Transcript Final review

Economics
Semester Review!
Everything YOU ever wanted to
remember… and COULD!!!
Introduction Unit
 What are the
three (3)
economic
questions?
What to Produce
How to Produce it
For Whom to
Produce
 Explain a
traditional
society.
Repetition based
on the past and by
a strict hierarchy.
 Explain a command
economy.
Strong government
role in the
economy.
Explain a market
economy.
Prices and the
products
manufactured are
based on supply
and demand/
What is the
definition of
scarcity.
limited resources
versus unlimited
wants
What do you love?
Economics of
course!
Individuals who
make purchases
are know as?
Consumers
The creators of a
new business is
known as an?
Entrepreneur
What is another
word for utility?
Usefulness
Supply and Demand
Explain diminishing
marginal utility.
the more you have
of an item – the
less satisfaction
you get with each
additional item.
List two (2)
determinants of
supply.
Price of resources
Technology
Government tools
Price of other
goods
Producer
expectations
 List two (2)
determinants of
demand.
Substitute and
complementary
goods
market size
income
future
expectations
tastes and
preferences
Explain demandpull inflation
Prices rise due to
the increased
demand for goods
Supply-side
economics gives
tax incentives to
whom?
Business
What is the point
where supply and
demand intersect?
Market Clearing
Price or Equilibrium
Point
When there is a
shift increase in
demand. (Which
way does the line
move?)
Right
 When there is a
shift increase in
supply. (Which
way does the line
move?)
Right
 People love straw
hats! A hurricane
hits wiping out
palm trees. What
is the impact of
the hurricane on
the supply and
demand for hats?
Decrease in Supply
What are the four
(4) types of
unemployment.
Cyclical
Frictional
Seasonal
Structural
 List the four (4)
phases of the
business cycle.
Expansion
Peak
Contraction
Trough
What is a problem
that occurs with
inflation?
Prices go up faster
than wages – The
same $ now buys
less.
 Give and example
of frictional
unemployment.
Just in between
jobs
Give an example of
cyclical
unemployment
the steel industry
collapses and put
people out of their
jobs
Give an example of
structural
unemployment
The new selfcheckout lines at
Jewel
Define Inflation
An increase in the
general price level
of goods and
services;
alternatively, a
decrease in
purchasing power
of the dollar.
Define Deflation
A decline in the
general price level
of goods and
services that
results in
increased
purchasing power
of money.
Fiscal / Monetary Policy
What is the
purpose of the
Federal Reserve?
Bank for banks
What is included in
M1?
Currency
Checking Accounts
(Demand Deposits)
Traveler’s Checks
What is included in
M2?
All of M1 plus:
– Savings
– Money Market
– CD’s
List the tools of
monetary policy.
Open Market
Operations
Discount Rate
Reserve Rate
Define Fiscal Policy
Practices of
government
spending and taxes
Define Monetary
Policy
The Federal
Reserve policy to
regulate the
nation’s money
supply and credit
What are the
three (3) types of
taxes?
Progressive
Proportional
Regressive
Why does the
government tax?
To redistribute
money throughout
society
Pay for services
List where U.S. tax
revenues come
from.
Individuals
Corporations
Property
Social Security
Sales
What is an example Sales
of a regressive
tax?
List the
characteristics of
money?
Recognizable
Durable
Portable
Divisible
Acceptable
Limited Supply
What is the U.S.’s
money backed by?
Trust in our
government and it’s
ability to collect
taxes
How many districts
are in the Federal
Reserve System?
12
Who carries out
Monetary policy?
The Federal
Reserve
Who carries out
Fiscal Policy?
The President and
Congress
GDP measures
Gross Domestic
Product - the
production of
goods and services
by a nation in a
year.
What are the
components of
GDP?
What is the
largest component
of GDP?
G+C+I+(x-m)
Gov’t spending
Consumption
Investment
Exports – imports
Consumption
When is the
economy most
likely to
experience an
increase in
unemployment?
Downside of the
business cycle or
when total
spending decreases
in the economy.
For those with
structural
unemployment to
be successful they
often need
Retraining or
additional
educational
because their skills
are no longer
productive for the
economy.
A representative
market basket of
goods and services
that are used by
the average
consumer in call
CPI – consumer
price index
What does a CPI
of 200 mean?
The base yr = 100
The cost of the
market basket has
increased by 100%
The study of how
Economics
people choose to
use their resources
to satisfy their
needs and wants is
Factors of
Production
Land
Labor
Capital
Entrepreneur
What direction
does a demand
curve shift?
Downward slope
and to the right
Examples of the
underground
economy
Illegal drugs
Under the table
payoffs where the
gov’t doesn’t get
taxes
Illegal gambling
What causes a
Production
Possibility Curves
to shift outward?
New resources or
new technology
Opportunity cost
The decision of
choosing the best
of all alternatives
What you have to
sacrifice in order
to be able to have
an additional item
What is the
largest Federal
Budget
expenditure?
Social Security
Who is the
chairman of the
Federal Reserve?
Ben Bernanke
If the fed sells
securities (OMO)
does this put
money into the
economy or take it
out?
Takes money out of
the economy
Why would the Fed
lower the discount
rate?
To increase or
stimulate spending
in the economy. It
increases the
incentive to take
out a loan.
What does
aggregate mean?
Total
Who does inflation
help?
Help – those who
owe money
Who does inflation
hurt?
Those with savings
Those on fixed
incomes
What services
does the Federal
Reserve provide
for the
government?
Financial advisor
Checking account
for the U.S.
treasury
pays social security
checks, tax
refunds, veteran
payments, etc.
Issuing Currency
What services
does the Federal
Reserve provide
for member banks?
Clearing checks
Loans to banks
Transfers deposits
from one account
to another
Supervise lending
practices
What is loose
monetary policy?
A policy that wants
to increase the
economy and
encourage
spending.
Using a Tight
Money Policy would
you buy or sell
government
securities?
Sell
In inflationary
times what
Monetary Actions
are available for
the Fed to use?
Increase the
discount rate
Increase the
reserve
requirement
Sell open market
operation
Economic concepts
associated with
Adam Smith
Society benefits
by each of us
working in our own
self interest
Invisible hand
regulates the
equilibrium price
for supply and
demand
Laissez Faire
What type of
economic system is
laissez faire
associated with?
Hand off – gov’t
should not
interfere with
business
Pure market
economy
To whom is most of
our national debt
owed?
How large is our
debt?
What is deficit
spending?
US citizens
15 trillion
Spending more
than the gov’t
takes in revenues
in a year
 John Maynard Keynes
is associated with
what type of ______
side policy
 Milton Freidman is
associated
Monetarists and with
which type of _____
side policy
Demand
Supply
Using an Easy
Money Policy what
actions would the
Federal Reserve
take?
Lower the Discount
Rate
Lower the Reserve
Requirement
Buy Government
Securities (Bonds)
Explain the
Discount Rate.
The discount rate
is the interest rate
charged to
commercial banks
and other
depository
institutions on
loans they receive
from their regional
Federal Reserve
Bank.
What are two (2)
characteristics of
developing nations?
Low GDP Per Capita
Few Resources
Growing population
Agriculture based
economy
What was Marx’s
view of capitalism?
It would destroy
itself.
Eventually the
people would want
to create a
classless society
What percentage
of nations are
“developing?”
80%
What did NAFTA
accomplish?
A reduction and
eventually
elimination of
tariffs between
countries. An
increase in trade
between countries.
List two (2)
countries that are
communist today.
North Korea
China
Vietnam
Cuba
Name two (2)
types of foreign
aid.
Grants
Advice
United Nations
World bank
International
Monetary Fund
Private Investment
(Corporate)
Explain absolute
advantage.
Cheaper & control
of the resources
What are the
benefits of
globalization?
lower tariffs
lower prices
specialized labor
increased
competition