Economics

Question 1

economics

Answer 1

the study of human behavior in response to the production, consumption, and distribution of assets or wealth

Question 2

subgroups of economics

Answer 2

microeconomics macroeconomics

Question 3

microeconomics

Answer 3

the study of individual or small group behaviors and patterns in relationship to such things as earning and spending money

Question 4

macroeconomics

Answer 4

focuses on how a society or nation’s goods, services, spending habits, and other factors affect the people of that entity

Question 5

scarcity

Answer 5

created through limited resources and high demands

Question 6

economic systems

Answer 6

determine what is being produced, who is producing it, who receives the product, and the money generated by the sale of the product

Question 7

types of economic systems

Answer 7

market economies and planned or command economies

Question 8

market economies

Answer 8

• privately owned businesses, groups, or individuals providing goods or services based on demand
• the types of goods and services provided (supply) are based on that demand
• two types: competitive market and free market

Question 9

competitive market

Answer 9

due to the large number of both buyers and sellers, there is no way any one seller or buyer can control the market or price

Question 10

free market

Answer 10

voluntary private trades between buyers and sellers determine markets and prices without government intervention or monopolies

Question 11

planned or command economies

Answer 11

• the government or central authority determines market prices of goods and services
• government or central authority determines what is being produced as well as the quantity of production
• some advantages to command economies include a large number of shared goods such as public service (transportation, schools, or hospitals)
• disadvantages include wastefulness of resources

Question 12

factors of production

Answer 12

used to create goods and services to make economic profit

Question 13

four factors of production

Answer 13

land: both renewable and nonrenewable resources
labor: effort put forth by people to produce goods and service
capital: the tools used to create goods and services
entrepreneurship: persons who combine land, labor, and capital to create new goods and services

Question 14

supply

Answer 14

amount of a product that a market can offer

Question 15

demand

Answer 15

the quantity of a product needed or desired by buyers

Question 16

taxes

Answer 16

• generate government revenue
• discourage purchase or use of “bad” products such as alcohol or cigarettes

Question 17

subsidies

Answer 17

• lower the price of goods and services
• reassure the supply of goods and services
• allow opportunities to compete with overseas vendors

Question 18

price controls

Answer 18

• act as emergency measures when government intervention is necessary
• set a minimum or maximum price for goods and services

Question 19

distribution of income

Answer 19

how wages are distributed across a society or segments of a society

Question 20

product market

Answer 20

places where goods and services are bought and sold

Question 21

Gross Domestic Product (GDP)

Answer 21

monetary measure of goods and services made either quarterly or annually

Question 22

perfect competition

Answer 22

• several businesses are selling the same product at the same time
• so many businesses and consumers that none will directly impact the market
• each business and consumer is aware of the competing businesses and markets

Question 23

profit maximization

Answer 23

• firms decide the quantity of a product that needs to be produced in order to receive maximum profit gains. profit is the total amount of revenue made after subtracting costs.

Question 24

short run

Answer 24

• a short amount of time where fixed prices cannot be adjusted
• the quantity of the product depends on the varying amount of labor. less labor means less product

Question 25

long run

Answer 25

- an amount of time where fixed prices can be adjusted - firms try to maximize production while minimizing labor costs

Question 26

types of unemployment

Answer 26

cyclical, frictional, and structural

Question 27

cyclical unemployment

Answer 27

the product of business cycle. this usually occurs during a recession

Question 28

frictional unemployment

Answer 28

the difficulty of matching qualified workers for specific jobs. an example would be a person changing careers.

Question 29

structural unemployment

Answer 29

when a person no longer qualifies for a specific job, or failing out of a retraining course for a job

Question 30

inflation

Answer 30

cost of goods and services rise over time

Question 31

Consumer Price Index (CPI)

Answer 31

tracks price changes of goods and services over time

Question 32

hyperinflation

Answer 32

when inflation rates increase to over 50 percent

Question 33

deflation

Answer 33

cost of goods and services decrease over time, inflation rates drop below zero percent

Question 34

business cycle

Answer 34

when the GDP moves downward and upward over a long-term growth trend. this helps determine where the economy currently stands and where it could be heading.

Question 35

phases of business cycle

Answer 35

expansion peak contraction trough

Question 36

expansion phase

Answer 36

- increased employment rates and economic growth - production and sales increase - on a graph, expansion is where the lines climb

Question 37

peak phase

Answer 37

- employment rates are at or above full employment and the economy is at a maximum productivity - on a graph, the peak is the top of the hill, where expansion as reached its maximum

Question 38

contraction phase

Answer 38

- when growth is on the rise - unemployment is on the rise - on a graph, it is where the graph begins to slide back down or contract

Question 39

trough phase

Answer 39

- the cycle has hit bottom and is waiting for the next cycle to start again - on a graph, it is the bottom of the contraction prior to when it starts to climb back up

Question 40

fiscal policy

Answer 40

the government is involved in adjusting spending and tax rates to assist the way in which an economy financially functions

Question 41

forms of money

Answer 41

commodity, fiat, and bank

Question 42

commodity money

Answer 42

money as a valuable good, such as precious metals

Question 43

fiat money

Answer 43

the value of the good set by supply and demand rather than the actual value it represents, such as paper money

Question 44

bank money

Answer 44

money that is credited by a bank to those who deposit it into bank accounts, such as checking and savings accounts or credit

Question 45

3 main purposes of the Central Bank

Answer 45

- manage monetary growth to help steer the direction of the economy - be a backup to commercial banks that are suffering - provide options and alternatives to government taxation

Question 46

types of monetary policy

Answer 46

expansionary monetary policy & contractionary monetary policy

Question 47

expansionary monetary policy

Answer 47

- increases the money supply - lowers unemployment - increases consumer spending - increases private sector borrowing - possibly decreases interest rates to very low levels, even near zero - decreases reserve requirements and federal funds

Question 48

contractionary monetary policy

Answer 48

- decreases the money supply - helps control inflation - possibly increases unemployment due to slowdowns in economic growth - decreases consumer spending - decreases loans and/or borrowing