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SCARCE GOOD: A resource with an available quantity less than its desired use. Scarce resources are also called factors of production. Scarce goods are also termed economic goods. Scarce resources are used to produce scarce goods. Like the more general society-wide condition of scarcity, a given resource is scarce because it has a limited availability in combination with a greater (potentially unlimited) productive use. It's both of these that make it scarce. In other words, even though an item is quite limited it will not be a scarce resource if it has few if any uses (think pocket lint and free good).
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Lesson 9: Macro Basics | Unit 1: The Macroeconomy
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Page: 1 of 16
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Let's start with a definition: An economy is an interactive system of production, distribution, and consumption of resources, goods, and services that addresses the basic economic problem of scarcity. - Economic functions are divided into four basic macroeconomic sectors:
- Household: the consumers.
- Business: the producers.
- Government: the regulators and taxers.
- Foreign: the others.
The household sector of the macroeconomy is everyone in an economy who consumes goods and services.- Consumption is the use of natural resources, goods, or services to satisfy wants and needs.
- In a complex economy, consumption is expenditures by the household sector for the purchase of final goods and services.
- Household sector is a term that indicates the consuming, wants-and-needs-satisfying population. Everyone in society is included in the household sector.
The household sector is responsible for consumption.The business sector of the macroeconomy produces the goods and services that are consumed by the household sector. - The business sector is responsible for production by combining the four basic resources: labor, capital, land, and entrepreneurship.
- A business is a method of combining resources for production.
- While the business sector buys raw materials, intermediate goods, and other things. The most important purchase of the business sector is capital goods, or investment in capital.
The business sector is responsible for capital investment.The government sector affects resource allocation and production by imposing laws and regulations that force decisions not otherwise made. - Three levels of government: Federal, State and Local.
- The government sector collects taxes and buys a share of the economy's production, termed government purchases. These are goods such as national defense, highway and street construction, education, and police protection.
- Government purchases do not include transfer payments (Social Security benefits, welfare or unemployment compensation).
The government sector is responsible for government purchases.Economic activity is divided into domestic, everything within the political boundaries of a nation, and foreign, everything outside the boundaries. - Any citizen of the U.S., any firm owned by a U.S. citizen, and the government of any U.S. city are part of the domestic economy.
- Any resident, business or government of another country is part of the foreign sector.
- Exports are goods purchased by the foreign sector that are produced by the domestic economy.
- Imports are goods purchased by the domestic economy that are produced by the foreign sector.
- Net exports are the difference between exports and imports, or exports minus imports.
The foreign sector is responsible for net exports.
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DERIVATION, SAVING LINE A saving line, a graphical depiction of the relation between household sector saving and income, can be derived from the consumption line. The saving line can also be derived by plotting the saving-income information from a saving schedule or using the slope and intercept values of the saving function. However, derivation from the consumption line emphasis the connection between consumption and income--that the household sector uses a portion of income for consumption and a portion for saving.
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Paper money used by the Commonwealth of Massachusetts prior to the U.S. Revolutionary War, which was issued against the dictates of Britain, was designed by patriot and silversmith, Paul Revere.
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"Sometimes when you innovate, you make mistakes. It is best to admit them quickly and get on with improving your other innovations. " -- Steve Jobs, Apple Computer founder
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IMF
International Monetary Found
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