MACROECONOMICS 11TH EDITION BY N
GREGORY MANKIW 2026 STUDY GUIDE
REVISION SHEET CORE CONCEPT
BREAKDOWN
◉ Economics.
Answer: Study of how society manages scarce resources
◉ Efficiency.
Answer: Society obtaining the maximum benefits from scarce
resources
◉ Equality.
Answer: The distribution of the benefits obtained from society's
scarce resources
◉ Opportunity Cost.
Answer: The cost of what is given up to obtain something
◉ Rational People.
Answer: People who systematically and purposefully do the best
they can to achieve their objectives
,◉ Marginal Change.
Answer: Small incremental adjustments
◉ Incentive.
Answer: Something that induces a person to act
◉ Property Rights.
Answer: Ability of an individual to own and exercise control over
scarce resources
◉ Market Failure.
Answer: A situation in which a market left on its own fails to allocate
resources efficiently
◉ Externality.
Answer: The impact of one person's actions on the well-being of a
bystander
◉ Market Power.
Answer: The ability of a single economic actor (or small group of
actors) to have unduly influence on market prices
,◉ Productivity.
Answer: Quantity of goods and services produced from each unit of
labor input; Correlated with high standards of living
◉ Inflation.
Answer: An increase in the overall price level in the economy;
Inversely related with unemployment in the short run
◉ Cause of inflation.
Answer: Growth in the quantity of money
◉ Business cycle.
Answer: Fluctuations in economic activity, such as employment and
production
◉ Circular Flow Diagram.
Answer: Visual model of the economy that shows how dollars flow
through markets among households and firms
◉ Factors of Production.
Answer: Labor land, capital, natural resources, and other inputs
used to make goods and services
, ◉ Production Possibilities Frontier.
Answer: A graph that shows the combinations of output that the
economy can possibly produce. The slope of the PPF measures
opportunity cost. Any point on the PPF curve (rather than inside) is
efficient.
◉ Microeconomics.
Answer: The study of how households and firms make decisions and
how they interact in specific markets
◉ Macroeconomics.
Answer: The study of economy-wide phenomena, including inflation,
unemployment, and economic growth
◉ Positive Statement.
Answer: A descriptive statement
◉ Normative Statement.
Answer: A prescriptive statement
◉ Absolute Advantage.
Answer: The ability to produce a good using fewer inputs than
another producer
GREGORY MANKIW 2026 STUDY GUIDE
REVISION SHEET CORE CONCEPT
BREAKDOWN
◉ Economics.
Answer: Study of how society manages scarce resources
◉ Efficiency.
Answer: Society obtaining the maximum benefits from scarce
resources
◉ Equality.
Answer: The distribution of the benefits obtained from society's
scarce resources
◉ Opportunity Cost.
Answer: The cost of what is given up to obtain something
◉ Rational People.
Answer: People who systematically and purposefully do the best
they can to achieve their objectives
,◉ Marginal Change.
Answer: Small incremental adjustments
◉ Incentive.
Answer: Something that induces a person to act
◉ Property Rights.
Answer: Ability of an individual to own and exercise control over
scarce resources
◉ Market Failure.
Answer: A situation in which a market left on its own fails to allocate
resources efficiently
◉ Externality.
Answer: The impact of one person's actions on the well-being of a
bystander
◉ Market Power.
Answer: The ability of a single economic actor (or small group of
actors) to have unduly influence on market prices
,◉ Productivity.
Answer: Quantity of goods and services produced from each unit of
labor input; Correlated with high standards of living
◉ Inflation.
Answer: An increase in the overall price level in the economy;
Inversely related with unemployment in the short run
◉ Cause of inflation.
Answer: Growth in the quantity of money
◉ Business cycle.
Answer: Fluctuations in economic activity, such as employment and
production
◉ Circular Flow Diagram.
Answer: Visual model of the economy that shows how dollars flow
through markets among households and firms
◉ Factors of Production.
Answer: Labor land, capital, natural resources, and other inputs
used to make goods and services
, ◉ Production Possibilities Frontier.
Answer: A graph that shows the combinations of output that the
economy can possibly produce. The slope of the PPF measures
opportunity cost. Any point on the PPF curve (rather than inside) is
efficient.
◉ Microeconomics.
Answer: The study of how households and firms make decisions and
how they interact in specific markets
◉ Macroeconomics.
Answer: The study of economy-wide phenomena, including inflation,
unemployment, and economic growth
◉ Positive Statement.
Answer: A descriptive statement
◉ Normative Statement.
Answer: A prescriptive statement
◉ Absolute Advantage.
Answer: The ability to produce a good using fewer inputs than
another producer
