Economics EOCT – Flashcards
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Economics
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A social science studying the allocation of scarce resources and goods
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Resources/factors of production
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The inputs used by a society to produce outputs
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Goods
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Finished products
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Scarce
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Short in supply
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Allocate
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To distribute according to some plan or system
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Opportunity Cost
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The value of the best alternative that could have been chosen but was not
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Marginal Cost
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The cost of producing one more item
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Marginal Benefit (Marginal Revenue)
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The benefit associated with one additional item
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Specialization
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Concentrating on a single activity or area of expertise
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Market System
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Private individuals and firms control all resources and the price and quantity of all goods are determined by the interaction of suppply and demand
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Command System
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The government controls all markets determining what to produce, how to produce, and for whom to produce
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Mixed System
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An economy that incorporates aspects from different economic systems
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Production Possibility Curve
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The maximum an economy can produce based on all inputs
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Microeconomics
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The interaction of people and businesses within a single market
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Firm
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Another term for business
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Supply
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The quantity of goods or services that someone is able and willing to supply at different prices
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Law of Supply
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The quantity supplied is typically directly proportional to the pirce, all other things being equal
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Law of Demand
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The quantity demanded is typically inversely proportional to its price, all other things being equal
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Equilibrium price
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The price where demand exactly equals supply
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Equilibrium quantity
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The quantity where demand exactly equals supply
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Substitute Good
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A good that satisfies most of the same needs as the original good
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Complementary Good
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Goods that tend to be used together
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Price Floor
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A minimum price for which a product can be sold
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Price Ceiling
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A maximum price at which a good can be sold
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Price Elasticity
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The percentage change in quantity divided by the percent change in price - to track how mch a change in price affects a change in quantity
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Inelastic
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When change in price is greater than the change in quantity demanded
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Elastic
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A good that is very sensitive to changes in price
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Sole Proprietorship
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A single owner who takes all the financial risks and reaps all the financial rewards
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Partnership
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Divides up the risk and reward among a group of people
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Corporations
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Issue stock
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Dividends
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Monetary payments to stockholders
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Monopoly
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Market structure with one producer, high barriers to entry, and no competition
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Price maker
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A company that has control over what it wants to charge people
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Pure (perfect) Competition
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Market structure with many producers, no barriers to entry, unlimited competiton, and identical products
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Price Taker
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A company that has no control over price - it is solely determined by supply and demand
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Monopolistic Competition
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Market structure with many producers, low barriers to entry, much competition, and differentiated products
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Oligopoly
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Market structure with few producers, high barriers to entry, and little competition
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Macroeconomics
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The study of the economic issues of an entire nation
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Gross Domestic Product
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Consumer expenditures + business investment + Government expenditures + Net Exports
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Net Exports
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Exports - Imports
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Inflation
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A rise in the price level
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Price Index
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Used to measure all future GDP in terms of of the base year prices
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Aggregate Demand
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Demand for ALL goods and services within a nation
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Aggregate Supply
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Supply of ALL goods ans services within a country
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Recession
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A decrease in total output that lasts for more than two or three consecutive quarters
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Depression
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A steep fall in total output combined with a high unemployment rate for more than a year
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Stagflation
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When prices rise and GDP falls
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Structural Unemployment
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Occurs when you have job skills that do not match the job requirements
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Frictional Unemployment
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Unemployment that occurs while peole are looking for a job that is a good fit
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Cyclical Unemployment
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Unemployment that rises during a downturn in the economy
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Deficit
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When government spends more money than it takes in
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National debt
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When a government operated with a deficit for many years, they build and form this
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Federal Reserve System
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Created by Congress and acts as the nation's central bank
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Monetary Policy
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Refers to changes in the money supply of a nation in order to influence its economy
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Fiscal Policy
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Expenditures, taxes, and borrowing made by a government in order to influence an economy
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Absolute advantage
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A country can produce more of a good than another country
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Balance of Trade
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The value of all products exported from a country minus the value of all products imorted
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Balance of payments
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All the economic transactions of a country
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Tariff
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A tax on an imported good
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Quota
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A limit on the amount of a good that is allowed into a country
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Embargo
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A government completely prohibits the import of an item
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Standards
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Used by governjments to ensure the safety of imported goods
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Subsidy
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Payments to a supplier to reduce the production costs of the supplier
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Exchange Rate
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The measure of the price of one nation's currency in terms of another nation's currency
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Apprecite
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To increase in value or strengthen
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Depreciated
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To decrease or weaken in value
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Savings
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Money deposite secured for a later use
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Investment
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Money used with the expectation of some future return or benefit
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Bank
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A safe means to store earnings
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Credit Union
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Similar services as a bank, but provided only to members
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Savings and Loan
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Takes deposits and focuses on mortgages and savings
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Payday loan company
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Provide small loans in return for a portion of an upcoming paycheck
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Bonds
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An investment that provides a promise to repay the investment plus interest
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Stocks
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In return for partial ownership of the company, the investor gives that corporation their money to spend
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Mutual fund
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A collection of various investments
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Progressive Tax
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The tax rate increases as income increases
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Regressive Tax
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Tax rate decreases as income increases
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Proportional Tax
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A flat tax; it does not change with respect to income
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Credit worthiness
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A measure of whether you'll be able to pay back a loan properly
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Simple Interest
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Principle X Rate X Time
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Compound Interest
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Future interest is determined with the existing amount owed
