Economics Final Exam Review Vocab

question

scarcity
answer

A situation in which unlimited wants exceed the limited resources available to fulfill those wants.
question

shortage
answer

A situation in which quantity demanded is greater than quantity supplied
question

opportunity cost
answer

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
question

traditional economy
answer

An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
question

command economy
answer

An economic system in which the government controls a country’s economy.
question

market economy
answer

An economy in which the decisions of households and firms interacting in markets allocate economic resources.
question

mixed economies
answer

Economic systems in which some allocation of resources is made by the market and some by the government
question

capitalism
answer

An economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth.
question

socialism
answer

A system in which society, usually in the form of the government, owns and controls the means of production.
question

communism
answer

A political and economic system where factors of production are collectively owned and directed by the state.
question

law of demand
answer

consumers buy more of a good when its price decreases and less when its price increases
question

elasticity of demand
answer

A measure of how consumers react to a change in price
question

equilibrium price
answer

The price at which the amount of goods producers supply meets the amount of goods consumers demand.
question

surplus
answer

A situation in which quantity supplied is greater than quantity demanded
question

price ceiling
answer

A maximum price that can be legally charged for a good or service
question

price floor
answer

A legal minimum on the price at which a good can be sold
question

perfect competition
answer

A market structure in which a large number of firms all produce the same product. The market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product
question

monopolistic competition
answer

A market structure in which many firms sell products that are similar but not identical.
question

monopoly
answer

(economics) a market in which there are many buyers but only one seller
question

oligopoly
answer

A degree of competition in which just a few sellers dominate the market
question

sole proprietorship
answer

A business owned by one person
question

partnership
answer

A business in which two or more persons combine their assets and skills
question

limited partnership
answer

A partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability
question

corporation
answer

A business owned by stockholders who share in its profits but are not personally responsible for its debts
question

stock
answer

A certificate of ownership in a corporation
question

investment
answer

In economics, spending for the production and accumulation of capital and additions to inventories.
question

bear market
answer

A steady drop in the stock market over a period of time
question

bull market
answer

A period of increased stock trading and rising stock prices
question

labor union
answer

An organization of workers in a particular industry or trade, created to defend the interests of members
question

strike
answer

Nonviolent refusal to continue to work until a problem is resolved between the union and management
question

right-to-work
answer

a measure that bans mandatory union membership
question

collective bargaining
answer

Negotiations between representatives of labor unions and management to determine pay and acceptable working conditions.
question

mediation
answer

A method of settling disputes outside of court by using the services of a neutral third party, called a mediator. The mediator acts as a communicating agent between the parties and suggests ways in which the parties can resolve their dispute.
question

arbitration
answer

A way of settling a dispute without going to trial. The parties who disagree select one or more impartial persons to settle the argument. If the arbitration is binding, then all parties must accept the decision.
question

GDP
answer

Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
question

nominal GDP
answer

the production of goods and services valued at current prices
question

real GDP
answer

gross domestic product (GDP) adjusted to account for changes in currency values and price changes
question

inflation
answer

A general and progressive increase in prices.
question

purchasing power
answer

The ability to purchase goods and services
question

types of inflation
answer

Cost Push Inflation, Demand Pull Inflation, Monetary Based Inflation
question

CPI
answer

(consumer price index) a measure of the overall cost of the goods and services bought by a typical consumer
question

cost push inflation
answer

A rise in prices due to an increase in the cost of the factors of production.
question

demand pull inflation
answer

A rise in prices due to excessive demand across the economy.
question

3 types of taxes
answer

progressive, proportional, regressive
question

Keynesian economics
answer

Theory based on the principles of John Maynard Keynes, stating that government spending should increase during business slumps and be curbed during booms.
question

fiscal policy
answer

Government policy that attempts to manage the economy by controlling taxing and spending.
question

expansionary policies
answer

fiscal policies, like higher spending and tax cuts, that encourage economic growth
question

contractionary policies
answer

fiscal policies, like lower spending and higher taxes, that reduce economic growth
question

budget surplus
answer

A situation in which the government takes in more than it spends
question

budget deficit
answer

Government spending more than it takes in
question

fiat money
answer

Money that has value because the government has ordered that it is an acceptable means to pay debts
question

commodity money
answer

Money that has an alternative use as a commodity; gold, flour, corn
question

representative money
answer

Objects that have value because the holder can exchange them for something else of value
question

medium of exchange
answer

Anything that is used to determine value during the exchange of goods and services
question

Federal Reserve
answer

A national banking system, established in 1913, that controls the U.S. money supply and the availability of credit in the country.
question

monetary policy
answer

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.
question

reserve requirement
answer

A percentage of commercial banks’ checking and savings accounts that must be physically kept in the bank.
question

easy money policies
answer

monetary policies that increases the money supply
question

tight money policies
answer

monetary policy that reduces the money supply
question

absolute advantage
answer

If you can produce more of a good with the same amount of resources as someone else
question

comparative advantage
answer

The ability of a country to produce a good at a lower cost than another country can.
question

trade surplus
answer

Exports exceed imports
question

trade deficit
answer

An excess of imports over exports
question

protectionism
answer

A policy adopted by a government to give domestic companies an advantage
question

credit score
answer

A rating used by credit reporting companies to help lenders decide whether and/or how much credit can be extended to a borrower.
question

mutual fund
answer

A selection of stocks that is owned by many shareholders and managed by a professional stock manager. It allows people to pool their money with other people to buy a variety of stocks.
question

401(k)
answer

A form of retirement fund that an employee to contributes directly through a deduction from their paycheck.
question

individual retirement account
answer

a self-funded retirement plan that allows you to contribute a limited yearly sum toward your retirement
question

compound interest
answer

interest calculated on both the principal and the accrued interest
question

FDIC
answer

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
question

diversification
answer

Buying several different investment alternatives to spread the risk of investing.

Get instant access to
all materials

Become a Member