Econ exam review Flashcards
Productions possibility curve
graph that shows possible quantities that can be produced by 2 products
economic independence
ability of an individual to be self-sufficient
capital goods
tools, equipment, machinery, and factories used in production of goods and services
trade-offs
things you give up
opportunity cost
your next best option when making a choice
goods
a real tangible item that has a use and satisfies a want
services
work that is performed by someone
circular flow
economic model that shows exchange of money for goods and services in our economy
law of supply
as price inc, business inc production; as price dec, business will dec production
law of demand
when consumers willing to buy more of a product at a lower price and less at higher prices
determinants of demand
income, substitutes, complements, consumer tastes, expectations, price
determinants of supply
cost of resources, productivity, technology, taxes, subsidies, expectations, government regulations, number of sellers
elasticity of demand
measurement that shows how a change in quantity demanded responds to a change in price
elasticity of supply
measure of quantity supplied to a change in price
3 big questions of economics
what will be produced, how will it be produced, how will it be distributed
scarcity
society doesn’t have enough of the resources to produce everything we want
factors of production
land, labor, entrepreneurship, capital goods
entrepreneurship
most powerful people in economy, start businesses, and have ideas
traditional economies
getting resources based and other econ activities based on ritual, tradition, custom
command economies
government (central authority) tells you what to make
market economies
supply and demand
mixed economies
traditional, command, and market -> poor
free enterprise
capitalistic econ where resources privately owned and competition allowed to flourish without government involvement
role of consumers in economy
consumers rule economy and decide what is made
fixed costs
costs that are independent of volume (rent, insurance)
variable costs
costs that change as the volume changes (gas, labor)
gross domestic product (GDP)
$ value of all our final goods and services and structures produced within a country during 1 yr per
real gdp
GDP after adjustment for inflation
business cycles
regular inc/dec in real gdp overtime in econ
phases of business cycle
- peak: real gdp stops growing
- recession: decline in real gdp
- trough: econ turning around
- recovery: uninterrupted growth
recession
decline in real gdp
depression
state of econ with high unemployment, Dec incomes, shortages, general econ hardships
inflation
inc in general level of prices for goods and services
federal reserve
central bank of u.s., is controlled by member banks
consumer price index
stat series used to measure changes in price level overtime
deflation
Dec in general level of prices for goods and services
stagflation
higher inflation with low econ growth and high unemploymment
hyperinflation
extreme inflation of 500%
types of unemployment: structural
need for less workes
types of unemployment: cyclical
response to change in business cycle
types of unemployment: technological
demand for certain jobs dec around change of seasons
types of unemployment: fricitonal
short term when workers in btwn jobs
Adam smith
an inquiry into the nature and causes of the wealth of nations
“the invisible hand”
how free markets can motivate individuals, acting in their own self-interest to produce what society needs
types of taxes: proportional
takes same % amount from high and low income
types of taxes: progressive
take larger share of income from rich compared to poor
types of taxes: regressive
take larger share from poor compared to rich
main source of tax revenue for local, state, and national government
local: property taxes
state: income and sales taxes
national: individual/corporate income taxes, social insurance taxes (social security)
stock market
a set of exchanges and other reserves where shares of publicly held companies are bought and sold
monetary policy
focused on interest rates and $ supply, governments plan to control currency and circulation of wealth in econ
interest rates
proportion of a loan that is charged as interest to the borrower (annual % of loan)
income
$ received, normally on regular basis for work or thru investments
price controls
price floor: lowest legal price can charge for product
price ceiling: highest legal price can charge for product
budget deficit
when spending of federal government is > revenue brought in
national debt
total amount of $ that a country’s government has borrowed
subsidies
sum of $ by government or public body to help an industry or business so price of service always stays low/competitive
free trade
international trade
protectionalism
practice of shielding a country’s domestic industries from foreign competitors by taxing imports
tariffs
tax or duty to be paid on a particular class of imports or exports
