Economics Final Exam! – Flashcards
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The study of how people seek to satisfy their needs and wants by making choices
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Economics
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A person who decides how to combine resources to create goods and services
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Entrepreneur
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Land, Labor, Capital & Physical
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What are the 4 FACTORS OF PRODUCTION
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The study of the individual and the market
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Microeconomics
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When you have LIMITED SOURCES
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When does SCARCITY occur
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The most desirable alternative given up as the result of a decision
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Opportunity Cost
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The use of resources in such a way as to maximize the output of goods and services
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Efficiency
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The value of fewer resources than an economy is capable of using
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Underutilization
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Increase
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How does an increase in technology affect a nations efficiency
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It represents the use of trade offs
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What does each point on the productions possibilities curve reflect
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All the possible combination of goods that a society can use at a given time
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What does the the productions of possibilities curve represent
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Military Spending
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In Guns and Butter, what does BUTTER represent
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â¢What goods and services produce â¢How goods and services produce â¢Who does goods and services produce for
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What are the 3 economic decisions that a society must make
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Economic system that is a traditional economy (BELIEFS)
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Traditional Economy
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Government makes all decisions on the key economic questions
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Command Economy
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Doctrine that the government cannot intervine
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Laissez Faire
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Households
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What is purchased in the FACTOR MARKET
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Effects other parties without it being reflected in the cost of goods and services
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Externality
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â¢Economic Growth â¢Economic Security â¢Economic Stability â¢Economic Freedom â¢Economic Efficiency â¢Economic Equality
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6 broad social goals of an economic system
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Goods and services
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Why do households consume in a free factor market economy
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Free Enterprise
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A term for market economy and capitalism
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Little to no government regulation
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Characteristics of a free market economy
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Private property is abolished, control is exercised by the state and is inspired by Karl Marx
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Communism
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North Korea, Cuba, China & Vietnam
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Examples of communist country's that have a command economy
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The total vale of goods and services produced in a country in a given year
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Gross Domestic Products (GDP)
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A shared good or service
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Public Good
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Someone who is not willing to pay for a good or service but would get benefits
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Free Rider
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Price increases, demand decreases
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Law of Demand
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Desire, ability and willingness to buy a good or services
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Demand
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Consumers feel richer when prices drop and poorer when prices rise
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Income Effect
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Less of one good for a substitution good
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Substitution Effect
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A graphic representation of a demand schedule (downward or regitevly sloped)
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Demand Curve
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Demand decreases when income increases
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Inferior Good
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Goods that are bought and used together
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Complementary Goods
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Determines how a price change will influence the quantity demanded of any product
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Elasticity of Demand
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Change in price does not affect product (inelastic)
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How does a change in price affect the demand for insulin for Diabetics
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Shifts left
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What happens to the demand curve for pasta if a new diet promoting low carbohydrate food causes the demand for pasta to decrease
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Price increases ð quantity increases
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Law of Supply
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Amount of goods and services available
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Supply
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Listings of quantity's of how much a good cost
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Market Supply Schedule
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Shifts Right
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How does an increase in supply affect the supply curve
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Short run: Inelastic | Long Run: Elastic
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Elasticity of supply in both the long and short run
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How much more output the next additional worker can produce
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Marginal Production of Labor
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Decrease
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How does an increase in the cost of resources affect supply
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Government provided financial help to encourage production in a certain area
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Subsidy
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Decrease
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What would happen to the supply of blueberries if the market price for raspberries is currently higher
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Rising cost
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Steel prices rise 10% causing the supply for cars to decrease. What causes the supply to decrease
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Point of quantity demand (IDK)
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Equilibrium
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Quantity supply isn't greater than the quantity demanded
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Surplus
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Lower prices $
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How do firms get rid of a surplus
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Increase price $
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How do firms get rid of a shortage
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The maximum price that can never legally charged for a good or service
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Price Ceiling
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Cause a surplus
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How does a price floor affect the labor market
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Decreases in price $
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What happens to equilibrium price when supply increases
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Limited supply
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How does rationing affect the availability of goods
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Every mortgage payment that you pay, you gain more equity in your house
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How doesn't paying your mortgage affect the equity in your house
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The ability to be used as or directly converted into cash
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Liquidity
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A card entitling it's owner to buy goods and services (promise to pay)
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Credit Card
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The strategy of spreading out investments rockin reduce risks
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Purpose for diversification
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A collection of financial assets
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Portfolio
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â¢Gas prices â¢food prices â¢utility bills (charges)
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Examples of variable expenses
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â¢Mortgage payment â¢Car payment (stays same)
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Examples of fixed expenses
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Checking account
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What's assets are considered to be part of M1
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â¢Loans â¢Mortgages â¢Credit Cards â¢Profit â¢Store â¢Save
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What are the functions of financial institutions
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Removes money from checking account
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Debit Card
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Amount of money borrowed
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Principal
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Money loaned to a borrower on an ongoing basis
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Credit
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â¢Emergency â¢easy to use â¢don't have to carry cash
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Benefit of using credit
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â¢High interest rate â¢bad debt â¢people overuse
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Identify drawbacks of using credit
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Pay bills each month
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How can someone maintain good credit
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Taking back of property by lender or seller from borrower or buyer
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Repossession
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Ability to repay a debt
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Capacity
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List of credit history for the last 7 years
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Credit Report
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GDP
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What allows economist to compare the productivity of an economy from one year to the next
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New car
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Examples of final goods counted as part of GDP
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Sale of used items
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Which is not counted of GDP
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GDP per Capita
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What is considered the best measure of a nations standard of living
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CPI and Inflation
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What does the consumer price index (CPI) measure
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Lien unemployment
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Characteristics of economic expansion during a business cycle
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A budget in which renevues are equal to spending
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Balanced Budget
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Use of government power to use taxes and government spending to regulate economy
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Fiscal Policy
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A federal insurance program that provides benefits to the retired, unemployed and disabled
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Social Security
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Decrease government spending and increase taxes
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Provide examples of contractionary fiscal policy used by the government to slow down economics growth
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The percentage % in which income paid in taxes decreases as income increases
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Regressive Tax
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Responsibility of controlling the money $ supply
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What is the role of the Federal Reserve System
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Price Stability
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What is the purpose of Monetary Policy
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â¢Open market operations â¢reserve requirement â¢discount rate
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What is the federal reserves 3 "tools" for monetary policy
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The interest that the FED charges commercial banks to borrow money $
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Discount Rate
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The amount of money $ that the FED charges commercial banks to borrow money $
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What are Reserve Requirements
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12
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How many regional banks does the federal reserve system have throughout the country
