Economics Final Exam Review Guide – Flashcards
Unlock all answers in this set
Unlock answersquestion
What is economics?
answer
The study of how individuals and societies satisfy their unlimited wants with limited resources.
question
Scarcity
answer
Situation that exists when there are not enough resources to meet human needs
question
What is the land resource?
answer
All the natural resources on or under the ground that are used to produce goods and services.
question
What is the labor resource?
answer
All the human time, effort, and talent used to produce goods and services.
question
What is the capital resource?
answer
All the resources people make and use to produce and distribute goods and services.
question
What is the entrepreneurship resource?
answer
The combination of vision, skill, ingenuity, and willingness to take risks that is needed to create and run new businesses.
question
What is the circular flow model?
answer
Visualizes how interactions occur in a market economy.
question
What are product markets? Who is the supplier?
answer
The market for goods and services Businesses, offer goods and services
question
What are factor markets? Who are the suppliers?
answer
The market for the factors of production, land labor capital entrepreneurship Businesses are the customers and the individual serves them.
question
What is the US economic system?
answer
Capitalist
question
What is capitalism?
answer
Economic system based on private ownership of factors of production.
question
What happens in a free enterprise system?
answer
Producers can produce whatever the consumers want. Anyone is free to start a business or enterprise.
question
What is the definition of opportunity cost?
answer
The value of something that is given up by choosing one alternative over another. What you lose when you choose.
question
What is the definition of Ceteribus Paribus?
answer
All things being equal or held constant.
question
What are the three economic questions?
answer
What will be produced? How will it be produced? For whom will it be produced?
question
What is a production possibilities curve?
answer
Graph used to illustrate the impact of scarcity on an economy by showing the maximum number of goods or services that can be produced using limited resources.
question
What are the four assumptions of the PPC model?
answer
1. Resources are fixed 2. All resources are fully employed 3. Only two things can be produced. 4. Technology is fixed.
question
What does increasing opportunity costs on a PPC curve look like? What does a constant one look like?
answer
When it bows out like half of a circle. One that is a straight line. Increases by the same amount every time.
question
What causes the PPC curve to shift on the outside? What points on the inside of the PPC curve?
answer
Unattainable point. Addition of new resources or more technology Unefficent, unemployment
question
What is the law of demand?
answer
States that when the price of a good or service goes down, quantity demanded increases, and when the prices go up, quantity demanded falls.
question
What is a demand curve?
answer
Graph shows how much of a good or service an individual will buy at each price.
question
What is a market demand curve?
answer
Shows quantity that all consumers, or market as a whole, are willing and able to buy at each price.
question
What is a normal good?
answer
Goods that consumers demand more when their incomes rise.
question
What is a substitute good?
answer
Products that can be used in place of other products to satisfy consumer wants.
question
What is a complementary good?
answer
Products that are used all together, increase or decrease in demand for one will result in increase or decrease in demand for the other.
question
What is an inferior good?
answer
Goods that consumers demand less of when their incomes rise.
question
What is the law of supply?
answer
Producers are willing to sell more of a good or service at higher prices than they are at a lower price.
question
What is the change in demand?
answer
Situation in which change in the marketplace prompts consumers to buy different amounts of goods or services at every price.
question
What is change in quantity demanded?
answer
A change in the amount of product that consumers will buy because of a change in price.
question
What is change in supply?
answer
Situation in which a change in the marketplace prompts producers to offer different amounts for sale at every price.
question
What is change in quantity supplied?
answer
An increase or decrease in the amount of a good or service that producers are willing to sell because of a change in price.
question
Define: Elasticity of demand
answer
How responsive consumers are to price changes in the marketplace
question
What is elastic? What is inelastic?
answer
Change in price up or down, leads to a larger change in the quantity demanded Price change ears to a small change in quantity demanded
question
What is a price ceiling?
answer
Set below the equilibrium price, so a shortage will result. An established maximum price that sellers may charge for a product. GIVES SHORTAGE
question
What is a price floor?
answer
Established minimum price that buyers must pay for a good or service. It is above the equilibrium point with ceiling below equilibrium. GIVES SURPLUS
question
What is GDP?
answer
Market value of all final goods and services produced within a nation in a given time.
question
Formula for expenditure GDP?
answer
C+I+G+(X-M)
question
What does the expenditure GDP stand for?
answer
Consumption, Investment, Government, exports, imports,
question
What is nominal GDP?
answer
Most basic, GDP in current value of goods and services,
question
What is real GDP?
answer
GDP corrected for changes in prices from year to year, adjusted for inflation
question
What is counted in the GDP?
answer
R + W + I + P
question
What is a final good?
answer
Consumed rather than used for the production of another good. Ex. Car
question
What is an intermediate good?
answer
Used as inputs in the production of other goods. Ex. Wheels to a car
question
What is excluded from the GDP?
answer
volunteer work, illegal activity, secondhand purchase, intermediate goods
question
What is frictional unemployment?
answer
Between jobs
question
What is cyclical unemployment?
answer
When the economy is bad
question
What is structural employment?
answer
Mismatches, overqualified or lack stills
question
What is medicare?
answer
A government run national health insurance program mainly for citizens over the age of 65
question
What is medicaid?
answer
Government run medical insurance program for low income people
question
How is inflation measured?
answer
Consumer price index.
question
What determines aggregate demand?
answer
C+ I + G + (X-M)
question
What determines aggregate supply?
answer
Input prices, productivity, legal activity, (taxes)
question
What is fiscal policy?
answer
when the government uses government taxation and spending to adjust the economy
question
What is aggregate demand?
answer
Demand for all goods and services produced in an economy.
question
What happens to AD with a weak dollar?
answer
Increases.
question
What is aggregate supply?
answer
Supply of all goods and services produced in an economy.
question
What is a recession?
answer
Two consecutive quarters of negative GDP
question
What are the two tools of fiscal policy?
answer
Government and taxation
question
What is the national debt?
answer
The total amount of money that the federal government owes.
question
What is the national deficit?
answer
When the government spend more than it takes in.
question
What is a budget surplus?
answer
When they take in more than what they spend.
question
What is a regressive tax?
answer
Takes larger percentages of income from low income than high income earners
question
What is a progressive tax?
answer
Places higher percentage rate of taxation on high income earners than low income earners
question
What is a proportional tax?
answer
Tax that takes the same percentage of income from all taxpayers regardless of income level
question
What is the ability to pay principle?
answer
Taxed on the ability to pay no matter the benefits. PEople with higher incomes pay more than lower incomes.
question
What is the benefits received principle?
answer
People who benefit from public goods should pay for them in proportion to the amount of benefits received.
question
What are the largest expenses of the federal government? What is the governments larger revenue?
answer
Entitlements, defense, intrests, income
question
Who monitors the supply of money? Who is the central bank of the US
answer
The federal reserve
question
How is the fed structured? How many years?
answer
7 members, 14 year terms, 1 chairperson per 4 year term
question
How are they chosen?
answer
Appointed by the president, confined by the senate
question
What is the FDIC?
answer
Underights most public bank deposits
question
What is the SEC?
answer
Responsibility for all of the markets
question
Federal Reserve Note
answer
a piece of paper money (especially one issued by a central bank)
question
What is trade surplus?
answer
Favorable balance of trade that occurs when nation exports more than imports
question
What is trade deficit?
answer
When a nation imports more than they export
question
What is dumping?
answer
Sale of a product in another country at a price lower than in the home market
question
Absolute advantage
answer
You have more of one thing
question
Comparative advantage
answer
The smaller opportunity cost
question
What is a budget?
answer
A plan for allocating income for savings and spending, most out of your money
question
How to save for a budget?
answer
Generic brands, used care, roommate, pay yourself
question
What is a deductible?
answer
The amount the insurer pays before the insurance company
question
What is depreciation?
answer
To decrease in value
question
How does life insurance work?
answer
Younger you are, cheaper it is,
