Midterm Flashcards
The study of how people seek to satisfy their needs and wants by making choices
Economics
Air, food, water, shelter
Need
Something we desire
Want
Actions or activities
Services
Physical objects
Goods
Knowledge and skills a worker gains through education and experience
Human capital
Effort that a person devoted to a task for pay
Labor
Producers will not or cannot offer other goods or services at the current price
Shortage
Limited quantities of resources to meet unlimited wants
Scarcity
Human-made resources that is used to produce other goods and services
Physical capital
All natural resources used to produce goods and services
Land
Land, labor, and capital
Factors of production
Human-made objects used to create other goods and services
Capital
Ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services
Entrepreneur
Which of the following is not considered a NEED according to your book ?
A nice car
WhicH of the following is a WANT a cording to your book ?
A nice car
Which of the following is not considered a country’s resources ?
Air
Cost always refers to money
False
Economies may operate ineffectively
True
A production possibilities curve shows alternative ways to USA an economy’s productive resources
True
Thinking in the margins is only about thinking how much more you can do
False
In your own words, define economics
Our choices and mindset alters our wants and needs
In your own words, define wants and needs
Wants- live without
Needs- can’t live without
In your own words, describe trade-offs
Choosing one option over another for a different outcome
If there is a large supply and low demand, prices would typically
Fall
If there is a short supply and high demand, prices would typically
Rise
A shortage is always permanent
No
Economics is the study of
Scarcity
Scarcity means something is temporarily unavailable
No
If IBM issues a bond and you buy their bonds, you own part of the company
No
If you buy IBM stock, you own part of the company
Yes
If you start saving for retirement now, you have a better chance of hitting your retirement goals then if you wanted to save until you were 40
Yes
A bill from your doctor
Expense
Your car
Assets
Car loan
Liabilities
Your paycheck
Income
A social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society is called
Socialism
Economic systems that are based on voluntary exchanges in markets are called ___________ __________ Economics
Free market
What is the most common reason someone starts their own business ?
Freedom
America is considered a Land of _______ because of our Free Enterprise
Opportunity
If you have a successful business, can the government of the U.S. take over control to run it for themselves without due process ?
No
What is Macroeconomics ?
The study of the behaviors and decision making of entire Economics
What is Microeconomics ?
The study of the behavior and decision making small units as small units, such as individuals, families, and businesses
What does GDP stand for ?
Gross Domestic Product
The study of economics begins with the idea that people cannot have everything they ___________ or _________
Need
Want
A ________ is something like air, food, or shelter
Need
A _________ is just about everything else
Want
We discussed two types of capital, _____________ and __________
Physical
Human
Human-made objects used to create other goods and services are called __________ capital
Physical
____________ capital is the knowledge and skills a worker gains through education and experience
Human
As discussed in class, nobody can take away your _________ or ____________
Education
Experience
Ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services are called __________
Entrepreneurs
___________-__________ are all the alternatives which we give up whenever we choose one course of action over another
Trade-off
The most desirable alternative given up as the result of a decision is called the _________ cost
Opportunity
For most decisions there are pros and cons. In economic terms we should do a ___________ / ___________ analysis
Cost
Benefit
Costs are financial
False
Which of the following usually gives the most protection to an individual
Incorporation
LLC stands for
Limited liabilities corporation
Does LLC typically issue stock and bonds ?
No
Why do nations trade ?
Lacking in resources, higher in profit
Define opportunity cost
The most desirable alternative given up as a result of a decision
What is an export ?
Putting out goods to other countries
What is an import ?
Something we get from other countries
What country is the largest importer ?
United States
What country is the largest exporter ?
United States
What are the thee most common trade barriers ?
Import quotes
Voluntary export restraint (VER)
Tariffs
Define tariffs
Tax on imported goods
What is a trade war ?
Escalating trade barriers
Define protectionism
When the nations protect the resources that is being traded
Does the US have a trade surplus or trade deficit ?
Trade deficit
Why are we in a trade war with China ?
Exporting to many goods at cheaper prices
Air, food, water, shelter, are examples of
Need
Something we desire is an example of
Want
The study of how people seek to satisfy their needs and wants by making choices
Economics
Producers will not offer goods or services at the current price
Shortage
Limited quantities of resources to meet unlimited wants
Scarcity
Human-made resource that is used to produce other goods and services ____________ capital
Physical
Ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services
Entrepreneurs
Define “cost” as taught in class
Something we end up losing in a situation
Define opportunity cost
The most desirable alternative given up as the result of a decision
Define trade-offs
Sow thing we give up in making a decision
Give an example of a trade-off
In class, Kery was offered $20 but he would have to get expelled but is he didn’t want that he’ll give it up
What is the difference between an LLC and a Sole-proprietor ?
LLC- deal with smaller businesses
Sole-Proprietor- all liabilities
What keeps a manufacturer from charging way too much for an item ?
Competition
Define incentive
Motivation
Something you get out of a situation
Define profit
How much the item is
Define communism
Government control
Define Laissez Faire
The doctrine that states that government generally should not intervene in the marketplace
Define private property
Property that is owned by the individuals or companies, not by the government of the people as a whole
How does welfare attempt to raise poor people’s standard of living ?
It doesn’t raise it up, welfare helps the people
Why does poverty exist in a free market economy ?
People can choose to make their own money
What is the difference between cash transfers and in-kind benefits ?
Cash transfers- direct payments of money to eligible poor people
In-kind benefits- goods and services provided for the free or at greatly reduced prices
How is Social Security an example of income redistribution ?
By taking a small amount of earned income and storing over time
What constitutional guarantees underlie the American free enterprise system ?
The Bill of Rights to the United States
Why have some nations begun a transition to free enterprise ?
The people want control what goes on in the market place instead of government choosing for them
Define Tariff
A tax on imported goods
What are the three trade barriers we discussed in class ? List each one and define
Import quotas- a limit on the amount of a good that can be imported
VER- limited exports to a specific country
Tariffs- a tax on imported goods
What is a trade imbalance ?
When a nation puts out so much product, but brings a smaller amounts of imports (vise versa)
Define “Fracking”
A light crude, oil you take out of the ground with machines
Why did Fracking become affordable ?
Gas prices rose
In a free market economy you have periods of ___________ and _________
Surplus
Deficit
Name three reasons for import Quotas
Protect U.S. manufacturing
Protect consumers
Protect prices
When unemployment is below 4%-5% it is effectively considered what ?
Full employment
Name three things that may cause inflation
Devaluing currency
A shortage
Slow economy
Are we on the Gold Standard or on the Floating Exchange Rate (Floating Dollar) ?
Floating Dollar
Define Money Manipulation
Devaluing a currency on purpose to get around the tariff
Why might a country devalue their currency ?
Increase domestic spending
Slow down economy
Get around tariffs
Benefit of devaluing a country’s currency
Increasing exports
Increasing domestic spending
Costs for devaluing a country’s currency
Slow economy
Increasing unemployment rate
Increasing debt payment
Inflation
What is the name of Chinese currency ?
Yuan
Which of the following is not a possible long-term negative impact on a nation’s economy if they devalue their currency ?
Lower debt payments
Which of the following is a short-term positive impact on a nation’s economy if they devalue their currency
Increased domestic spending on domestic goods
What are three positive things that may happen after a natural disaster ?
Short-term employ employment rate
Government aid
Money from the government
What are three negative things that may happen during/after a natural disaster ?
Business close
Unemployment rate goes up
Loss of assists
Define shareholder
A owner of stock
Define shareholder
A person of interest or concern with something, especially a business
How might our government reduce spending ?
Military spending
Infrastructure
How might our government increase income ?
Tariffs
Taxes
Does a company have a moral or ethical obligation to make sure their suppliers do not use slave/child labor ?
In my opinion, I believe they do
Name three ways a Wal-Mart type of store may hurts local economy
Has other stores going out of business
Keep paying at a cheaper price
Taking more products from other companies
Name three ways a Wal-Mart type of store may help a local economy
It’s well know
Get jobs
Cheaper prices
Why do we have issues today with China as a trade partner ? Name three things
Devalue currency
To much import
Steal technology from us
Whose interest does a business have as their top priority ?
Shareholders
Do most countries carry external debt ?
Yes
What is the desired outcome of our trade war with China ?
We will have more of a trade imbalance
What does GDP stand for ?
Gross domestic product
GDP is the, “dollar value of all final ___________ and _________ produced within a country’s borders in a given year.
Goods and services
Does GDP include intermediate goods ?
No
What are intermediate goods ?
Goods and services to make the final product
Would GDP include cars made in Ohio by a company owned by a Japanese company ?
Yes
Would GDP include cars made in Brazil by an American owned company ?
No
Your neighbor brought a brand new house in 2010. He was transferred to a new job in Georgia so he sold his house last week. Would this be included in the US GDP for this year ?
No
In the above scenario, would the fee paid to the real estate agent who handled the resale of the house last week be counted in this year’s GDP ?
Yes
You hired a contractor to build a new home for you today. Would the lumber, nails, shingles, windows, and doors be included in this year’s GDP ?
No
In question 8, would the sale of the home be included in this year’s GDP ?
Yes
When comparing the “Expenditure Approach” and the “Income Approach” for figuring out the GDP, should they give us the same total or very differs totals ?
Same
Of the following, circle all of the durable goods
Stove Car Refrigerator Play Station Computers Lazy Boy Chair
Of the following, circle all of the non-durable goods
Blue jeans
Green beans
Air Jordan’s
Does measuring the GDP help determine how well the economy is doing ?
Yes
What are the four phases of a business cycle ?
Expansion
Peak
Contraction
Trough
An economy is said to be in a recession when GDP falls for how many consecutive quarters ?
2 quarters
Does rising unemployment typically happen during periods of recession ?
Yes
Does rising interest rates cause job growth to shrink or expand ?
Shrink
The price paid for the use of borrowed money
Interest
A paper currency issued during the Civil war
Greenback
The ability to be used as, or directly converted into, cash
Liquidity
Money in a checking account that can be paid out “on demand”
Demand deposit
Objects that have value because the government has decreed that they are an acceptable means to pay debts
Fiat money
Failing to pay back a loan
Default
An institution for receiving, keeping, and lending money
Bank
A card used to withdraw money from a bank account
Debt card
Coins and paper bills used as money
Currency
A widespread panic in which many people try to redeem their paper money at the same time
Bank run
A monetary system in which paper money and coins had the value of certain amounts of gold
Gold standard
The seizure of property from the borrowers who don’t repay their loans
Foreclosure
A banking system that keeps only a fraction of its funds on hand and lends out the remainder
Fractional Reserve Banking
A bank that belongs to the Federal Reserve System
Member bank
The direct exchange of one set of goods or services for another
Barter
All the money available in the US economy
Money supply
A bank that can lend to other banks in time of need
Central bank
A specific type of loan that is used to buy real estate
Mortgage
The amount of money borrowed
Principle
Anything that serves as a medium of exchange, a unit of account, and a store of value
Money
A card entitling its owner to buy goods and services based on the owner’s promise to pay for those goods and services
Credit card
A person or institution to whom money is owed
Creditor
Before we were on the “Floating Dollar” the U.S. had its money backed by what valuable item ?
Gold
When a country devalues its currency, do they typically see an increase or decrease in exports ?
Increase
When a country devalues its currency, will their economy typically slow or grow in the long term ?
Slow
What is the difference we discussed in class between a Charge Card (like American Express) and Visa card ?
Charge card is 100% payed off monthly
Visa card is when you have to pay back the interest
Money held in a checking account is considered M1 or M2 ?
M1
Money held in a savings account is considered M1 or M2 ?
M2
What is the real estate appraisal ?
Estimation of value of the property
If you were approved for a secured loan, you may have to give some kind of collateral. What is collateral ?
Something you can secure a loan
If you default on a secured loan, they may ________ your collateral
Repossess
What is P and I ?
Principle
Interest
If GDP decreases for _____________ consecutive months, it is called a __________
Six
Recession
If your bank need a temporary loan, they would get that loan from the ____________ Bank
Central
If Rason’s Smelly Shoe Company had a record year in sales. Name three things we discussed in class they may do with their profits
Expansion
More employees
More product
_______________ is king (Economically speaking)
Cash
The greater the Risk the greater the potential
Reward
If you have lack of cash to pay your bills, you are cash
Poor
The Federal Reserve Bank is also known as the
The Fed
Who issues credit cards ?
Banks
When you use a Visa debit card, do you pay a bill at the end of the month or do funds automatically come out of your checking account at the time of the transaction ?
Funds automatically come out of your checking account at the time of the transaction
Is M1 money considered Liquid Assets or Fixed Assets ?
Liquid assets
Which typically has higher interest Checking accounts or Savings accounts ?
Savings
Checking accounts are considered
Demand accounts
Name a savings instrument that can be either short or long term, that earns interest, that’s has a penalty if you pull money out before its maturity date, and which typically locks in an interest rate
CD
If you knowingly write checks without having the funds in the account, you may be guilty of
Check fraud
If Ashley’s Lip Balm Company had a terrible year in sales p, name three things we discussed in class they may do with their profits
You can’t expand
Start dropping employees
Can’t make more product
When comparing the “Expenditure Appeoach” and the “Income Aproach” for figuring out the GDP, what percentage differences would you expect to find ?
0%
Name three things which we might come to expect during a recession
Stop buying producers
Lose consumers
Going out of business
When a country devalues its currency, do they typically see an increase or decrease in imports ?
Decrease
Our banks are part of the Fractional-Reserve Banking system meaning that they don’t hold all of your money in their values, instead they loan it out. However, they are required to keep a certain amount in their vault or on deposit with the Central Bank. What is the term for this amount ?
Reserve ratio
OMB is the ____________ of ____________ and ______________
Office of management and budget
What branch of government does the OMB fall under ?
Executive
If revenues are equal to spending, it means we have a ___________ budget
Balance
A plan for the federal government’s revenues and spending for the coming year is called the Federal __________
Budget
When does the Fiscal Year begin for the U.S. Government ?
Oct 1
What branch typically does the first draft of the budget ?
Executive
From there it goes to
House of Representatives
If the government wants to spend more then it has budgeted revenue, it must get more money. It can do this in the two ways. Name them:
Taxes
Bonds
If the government takes in more than it spends it means we have a budget
Surplus
If the government takes in less than it spends, it means we have a budget
Deficit
If the government wants to increase spending and lower taxes, it must take on more
Debt
If the government wants to decrease spending and lower taxes to encourage economic growth, this would be called an _______________ policy
Expansionary
If the government wants to decrease spending and increase taxes, this would be called a __________________ policy
Contractionary
When in a budget deficit, the government takes on debt. How ?
The government will typically issues bonds they will have to pay back
Name one of the debt instruments. T-
Treasury bill
Name another. T-
Treasury bond
Name the third. T-
Treasury note
Explain the political issues involved worth increasing spending on social programs without raising taxes or talking on more debt
The government would have to pay less on defense and would have to let go on some military
With every dollar change in fiscal policy, whether it is an increase in spending or a decrease in taxes, it creates a greater than one dollar change in the national income. This is called the _________________ Effect
Multiplier
Treasury Bills are repaid within ____________ years
3 months - 1 years
Treasury Bonds are repaid within ________ years
30
Treasury Notes are repaid within __________ years
2-10
If you are an investor and want to buy U.S. Government Bonds and you believe that interest rates will go up in the near future, which treasury debt instrument would you buy ?
Bill
If you are an investor and want to buy U.S. Government Bonds and you believe that long term interest rates are only going to go down, which treasury debt instrument would you buy ?
Bonds
When the U.S. Government issues bonds, what effect does that have on future Federal Budget ?
The Federal Budget now has to include he new debt from the bonds
If the government wants to slow the economy because of the fear of inflation, would it write an expansionary or contractionary budget ?
Contractionary
We did not discuss in class yet, but your book discusses a way to respond to a budget deficit by creating money. If left unchecked, we could see hyperinflation. Define hyperinflation
A very high inflation
For FY 2019, the federal budget is estimated to be $4.407 trillion. The estimated revenue will be $3.422. The leaves $985 billion shortfall. That shortfall is called a budget
Deficit
For FY 2019, interest on the national debt is $363 billion. How does this effect the Federal Budget and why will this amount only get worse if we continue to run a deficit ?
It will effect the Federal Budget because it’s adding more money then the set that year and it’s taking more in then it should
If interest payments on the national debt continue to rise, name three ways we will be forced to service it
Decrease infrastructure
Decreasing military spending
Increase taxes
Debt is normal for a government, but serving that diet can get out of control. If you worked for the OMB, what would you do to decrease out national without creating hyperinflation, unemployment, or a recession ?
Would cut down on budget
Right now in the world there is surplus oil. This has caused the price per barrel to
Decrease
OPEC is discussing cutting output of oil. If they do,what effect will this have on global oil prices ?
Increase
