Final Exam Flashcards
The economic equivalent of the evolutionary idea of survival of the fittest
Economic Darwinism
Equally distributing a nation’s pool of wealth to all its citizens
Economic leveling
If a business firm takes a _______ ___________ approach, it relies more on human labor
Labor intensive
During times of _________ _________, a nation’s business firms increase their production of goods and services with greater efficiency
Intensive growth
Goods that individuals purchase for personal use
Consumer goods
What firms use to produce other consumer items
Capital goods
Firms that mostly use automated equipment for labor
Capital intensive
The only economic right a nation should entitle to its citizens is the right to own and use property without government interference
Libertarian fairness
Each person in a nation has a right to a part of that nation’s wealth simply because they are a part of the human race
Egalitarian fairness
An increase in the quantity of goods and services a nation can produce
Economic growth
What is a society’s economic problem?
How best to accomplish its economic goals
How is the consumer goods/capital goods trade off a matter of spending vs. saving?
When people spend money for consumer goods rather than save it, financial institutions do not have money available to loan to businesses and the inverse is true
What way does the bible give for a person to generate his own personal income? Give a bible verse to support this.
Work- Proverbs 10:4, Proverbs 12:27, Proverbs 22:29
What should be the standard that Christians use to answer the distribution question?
Scripture
How is unemployment a problem for society?
Waste of human labor and is usually accompanied by poverty, crime, and despair
True/ False: What will be produced is one of the three critical questions every society must answer when seeking to meet its economic goals.
True
True/ False: Loving your neighbor isn’t one of the three biblical principles that provide a basis for our treatment of the poor.
False
True/ False: A labor intensive business uses a lower number of workers than a capital intensive business.
False
True/ False: With extensive growth, an economy produces less goods and services by decreasing its amount of land, labor, and capital.
False
True/ False: A low level of unemployment and a fair distribution of income are two of the four economic goals most societies have.
True
Socialism in its most extreme form
Communism
When a nation’s government assumes ownership of companies on a large scale
Nationalism
When the national government should be both the central owner and decision maker in all economic affairs of the state
Centralized socialism
High taxes and redistributed funds OR a nation under extreme state capitalism
Welfare state
To let alone OR what Adam Smith saw as the true path to national enrichment
Laissez faire
True/ False: When a nation buys more goods from other nations than it sells to them, that nation has a favorable balance of trade.
False
True/ False: Eastern European nations pioneered the economic policy of mercantilism.
False
True/ False: With capitalism, the government generally has more control over the private business owner.
False
True/ False: Public goods are usually provided by government because business firms could not supply them and make a profit.
True
Capitalism in its most extreme form, really only exists as an economic theory
Radical capitalism
When a nation sells more goods to other nations than it purchased from them
Favorable balance of trade
Private citizens own the vast majority of natural resources, financial capital, and labor but the government freely intervenes in economic decision making
State capitalism
Marx argued that any arrangement of the tools of production short of total state ownership would be counterproductive
Communist Manifesto
Form of capitalism that arose from the writings of Adam Smith
Classic liberal capitalism
Good and services that benefit all or nearly all of a nation’s people
Public goods
Transitional economic system bridging the gap between capitalism and socialism
Social democracy
When a government decides to sell their nationalized businesses back to private stockholders
Privatization
More government control in an economy
Socialism
Less government control in an economy
Capitalism
What was the major economic goal of European countries from the 1500’s to 1700’s?
Mercantilism, wanted to increase their holdings of gold and silver
Name three economic systems and for each one answer who owns the factors of production and who owns the three key economic questions.
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Name two economic principles of capitalism supported by Scripture and give a reference for each.
1) private ownership of property- Acts 5:4
2) principle of individual accountability- Luke 12:47-48
According to Adam Smith, what are the two keys to the economic prosperity of a nation?
1) limited government
2) personal responsibility
According to Adam Smith, what were two flaws in mercantilist economic policy?
1) the nation would exploit its resources to accumulate gold and silver at the expense of its own people
2) the aggressive actions of the mercantilist nation would create enemies
True/ False: Exploration is not one of the five points of mercantilism.
False
True/ False: The full title of Adam Smith’s landmark economic treatise is “An Inquiry Into the Nature and Causes of Nations”.
False
True/ False: According to the classical definition, liberalism does not equal liberty.
False
True/ False: One of the three functions of government according to Adam Smith is to protect its citizens from foreign invasion.
True
True/ False: Because it denies the legitimacy of government, radical capitalism is approved by Scripture.
False
General public owns and government manages
Public corporation
After buying shares of this, a person becomes owner of part of a corporation
Stock
Owned by individual citizens
Private corporation
Business with at least one general partner who has unlimited financial liability
Limited partnership
The lender
Creditor
A business enterprise with two or more persons as the owners
Partnership
True/ False: A limited partner holds all management responsibilities and makes all business decisions.
False
A separate entity recognized by law
Corporation
The act of becoming security for or pledging to undertake another’s debt
Surety
A business firm with one owner
Sole proprietorship
Sets money in the business and has the right to inspect the books and share in the profits of the firm
Limited partner
When a credit-worthy person promises to pay a loan if the original borrower cannot
Cosigning
What are three advantages of a sole proprietorship?
1) freedom to enter/exit the market easily
2) freedom from outside control
3) freedom to retain info
What are the disadvantages of a partnership?
1) unlimited personal financial liability
2) uncertain life
3) potential conflicts between the partners
What are three advantages of incorporation?
1) limited personal financial liability
2) experienced management and specialized employees
3) continuous life
An LLC combines the benefits of which two forms of business ownership?
Partnership and corporation
According to the law, what is a corporation and what are it’s important properties?
An artificial being, invisible, intangible, and existing only in the contemplation of the law
Important properties: immortality and individuality
True/ False: Two of the advantages of a partnership are greater management skills and greater possibilities of keeping competent employees.
True
True/ False: Two of the disadvantages of a sole proprietorship are unlimited personal financial liability and limited life.
True
True/ False: Scripture warns against becoming surety for another’s debts.
True
True/ False: Two of the disadvantages of incorporation are lower taxes and less government regulation.
False
True/ False: Corporations are the most common form of business organizations in the USA.
False
A distribution of a portion of a corporation’s profits
Dividends
Stockbrokers work for this fee
Commission
Where merchants trade stocks
Stock exchanges
The most well known stock index
DJIA
True/ False: The S&P 500 is intended to give a broad perspective on business in the US.
True
When stock prices rise in an industry of across the entire market simply because of expectations and they rise in excess of the corporations’ true value
Speculative bubble
A group of stocks high are organized to help identify trends in certain industries
Stock indexes
True/ False: An IPO is known as an Initial Private Offering.
False
Founded by the government in 1934 to help ensure that corporations provide accurate and current info to the public about their financial situations and business dealings
Securities and exchange commission
Those who buy and sell stocks for the purpose of taking advantage of short-term price changes are engaging in this practice
Speculation
One of the most well-known stock markets
New York Stock Exchange
A person who generally works for a brokerage company and who specializes in buying and selling stocks on behalf of clients
Stockbroker
The most prevalent type of stock that companies offer and represents true ownership of the firm
Common stock
Another name for stock traders
Floor traders
Another of the most well-known stock markets
NASDAQ
Shareholders who own this type of stock receive their share payments before all others
Preferred stock
Used to be paper from a stock ticker but is now an electronic message board
Tape
Privately managed stock portfolios
Mutual funds
List three reasons that stock markets are important to the economy.
1) provide a place where corporations can raise needed revenue
2) provide opportunities for individuals to invest
3) provide valuable info concerning the state of the nation’s economy
Identify each of the following as being associated with common or preferred shares of stock:
A. Shareholders receive dividends first
B. Owners have voting rights
C. Considered true ownership
A. Preferred
B. Common
C. Common
When and why was the SEC founded?
Founded following the Great Depression in order to protect investors by regulating brokers and exchanges and ensuring that corporations provide accurate info
In what two ways is a stock market like other markets?
It is a place for people who want to buy and sell to come together and the price of things are based on what consumers are willing to pay
Owning shares of stock not only makes a person a partial owner of a corporation but also gives that person what other opportunity?
Vote on business decisions proposed by the board of directors
True/ False: The NASDAQ is the largest stock exchange in the US that has no trading floor.
True
True/ False: The S&P 500 tracks industrial production along with other types of industries.
True
True/ False: “Buy high, sell low”.
False
True/ False: Stock exchanges originated in Ireland and Belgium.
False
True/ False: The first stock exchange in the US developed in Philadelphia in 1790.
True
When firms sell the same good to different buyers at different prices
Price discrimination
When firms require smaller companies to purchase their full line of products
Tying contracts
When the government allows a firm an exclusive right to provide a good or service
Legal monopoly
An agreement among a small number of producers to reduce their output and increase prices
Collusion
Many producers of slightly differentiated goods
Imperfect competition
True/ False: With perfect competition, no single firm controls the price of products.
True
True/ False: Barriers to entry may be either natural or artificial.
True
True/ False: Differentiated products are exactly alike, regardless of which firm produced them.
False
True/ False: Industry refers to the arrangements that people have developed for trading with one another.
False
“Selling by a few”
Oligopoly
The arrangements that people have developed for trading with one another and competition is the struggle each firm experiences as it seeks to survive and then thrive within those arrangements
Market
Visibly different from one firm to another
Differentiated products
Occur when firms already in the industry own all a vital natural resource that a new firm would need to enter the market
Natural barrier to entry
Form of market organization in which there is only one supplier in the industry
Monopoly
When a firm controls 100% of a resource that is essential to an industry
Natural monopoly
When a firm places one or more directors on the boards of competing firms
Interlocking directorates
When the head of a large company persuades other firms to put their stock in one account
Trust
Agreement among a small number of producers to reduce their output and increase prices
Collusion
What is an industry?
A group of businesses that sell a similar product, sell to a certain group of customers, or produce their product in a similar way
List the four different characteristics of market organization.
1) number of firms in the industry
2) differences in products sold
3) control of price
4) ease of entering/exiting market
What government agency was created to enforce a particular act from 1914 and what additional responsibility was it later given?
Federal Trade Comission- consumer protection
Why is it extremely difficult for a monopolistic firm to exit the industry?
The firm is the sole provider of a product or service
What type of business is one of the best examples of perfect competition?
Farming a certain crop (soybeans, corn, wheat, etc)
What is the most prevalent form of competition in America today?
Imperfect competition
What is the most important characteristic of an oligopoly and what does this term mean?
Mutual interdependence- the production decisions of one firm affect the profits of another
List three of the five congressional acts that were passed between 1890 and 1950 to preserve competition.
1) Sherman Anti-Trust Act of 1890
2) Clayton Act of 1914
3) Robinson-Patman Act of 1936
What is the difference between a monopoly and a trust?
Monopoly- one business
Trust- multiple businesses acting as one under the same manager
True/ False: An anticompetitive takeover is when a few big companies require that smaller companies guy from them and purchase their full line of products.
False
True/ False: A legal monopoly is when the government does not allow a firm the exclusive right to provide a good or service.
False
True/ False: A cartel has nothing to do with collusion.
False
An oligopoly composed of two business firms
Duopoly
Exists when there are many producers selling an identical product, no single firm controls the price, and businesses find it relatively easy to enter and exit the market
Perfect competition
How does Romans 12:2 apply to the development of the one’s opinions?
The renewing of the mind will transform a person’s ideas about public policy
Identify the four stages of public policy development.
1) identifying the issue
2) setting the agenda
3) formulating policy
4) implementation and evaluation
What are the basic modern implications of the words “liberal” and “conservative”?
Liberalism- implies a belief that more government influence is better
Conservatism- usually implies a reluctance to expand government authority
How are executive and judicial branches of government involved in public policy?
Executive branch- State of the Union address, executive orders, treaties, and diplomatic agreements
Judicial branch- court decisions
Why must politicians be wary of public opinion?
Public opinion may change quickly and may also be based on incorrect info
True/ False: Another name for an interest group is “influence group”.
False
True/ False: The media would never give up certain info more extensive or prominent coverage to manipulate the public.
False
True/ False: Three of the five categories of interest groups are economic, single-interests and civic.
True
True/ False: With opinion polls, different wording of specific questions never really leads people to make different responses.
False
True/ False: Some public opinion issues have lasting interests while others are short-lived.
True
The arrangements that people have developed for trading with one another and competition is the struggle each firm experiences as it seeks to survive and then thrive within those arrangements
Market
Visibly different from one firm to another
Differentiated products
Occur when firms already in the industry own all a vital natural resource that a new firm would need to enter the market
Natural barrier to entry
Form of market organization in which there is only one supplier in the industry
Monopoly
When a firm controls 100% of a resource that is essential to an industry
Natural monopoly
When a firm places one or more directors on the boards of competing firms
Interlocking directorates
When the head of a large company persuades other firms to put their stock in one account
Trust
Agreement among a small number of producers to reduce their output and increase prices
Collusion
What is an industry?
A group of businesses that sell a similar product, sell to a certain group of customers, or produce their product in a similar way
List the four different characteristics of market organization.
1) number of firms in the industry
2) differences in products sold
3) control of price
4) ease of entering/exiting market
What government agency was created to enforce a particular act from 1914 and what additional responsibility was it later given?
Federal Trade Comission- consumer protection
Why is it extremely difficult for a monopolistic firm to exit the industry?
The firm is the sole provider of a product or service
What type of business is one of the best examples of perfect competition?
Farming a certain crop (soybeans, corn, wheat, etc)
What is the most prevalent form of competition in America today?
Imperfect competition
What is the most important characteristic of an oligopoly and what does this term mean?
Mutual interdependence- the production decisions of one firm affect the profits of another
List three of the five congressional acts that were passed between 1890 and 1950 to preserve competition.
1) Sherman Anti-Trust Act of 1890
2) Clayton Act of 1914
3) Robinson-Patman Act of 1936
What is the difference between a monopoly and a trust?
Monopoly- one business
Trust- multiple businesses acting as one under the same manager
True/ False: An anticompetitive takeover is when a few big companies require that smaller companies guy from them and purchase their full line of products.
False
True/ False: A legal monopoly is when the government does not allow a firm the exclusive right to provide a good or service.
False
True/ False: A cartel has nothing to do with collusion.
False
An oligopoly composed of two business firms
Duopoly
Exists when there are many producers selling an identical product, no single firm controls the price, and businesses find it relatively easy to enter and exit the market
Perfect competition
What term implies that a merchant must accept in the payment of debts whatever the government declares to be money?
Legal tender
What three functions does money serve?
1) a means of payment for goods and services
2) a measure of value
3) a means of storing purchasing power
What characteristics should an effective monetary system possess?
1) convenience
2) portability
3) divisibility
4) durability
5) stability
What are the three kinds of money that can circulate in an economy?
1) commodity money
2) representative money
3) fiat money
Name the two measures of the money supply discussed in the book and list what each includes.
1) M-1: comprises paper currency, coins, traveler’s checks, and checking accounts
2) M-2: comprises a variety of savings accounts and M-1
What does it mean to say that the United States has a dual banking system?
There are banks regulated by state charters and banks regulated by national charters
What are the three functions of commercial banks?
1) accepting deposits
2) extending loans
3) providing miscellaneous services
Which type of thrift usually originates with a group of people who have something in common (usually employment)?
Credit unions
Give an example of a contractual saving institution.
Insurance companies
Name an advantage and a disadvantage of the traditional money system used on Yap Islands.
Advantage- very easily identifiable
Disadvantage- lack of portability
How does money act as a store of purchasing power?
By keeping its face value, money can be received and exchanged for something at one time and for something of comparable value at a later time
Which characteristic of money do you consider the most important and why?
Opinion
Are today’s coins full-bodied or token coins? Explain.
Token coins, because the metal in them is of less value than their face value
What is the name given to unbanked money when it is issued by a government decree?
Fiat money
What two factors keep the fiat system functioning?
1) faith that others will accept the money that we have accepted
2) a limited quantity of that money
What type of money does the United States currently use?
Fiat money
Why can commercial banks also be referred to as full-service banks? Give examples.
They offer a wide range of service to their customers, such as checkings and savings accounts, debit and credit cards
For what economic position was Milton Friedman a leading spokesman and what did that position see as the principle cause for inflation?
Advocated the monetarist approach and the principle cause for inflation was the money supply
