Economics – Flashcard Exam Test
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Economics
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the study of how individuals and societies make choices about ways to use scarce resources to fulfill their needs and wants.
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labor
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human effort directed toward producing goods and services.
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goods
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tangible objects that can satisfy people's wants
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capital
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previously manufactured goods used to make other goods and services.
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technology
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advance in knowledge leading to new and improved goods and services and better ways of producing them.
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everything that exists is limited
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the need to make choices arises because
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scarcity
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the basic problem of economics is
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a want
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something other than a basic survival need.
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entrepreneurship, land, capital, and labor
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four factors of production are?
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natural resources
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as an economic term, land includes
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trade-off
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sacrificing one good or service to purchase or produce another
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opportunity cost
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value of the next best alternative given up for the alternative that was chosen
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productions possibilities curve
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graph showing the maximal combinations of goods and services that can be produced from a fixed amount of resources in a given period of time
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guns versus butter
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production possibilities involving choices between military defense and civilian goods
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time
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a scarce resource
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trade-offs
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all economic choices involve
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exchanging money for goods
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what trade-off is involved when you buy a CD?
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next best alternative
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in a trade-off, opportunity cost is the value of the
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production possibilities curve
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visual aid that helps a business determine how best to use its resources
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more civilian goods
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the amount of military goods given up in a year is the opportunity cost for producing
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economy
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the production and distribution of goods and services in a society
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economic model
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a theory or simplified representation that helps explain and predict economic behavior in the real world
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hypothesis
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an assumption involving two or more variables that must be tested for validity.
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constant factors
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everything in an economic model except the variables being analyzed
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values
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the beliefs or characteristics that a person or group considers important
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define the problem
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the first step in creating an economic model is to
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people's reactions to change in economy
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economic models are useful because they show
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judgements depend on values
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why can't economics judge whether policies are good or bad?
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personal beliefs influence how economists apply facts to theories
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different schools of economic thought exist because
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offer solutions to economic problems
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what do economists do?
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supply and demand
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from a market economist's perspective, what is considered to be one of the most important models for any product?
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Law of Supply
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as price increases, the quantity that producers are willing to supply increases.
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direct relationship
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since the price of michael jordan shirts decreased, the quantity that the producers were willing to supply decreased. this is known as:
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always upsloping
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in a supply and demand curve on an economic model, the supply line is:
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Law of Demand
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as price decreases, the quantity demanded by consumers increases.
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always downsloping
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in a supply and demand curve on an economic model, the demand line is:
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macroeconomics
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this deals with the economy as a whole and decision making by large units such as governments:
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gross national product
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the most important aggregate of how a country is doing economically?
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Recession
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what happens just before a depression hits? We've been through this cycle in the early 1980's and 2009.
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inflation
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a car which used to cost $3,000 now costs $15,000. This rise in price is called?
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monetary policy
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this policy is the process by which government or central bank controls the supply of money in order to attain a set of objectives oriented towards the growth and stability of the economy:
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fiscal policy
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this policy is the use of government spending revenue collection to influence the economy:
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microeconomics
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this deals with the behavior and decision making by small units such as individuals and firms:
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market
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in the flow in the market economy, money from the household moves first to the?
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price
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which of the following is the control mechanism in a free market economy?
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monopoly
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A company is the only manufacturer of a product
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resources
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an economic system is a way of determining how to use ___________ to satisfy people's wants and needs.
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goods and services
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a nation must determine what _________ and _________ to produce and how to produce them.
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economic system
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the _________________ a nation has determines for whom goods and services will be produced.
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price system
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In the United States, most goods and services are distributed through a _____________.
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resources
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the amount of involvement a society's leaders have in allocating scarce ____________ helps determine its economic system.
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traditional economy
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based on customs and beliefs, in limited parts of the world.
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command economy
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government leaders control the factors of production and make all economic decisions in a:
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Market economy
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individuals control economic decisions, the economy is based on information obtained from the market, where the voluntary exchange of goods and services takes place.
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circular flow of economic activity
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Economists use this model to illustrate how the market system works.
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mixed economy
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combines basic elements of the command and market economy, there is private ownership of property and individuals decisions are combined with government intervention. The United States follows this type of economy.
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for whom should the goods be produced? what should be produced? how will it be produced? who.what.how.
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3 basic question of economic system?
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individuals
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who decides what is being produced in a capitalistic economy?
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government
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who decides how the goods and services are produced in a command economy?
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Capitalism
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consumers/individuals answer the 3 basic questions in an economic system, economic system in which private individuals own factors of production.
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Adam Smith
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father of capitalism, wrote "A Wealth of Nations", talked about the invisible hand, he said the government should keep its hands off of the economy, if the government played any kind go role in the economy it was only to keep competition free and fair.
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mixed market
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Capitalism + Command Economy = ? individuals are free to make their own decisions, but those decisions are supported and regulated by the government.
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laissez-faire
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economic system in which the government lets people do as they choose.
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profit
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money left over after all the costs of production have been paid
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private property
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whatever is owned by individuals rather than my the government
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competition
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rivalry among producers or sellers of similar goods and services to win more business.
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increased significantly
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since the 1880s, the role of government in the United States has
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free enterprise system
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individuals are free to own and control the factors of production
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consumers
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in a free enterprise system, who makes the decisions about what should be produced?
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profit incentive
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what motivates people to establish new businesses or expand existing ones?
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keep prices low
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competition forces businesses to
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economic growth
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an expansion of the economy to produce more goods, jobs, and wealth
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command
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the kind of economic system that operates according to government controls
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capitalist
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an economic system in which individuals own the factors of production and make their own decisions
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income
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the money left after costs, including taxes, have been paid.
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free enterprise
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individuals may own and control the factors of production in a system ____________.
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command
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the government controls the economy. it assigns jobs, sets production goals, and decides wages.
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market
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business is based on competition. success comes from doing something better and cheaper than your competitors.
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market
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producers decide what and how much to make based on what people want to buy.
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traditional
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we have no need for money. by custom, some of us hunt, some fish, others farm, and we are all taken care of.
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command
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central planners decide when we should expand old factories or build new ones.
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command
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the government makes economic decisions
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market
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the government has a very small role
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disposable income
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money left over after taxes
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discretionary income
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leftover income that can be saved or spent on luxury items
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education, occupation, experience, and health
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what factors help determine a person's potential earning power?
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income and time
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what scarce resources are involved in making a purchase?
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rational choice
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the alternative that has the greatest perceived value, consumer decisions based on opportunity costs
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consumerism
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movement to educate buyers about their purchase
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disposable income
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money remaining after paying all your taxes
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consumer
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any person or group that buys or uses goods and services
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informative advertising
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advertising that benefits consumers
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generic brand
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general name for a product
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bait and switch
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misleading advertising practice and is illegal
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warranty
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promise made by manufacturer or seller to replace a faulty product
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comparison shopping
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getting information on types and prices of available products
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brand name
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word, picture, or logo on a product that helps consumers distinguish it from similar products
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ethical behavior
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respecting the rights of producers and sellers.
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competitive advertising
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an ad that appeals to emotions, but does not provide facts is an example of:
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Better Business Bureau
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private consumer group that helps settle disagreements between buyers and sellers
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Food and Drug Administration
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federal agency that protects the public against impure and unsafe foods, drugs, and cosmetics
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right to safety
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being protected against goods that are dangerous to life or health is a consumer's
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credit
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receipt of money to buy goods and services in the present with the promise to pay for them in the future
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principal
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amount of money originally borrowed in a loan
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interest
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amount of money a borrower must pay for the use of someone else's money
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durable goods
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manufactured items that have a life span longer than three years
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mortgage
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installment debt owed on houses, buildings, or land
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durable good
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a refrigerator is an example of what type of good?
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home mortgages
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the largest installment debt in the U.S. is money people owe on
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8
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the average family carries how many credit cards?
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Usury Law
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a law to protect consumers against high interest rates
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Marquette decision
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allowed banks to export interest rates
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dead beat
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someone who pays for their credit card balance at the end of the month is considered
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FICO Score
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a credit rating that is used in determining how likely people are to pay their bills is:
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fiscal responsibility
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IS NOT a reason for bankruptcy filing due to credit debt
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introductory to Teaser Rate
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low rate such as 0% APR to get people to borrow on credit
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Smiley v. Citibank
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This supreme court case lifted restrictions on fees that credit card banks could charge a consumer and "opened the door" for more profits:
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Venice
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Where was the concept of credit most advanced during the 16th century? Banks first formed within this city during the Renaissance period.
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13
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Which chapter of bankruptcy deals with personal reorganization of debt?
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20-30 year Fixed Loans
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After the Great Depression many people were able to own their own home due to this type of loan.
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recession
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6 months of dropping value of goods and services produced in a given country is considered a
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savings and loan
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depository institution that accepts deposits and lends money
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charge ammount
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credit from a particular company allowing consumers to buy goods and pay for them later
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finance change
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cost of credit expressed monthly in dollars and cents
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annual percentage rate
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cost of credit expressed as a yearly percentage
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commercial bank
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type of financial institution that controls most money and offers the widest range of services
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credit union
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type of financial institution that is owned and operated by its members
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credit limit
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the maximum amount of goods and services a person can buy on the promise to pay in the future
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annual percent rate
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to determine which creditor is charging the most for credit, a consumer should compare the
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debit card
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a method of payment that enables customers to transfer funds electronically from their bank to a place where they purchase goods
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credit check
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investigation of a person's income, current debts, personal life, and past history of repaying debts
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credit rating
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estimation of the risk involved in lending money to a person or business
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collateral
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something of value that a borrower lets the leader claim if a loan is not repaid
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secured loan
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loan that is backed up by collateral
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unsecured loan
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loan guaranteed only by a promise to repay it
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obtain a loan
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your credit rating affects the ability to
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other large debts
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this factor might affect a person's capacity to pay back a loan
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car
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example that could be used as collateral
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pay high-interest credit cards first
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a person who has lost control of debt should
