Midterm Review Flashcards
What is scarcity?
demand for a good or service is greater than the availability of the good or service
What are production possibilities?
refers to differences in the amount and quality of a product caused by different uses of resources.
What is opportunity cost?
It is the value of what one gives up to get something else.
What is an inferior good?
An item that becomes less desireable as the income of consumers increases
Ex: instant noodles
What is macroeconomics?
It is the study the of economic activity in Essex County, New Jersey or the United States.
What are the stages of the business cycle?
trough, expansion, peak, contraction
What is a recession?
two quarters of negative GDP
What is expansionary fiscal policy?
expanding the money supply faster than usual
* would include lowering taxes, increase in government spending to cure an economic downturn.
What is restrictive/tight monetary policy?
slowing the money supply’s growth to decelerate the economy
* would be employed by a central bank seeking to cure unanticipated and accelerating inflation.
What is deflation?
It is a decrease in the general level of prices.
What is disinflation?
This represents a time period when inflation rates are positive, but declining over time.
What is the Core CPI?
It is the market basket of goods measured in the United States on a regular basis minus food and energy products.
What is stagflation?
It is an economic period of high levels of unemployment and high levels of inflation.
What is the substitution effect?
Decrease in sales when products’ price is raised, people switch to cheaper alturnatives
What is seasonal unemployment?
Santa Claus, Life guards and construction workers all have this in common.
What is structural unemployment?
involuntary, mismatch between what companies need and what available workers offer
Ex: worker that is replaced by a robot or technology.
What is frictionally unemployed?
voluntary, person searching for new job
Ex: computer programmer who leaves her job to move to Florida.
Who is Adam Smith?
In 1776, this Scottish economist and philosopher published “The Wealth of Nations”. His laissez faire belief is the model for free market capitalism.
What is providing financial capital?
It is the primary function of stockholders in a company.
What is real GDP?
It is the value of the total amount of goods and services produced by a nation in a given year that is adjusted for inflation.
What is inelastic demand?
Term used to describe when price changes on these items, demand doesn’t fluctuate much because these items are required in the everyday lives of most. Examples include gasoline, necessary foods, and prescription drugs.
What is the Dow (or the Dow Jones Industrial Average or the DJIA)?
It is a stock market barometer of 30 prominent companies listed on stock exchanges in the United States
What is a market economy?
Determined by the supply and demand of goods and services, indivisuals follow their self interest and make decisions about production and distribution
What is a traditional economy?
Based on what has been done in the past.
What is a command economy?
Government decided what to produce, how to produce, and who it will consume
What is a mixed economy?
Combination of different systems
What is a stock?
Share of ownership in a company
What is a bond?
issued by governments and corporations when they want to raise money
what are the factors of production in economics
land, labor, capital and entrepreneurship
Standard of Living
the material well being of the average person in a given population. It is typically measured using gross domestic product (GDP)
budget deficit definition
the situation in which the spending is more than the income
budget surplus definition
when income or revenue exceeds expenditures
Functions of stocks
raise money to fund operations by selling shares
Functions of bonds
raise money
What is a primary market?
securities are created, companies sell new stocks and bonds to the public for the first time, such as with an initial public offering (IPO)
What is secondary market?
securities are traded by investors
law of demand
when the price of a product goes up, the quantity demanded will go down – and vice versa.
law of supply
an increase in the price of goods or services results in an increase in their supply
determinants of demand
income, consumer preferences, number of buyers, price of related goods,
determinants of supply
price of the product or service, price of a related item, price of factors of production, technology intervention, administrative policy, and price speculations.
Normal Goods
Income and the demand for the product are directly related. This means when there’s an increase in income the demand is going to increase. When theres a decrease in income the demand is going to decrease.
What is expansion?
rising prices, stock prices rise, wage growth
What is a peak?
high inflation, low unemployment,
What is contraction?
unemployment rate rises, decrease in production, increased unemployment, decrease in wages, decrease in spending
What is a trough?
unemployment is at its highest, inflation is low
