ECONOMICS FINAL Flashcards
What is an economy?
an economy is the sum total of all decisions regarding the allocation of resources in a given society
What is Economics?
the study of how scarce resources are used to meet supply and demand
What are the four resource types?
human, natural, capitalst, entrepreneurship
What is scarcity?
limited resources, unlimited wants
What is opportunity cost?
the total value of what you give up when you make a choice
What is utility?
the pleasure, satisfaction, or benefit a person receives from consuming a product or service or from taking an action
What is an incentive?
a thing that motivates or encourages one to do something
What is a disincentive?
tends to discourage people from doing something
What is comparative advantage?
the condition that exists when someone can produce a good or service at a lower opportunity cost than someone else
What is cost-benefit analysis?
estimates and totals up the equivalent money value of the benefits and costs to the community of projects to establish whether they are worthwhile.
What are the different types of economies?
traditional, command, pure market, and mixed
What are the characteristics of a traditional economy?
an economic system in which decisions about production and consumption are based on custom and tradition
What are the characteristics of a command economy?
an economic system in which decisions about production and consumption are made by a powerful ruler or government
What are the characteristics of a market economy?
an economic system in which economic decisions are left up to individual producers and consumers
What are the characteristics of a mixed economy?
an economic system in which both the government and individuals play important roles in production and consumption. most modern economies are mixed economies
Who was Adam Smith? What was Wealth of Nationns?
Scottish economist who wrote the wealth of Nations, pioneering the idea of market economy
What is the unemployment rate?
the percentage of the labor force that is seeking work.
What is frictional unemployment?
when someone is in-between jobs
What is structural unemployment?
advances in technology reduce the demand for certain skills
What is seasonal unemployment?
demand for labor depends on the season. businesses shut down for part of the year
What is cyclical unemployment?
occurs during periods of decline
What is economic growth?
a condition in which an economy is expanding and producing more and better goods and services
What is the business cycle?
a recurring pattern of growth and decline in economic activity overtime
What is self interest?
acting in a manner in your best interest
What is trade?
exchange of goods and services
What are the goals of any economy?
enrichment of everybody, survival, provide structure
What do we mean by Demand and Supply?
demand is how much consumers are able to purchase. Supply is how much is produced
What can cause shifts of the Demand Curve?
change in income, change in the number of consumers, change in consumer tastes and preferences, changes in consumer expectation, changes in the price of substitute goods, price of complementary
What can cause shifts of the Supply curve?
cost of inputs, number of producers, conditions (natural disaster) , technology, expeectations, government
What is money?
medium of exchange, unit of currency, store of value
What is the function of Households in the Circular Flow Model?
provide a labor force, purchase goods and services
What is the function of businesses in the Circular Flow Model?
produce goods and services
What are the different market types?
monopoly, oligopoly, perfect competition, monopolistic competition
What is the role of government in the Circular Flow Model?
programs to households, subsidizes businesses
What is the role of Financial Markets in the Circular Flow Model?
provide loans to businesses
What is GDP?
sum total of all final goods
What is GDP per capita?
measure of efficiency
What are some short-comings of GDP and GDP per capita as measures?
biased because of outliers
What is inflation?
devaluation of money
Describe the US economy
high GDP, high inflation
What is a public good?
available to anyone, nobody can be prevented from using it
What are taxes?
money paid to the government
What are the largest items in the US federal budget?
social security, medicare, welfare
What is the largest item in state budget?
Education
What is a deficit?
shortfall between revenues and expenditures for any given year
What is fiscal policy?
taxes and spending
Who controls fiscal policy?
Congress
When is expansionary fiscal policy used?
during a recession
When is contractionary fiscal policy used?
during inflation
Who controls monetary policy?
The Federal Reserve
