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Economy > Economics: Semester Exam Review > Flashcards

Economics: Semester Exam Review Flashcards

1
Q

What is economics?

A

Study of how we make choices using scarce resources to satisfy unlimited wants

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2
Q

What is the fundamental economic problem?

A

Scarcity

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3
Q

What are the 4 factors of production?

A
  1. Land
  2. Labor
  3. Capital
  4. Entrepreneuship
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4
Q

What is the difference between needs and wants?

A

Need - must have to survive
Want - Something desired

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5
Q

What is the difference between a good and service?

A

Goods are tangible (touchable) items
Service is work performed for someone else

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6
Q

What is scarcity?

A

There’s only a finite amount of resources - not enough resources to satisfy human wants

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7
Q

What is opportunity cost? List some examples.

A
  • The most desirable alternative given up when you make a decision.
    Ex: John studies all night, so the next day he is tired. Opportunity cost = a good night’s sleep
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8
Q

What is a production possibilities curve (PPC)? KNOW HOW TO READ

A

A graph showing 2 different goods you can produce when using resources.
- Straight line is constant cost
- Bowed out is decreasing
- Concaved is increasing

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9
Q

What is the importance of efficiency? What is underutilization?

A

Efficiency is an idea within the PPC, where the condition resources are being used to produce the maximum amount of goods and services.
Underutilization is when resources are not being used to their full potential

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10
Q

Explain the Guns and Butter scenario.

A

A nation chooses between 2 options - either guns (defense/military) or butter (consumer goods) or a combination

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11
Q

What is the significance of Adam Smith?

A
  • Father of economics
  • 1776 - wrote “Wealth of Nations”
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12
Q

Explain TINSTAFFL.

A

“There is no such thing as a free lunch”
- Goods and services must be paid by someone - don’t get something for nothing

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13
Q

What are the three basic economic questions?

A
  1. What will be produced?
  2. How will it be produced?
  3. Who will get what is produced?
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14
Q

What is a circular flow diagram? KNOW HOW TO READ

A

A visual that shows how we exchange money, resources (LLCE) and products in 2 types of markets

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15
Q

What is the difference between a factor market and a product market?

A

Factor - Make our money (sell resources)
Product - spend our money (buy goods and services)

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16
Q

What are the 4 types of economic systems?

A
  1. Traditional
  2. Market
  3. Command
  4. Mixed
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17
Q

What is an economic system?

A

A system to determine how resources will be used to provide for the wants and needs of people because of scarcity

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18
Q

What are the advantages of a traditional economy? (Hint: there are 6)

A
  • family/tribe based economy
  • simple/constant way things are done
  • works with natural environment
  • tradition determines who gets what
  • sharing/support
  • bartering (trading) heavily
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19
Q

What are the disadvantages of a traditional economy? (Hint: there are 5)

A
  • isolation
  • overwhelmed with outside economies
  • unpredictability creates uncertainties with survival (natural disasters)
  • economic stagnation (no economic growth) from lack of progress
  • lower quality of life
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20
Q

What are the advantages of a command economy? (Hint: there are 4)

A
  • industrial power boosted
  • citizens get free healthcare, edu., etc.
  • low unemployment
  • equal income; no extreme poor people
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21
Q

What are the disadvantages of a command economy? (Hint: there are 9)

A
  • corrupt leaders
  • restricted freedom
  • societal needs ignored
  • limited to propaganda
  • cut off from world
  • production of low quality goods
  • takes a large government
  • no competitions offered
  • unbalanced amounts of goods
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22
Q

What are the advantages of a market economy? (Hint: there are 6)

A
  • high degree of individual freedom
  • adjust change overtime
  • small degree of government interference
  • decentralized decision making
  • large variety of goods and services
  • private ownership of resources
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23
Q

What are the disadvantages of a market economy? (Hint: there are 3)

A
  • does NOT provide for everyone
  • may NOT provide enough basic goods/services
  • high degree of uncertainty
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24
Q

What is a traditional economy?

A

Economy where decisions are made based on customs and habits found in rural non-developed countries

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25
Q

What is a command economy?

A

All decisions made by government - centrally planned - decisions made for you NOT by you Ex: Cuba, North Korea, China

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26
Q

What is a market economy?

A

System where laws of supply and demand direct production of goods and services; buyer and sellers determine goods and services

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27
Q

What is a mixed economy?

A

Combines elements of all 3 systems

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28
Q

Japan (in terms of economy)
- What economy are they considered?
- What has contributed to their success?

A

Never communism - has always been a SUCCESSFUL CAPITALISTIC MARKET ECONOMY
- tech. advancement
- industrial robots
- cars

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29
Q

South Korea (in terms of economy)
- What is their history?
- What has contributed to their success on the global economy?

A

In the aftermath of the Korean War, South K’s economy was destroyed and considered the poorest country in Asia
- Leading producer in automobiles (Kia and Hyundai)
- skilled production and exports
- world trade in textiles
PERFECT EX. of economic change

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30
Q

Russia:
- What type of economy/gov. do they have?
- When did communism begin? How long? When did it fall?
- How many five-year plans?
- Who is Mikhali Gorbachev?
- Who is now leader?

A
  • A federal democratic state (on paper, but in practice, a dictatorship)
  • 1912-1991; lasted 79 years
  • Had 13 five year plans
  • 8th and final leader of USSR and introduced Perestroika (restructuring Soviet Union)
  • Vladimir Putin
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31
Q

What is a five-year plan?

A

Series of nationwide centralized economic plans designed to achieve rapid industrialization

32
Q

China:
- When did they become communists? Under whose lead?
- What was Great Leap Forward?
- What type of economy/gov. do they have?

A
  • 1949 under Mao Zedong
  • GLF - economic plan designed to transform China’s agrarian culture towards an industrialized one
  • Regarded as 1-party communist dictatorship in which communist party has a monopoly on power - transformed into socialist market economy
33
Q

What are 4 reasons nations trade?

A
  1. unequal distribution of resources
  2. different levels of tech.
  3. lack of raw materials
  4. specialization
34
Q

What is absolute advantage?

A

ability to produce more of a good using same resources

35
Q

What is comparative advantage?

A

Ability to produce a good at a lower opportunity cost than another

36
Q

What is the difference between a trade deficit and trade surplus?

A

Deficit - (negative balance) (also called trade gap) consists of a country importing more than it exports
Surplus - (positive balance) consists of exporting more than is imported

37
Q

What are the barriers of trade?

A
  1. tariffs - tax
  2. quotas - limit
  3. embargo - prohibit movement
  4. inspections
  5. licenses
  6. health concern
  7. nationalism and culture
38
Q

What is the Smoot-Harley Tariff Act of 1930?

A
  • Goal was to protect American farmers against agricultural imports
  • Raised prices 50% (highest protective tariff)
  • Increases U.S tariffs on agricultural imports
39
Q

What are imports?

A

Goods coming in

40
Q

What are exports?

A

Goods coming out

41
Q

What is the difference between fixed exchange rate and flexible exchange rate?

A

Fixed - currency system in which price does not change
Flexible (floating) - currency system that allows exchange rate to be determined by market (changes)

42
Q

What are the advantages of sole proprietorship? (Hint: There are 6)

A
  • Easy to start
  • Ease of management (full control)
  • ONLY receiver of profit
  • No separate business income tax
  • Psychological satisfaction
  • Easy to end
43
Q

What are the disadvantages of a sole proprietorship? (Hint: there are 6)

A
  • Unlimited liability - fully responsible for ALL losses and debts
  • Hard to raise financial capital
  • Being small
  • Limited managerial experience
  • Hard to get qualified employees
  • limited life
44
Q

What are the advantages of a partnership? (Hint: there are 5)

A
  • Easy to start
  • Easy to manage
  • Lack of separate taxes
  • Attract money
  • Potential for growth
45
Q

What are the disadvantages of a partnership? (Hint: there are 3)

A
  • Unlimited liability
  • Limited life
  • Potential for conflict
46
Q

What are the advantages of a corporation? (Hint: there are 5)

A
  1. Ability to attract capital (potential growth)
  2. Limited liability for owners
  3. Hire professional managers/experts
  4. Unlimited (long) life
  5. Ease of transferring ownership
47
Q

What are the disadvantages of a corporation? (Hint: there are 4)

A
  • Double taxation
  • Difficult, expensive, time consuming, hard to get a charter
  • Little voice (loss of control)
  • More regulations by gov. (Watched by government)
48
Q

What is the difference between a horizontal and vertical merger?

A

Horizontal - Involves 2 firms operating and competing in the same kind of business activity (ex: Merger of Exxon and Mobil)
Vertical - Merger between 2 companies producing different goods/services (ex: Pixar-Disney Merger)

49
Q

What is a multinational corporation (MNC)?

A

International corporations whose business activities are spread among 2+ countries

50
Q

What is a franchise? Who started it?

A

Renting/leasing another firm’s successful business model
- Issac Singer started franchises

51
Q

What is the difference between a franchisor and franchisee?

A

Franchisor - Actual owner of business that let owners rent/lease
Franchisee - investor who rents/leases business model from franchisor

52
Q

What are the advantages of franchises? (Hint: there are 4)

A
  1. Respected product, excellent quality, standards
  2. National advertising program
  3. Management training and support
  4. Centralized buying power- bulk buying
53
Q

What are the disadvantages of franchises? (Hint: there are 5)

A
  1. Sacrifices some freedom
  2. High fees and royalties
  3. Strict operating standards
  4. Purchasing restrictions
  5. Limited product line
54
Q

What are the 3 types of cooperatives?

A
  1. Consumer - retail outlet owned and operated by consumers
  2. Service - provide service rather than goods
  3. Producer - help members sell their products
55
Q

What was the Great Depression? How long did it last?

A

Was the worst economic downturn. Lasted 10 years (1929-1939)

56
Q

What is Black Tuesday? When was it?

A

Stock Market Crash
- October 29, 1929

57
Q

What year was the lowest point during the Great Depression?

A

1933 - Unemployment rose 800%

58
Q

Who was president in the beginning of the Great Depression?

A

Herbert Hoover

59
Q

Who was president for the remaining of the Great Depression?

A

Franklin D. Roosevelt

60
Q

What is the Labor Force? Who is NOT considered for the Labor Force?

A

Those who have jobs or seeking a job, are at least 16 years old, no serving in the military, and are not institutionalized.
NOT INCLUDED - military personnel – prison – handicapped/mental health facilities – rest homes – retirees – at home not looking (discouraged workers)

61
Q

What is full employment?

A

Unemployment is 3-6% due to only frictional and structural unemployment, not cyclical

62
Q

What does underemployed mean?

A

Workers who are very overqualified at their job

63
Q

What is a discouraged worker?

A

Considered the long-term unemployed - those who have given up on finding a job

64
Q

What are the 3 types of inflation?

A

Creeping - rise 3% or less
Galloping - rise 10% or more
Hyperinflation - rises 50% per month

65
Q

What are the 5 types of unemployment?

A
  1. Frictional - Occurs when people change jobs
  2. Structural - Occurs when workers’ skills do not match available jobs
  3. Technological - When people are replaces by technological advancements
  4. Seasonal - Occurs when jobs slow down or pick up with seasonal changes
  5. Cyclical - Occurs with the changes in the business cycle
66
Q

What is the Gross Domestic Product (GDP)?

A

The total market value of all FINAL goods and services produced within a country’s borders in 1 year

67
Q

What is not included in GDP?

A
  1. Intermediate goods
  2. Secondhand Sales
  3. Nonmarket transaction
  4. Underground economy
68
Q

What are the 4 sectors of the GDP?

A
  1. Household (Largest sector)
  2. Business/Investor
  3. Government
  4. Net Foreign
69
Q

What is the difference between urban and rural population?

A

Urban - 2500 or more
Rural - 2500 or less

70
Q

What are baby boomers?

A

Those born during high birthrate years
- 1946-1964

71
Q

What is fertility rate?

A

Rate at which the number of births in a population offsets U.S rate; barely above replacement population rate

72
Q

What is life expectancy?

A

Average remaining life span of a person who’s reached a given age

73
Q

What is net immgration?

A

Overall change in population caused by people moving in and out of the country

74
Q

What are some causes of poverty/income inequality?

A
  1. Education
  2. Wealth
  3. Tax law changes
  4. Decline in unions
  5. More service jobs
  6. Advances in tech.
  7. Monopoly power
  8. Discrimination
  9. Changing family structure
75
Q

What is the Lorenz Curve?

A

Graph representation of distribution of income or wealth

76
Q

What are some efforts to help the poor?

A

Antipoverty programs
- Welfare
- TANF (Temporary Assistance for Needy Families)
- Medicaid
- Social Service Planning
- Earned Income Tax Credit (EITC)
- Enterprise zones
- Workfare programs
- Negative income tax

Economy (11 decks)

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