Economics Unit 1 Review Flashcard
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Scarcity
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Basic economic problem that results from a combination of limited resources and unlimited wants
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Factors of production
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Resources of land, labor, capital, and entrepreneurship used to produce goods and services
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Opportunity cost
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Value of the next best alternative given up for the alternative that was chosen
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Macroeconomics
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The branch of economic theory dealing with the economy as a whole and decision making by large units such as government
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Command economy
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System in which the government controls the factors of production and makes all decisions about their use
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Microeconomics
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The branch of economic theory that deals with behavior and decision making by small units such as individuals and firms
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Laissez-faire
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Economic system in which the government minimizes it's interference with the economy
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Usury law
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Law restricting the amount of interest that could be charge for credit
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Collateral
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Something of value that a borrower lets the lender claim if the loan is not repaid
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Annual percentage rate
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Cost of credit expressed as a yearly percentage
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Bait and switch
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Ad that attracts consumers with a low price product, then tries to sell them a higher priced product
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Competitive advertising
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Advertising that attempts to persuade consumers that a product is different from and superior to any other
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Economic equity
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The attempt to balance an economic policy so that everyone benefits fairly
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Profit incentive
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Desire to make money that motivates people to produce and sell goods and services
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List three major types of economic systems and their differences
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Traditional economic system; based on tradition customs and beliefs Command economic system; Government leaders control system of production Market economic system; economic decisions are made by individuals
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What are six important characteristics of free enterprise?
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Limited role of government, freedom of enterprise, freedom of choice, profit initiative, competition, private property
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What are the goals of the free enterprise system?
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Freedom (make choices), efficiency (limited resources), equity, security, stability, and growth
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What are two types of advertising?
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Competitive; takes customers away from competitors to keep consumers Informative; aids consumers by providing useful product info
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What type of goods do people typically use installment debt to buy?
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Many people by durable goods, or manufactured items that last longer than three years on installment plan
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How does a finance charge different from an annual percentage rate?
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A finance charge is the cost of credit express in dollars and cents where an annual percentage is a yearly percentage
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What are six types of basic lending institutions in our economy?
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Commercial banks, saving and loan Association, saving banks, credit union, finance companies, charge accounts
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What does that Equal Credit Opportunity Act of 1974 prohibit?
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It prohibits credit companies to deny you such credit solely on the basis of your race, religion, national origin, gender, marital status or age
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What is the difference between a secured and unsecured loan?
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A secured loan is a loan that is backed up with collateral and an unsecured loan is when financial institutions would lend funds on a person's reputation and a promise to repay.
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What is the difference between scarcity and shortages?
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Scarcity always exist because of competitive alternative uses for resources where a shortages are temporary
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What is the condition that results because I want our unlimited?
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Scarcity
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What are the four factors of production?
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Land, labor, Capital and entrepreneurship
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How are trade-offs an opportunity costs related?
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You are giving up something in both scenarios
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What do economists call the next best alternative that was given up for the one chosen?
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Opportunity cost
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What are theories in economics called?
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Economic models
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Mixed economy
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Combines basic elements of a pure market economy and a command economy
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What three questions most all economic systems answer?
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What goods and services should be produced? How should they be produced? Who should share in what is produced?
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Standard of living
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The material well-being of an individual, group, or nation
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Disposable income
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Is the money income a person has left after all taxes have been paid
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Discretionary income
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Any leftover income, which can be saved or spent on extras such as luxury items or entertainment
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Before you buy anything, what three questions should you ask yourself?
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Do I really require this item, why? Is a good or service worth the time I spent earning the income to pay for it? Is there any other better use to spend my income?
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What are three important buying principles?
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Gather information, use advertising wisely and comparison-shopping
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What are consumer rights?
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The right to safety, and the right to be informed, the right to redress, the right to be heard, the right to choose
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What are the four factors that determine a person's credit ratings?
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Past history of credit use, capacity to pay, collateral, character
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The Truth in Lending Act of 1968
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Requires creditors to keep consumers fully informed about the cost and conditions of borrowing
