Final Exam Review Flashcards
Economics is the study of what?
The study of the choices that individuals and societies make in the production, distribution, and consumption of goods.
What is an economy?
Any system for the production, distribution, and consumption of goods and services.
The economic system in Plymouth called Common Course and Condition is a form of _____.
Communism
What is macroeconomics?
The study of national and international economies and how these major economies are affected by large scale choices and public policies.
What is microeconomics?
The study of specific components within a major economy and how the choices made by individuals, households, and businesses affect that economy.
What is a tangible item that people want and for which they will pay?
Good
What are intangible goods produced by labor for which people expect to pay?
Services
What is a human desire?
Want
What is a mechanism that allows people to exchange goods?
a Market
What is the quantity of a good for sale at a certain price under certain conditions?
Supply
What is the amount of a good that is bought at a certain price under certain conditions?
Demand
Who are the people who provide goods?
Producers
Who are the people who use goods?
Consumers
What is the first thing to understand about economics?
All goods have to be worked for.
What is the bad habit of spending more than one can afford?
Prodigality
What is a necessity, or something that would be difficult to do without?
Need
What are the general rules or principle guiding the production distribution and consumption of goods?
Law of Economics
From early in the 16th century until the 18th century the principle states Europe followed what set of economics policies?
Mercantilism
What are taxes that government applies only to imported goods?
Tariffs
What is the difference in the value of goods that a country sells abroad compared to those it purchases from other countries?
Trade Balance
What Economics policy established colonies and extensive territories created to benefit their mother country?
Imperialism
Who were the French economists that favored the natural economy opposed to the artificial?
Physiocrats
What is the French phrase that means let things alone?
laissez-faire
Who is the founder of modern economics?
Adam Smith
Who wrote the wealth of nations?
Adam Smith
What is the separation of work into individualized tasks?
division of labor
What does “invisible” hand mean?
brought together
What is the division of labor that allows the production of goods by workers doing the jobs they do best?
specialization
What is the term for economic success?
prosperity
What is the value of all things that people own?
wealth
What is the human activity which results in the creation of goods and services?
Labor
Goods that last less than 3 years are called?
Nondurable goods
Goods that last at least 3 years are called?
Durable goods
Who determines what goods are to be produced and in what quantity in a free market economy?
The Consumer
What is a system that gives people only limited choices regarding what to produce and consume?
Traditional Market Economy
What is the alternative, illegal system for exchanging goods to avoid governmental regulations?
Black Market
What part of an economy is controlled by private individuals, businesses, and organizations?
Private Sector
What part of an economy is controlled by national, state, and local governments?
Public Sector
What is the desire to work to improve one’s economic situation?
Profit Motive
The diminishing of the value of goods that is caused by wear and time is known as what?
Depreciation
What is the excess of the total revenue paid by buyers for goods over the seller’s total expense of producing these goods?
Profit
what indicates that people tend to substitute less expensive goods for ones whose prices have risen?
substitution effect
The cost of labor, and what it would cost people who run their own establishments to hire managers to run the business for them is called the _____ __ ________.
Wage of Management
What is the total value of a business minus any liabilities?
Equity
What is the quality of producing goods efficiently with a minimum of waste?
Efficiency
There are only ___ ways to improve efficiency.
Two
what is the value that is directly related to the benefits their owners receive through their use?
value in use
what a particular good is worth in exchange for some other good is what?
value in exchange
what is the amount of money that a buyer pays the seller for a particular item?
price
what are prices at which goods can be sold in an open market with many potential sellers and buyers?
market prices
what is the amount of satisfaction that results from a one unit increase of a product?
marginal utility
what states that as ones supply of a specific good or service increase, the satisfaction derived from each additional unit tends to decrease?
diminishing marginal utility
what is the total amount of satisfaction received for possessing a particular amount of good?
total unity
what explains the inverse relationship between the price of a good and the amount that people choose to buy?
law of demand
what says that when the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything?
income effect
what indicates that people tend to substitute less expensive goods for ones whos prices have risen?
substitution effect
what is the list of numbers that compare price with quantity demanded?
demand schedule
What is the sum of all of the factors of production used in making goods.
Total Cost
What is the sum cost of all the factors of production used in producing ONE unit of a good?
Average Cost
It is _______ _____ that creates the wealth of nations.
Intelligent Work
The 3 qualities of mass production are:
- division of labor
- standardization of parts
- automatic conveyance
What is the ability of one entity to produce goods or provide services more efficiently than his competitors when given the same resources?
Absolute Advantage
What is the ability of an entity to produce a good or service at an opportunity cost that is lower than that of another produce.
Comparative Advantage
What is the production of goods in which a country or region has absolute or comparative advantage?
Geographic Specialization
The theory that domestic manufacturers need government protection against foreign competitors is known as __________.
Protectionism
what is the graphic representation of the quantity of goods purchased at different prices?
demand curve
What law states the direct relationship between the price of a good and the amount that suppliers make available?
The Law of Supply
What is a list of numbers that compares price with quantity supplied?
Supply Schedule
What is a graphic representation of the quantity of goods supplied at different prices?
Supply Curve
What phenomenon describes how people will buy less as prices go up?
Price Elasticity of Demand
What are price levels set above equilibrium prices?
Price Floor
A _____ is when the government places a limit on how high a producer may charge for his product.
Price Ceiling
Who was the main advocate of the Principal of Comparative Advantages?
David Ricardo
What are groups of firms that produce similar products or provide similar services??
Industries
What is the situation that arises when a single firm is the only supplier of a good for which no substitute exists?
a Monopoly
What is the difference between a monopoly and a legal monopoly?
A monopoly is illegal, but a legal monopoly is when the government lets a business have a monopoly to encourage production.
What kind of monopoly occurs when a single firm can fill the demand for a good more efficiently than if there were multiple firms in the industry?
a Natural Monopoly
What is it called when each firm promotes a differentiated product?
Monopolistic Competition
What kind of market is one in which each firm promotes a differentiated product?
Monopolistic Competition
What is a market that occurs when an industry is dominated by only a few firms?
Oligopoly
What is it called when companies get together to set unnecessarily high prices?
a Collusion
What is a collusion of businesses which join together to restrict or eliminate competition?
a Trust
What is anything that is generally accepted as a means of payment?
Money
What are the 3 principal purposes that money functions as?
- To be a medium of exchange
- To provide a measure of value
- To provide a store of value
What is coined, metallic money?
Specie
What is the asserted face value?
Face Value
When the level of prices in the market rises because too much money is in circulation?
Inflation
If prices decrease because money seems more valuable and stable?
Deflation
A system which allows banks to hold less than 100% of deposits in reserve is what?
Fractional Reserve Banking
What is legal tender that is backed by nothing but a government’s promise?
Fiat Money
What does M1 include?
Transaction accounts, (checking accounts, money market accounts, etc.), and traveler’s checks and all coins and currency.
What does M2 include?
M1 and non-checkable savings deposit, money market mutual funds and similar deposits, and time deposits worth less than $100,000
What is selling the same type of goods at different prices to different buyers?
Price Discrimination
What is the quantity of producing effectively with a minimum of waste?
Efficiency
What is the total amount invested in the production of a good?
Input
What is the total amount of a good that is produced?
Output
What is the commitment of resources to a project or purpose that is expected to bring future profit to the investor?
Investment
What is a debtor?
One who borrows money or capital.
What is a creditor?
One who lends money or capital.
What does M3 include
M1 and M2 and time deposits over $100,000
What is a period, usually six months or longer, during which the economy recedes or declines?
Recession
What is the theory that the variation in the money supply is the main source of economic fluctuations?
Monetarism
What is an account that guarantees a certain interest rate and has a specified maturity date?
CD (Certificate of Deposit)
What is an account that allows limited transactions and pays an interest rate that changes with the demand for loans?
Money Market Account
What is a contract between two parties in which one party protects the other against certain types of loss in exchange for payments called premiums?
Insurance
What is an arrangement provided by an individual’s employer for the intent of providing for the employee’s retirement from work?
Pension Plan
What is the resources corporations gather by selling ownership in their businesses?
Stocks
What is a legal entity which is distinct from the people who own it?
Corporation
What is equal portions of a corporation’s stock?
Shares
If a corporation fails or declares bankruptcy, the individual stockholders do not personally have to pay the firm’s creditors. This is called what?
Limited Liability
What is shares of a corporation’s profit?
Dividends
What is a document that guarantees the bondholder the amount of his original investment plus a specified rate of interest by a certain date?
Bond
What are assets that flow easily since they can be converted into other investments or cash without much time or difficulty?
Liquid Investments
What is an established system of political administration by which a nation, state, society, or organization is ruled?
Government
What is an economic system based upon collective ownership and control of natural resources?
Socialism
What are are 5 government practices that have harmed economic systems over the centuries?
- Excessive Taxation
- Inflation and Debasement of Money
- Excessive Public Expenditure
- Excessive Regulation and Direction of the Economy
- Political Plundering of the Economy
What are large, complex organizations made up of appointed officials and their numerous agencies and departments?
Bureaucracies
Who was the founder of the Keynesian school of Economics?
John Maynard Keynes
What is the belief that a society’s economic problems can be better solved by “expert planners” than by the natural, automatic corrections made by a free market?
Keynesianism
What are the recurrent fluctuations in the level of economic activity form that economists call?
Business Call
What is the value of all finished goods and services produced within a country during a year’s time.
Gross Domestic Product (GDP)
What is the high point of the business cycle called?
Peak
What is the low point of the business cycle called?
Trough
What is a boom in the business cycle?
Recession
