Transcript Who has the power to enforce laws?

Who makes all the important
decisions in a command
economy?
the government, or Kojak
Who makes all the decisions in a
free market economy? Who is the
father of this type of economics?
individuals, Adam Smeeeth
What is the driving motivating
factor in a market economy?
self interest, actors respond to
incentives
Give three examples of nations
with capitalist economies.
United States, Canada, Great
Britain, Japan, Mexico
Identify three of the key rights
that individuals have in the
United States economy.
private property, enter contracts,
economic competition, act on self
interest, limited government
involvement
What are 4 of the main
economic goals of the United
States? Which of these is most
difficult to achieve?
freedom, efficiency, equity,
security, stability, and growth;
equity is most difficult to achieve
What are the two main
measures of economic stability?
price stability & full employment
What is used to measure the
total productivity (all goods and
services) of an economy?
Gross Domestic Product (GDP)
What is Real GDP? Per capita
GDP?
GDP adjusted for inflation; GDP
divided by population
What are the four components
of the business cycle?
expansion, peak, contraction,
trough
What does a leading
indicator tell economists.
The direction the economy is
headed in the future
What are two key leading
indicators?
housing starts, orders for
durable goods, investment in
capital
In a laissez faire system, what
determines the price of a given
product?
Interaction of supply and demand
What almost always happens to
quantity demanded as price
drops?
it goes up
If demand for a product
increases, what happens to the
demand curve?
It shifts to the right, showing a
higher quantity demanded at
every price
What impact does increasing
income have on demand?
it increases purchasing power which
increases demand
What are two other factors that
greatly impact overall demand?
market size (population), tastes and
preferences, prices of related
goods, consumer expectations
What is the substitution effect?
consumers will purchase a lower
priced substitute if it’s effective
What is the name for reduced
satisfaction achieved from
continued consumption of a
particular good?
diminishing marginal return
What does elasticity of demand
measure?
the impact on demand of a price
change in a particular good
If demand for a good changes
little with changes in price then
demand is elastic or inelastic?
inelastic
What are three key factors that
affect elasticity?
availability of substitutes, relative
importance, need or want, how
quickly price changes over time
What does a demand or supply
schedule measure?
the amount demanded or supplied
at a given price
If producers are willing to produce
a much larger quantity with a small
increase in price supply is
considered elastic or inelastic?
elastic
What are two factors that cause
shifts in supply?
price of resources, technology,
competition, price of related
goods, government activity
What will suppliers do when
there is excess demand? Excess
supply?
Raise their price to match
equilibrium
Lower their price to match
equilibrium
What is the amount of additional
cost required to produce one
more unit?
marginal cost
Where is market equilibrium?
where the demand curve hits the
supply curve
What is a shortage? a surplus?
a shortfall in the amount supplied,
an excess of the amount supplied
What are the two ways of
making money on a share of
stock?
Dividends (share of the profit) and
appreciation (capital gain)
What does a “future” represent?
the right to buy a commodity (oil,
pork bellies, corn, etc.) in the
future at a set price
What are the two main types of
bonds? Are they generally more
or less risky than stocks?
government and corporate, less
What are low risk ways to invest
money?
Money market account, CD’s,
savings bonds, savings accounts
What is a “blue chip” stock?
An established company with a
proven earnings record
(profits/dividends) and steady
price appreciation
What is the strategy that
spreads out investments to
reduce risk?
Diversification (investing in a variety
of different things)
What do mutual funds do?
Pool the savings of many individuals
and invests money in a variety of
stocks
What are the contracts that give
investors the choice to buy or
sell stock at a set price in the
future?
Options
What is a publicly held
company? What are these
companies required to do with
their key financial information?
A company who’s stock is traded on
a public exchange (e.g. NYSE),
must make it available to the
public
What is the primary reason a
corporation sells stock?
Gives them easy access to
additional capital to expand/grow
their business
What is insider trading? Why is
it illegal?
Making a stock sale based on
information that has not been
made public; unfair to rest of
market
In what two key ways was Enron
deceiving its investors?
Using questionable accounting
practices to hide losses and
moving bad debts to shell
companies to make Enron look
healthier
Why did Enron pursue increasing
risky trading strategies in the
early 2000’s? What was the
most infamous example of this?
Enron needed larger payouts to
cover all its bad
investments/trades, their
manipulation of the CA electricity
markets (rolling blackouts)
What is the primary influence
the FED has over the economy?
They can regulate the money
supply by setting key interests
rates, buying/selling securities,
and setting reserve requirements
Who prepares the initial budget
proposed to Congress?
The President
Which office manages development
of this budget and negotiates
between the President and the
various agencies?
Office of Management and Budget
(OMB)
Name two entitlements. What
portion of the federal budget do
they represent?
Medicare, Medicaid, Social Security;
more than half
What funds are supposed to pay
for all current Social Security and
Medicare benefits?
Social Security and Medicare taxes
paid by current workers
What does Congress’ concurrent
budget resolution do?
Sets forth the spending and tax
plan for the upcoming fiscal year
What is happening when House and
Senate budget committees fit the
concurrent budget resolutions to
the specific needs of agencies and
programs?
budget reconciliation
What is the final step in the
budgeting process after
reconciliation?
The House must issue an
appropriations bill approving the
money to fund the budget
What government agency is
charged with maintaining high
standards for worker health and
workplace safety?
Occupational Safety and Health
Administration (OSHA)
What government agency has
primary responsibility for overseeing
investments and financial markets?
Securities Exchange Commission
(SEC)
What is the FTC responsible for?
Maintaining the needed conditions
for fair trade, enforcing anti-trust
laws
When gov’t revenues exceed
expenditures it’s called a ____.
When expenditures exceed revenue
it’s a ______.
Surplus; Deficit
What does the FDA do?
Responsible for maintaining and
enforcing government standards
for the purity and safety of food
and drugs
What agency insures bank
deposits up to $250,000?
FDIC
Which agency works to ensure
fairness in employment and
hiring practices?
Equal Employment Opportunity
Commission (EEOC)
Which agency controls
everything from broadcast
spectrum to standards for
broadcast content?\
Federal Communications
Commission (FCC)