Final Exam: Economics – Flashcards

land, labor, and capital - the three groups of resources that are used to make all goods and services

Economic choices are necessary because resources are limited while the human wants are unlimited. People need to make the best decision between/among alternatives

The most desireable alternative given up as a result of a decision

State firms must be privitized, or sold to individuals, and then allowed to compete with one another in the marketplace

Competition is the rivalry amont sellers to attract customers while lowering costs. It provides customers with a larger variety of goods, most of which are sold at reasonable prices

It's founded on a free market and free enterprise; private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market

A period of macro-economic expansion followed by a period of contraction Peak Peak Contr- Expan- action Trough sion

The by-product of a market failure - externalities - school of economics that believes tax cuts can help an economy by raising supply

Theory that inflation occurs when demand for goods and services exceeds existing supplies

Social welfare programs that people are "entitled" to if they meet certain eligibility requirements

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

When quantity supplied - the amount a supplier is willing and able to supply at a certain price - is greater than quantity demanded, the prices will fall.

Tendency of suppliers to offer more of a good at a higher price

The expenses a firm must pay before it can begin to produce and sell goods

Any factor that makes it difficult for a new firm to enter a market

Deregulation is the removal of some government controls over a market. Competition is the rivalry between sellers to attract customers (See Purpose of Competition). Competition increases with more deregulation.

The government can give companies monopoly power by issuing patents, exclusive rights to sell a new good or service for a specific period of time. When firms create new innovations and technology, it can destroy natural monopolies.

Business organizations owned by two or more people who agree on a specific division of respoonsibilities and profits. General: Two equal partners Limited: One partner carries all the liability Limited Liability Parntership: all partners have limited liability

ADVANTAGES: Easy start-up Few regulations Sole reciever of profits Full Control Easy to discontinue DISADVANTAGES: Unlimited personal liability Limited access to resources Lack of permanence

ADVANTAGES: Limited liability for owners Transferable ownership Ability to attract capital Long life DISADVANTAGES: Expensive and difficult start-up Double Taxation Potential loss of control by founders More legal requirements and regulations

Structural unemployment: workers' skills don't match the available jobs E.G. Celia lost her job on an automobile assembly line when NAFTA went into effect. Her company moved its assembly work to Mexico where labor is cheaper.

Shows alternative ways to use an economy's resources Watermelon: 0, 8, 14, 18, 20, 21 Shoes: 15, 14, 12, 9, 5, 0

Assets: each partners' assests improve the firm's ability to borrow funds for operations and expansions

Disposable income = Personal Income - Individual Income Taxes

Low-denomination bond issued by the U.S. government ($50 to $10,000), the funds are used to pay for public works

Principal is the amount of money borrowed, but borrowers must also pay back interest

Interest - the price paid in addition to paying back the principal

Lower (Higher potential returns come from riskier investments.)

Gross Domestic Product: the total market value of all final goods and services produced annually in an economy~measure of the United States economy adopted in 1991

Economy's output is cars and trucks: 10 cars at $15.000 each = $150,000 +10 trucks at $20,000 ea.=$200,000 _____________________________ Total = $350,000

GDP expressed in constant, or unchanging, prices

It should hover around 4% to 6%

Taxes on property

a tax based on the cost of the item purchased and collected directly from the buyer

Yes. (The federal income tax is progressive, a tax that charges more for higher incomes.)

a tax for which high-income and low-income taxpayers pay the same fraction of income

The largest category of federal spending is social sercurity

The Constitution (vague) and amendments (more specific)

One of the method of discourage bank loans (and most commonly used) is to influence the interest rate. With a high interest rate, people are more inclined to save rather than borrow (due to high return)

It uses a tight money policy, constricting spending in an economy that is growing too quickly, or to curb inflation when it is rising too fast. The Fed will "make money tight" by raising short-term interest rates (also known as the Fed funds, or discount rate), which increases the cost of borrowing and effectively reduces its attractiveness.

The result of a nation importing more than it exports

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

Agreement that will eliminate all tariffs and other trade barriers between Canada, the U.S., and Mexico

A steady, long-term increase in real GDP

The ability to produce a product most efficiently given all the other products that could be produced

The ability to produce more of a given product using a given amount of resources

Progressive taxes are based on the percentage of income paid in taxes which increase as income increases

Diversification is spreading out investments to reduce risk. Investments redirect resources from being consumed today so that they may create benefits for the future; the use of assets to earn income or profit.

Demand Curve~ a graphic representation of a demand schedule Supply Curve~ a graph of the quantity supplied of a good at different prices

It describes the flow of money and products throughout the economy in a very simplified way. The model represents all of the actors in an economy as either households or firms (companies), and it divides markets into two categories: markets for goods and services and markets for factors of production (factor markets).

It describes the flow of money and products throughout the economy in a very simplified way. The model represents all of the actors in an economy as either GOVERNMENT or firms (companies), and it divides markets into two categories: markets for goods and services and markets for factors of production (factor markets).

DOW Jones and S&P 500 (An index measures the performance of its constituents. It gives an indication of the OVERALL market performance. It can be used as a benchmark, for example, for a managed portfolio of SOME of the constituents. An index doesn't predict anything nor does it purport to and it is historic. Let's say we had an index of the US housing market (the whole of the USA). The index is established by taking the value of every house in the US (or every house sold) and dividing by the number of houses in the valuation. If the index goes up we can say the house prices in the US are going up and vice versa.)

The FDIC directly examines and supervises more than 4,500 banks and savings banks for operational safety and soundness, more than half of the institutions in the banking system. Banks can be chartered by the states or by the federal government. Banks chartered by states also have the choice of whether to join the Federal Reserve System. The FDIC is the primary federal regulator of banks that are chartered by the states that do not join the Federal Reserve System. In addition, the FDIC is the back-up supervisor for the remaining insured banks and thrift institutions.

a range with no clear divisions. On one end of the eco. Con. Is centrally planned governments (I.e. north korea) and on the other end is the free market (like america) Capitalism>Socialism>Communism

luxury items, items with substitues items that don't take much income; means that with a little change in price (little effort) means a big change in demand or supply.

not sensitive to change in price ~ water, fossil fuels, minerals, prescription drugs, clothing, food

GDP/population, total value of goods and services produced in a year divided by the population

equality of distribution in supply and demand

nations with relatively high standards of living and economies based more on industry than on agriculture Pros•Easy access to information via books and the internet. •Quality educational opportunities •Improved access to health services •Availability of balanced diet options •Credit, banking, and other financial services readily available •More economic opportunities •Increased variety of entertainment options •Wide array of consumer choices •Freedom to travel i.e. road conditions, flight prices, public transportation and other reduced transportation costs makes mobility much easier •Stronger emphasis placed on values of tolerance, equality, and diversity. •A general feeling of care and stewardship for the environment Cons•Lack of strong sense of community •Often overly busy, rigidly structured schedules and by consequence, lives. •Higher levels of stress and perfectionism •Lack of friendliness to strangers •Insatiable desires and a general lack of gratitude and appreciation •A more dogmatic and defensive approach to personal beliefs and opinions •People are often overly sensitive/easily offended

A system in which the definitive money is money authorized by a central bank or governmental body as legal tender. Paper currency and coins issued by the government are definitive money in this system.