Transcript Economics Final Powerpoint Review

Final Review
Economics
What term describes the total
value of all final goods and
services produced in a particular
economy in a year?
Gross domestic product (GDP)
What is a mutual fund?
A device for pooling the savings of
many investors and investing it in a
variety of ways
Americans have a high standard of
living and have shifted the
production possibilities frontier
outward via a good work ethic and
what which allows an economy to
produce more output from the
same quantity resources?
Technology
What would be the annual yield of
a bond if the coupon rate was
8.5%, maturity was 10 years, and
the par value was $10,000?
$850
Why might Soviet economic
planners have favored heavy
industry over the makers of
consumer goods?
The products of heavy industry
provide material for many other
industries
What term describes a shared
good or service for which it would
be impractical to make consumers
pay individually and to exclude
non-payers?
Public good
What “invisible hand” regulates the
free market economy?
Competition and self-interests
How do public goods limit a free
market economy?
They allow government, and not
consumers, to make some
economic decisions
What term describes an economy
that is using all its resources to
produce the maximum output of
goods and services?
Efficiency
What is critical in determining
whether something is produced as
a public good?
Whether the benefits to society are
greater than the total cost
What term describes a social
philosophy based on the belief that
democratic means should be used
to evenly distribute wealth
throughout a society?
Socialism
What is the government’s role in
controlling externalities in the
American economy?
Government tries to encourage
positive externalities and limit
negative externalities
In 2009, a single parent with one
child with an income level less
than $15,000 per year falls below
what?
Poverty threshold
Since the 1930s, what term
describes the main government
effort to ease poverty by collecting
taxes from individuals and
redistributing some of those funds?
Welfare
How does improved technology
help create a higher standard of
living for future generations?
Providing additional goods and
services
Why is a certificate of deposit
considered a safe investment?
It is guaranteed by the federal
government
What term describes direct
payments of money to eligible poor
people?
Cash transfers
What allows the United States
economy to operate more
efficiently and productively,
increasing GDP and giving U.S.
businesses a competitive
advantage in the world?
Technology
Respectively, what governmental
health insurance covers people
over 65 and what governmental
health insurance covers the poor
or unemployed?
Medicare
Medicaid
What term describes the line on a
production possibilities graph that
shows the maximum possible
output?
Production possibilities frontier
How do education programs make
the economy more productive?
Adding to human capital and labor
productivity
What term describes the tendency
of suppliers to offer more of a good
at a higher price?
Law of supply
What term describes goods and
services provided for free or at
greatly reduced prices, like food
stamps and subsidized housing?
In-kind benefits
What term describes consumers
buying more of a good when its
price is lowered?
Law of demand
In which direction will the demand
curve for RVs shift as baby
boomers start to retire?
Right
What term describes goods for
which demand falls as income
increases?
Inferior goods
What causes a change in the
demand curve or a shift in
demand?
A change in an area other than
price
How does the price range affect
the elasticity of demand for a
product?
Demand for a good can be
inelastic at a low price, but elastic
at a high price
What term describes a measure of
how suppliers react to a change in
price?
Elasticity of supply
What term describes the
relationship between price and total
quantity supplied by all firms?
Market supply schedule
What term describes elasticity of
supply that is less than 1 and is not
very responsive to changes in
price?
Inelastic
What term describes the change in
consumption resulting from a
change in real income?
Income effect
A demand curve is only accurate
for a specific set of market
conditions and what is the only
factor affecting demand on a
demand curve?
Price
What do economists call a
situation in which consumers buy a
different quantity than they did
before, at every price?
A change in demand
The best level of output occurs
when marginal revenue is equal to
what?
Marginal cost
What term describes a graphic
representation of a demand
schedule?
Demand curve
What does it mean when an
economist says a consumer has
demand for a good or service?
He is willing and able to buy the
good or service at the specified
price
What term describes two goods
that are used together?
Complements
What term describes the income
level below which income is
insufficient to support a family or
household?
Poverty threshold
What term describes goods used
in place of one another?
Substitutes
In a free market economy, who
owns the factors of production?
Households
Firms
What age group in the United
States has the largest percentage
of its members living in poverty?
Children
Why is the 2008 American median
household income of $51,000
misleading?
It does not take into account
income distribution
If marginal cost becomes higher
than price, what happens to a
company?
The company will lose money on
each additional unit produced
What term describes the change in
output that results from having one
more worker?
Marginal product of labor
What is the elasticity of supply for
an orchard owner in the short run if
the price he can get for his crop
goes up?
Inelastic
How long can a family collect aid
from the Temporary Assistance for
Needy Families (TANF) program?
A maximum of 5 years
What effect does a rise in the cost
of machinery or raw materials have
on the cost of a good?
The good becomes more
expensive to produce
What term describes a condition of
rising prices?
Inflation
What term describes a chart that
lists how much of a good a
supplier will offer at different
prices?
Supply schedule
Why does every decision involve
trade-offs?
Everyone’s resources are limited
When should one decide not to do
or use one additional unit of some
resource?
When the opportunity cost
outweighs the benefits
What does new technology
generally do to production?
It lowers cost and increases supply
If a restaurant owner decides to
serve only phở in his restaurant,
what economic term describes the
absence of hamburgers, French
fries, and shakes?
Trade-off
What term describes the additional
cost of producing one more unit?
Marginal cost
Which political system believes in
violent revolution and requires
strict obedience to an authority,
such as a dictator?
Communism
What term describes a situation
that occurs when a producer
cannot offer a particular good or
service at the current price?
Shortage
What term describes a large
capital investment to produce
items used in other industries?
Heavy industry
What term describes when the
government sets a price floor on
earnings?
Minimum wage
As part of the nation’s recovery
from the Great Depression of the
1930s, the banking system was
reformed in what way?
The banking system was taken off
the gold standard
What term describes a graph that
shows alternative ways to use an
economy’s resources?
Production possibilities curve
What term describes the device
that allows its holder to buy goods
based on a promise to pay?
Credit card
How did collectives in the Soviet
Union avoid the competition that
drives a free market economy?
There were no incentives for
competition because the
government determined prices,
wages, and products
What term describes a system that
keeps only a small part of a
deposit on hand and lends out the
rest?
Fractional reserve banking
What effect do low interest rates
have on business investment?
They encourage investment
What term implies that there are
limited quantities of resources to
meet unlimited wants?
Scarcity
What is the difference between
simple and compound interest?
Simple interest is paid on the
principal only
Compound interest is paid on both
principal and accumulated interest
How does a bank make most of its
profit on its business?
By earning interest on loans
What are the three factors of
production?
Land, labor, capital
What term describes the amount of
money borrowed?
Principal
What term describes spreading out
investments to reduce risk?
Diversification
When any effort by a government
causes the supply of a good to
rise, in what direction will the
supply curve shift for that good?
Right
What term describes the legal
maximum that can be charged for
a good?
Price ceiling
What term describes the point at
which supply and demand come
together?
Equilibrium
Why does the government
sometimes use an expansionary
fiscal policy?
To encourage growth and try to
stop or prevent a recession
How does a firm generally respond
to a higher demand for its goods?
It raises prices
What term describes when quantity
supplied exceeds quantity
demanded at a certain price?
Surplus
What term describes the federal
government’s use of taxing and
spending to keep the economy
stable?
Fiscal policy
What term describes the idea that
markets regulate themselves?
Classical economics
What term describes fiscal
procedures that try to increase
economic output?
Expansionary policies
What term describes redirecting
resources from being consumed
today to create future benefits?
Investment
What term describes the idea that
the government can, and should,
regulate the economy?
Keynesian economics
What are the two main economic
problems that Keynesian
economics seeks to address?
Periods of recession/depression
and inflation
What term describes federal
spending equal to federal revenue?
Balanced budget
How will the federal budget be
affected when members of the
baby boom generation begin to
retire in large numbers?
Increased deficits
What is a major argument against
a constitutional amendment
requiring a balanced budget?
It would be too inflexible
What term describes the twelve
banking regions created by the
Federal Reserve Act?
Federal Reserve Districts
What term describes the Federal
Reserve committee that makes key
decisions about interest rates and
the U.S money supply?
Federal Open Market Committee
(FOMC)
Respectively, what term describes
a situation in which the
government spends more than it
takes in and what term describes a
situation in which the government
takes in more than it spends?
Budget deficit
Budget surplus
How many Federal Reserve
Districts are there?
12
What term describes when
quantity demanded exceeds
quantity supplied at a certain
price?
Shortage
Excess demand
What term describes the rate the
Federal Reserve charges for
emergency loans to commercial
banks?
Discount rate
What term describes the alternative
that is given up because of a
decision?
Cost
What banks must join the Federal
Reserve System?
All nationally chartered banks
Which of the following is not one of
the three key economic questions
that are addressed to deal with
limited economic resources?
What goods and services should be
produced?
How should these goods and services be
produced?
Who consumes these goods and services?
How does each society determine
who will consume what is
produced?
It is a combination of social values
and goals
To improve its standard of living, a
nation’s economy must do what?
Grow through innovation
What type of economy makes
economic decisions based on
exchange or trade?
Market
How are traditional economies
characterized?
Small, close communities that
avoid change and new technology
Most modern economies have
what type of economy which is
characterized by limited
governmental involvement?
Mixed
Respectively, what term describes
a market in which households
purchase the goods and services
that firms produce and what term
describes a market in which firms
purchase the factors of production
from households?
Product market
Factor market
What term describes a formula that
tells how much money will be
created by an initial cash deposit?
Money multiplier
What term describes a situation in
which resources are distributed
according to price?
Free market
Why do people need to buy and
sell products or services?
No one is self-sufficient
What term describes dividing up
goods and services without regard
to price?
Rationing
What provides a language of
exchange where producers can
measure demand and consumers
express demand for a product?
Price
What term describes factors that
make it difficult for new firms to
enter a market?
Barriers to entry
What term describes an illegal
grouping of companies that
discourages competition like a
cartel?
Trust
What term describes a market with
many well-informed buyers and
sellers, identical products, and free
entry and exit?
Perfect competition
Why does a perfectly competitive
market require many participants
as both buyers and sellers?
So that no individual can control
the price
What is the relationship between
start-up costs and a competitive
market?
Markets with high start-up costs
are less likely to be perfectly
competitive
Advances in what can transform a
good from an expensive luxury to a
mid-priced good?
Technology
Factors that reduce supply can
shift the supply curve in what
direction?
Left
Who issues United States paper
currency?
District Federal Reserve banks
What term describes production
costs or externalities paid by the
general public?
Spillover costs
What term describes the buying
and selling government securities
to change the supply of money?
Open market operations
Who is considered the banker for
the United States government?
Federal Reserve
What does monetary policy do?
It alters the supply of money
How does the cost-push theory
explain inflation?
Producers raise prices in order to meet
increased costs
Wage increases cause increased prices
Rising wages cause higher prices
What term describes the point at
which the quantity supplied and
quantity demanded are the same?
Equilibrium
What does the Lorenz Curve
illustrate about the economy?
The distribution of income
What typically happens to the
inflation rate when unemployment
falls to very low levels?
It rises
What term describes a tax in which
the percentage paid increases as
income increases?
Progressive tax
What term describes monetary
policy that reduces the money
supply?
Tight money policy
How does reducing the required
reserves by the Fed affect the
money supply?
It increases the money supply
How does the Fed encourage
banks to loan more money?
By reducing the discount rate
What term describes a tax for
which the percentage of income
paid in taxes remains the same for
all income levels?
Flat tax
Proportional tax
What do local governments spend
the bulk of their revenue on?
Public school systems
To what part of an industry does a
worker’s education contribute?
Human capital
What term describes a delay in
implementing monetary or fiscal
policy?
Inside lag
What is the difference between a
shortage and scarcity?
Shortages can be temporary or
long-term
Scarcity always exists
If a person has just enough money
to buy one DVD and chooses DVD
#1 instead of DVD #2, what
economic term describes DVD #2?
Opportunity cost
What term describes a collection of
financial assets?
Portfolio
What term describes a phrase that
refers to the trade-offs that nations
face when choosing whether to
produce more or less military or
consumer goods?
Guns and butter
What term describes an economic
system characterized by private or
corporate ownership of capital
goods?
Free enterprise
What term describes a period of
change in which an economy
moves away from a centrally
planned economy toward a
market-based system?
Transition
The United States’ mixed economy
is based on what?
Based on the principles of the free
market, but allows some
government intervention
What early free market term
describes a doctrine that permits
the conduct of business with
minimal government intervention?
Laissez faire
How is government intervention in
a modern economy useful?
Governments are more able to
meet some needs and wants and
all members of society have an
opportunity participate
Respectively, what term describes
a tax on the value of a property
and what term describes a tax on
the dollar value of a good or
service being sold?
Property tax
Sales tax
The United States government has
a free enterprise economy, but it
still intervenes in what instances?
Keep order, provide vital services,
and promote the general welfare
How does the concept of a
balanced budget apply to state
government?
Only the operating budget must be
balanced
What are the major sources of
revenue for most state
governments?
Sales and individual income taxes
The result of free enterprise’s
economic rights is extensive what
which is the rivalry among sellers
to attract customers while lowering
costs?
Competition
What term describes restrictive
laws that require companies to
provide full information about their
products in order to protect the
public’s well-being?
Public disclosure laws
What is the purpose of free
enterprise?
To give consumers freedom of
choice
What term describes the study of
the economic behavior and
decision making of small units,
such as individuals and
businesses?
Microeconomics
What term describes a period of
macroeconomic expansion
followed by a period of contraction
that may last many years?
Business cycle
Why are patents a form of
monopoly that society allows?
Encourages firms to research and
develop new products that benefit
society as a whole
What term describes many
companies in an open market
selling similar products?
Monopolistic competition
What term describes a market
structure dominated by a few
large, profitable firms that produce
70% - 80% of the market output?
Oligopoly
What term describes an
agreement among members of an
oligopoly to set prices and
production levels?
Collusion
What term describes setting the
market price below the cost in the
short term to drive competitors out
of business?
Predatory pricing
What is the only way that a cartel
is able to survive?
Every member keeps to the
agreed output levels
What term describes government
policies that keep firms from
controlling the price and supply of
important goods?
Antitrust laws
What is the purpose of both
deregulation and antitrust laws?
Promote competition
What term describes an
authorization from the local
government to carry on an
enterprise?
Business license
What term describes the most
attractive alternative that is given
up when a decision is made?
Opportunity cost
What term describes the
government no longer deciding
what role each company can play
in the market and how much it can
charge?
Deregulation
What term describes a payment to
employees other than wages or
salaries?
Fringe benefit
What term describes a business in
which all partners share in both
responsibility and liability?
General partnership
What must an owner of a sole
proprietorship do if the business
fails?
Pay all the business debts
What term describes the legal
obligation to pay debts?
Liability
What is the term for the joining of
two or more firms involved in
different stages of producing the
same good or service?
Vertical merger
What term describes a retail outlet
owned and operated by its
members?
Consumer cooperative
What term describes a semiindependent business that pays
fees to a parent company for
exclusive rights to do business in a
certain area?
Business franchise
What is a common factor in all
nonprofit business?
Pay no income tax
Why are U.S. firms moving
manufacturing jobs overseas?
Labor costs less overseas
What term describes a government
institution that insures customer
deposits against bank failure?
FDIC
What is the function of retail or
purchasing cooperative businesses
or co-ops?
Obtain lower prices for members
What term describes organizations
such as museums, the Red Cross,
and churches that promote a
benefit to society?
Nonprofit organization
What is an example of a tax for
which the percentage of income
paid in taxes decreases as income
increases?
Sales tax
What term describes a business in
which only one person has
unlimited personal liability for the
business’s actions?
Limited partnership
What term describes taking out a
part of an employee’s income as it
is earned for taxes?
Withholding
What is the main purpose of
federal taxes on tobacco and
alcohol products?
To discourage the use of these
products
Why does the federal government
collect income taxes in installments
rather than waiting until April 15th?
It is more convenient for the
government and taxpayers to
collect in installments
What term describes the theory
that suggests that completion of
college indicates that a job
applicant is intelligent and hardworking?
Screening effect
What term describes a company
that has the exclusive right to sell a
new good or service for a specific
time period?
Patent
What term describes a market
structure that does not meet the
conditions of perfect competition?
Imperfect competition
In 2010, the federal government
collected approximately $2.16
trillion in tax revenue and 42%
came from what source?
Individual income taxes
What term describes a single seller
that has the right to sell goods in
an exclusive market?
Franchise
What term describes money
lawmakers have a choice about
spending?
Discretionary spending
What is the difference between
Medicare and Medicaid?
Medicare is for people over age 65
Medicaid is for low-income families
What term describes a social
welfare programs from which
people benefit if they meet certain
eligibility requirements?
Entitlements
What term describes assets such
as land and buildings?
Real property
Why are Social Security and
Medicare spending expected to
increase further in the near future?
The baby boomer generation will
qualify for both programs
What term describes spending that
is equivalent to revenue?
Balanced budget
What term describes spending for
day-to-day expenses?
Operating budget
On average, 28% of total
compensation in the U.S. economy
today is comprised of what?
Benefits
Why do many firms hire temporary
workers to do a particular job?
They can quickly adjust their workforce
It is easier to fire temporary workers
Some workers prefer flexible work
arrangements
Temporary workers are usually paid less
What term describes a single seller
in a market?
Monopoly
What term describes a wage that
produces neither a surplus of labor
nor a shortage of labor?
Equilibrium wage
What term describes the invisible
barrier that keeps women and
minorities from advancing to the
top ranks in business?
Glass ceiling
What is the underground
economy?
The products and income that are
not reported as incomes to the
government
What term describes an
organization of workers that tries to
improve working conditions,
wages, and benefits for its
members?
Labor union
What types of laws are designed to
help minorities gain education and
access to job experience and close
the wage gap?
Non-discrimination laws
What term describes a period of
macroeconomic expansion
followed by a period of
contraction?
Business cycle
What term describes the process
by which union and company
representatives meet to negotiate
and form a new labor contract?
Collective bargaining
What term describes an organized
work stoppage intended to force
an employer to address union
demands?
Strike
What is the major advantage of a
business that is a partnership
rather than a sole proprietorship?
The responsibility for the business
is shared
What term describes a portion of
corporate profits paid out to
stockholders?
Dividend
What term describes a settlement
technique in which a third party
reviews a case and imposes a
legally binding decision?
Arbitration
What is generally the difference
between blue-collar workers and
white-collar workers?
Blue-collar workers have industrial
jobs
White-collar workers have
professional or clerical jobs
What term describes the share
representing a portion of
ownership in a company?
Stock
What term describes anything that
is used to determine value?
Medium of exchange
What term describes a legal
agreement that sets out each
partner’s rights and responsibilities
in a particular partnership?
Articles of partnership
What is the primary goal of a labor
union?
Secure its workers’ jobs
What term describes money that
can be easily divided into smaller
units of value?
Divisibility
What is considered a negative
impact caused by a strike?
Loss of profits
What term describes the coins and
paper bills used as money in a
society?
Currency
What term describes the direct
exchange of one good for another?
Barter
What term describes money that
has value because the government
has ordered that it is an acceptable
means to pay debts?
Fiat money
What is the gold standard?
A system in which a country’s
money is backed with gold
During the Free Banking Era
between 1837 and 1863, what
dominated U.S. banks?
State-chartered banks
Investors earn interest on the
bonds they buy, but what other
way can investors make money
from bond purchases?
Buying bonds at a discount
Why would an investor buy a junk
bond?
Junk bonds pay a potentially
higher level of interest than other
bonds
What term describes a period
during which the stock market falls
steadily?
Bear market
What term describes a bond
issued by a state or local
government authority?
Municipal bond
What term describes a business
that specializes in trading stocks?
Brokerage firm
Respectively, what term describes
the option to sell shares of stock at
a specified time in the future and
what term describes the option to
buy shares of stock at a specified
time in the future?
Put option
Call option
What are the Dow and the S&P
500?
Indexes that show the
performance of limited but
representative stocks
What term describes the dollar
value of all final goods and
services produced within a
country’s borders in a given year?
Gross domestic product (GDP)
What term describes an institution
for receiving, keeping, and lending
money?
Bank
What term describes the loss of
the value of capital equipment that
results from normal wear and tear?
Depreciation
What is a certificate of
incorporation?
A license to form a corporation
issued by the state government
What type of corporation issues
stock to only a few people, often
family members?
Closely held corporation
What term describes a certificate
issued by a corporation promising
to repay the amount it has
borrowed?
Bond
What are intermediate goods?
Goods used in the production of
final goods
What term describes a prolonged
economic contraction?
Recession
What term describes a steady,
long-term increase in real GDP?
Economic growth
What are the leading economic
indicators supposed to predict?
Business cycles
What term describes the process of
increasing the amount of capital
per worker?
Capital deepening
What term describes the lowest
point in an economic contraction?
Trough
How does one describe the saving
rate?
Proportion of disposable income
that is saved
What term describes GDP
expressed in unchanging prices,
divided by the total population?
Real GDP per capita
If the government uses tax money
to pay for long-term investments
such as roads or other
infrastructure, what happens to the
economy?
Increased capital deepening
What is labor productivity?
The amount of output produced
per worker
What term describes when a period
of steady work is followed by a
period of unemployment each
year?
Seasonal unemployment
What term describes when
unemployment rises during
economic downturns and falls
when the economy improves?
Cyclical unemployment
What term describes an increase
in efficiency gained by producing
more output without using more
inputs?
Technological progress
What is the term for a situation in
which a person is overqualified for
the job he or she has?
Underemployment
What term describes the study of
how people make decisions to
satisfy their needs and wants?
Economics
Respectively, what term describes
the rate of inflation excluding the
effects of food and energy prices
and what term describes the
percentage rate of change in price
levels over time?
Core inflation rate
Inflation rate
What does “full employment”
mean?
There is no cyclical unemployment
What term describes a price index
determined by measuring the price
of goods meant to represent the
“market basket” of a typical urban
consumer?
Consumer Price Index (CPI)
What term describes the ability to
purchase goods and services?
Purchasing power
Who buys and sells stocks on a
minute-by-minute basis to try to
make a profit?
Daytraders
What term describes rising wages
causing higher prices which cause
higher wages?
Wage-price spiral
What term describes when the
skills of workers do not match the
jobs that are available?
Structural unemployment