Economics Final Questions – Flashcards with Answers
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Any resources that are made by humans and used to create other goods and services
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Capital
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The resources used to make all goods and services
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Land
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An efficient economy is one that
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uses resources in such a way as to maximize the production of goods and services
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the law of increasing costs means that when an economy increases the production of one item
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The cost of producing the second item increases
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The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a
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Trade off
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Why are all goods and services scarce?
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Because the land, labor, and capital used to make them are scarce
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What is the opportunity cost of a decision?
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Something given up due to a decision
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What is factory building an example of?
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Physical capital
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What does a production possibilities frontier show?
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The maximum possible output
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What is the struggle among various producers for the consumer's business called?
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Competition
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Why does even a free market economy need some government intervention?
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tells how much to make and how much to charge
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What is one of the most important advantages of a free market?
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Consumer choice
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What incentive motivates a manufacturer to sell a product?
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Competition
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Which of the following is characteristic of a traditional economy?
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relies on custom, habit, and ritual
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What is the product market?
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the market in which households purchase the goods and services that firms produce
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In what kind of an economy does the government make all the decisions?
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Centrally planned economy
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Who was the leader that introduced communism and central planning to the former Soviet Union?
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Czar Nicholas II
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What is the most effective way for consumers to make their desires known to businesses?
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Join an interest group
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What is a positive externality?
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Good side effects of a good or service
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What effect does new technology usually have on an economy?
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allows an economy to produce more output from the same or a smaller quantity of inputs or resources
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Why does the government require businesses to disclose so much info to the public?
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So the consumers know info about the product they are purchasing
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What is the term for the total value of all goods and services produced in a particular economy?
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GDP- Gross Domestic Product
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What are benefits provided by Social Security?
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Provides direct cash transfers of retirement income to the elderly and living expensive to the disabled
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A person who consumes a good or service without paying for it
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Free rider
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When a consumer is able and willing to buy a good or service, he/she creates
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Demand
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What are inferior goods?
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A good that consumers demand less when income increases
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How is future price related to current demand?
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As price goes up, demand goes down and as price goes down, demand goes up
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What kind of system is the US economy based on?
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Free market
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Ceteris paribus, or "all other things held constant" means-
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Outside things held constant
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What does it mean when the demand for a product is inelastic?
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Not very sensitive to price change
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What is a basic principle of the law of demand?
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More people want it, the higher the demand
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A shift in the demand curve means-
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The demand is increasing/decreasing
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What is a company's total revenue?
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The amount of money the company receives by selling its goods
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What do sellers do if they expect the price of goods to increase dramatically in the near future?
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Store the goods to sell more in the future
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What happens when wages are set above the equilibrium level by law?
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There is a decrease in employment
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On which kinds of goods do governments generally place price ceilings?
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"Essential" goods and goods that might become to expensive to some consumers
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When buyers will purchase exactly as much as sellers are willing to sell, what has been reached?
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Equilibrium
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Why did Communist governments use a command economic system for many years?
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In attempt to create a society where everyone is equal
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What is the name of the smallest amount that can legally be paid to most workers for an hour of work?
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Minimum wage
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The price ceiling that was used to control the price of housing in New York city and other cities was called-
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rent control
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When a buyer NOT willing to spend a lot of time and energy researching the market?
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When savings are small
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What kind of market runs most efficiently when one large firm supplies all of the output?
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Natural monopoly
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What is monopolistic competition?
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a market structure in which many companies sell products that are similar but not identical
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Why does the government sometimes give monopoly power to a company by issuing a patent?
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exclusive rights to sell a new good or service for a specific period of time
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What is the definition of an oligopoly?
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A market structure in which a few large firms dominate a market
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If a general partnership fails, who is responsible for the debts?
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Each general partner
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What are royalties?
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Shares of earnings given as payment
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What are the money and other valuables that belong to a corporation or a partnership called?
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Assets
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What are organizations that are in the business of benefiting society and operate like a business called?
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Nonprofit organizations
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What percentage of US businesses are sole propietorships?
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75%
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Why is it easier for a partnership to borrow money and to hold good employees than it is for a sole proprietorship to do so?
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more personal stability and access to more money
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What is collective bargaining?
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the process in which union and company representatives meet to negociate a new labor contract
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In inflation-adjusted dollars, how have average wages in the United States changed in the last 20 years?
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toward slightly lower earnings
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What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?
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to insure customer deposits if a bank fails
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What did the Federalists believe about banking?
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They believed that a centralized banking system was necessary for the US to develop healthy industries and trade
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Why is using coins as money easier than using gold bars?
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It was easier to carry around and to divide it
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What happens during a bank run?
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A lot of people try to redeem their paper money in a widespread panic
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What condition is necessary for a fiat money system to work?
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Control of the money supply
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The main advantage of diversification as an investment policy is that it-
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Reduces risk
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The interest rate the bond issuer pays to the bondholder is called-
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Coupon rate
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An example of a blue chip stock
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a large company traded on NYSE
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The Dow Jones Industrial Average consists of
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30 large companies in various industries, such as food, entertainment, and technology
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Products that would be used in calculating GDP include-
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Dollar value, expenditure approach, and income approach
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An example of a durable good
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cars, refrigerators, DVD players, etc...
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An example of capital deepening
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labor force
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The calculation of GDP would include-
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income of teachers and such...
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GDP expressed inconstant, or unchanging, prices is called-
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real GDP
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The lowest point in an economic contraction
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trough
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When the economy is working properly, what is the unemployment rate?
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4-6%
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What is a major difference between an operating budget and a capital budget?
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Operating budget is for day-to-day expenses and capital budget is for major investments
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What is the major source of tax revenue for local governments?
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Property taxes
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An example of expansionary fiscal policy-
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increasing government spending
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In contrast with classical economics, Keynesian economics
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classical- Government regulates themselves; Keynesian- includes government intervention
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When revenues exceed expenditures
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surplus
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Keynesian economics failed to deal successfully with
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The Great Depression
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The Office of Management and Budget
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prepares the President's budget proposal
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An example of contractionary fiscal policy-
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decreasing government spending.
