Economics Final Exam Review Sheet

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Economics
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social science dealing with the study of how people satisfy seemingly unlimited and competing wants with the careful use of scare resources
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Scarcity
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fundamental economic problem facing all societies that results from a combination of scare resources and people’s virtually unlimited wants.
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Utility
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ability or capacity of a good or service to be useful and give satisfaction to someone.
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Value
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worth of a good or service as determined by the market.
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Factors of Production
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productive resources that make up the four categories of land, capital, labor, and entrepreneurship.
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Human Capital
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the sum of people’s skills, abilities, health, and motivation.
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Capital Goods
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tool, equipment, or other manufactured good used to produce other goods and services; a factor of production.
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Opportunity Costs
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cost of the next best alternative use of money, time, or resources when one choice is made rather than another.
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Cost-Benefit Analysis
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Way of thinking that compares the cost of an action to its benefits.
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Market
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meeting place or mechanism that allows buyers and sellers of an economics product to come together; may be local, regional, national, or global.
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Free Enterprise Economy
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market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention; same as private enterprise economy.
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Command Economy
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economic system characterized by a central authority that makes most of the major economic decisions.
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Modified Private enterprise economy
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free enterprise market economy where people carry on their economic affairs freely, but are subject to some government intervention and regulation.
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Microeconomics
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branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.
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Macroeconomics
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The part of economic theory dealing with the economy as a whole and decision making by large units such as governments and unions.
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Demand
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combination of desire, willingness, and ability to buy a good or service.
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Demand Curve
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graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time.
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Change in quantity demanded
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movement along the demand curve showing that a different quantity is purchased in response to a change in price.
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Change in demand
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a change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.
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Demand Elasticity
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measure of responsiveness relating change in quantity demanded (dependent variable) to a change in price (independent variable).
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Supply
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schedule of quantities offered for sale at all possible prices in a market.
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Supply Curve
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graphical representation of the quantities produced at each and every possible price in the market.
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Change in quantity supplied
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change in amount offered for sale in response to a price change; movement along the supply curve.
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Change in supply
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different amounts offered for sale at each and every possible price in the market; shift of the supply curve.
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Supply Elasticity
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responsiveness of quantity supplied to a change in price.
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Equilibrium Price
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price where quantity supplied equals quantity demanded; price that clears the market.
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Substitute good
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competing products that can be used in place of one another; products related in such a way that an increase in the price of one increases the demand for the other.
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Complements
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products that increase the value of other products; products related in such a way that an increase in the price of one reduces the demand for both.
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Marginal costs
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the extra cost of producing one more unit of production.
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Marginal revenue
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extra revenue from the sale of one additional unit of output.
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Perfect competition
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market structure characterized by a large number of well-informed independent buyers and sellers who exchange identical products.
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Monopolistic Competition
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Market structure having all conditions of pure competition except for identical products; form of imperfect competition.
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Monopoly
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Market structure characterized by a single producer; form of imperfect competition.
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Closed Shop
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Illegal arrangement under which workers must join a union before they are hired.
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Union Shop
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arrangement under which workers must join a union after being hired.
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Fair Labor Standards Act
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fixed a federal minimum wage for many workers and establishes time-and-a-half pay for overtime, which is defined as more than 40 hours a week. It also prohibits oppressive child labor, which includes any labor for a child under 16 and work that is hazardous to the health of a child under 18.
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Market Failure
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market where any of the requirements for a competitive market -adequate competition, knowledge of prices and opportunities, mobility of resources, and competitive profits- are lacking.
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Gross Domestic Product
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dollar value of all final goods, services, and structures produced within a country’s national borders during a one-year period.
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Hidden economy
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Gross National Product
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total dollar value of all final goods, services, and structures produced by a country residents, regardless of where the production takes place; largest measure of a nation’s income.
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Budget deficit
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Budget process
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Federal Reserve
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privately owned, publicly controlled, central bank of the United States
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Monetary policy
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actions by the Federal Reserve System to expand or contract the money supply in order to affect the cost and availability of credit.
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Functions of money
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Functions of banks
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Consumer Price Index
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index used to measure price changes for a market basket of frequently used consumer items.
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Progressive Tax
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tax where percentage of income paid in tax rises as level of income rises.
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Regressive Tax
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Tax where percentage of income paid in tax goes down as income rises.
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Proportional Tax
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tax in which percentage of income paid in tax is the same regardless of the level of income.
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NAFTA
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North American Free Trade Agreement; agreement signed in 1993 to reduce tariffs between the United States, Canada, and Mexico.
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Devaluation of currency
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SEC
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Securities and Exchange Commission; an independent federal agency that oversees the exchange of securities to protect investors.
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FDIC
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Federal Deposit Insurance Corporation: A federal guarantee of savings bank deposits initially of up to $2500, raised to $5000 in 1934, and frequently thereafter; continues today with a limit of $100,000.
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Glass Steagall
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Glass Steagall act: Reform: It separated banks into different categories. The banks couldn’t gamble with the investments, so the investments were kept safe; protected bank depositors; forced a separation between commericial banking and investment banking, that provided the Federal Deposit Insurance Corporation (FDIC) which insured individual deposits up to $5000, thereby eliminating the epidemic of bank failure and restoring faith to banks.

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