchy, etc. ○ The Price System (market system or free market) ▪ Individuals & private companies make the decisions; decentralized decision making ○ Mixed Economic Systems ▪ Some decisions are made by the price system (or market mechanism) & some by a central authority