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Economic > Economics 1 Study Guide > Flashcards

Economics 1 Study Guide Flashcards

1
Q

Economic system characterized by a central authority (government) that makes most of the major economic decisions.

A

Command Economy

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2
Q

Market economy in which privately owned businesses have the freedom to operate for profit with limited government intervention.
Also US Economy

A

Free Market/ Free Enterprise Economy

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3
Q

Economic system in which private citizens own and use the factors of production in order to generate profits.
3 Characteristics
1. Open Competition
2. Profit Motive of Produces
3. Private ownership of Property

A

Capitalism

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4
Q

Cost of the next best alternatives use of money, time, or resources, when one choice is made rather than another.

A

Opportunity Cost

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5
Q

Economic a political system in which factors of production are collectively owned and directed by the state (government); a theoretically classless society in which everyone works for a common good.
- No religion
- No government
- No money
- Everyone is socially and economically equal
-Everyone has food, water, and shelter

A

Communism

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6
Q

Risk-taking individuals who introduce new products or services in search of profits; one of the four factors of production.

A

Entrepreneur

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7
Q

Economic system in which government own some factors of production and has a role in determining what and how goods are produced.
Government tries to make everyone socially, politically, and economically equal.

A

Socialism

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8
Q

Metaphor, introduced by the 18th - century Scottish philosopher and economist (Adam Smith), that characterizes the mechanisms through which beneficial social economic outcomes may arise from the accumulated self-interest action of individuals, none of whom intends to bring about such outcomes.

A

Invisible Hand

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9
Q

Economic system that has some combination of traditional command, and market economies; also see modified free enterprise economy. Also US Economy

A

Mixed (Market) Economy

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10
Q

Fundamental economic problem facing all societies resulting from a combination of (limited) resources ad people’s virtually unlimited needs and wants.

A

Scarcity

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11
Q

Productive resources needed to produce goods or services; the four factors are land, labor, capital, and entrepreneurship.

A

Factors of Production

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12
Q

Something that motivates.

A

Incentives

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13
Q

People who buy or use goods and services to satisfy their wants and needs.

A

consumer

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14
Q

A combination of quantities that someone would be willing to buy over a range of possible prices at a given moment.

A

demand

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15
Q

A condition or state in which economic forces are balanced.

A

equilibrium

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16
Q

The highest legal price that can be charged for a product.

A

Price Ceiling

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17
Q

A curtail (reduction) of the freedom of market participants or grants special privileges.

A

Regulation

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18
Q

The lowest legal price that can be paid in the market for goods and services, labor, or financial capital.

A

Price Floor

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19
Q

A person or organization that makes goods or provides service.

A

Consumer Sovereignty

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20
Q

Theoretical market structure characterized by a large number of well-informed independent buyers and sellers who exchange identical products and have freedom of entry and exit.

A

Perfect Competition

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21
Q

Market structure having all conditions of pure competition except for identical products.
- A form of imperfect competition.

A

Monopolistic Competition

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22
Q

A person or organization that makes goods or provides service.

A

Producer

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23
Q

Amount of a product a producer or seller would be willing to offer for sale at all possible prices in a market at a given point in time.

A

Supply

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24
Q

A measure of responsiveness that tells us how a dependent variable, such as quantity demand or quantity supplied, responds to a change in an independent variable such as price.

A

Elasticity

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25
Q

Money flows from producer to workers as wages, and flows back to producers as payment for products.

A

Circular Flow

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26
Q

Market structure in which a few large sellers dominate and have the ability to affect prices in the industry.
- A form of imperfect competition.

A

Oligopoly

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27
Q

Market structure characterized by a single producer.

A

Monopoly

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28
Q

Systematic changes in real GDP market by alternating periods of expansion and connection

A

Business Cycle

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29
Q

Use of government spending and revenue collection measures to influence the economy.
- Changes in government spending
- Changes in tax rates and rules

A

Fiscal Policy

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30
Q

Sustained rise in the general level of prices of goods and services.
The purchasing power of the dollar decreases.
Healthy rate: 2% - 3%

A

Inflation

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31
Q

Index used to measure price changes for a market basket of frequently used consumer items.

A

Consumer Price Index (CPI)

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32
Q

Monetary value of all final goods, services, and structures produced within a country’s national border during a one-year periods.

A

Gross Domestic Product (GDP)

33
Q

Government payment to encourage or protect a certain economic activity.

A

Subsidy

34
Q

Government spending and taxation policies suggest by John Maynard Keynesian to stimulate the economy.

A

Keynesian Economic Theory

35
Q

Actions by the Federal Reserve System (FED) to expand or contact the money supply to affect the cost of availability of credit.
- Buying/Selling government securities
- Changing the reserve requirement
- Changing interest

A

Monetary Policy

36
Q

Helps to measure the health of a economy.
5% - Healthy Rate

A

Unemployment Rate

37
Q

Privately owned, publicly controlled, central bank of the United States.

A

Federal Reserve System

38
Q

A tax percentage of income paid in tax, rates rises as level of income rises.

A

Progressive Tax

39
Q

A tax in which percentage of income paid in tax is the same regardless of the level of income.

A

Proportional Tax

40
Q

A tax where percentage of income paid in tax goes down as income rises.

A

Regressive Tax

41
Q

A contract agreement in which a borrower receives a sum of money or something of value and repays the lender at a later date, generally with interest.

A

Credit

42
Q

The efficiency or ease with which as asset or security can be converted into ready cash washout affecting its market price.

A

Liquidity

43
Q

A risk management strategy that mixes a wide variety of investments within a portfolio.

A

Diversification

44
Q

The original sum of money borrowed din a loan or put into an investment.

A

Principal

45
Q

To commit money in order to earn a financial return.

A

Investment

46
Q

A concept that states that the higher the risk of an investment the higher the possible return.

A

Risk v Reward

47
Q

An employee benefit that commits the employer to make a regular contribution to a pool of money that is set aside in order to fund payments made to eligible employees.

A defined benefit plan guarantees a set monthly payment for life or a lump sum payment at retirement.

The most common form or retirement savings plan many American employers offer to employees.

A

401K /Pension

48
Q

An employee benefit that commits the employer to make a regular contribution to a pool of money that is set aside in order to fund payments made to eligible employees.

A

401K/Pension

49
Q

A define benefit plan guarantees a set monthly payment for life or a lump sum payment at retirement.

A

401K/Pension

50
Q

The most common form of retirement savings plan many American employers offer to employees.

A

401k/Pension

51
Q

A fixed-income instrument that represents a loan made by an investor to a borrower.

A

Bonds

52
Q

The amount a lender charges a borrower and is a percentage of the principal - the amount loaned.

A

Interest Rate (APR)

53
Q

Something, usually money, borrowed by one party from another.

A

Debt

54
Q

A security that represents the ownership of a fraction of a corporation

A

Stocks

55
Q

A type of financial vehicle made of a pool of money collected from any investors to invest in securities like stocks, bonds, money market instruments, and other assets.

Operated by professional money managers, who allocate the fund’s assets and attempt to produce income for fund’s investors.

A

Mutual Funds

56
Q

A product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time.

A

Certificate of Deposit (CD)

57
Q

Interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

A

Compound Interest

58
Q

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

A

Absolute Advantage

59
Q

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

A

Comparative Advantage

60
Q

The value of a nation’s currency in relation to a foreign country.

A

Exchange Rate

61
Q

A good or service sent to another country for sale.

A

Exports

62
Q

A good or service brought in from another country for sale.

A

Imports

63
Q

The lowering or elimination of protective tariffs and other trade barriers between two or more nations.

A

Free Trade

64
Q

The increasingly tight interconnection of producers, consumers, and financial systems around the world.

A

Globalization

65
Q

The shared need of countries for resources, goods, services, labor, and knowledge supplied by other countries.

A

Interdependence

66
Q

The practice of contracting with another company to do a specific job that would otherwise be done by a company’s own workers.

A

Outsourcing

67
Q

The use of trade barriers to shield domestic industries from foreign competition.

A

Protectionism

68
Q

Level of economic prosperity.

A

Standard Living

69
Q

Taxes imported on goods.
The amount of good or service that a producer is willing and able to supply at a specific price.

A

Tariffs/Quotas

70
Q

Who is Adam Smith?

A

Adam Smith was an 18th-century Scottish philosopher; he is considered the father of modern economics. Smith is most famous for his 1776 book, “The Wealth of Nations.” Smith’s writings were studied by 20th-century philosophers, writers, and economists.

71
Q

What did Adam Smith invent?

A
  • Division of Labor
  • Specialization
72
Q

Why do Nations trade?

A

Nations trade because it allows them to access goods and services they cannot efficiently produce themselves by specializing in products where they have a comparative advantage, utilizing their unique resources, and benefiting from economies of scale, ultimately leading to increased economic prosperity for all involved parties.

73
Q

What are the two fundamental principles of trade among nations?

A
  • Division of labor
  • Specialization
74
Q

Countries can specialize in what they produce

Making products for domestic and trade means that they can make the products in bulk, increasing cost benefits, benefiting the economy

Increased competition, lower prices, higher purchasing power to consumers, and more consumers

Fewer domestic monopolies

Quality of goods and services increase

Increase in employment, benefiting the economy

A

Advantages of Trade

75
Q

Over specialization, which would hurt the economy and cause unemployment if the good or service is no longer in demand

Certain industries do not get a chance to grow

Local producers make suffer because of cheaper imports

A

Disadvantages of Trade

76
Q

What is a traditional economy?

A

A traditional economy is an economic system where people use customary means to provide for themselves, such as hunting, fishing, gathering, or farming. In a traditional economy, customs and traditions are more important than money, and people use skills passed down from previous generations.

77
Q

Who wrote the “Communist Manifesto”?

A
  • Karl Marx
    &
  • Friedrich Engels
78
Q

What type of economy does the U.S have?

A
  • Free enterprise economy
    &
  • Mixed Economy
79
Q

Factors of production?

A
  • Capitalism
  • Labor
  • Land
  • Entrepreneurship

Economic (5 decks)

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