study guide for test #1 Flashcards
economics
the study of choice under conditions of scarcity/the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses
scarcity
exists when we desire more than we have/little quantity of an object
trade off
give up one thing to get something else
need
bare minimum requirements to sustain life (water,air,home,etc.)
opportunity cost
the cost of getting one thing and not another
want
things that are desired but unnecessary
goods
physical items that are produced/manufactured to be sold (toothbrush, hairbrush, etc.)
services
activities produced in an economy (education,medicine)
resources
the basic elements from which all goods and services are produced
land
anything drawn from nature for the use of production of goods or services (trees)
labor
time and effort people contribute to the production process
capital
anything long lasting that is created by humans to be used in production (saw, hammers, nails, etc.)
entrepreneurship
people who take risks and create products/companies
communist
economy controlled by gov
Capitalist (free market)
little gov involvement in economy
socialist
Private + gov owned businesses
fascism
basically rallying people against/for a goal (think hitler and germany) , but fascist governments tend to have capitalist economies
money
anything that is widely accepted in exchange for goods and services, it is a medium of exchange, a store of value, and a unit of account
barter
the exchange of goods or services for other goods or services without the use of money, it limits choices
currency
paper money and coins
demand deposits
money held in checking accounts in the bank
medium of exchange
something people acquire for the purpose of payment for goods and services
production possibility frontier model
a curve that shows the max quantity of one good that can be produced for each possible quantity of another good produced
guns v butter
guns- anything with war
butter- anything other than war
law of increasing opportunity cost
once more of a good is produced, its opportunity cost will rise, economies must make trade offs and some resources are best suited for one type of production (ex- florida oranges)
microeconomics
the study of how companies make decisions and how those decisions affect the economy ( with that… profits, markets, and pollution )
macroeconomics
the study of the economy as a whole from a national perspective ( with that… inflation, interest rates, and government spending )
positive economics
study of what the world is like and why it works the way it does, (questions include: how many teenagers live in poverty?
normative economics
study of what the way things should be and bring in opinions and ideas (questions include: should our country do more to help the poor? Should our country cancel student loans?)
standard of living
measure of comfort in terms of goods and services available (choices not quality of living)
product market
anywhere something is sold/ anywhere you can buy goods
resource market
households hold resources that transfers businesses
4 factors of production
land, labor, capital, entrepreneurship
firm
business or company that makes goods
to an economist, the cost of something is….
the total of all you gave up to get it
The basic elements from which all goods and services are produced are known as:
resources
Anything long-lasting that is created by humans for use in production describes the scarce resource:
capital
As a generally accepted form of payment for virtually anything buyers seek, money serves as a:
medium of exchange
Which of the following is an asset that is considered part of the M1 definition of money?
checking/savings account
Money that has value apart from its use as money is called:
commodity money
Money that has no value of its own, but can be exchanged for something of value (often gold or silver) is called:
representative money
When you put money in your savings account to save up for college, money is serving as:
a store of value
When a person makes price comparisons among products, money is being used as a:
unit of account
Which type of money is used in the United States today?
fiat money
Which of the following assets is contained in M2 but not in M1?
Long term bank savings accounts (CDs, certificates of deposit)…these are not regular savings accounts
Fiat money has value because:
the gov says it does
Which of the following is an example of an economic model?
curve showing maximum quantities of goods produced
What factor would show that an economy is inefficient?
There are unemployed resources.
The tendency for the opportunity cost of a good to rise as more of the good is produced is called:
the law of increasing opportunity cost
Adam Smith believed that economic decisions should be made by:
buyers + sellers
Which statement best explains the underlying cause of the law of increasing opportunity cost?
Economies must make trade-offs as they decide which goods to produce + Some resources are better suited for one type of production than another.
an increase in the amount of goods and services an economy can produce over time.
economic growth
A manufacturer who decides to use more labor and fewer machines to produce a given level of output is dealing with the economic question of:
how to produce
When a corn processing plant decides to produce more ethanol and less feed corn it is dealing with the economic question of:
what to produce
Which of the following would be a question about a country’s standard of living?
Do people enjoy plenty of goods and services, including things such as secure homes and reliable cars that make life more enjoyable?
Which of the following would be a question about economic growth?
Is the economy experiencing an increase or a decrease in the amount of goods and services it can produce over time?
Achieving economic growth and in the process using up resources faster than they become available puts the goal of economic growth in conflict with the goal of:
sustainability
people can make economic decisions for themselves.
economic freedom
In recent years, e-book readers have experienced great economic growth. What is one likely tradeoff of meeting this economic goal?
Owners of traditional bookstores experience less economic security.
the quality of being just and fair.
equity
an organizational structure for addressing, what, how and for whom to produce.
economic system
What economic system was the philosopher Karl Marx most influential in shaping?
communism
Which statement best summarizes an idea of the economist Friedrich von Hayek?
Local business owners understand their own markets best.
What is the primary incentive for business owners in a market economy?
earning PROFIT
In countries where social safety nets are very low we would expect to find:
people saving more of their income
Households that lend firms money to buy capital receive:
interest
Which of the following is an example of a public good?
removing snow roads
Which of the following transactions would take place in the factor market?
firms buying labor from households
Expenditures for which the government receives no good, service, or resource in return is:
transfer payment
Which of the following is true about the circular-flow diagram?
The circular-flow diagram illustrates the economic relationship between households and businesses.
Which statement best explains why must government provide some public goods?
Market economies offer little incentive for producer to make certain shared goods and services.
Which of the following transactions would take place in the product market?
firms selling goods to households
Which of the following is most closely associated with larger social safety nets?
higher taxes
One half of a circular flow diagram shows the exchange of goods and services for money that takes place in:
product markets
Resources are exchanged for money in:
factor markets
