Economics Midterm Test Questions – Flashcards
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When the want for something exceeds the ability of the resource to produce
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Scarcity
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Analysis of individual markets, workers, households, firms, exc.
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Microeconomics
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'The big picture' analysis of economy-wide issues.
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Macroeconomics
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The study of choices that individuals, businesses, government, and total societies make as they cope with scarcity and incentives.
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Economics
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outputs that are divided into physical goods, and intangible goods.
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Good vs. Service
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The belief that the economy functions best with no government interference.
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Laissez-Farire
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-what is to be produced -how is it to be produced -for whom is it being produced
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Three questions economics answers
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A reward or penalty that encourages or discourages an action
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Incentive
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The level of consumption of goods and services that people enjoy
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Standard of Living
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Flow of expenditure and incomes that result from choices and how those choices interact with the three questions
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Circular flow model
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The productive resources that are used to produce goods and services: land, labor, capital, and entrepreneurship.
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Factors of production
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U.S. Households as buyers in product markets and sellers in resource markets
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Decision makers in the U.S. economy
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Goods and Services that are bought by individuals and used to provide personal enjoyment and contribute to a persons quality of life.
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Consumption Goods/Services
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Any arrangement that brings buyers and sellers together and enables business
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Market
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The benefit that arrises from a one-unit increase in any activity. What your willing to give up.
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Marginal benefit
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What you must give up to get one additional unit of something.
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Marginal cost
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Up-and-Down movement of total production, jobs, and other measures of economic activity.
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Business Cycle
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Founder of economics and his book. Obsessed with Laissez- faire
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Adam Smith's Wealth of Nations
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The best thing you have to give up in order to get something else.
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Opportunity Cost
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The boundary between the combination of goods and services that can and cant be produced give the availability factors of production and the state of technology
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PPF Graph
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When one person is more productive than another in several or all activities
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Absolute advantage
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The ability of a person to produce a good or service at a lower opportunity cost than someone else.
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Comparative advantage
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Once you begin to exceed marginal benefit, productivity begins to decrease.
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Diminishing marginal returns
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All expenses except for food and board.
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Opportunity cost of college
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Economic growth
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Factors that shift PPF outward
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An exchange- giving up one thing for something else.
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Tradeoff
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Effect caused by a rise in price that includes a customer to buy more of a relatively lower-priced good and less of the high-priced one
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Substitution Effect
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Other things remaining the same, if the price of a good rises, the quantity demand of that good decreases; and if the price of the good falls, the demand for that good increases.
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Law of Demand
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The amount of any good, service, or resource that people are willing and able to buy during a specified period at a specified price.
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Quantity Demanded
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When the price falls, the quantity increase. When the price increases, the quantity increases.
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Demand curve shifts
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A good that can be consumed in place of another good.
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Substitutes
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If demand is held constant, an increase in supply leads to a decrease in price, while a decrease in supply leads to an increase in price
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Law of Supply
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When demand equals supply.
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Equilibrium
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A government regulation that places an upper limit on the price at which a particular good, service, or factor of production can be traded.
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Price ceiling
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As quantity increases, price decreases
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Reason the demand curve is downward sloping
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As quantity demand increases price increases. And as quantity demand decreases the price decreases.
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Price change and quantity demanded changes
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- # of consumers -Income - Expectations -Consumer preference -Price of related goods
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Factors that shift Demand Curve
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- # of producers - Technology - Expectations - Price of relevant resources (used in production) - Price of alternative goods
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Factors that shift Supply Curve
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Demand for a good or service that does not increase or decreases in response to change in price (gas)
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Inelastic
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Demand for a good or service that decreases when the price of the good or service increases, and increases when the price decreases
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Elastic
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A tax whose average rate increases as income increases
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Progressive Taxes
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A cost or a benefit that arises from production and that falls on someone other than the producer, or a cost or benefit that arises from consumption and that falls on someone other than the consumer.
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Externalities
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A market in which no participant can influence. Characterized by a free flow of information, no barriers to entry. Large number or buyers and sellers.
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Perfect Competition
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A market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright.
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Legal Monopoly
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A market in which a large number of firms compete by making similar but slightly different products.
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Monopolistic Competition
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A market in which a small number of interdependent firms compete.
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Oligopoly
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Total dollar value of all goods and services PRODUCED in one year
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GDP
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GDP= C + I + G + NX (or E)
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Calculating GDP
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Unemployment that occurs when there is a change in technology or there is international competition.
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Structural Unemployment
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Unemployment from normal labor turnovers. People entering and leaving the workforce, and from ongoing creation and destruction of jobs.
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Frictional Unemployment
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Unemployment that increases during a recession and decreases during an expansion.
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Cyclical Unemployment
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High inflation
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Cause of low unemployment in 1990s
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A measure of the average of the prices paid by urban consumers for a fixed market basket of consumption goods and services.
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Consumer Price Index
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Rise in general level of prices of goods and services in an economy over time.
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Inflation
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Supervise nations banking system, determine the money supply.
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Federal Reserve
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Sum of all deficits in U.S. history
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National Debt
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Accepted means of payment
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Money
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Federal governments policy for the economy
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Fiscal Policy
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Federal reserves policy for the economy
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Monetary Policy
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Taxes
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Federal Government #1 Revenue
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When expenditure exceeds revenue
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Deficit
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Education
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Largest State government expenditure
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Advantages: Run by board of directors, owners are stockholders, limited liability, large profits; Disadvantages: Taxed twice, limited decision making.
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Corporations
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Unemplyment: UP GDP: DOWN Money Supply: DOWN
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Recession Characteristics
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Government spending: Down Taxes: Up
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Fiscal Tools during Expansion
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Government spending: Up Taxes: Down, so consumer spending goes up
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Fiscal Tools during Recession
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Money Supply: Decreased (Tight Money) Tight Money: reserve requierments: Up discount rates: Up Price of Bonds: Down
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Monetary Policy During Expansion
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Money Supply: Increased (Loose Money) Loose Money: reserve requierments: Down discount rates: Down Price of Bonds: Up
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Monetary Policy During Recession
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Consumption
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2002 #1 Share of Production
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Unemployment, GDP, Money supply
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Economics Indicators
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Single owned; Advantages: Sole decision making, receive all profits; Disadvantages: Hard to start up, unlimited liability, death/retirement affects business.
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Sole Proprietorship
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Profit from stock market.
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Dividend
