Economics Exam Review

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Economics
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-The branch of knowledge concerned with the production, consumption, and transfer of wealth
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Factors of Production
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-Any commodities or services used to produce goods and services
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Opportunity Cost
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-The loss of potential gain from other alternatives when one alternative is chosen
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Real Cost
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-The complete cost of a product with all factors included
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Production Possibility Curve
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-A graph that shows the different rates of production of two goods and/or services that an economy can produce efficiently during a specified period of time
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Economic Systems
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-The system of production and distribution and consumption
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Market Systems
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-The individual rather than the collective whole (society) determines what to produce, how much to produce, and what the cost will be
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Gross Domestic Product
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-The total value of goods produced and services provided in a country during one year
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Absolute Advantage
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-The ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group
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Comparative Advantage
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-The ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity
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Aggregate Demand
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-The total demand for final goods and services in the economy (Y) at a given time and price level
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Aggregate Supply
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-The total supply of goods and services that firms in a national economy plan on selling during a specific time period
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Circular Flow
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-The fact that income earned in production is spent on goods that were produced, providing the funds to pay that income
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Inflation
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– The general increase in prices and fall in the purchasing value of money
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Phillips Curve
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-A supposed inverse relationship between the level of unemployment and the rate of inflation
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Laffer Curve
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-A supposed relationship between economic activity and the rate of taxation that suggests the existence of an optimum tax rate that maximizes tax revenue
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Monetary Policy
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-The process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest 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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-A government policy for dealing with the budget (especially with taxation and borrowing)
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Cyclical Unemployment
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-Unemployment precipitated by a downturn in the economy
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Structural Unemployment
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-Unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand
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Technological Unemployment
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-Unemployment caused by the replacement of workers by machines or artificial intelligence technology
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Economic Expansion
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-The upward phase of the business cycle, in which GDP is rising and unemployment may be falling over time
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Recession
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-A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters
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Depression
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-A long-term economic state characterized by unemployment and low prices and low levels of trade and investment (more than two quarters)
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Propensity to Consume
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-An empirical metric that quantifies induced consumption, the concept that the increase in personal consumer spending (consumption) that occurs with an increase in disposable income (income after taxes and transfers)
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Market Price
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-The price of a commodity when sold in a given market
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Law of Demand
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-An economic law that states that consumers buy more of a good when its price decreases and less when its price increases
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Law of Supply
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-The tendency of suppliers to offer more of a good at a higher price
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Income Effect
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-The change in consumption resulting from a change in real income
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Substitution Effect
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-The tendency of people to substitute in favour of cheaper commodities and away from more expensive commodities
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Consumer Surplus
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-The value of a commodity, good, or opportunity above the cost to the consumer; measured using willingness to pay
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Change in Demand
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-An increase or decrease in the quantity demanded at each possible price of the product, represented by a shift in the whole demand curve
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Interrelated Demand
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-In a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied
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Price elasticity of Demand
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-To show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price
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Inelastic Demand
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-Demand for which the price elasticity is less than 1
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Elastic Demand
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-Demand that changes significantly when price changes (e.g., demand drops when price rises)
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Inferior Goods
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-A good that decreases in demand when consumer income rises
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Regressive Supply Curve
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-Graph curve that slopes upwards to the left of the chart, showing the unusual situation where the amount of a product (good or service) supplied decreases with the increase in its price
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Joint Supply
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-The production of more of one good leads to the production of more of another
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Elastic Supply
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-An elasticity defined as a numerical measure of the responsiveness of the supply of a given good to a change in the price of that good
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Equilibrium Market Supply
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-The price agreed by the seller to offer its good or service for sale and for the buyer to pay for it
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Price Floor
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-A government- or group-imposed limit on how low a price can be charged for a product
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Price Ceiling
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-A government-imposed limit on the price charged for a product
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Unlimited Liability
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-Full liability for the debt and other obligations of a legal entity
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Average Fixed Costs (AFC)
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-A per-unit-of-output measure of fixed costs
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Marginal Revenue
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-The extra revenue that an additional unit of product will bring
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Economies of Scale
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-The cost advantages that a business obtains due to expansion
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Marginal Profit
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-The term used to refer to total when marginal cost is subtracted from marginal revenue
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Marginal Cost
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-The increase or decrease in costs as a result of one more or one less unit of output
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Average Variable Cost (AVC)
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-A firm’s variable costs (labor, electricity, etc.) divided by the quantity (Q) of output produced
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Perfect Competition
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-A market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers
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Imperfect Competition
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-A market in which elements of monopoly allow individual producers or consumers to exercise some control over market prices
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Monopoly
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-The exclusive possession or control of the supply or trade in a commodity or service
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Oligopoly
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-A state of limited competition, in which a market is shared by a small number of producers or sellers
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Keynes
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-English economist, he laid the foundations of modern macroeconomics with The General Theory of Employment, Interest and Money.
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Marx
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-The founder of modern communism, and the controlled market
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Moore’s Law
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-Doubling of the number of transistors on integrated circuits (a rough measure of computer processing power) every 18 months.
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Say’s Law
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-Supply creates its own demand
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Information Revolution
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-The proliferation of the availability of information and the accompanying changes in its storage and dissemination owing to the use of computers
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E-Commerce
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-Commercial transactions conducted electronically on the Internet
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Types of Taxation
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-Personal income, sales, property, corporate, excise, payroll, health, estate, and internet
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Laffer Curve
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-The relationship between economic activity and the rate of taxation that suggests the existence of an optimum tax rate that maximizes tax revenue
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Direct Taxes
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-A tax, such as income tax, that is levied on the income or profits of the person who pays it, rather than on goods or services
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Indirect Taxes
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-A tax levied on goods or services rather than on persons or organizations
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Okun’s Law
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-There is a three percentage point widening between the actual and full employment level of GDP for every one percentage point increase in unemployment
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Disposable/Discrestionary Income
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-Disposable, is when there is an excess income to spend -Discretionary, is when there is not a lot of money left for random spending
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Command Systems
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-This is when an economy is planned to shape a government, much like a socialist economy
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Mixed Systems
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-This is when an economy is based on the planning of the government and the demand of the market

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