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Economics > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

Define economics.

A

The study of how people satisfy their needs and wants by making choices; we have scarce resources for unlimited wants and needs

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2
Q

Explain what happens in the Factor Market.

A
  • Firms purchase from households

- Households are the sellers

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3
Q

Explain what happens in the Product Market.

A
  • Households purchase the goods/services that firms produce

- Households are the buyers

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4
Q

What is National Income and how is it determined? Hint: refer to the Factor Market

A

Sum of wages, rent and interest; total payments received by the factors of production

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5
Q

What is Gross Domestic Product and how is it determined? Hint: refer to the Product Market

A

The total value of all final goods and services produced in an economy

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6
Q

Who are the three participants in the Circular Flow Model?

A

Households, government & business

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7
Q

In which market is the “What to produce?” question answered in a free enterprise system?

A

Product Market

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8
Q

In which market is the “How to produce?” and “Who will consume it?” questions answered in a free
enterprise system?

A

Factor Market

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9
Q

What are the payments for land, labor, and capital?

A

Rent, wages and interest

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10
Q

Explain economic interdependence as it relates to the Circular Flow Model.

A

Consumers rely on business and vis versa

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11
Q

Production frontier

A

Line showing maximum on a PPC

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12
Q

Underutilization

A

Fewer resources than an economy is capable is using

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13
Q

Growth-economy increases output through…

A
  1. Increased resources

2. Technology

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14
Q

Effects of technology and increased resources on the

Production Possibility Curve

A

PPC shifts to the right

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15
Q

Cost of producing one product over another on a PPC graph

A

Opportunity cost

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16
Q

What are the three economic questions every system must answer?

A

What good/services?
How goods/services should be produced?
Who consumes these goods/services?

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17
Q

What are the different types of economic systems and the characteristics of each?

A
  1. Traditional- Customs decide
  2. Command-A lot of government decision
  3. Market- Consumers decide based on exchange of sellers & buyers
  4. Mixed- Combined free market with limited government
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18
Q

How does government control in a mixed economy?

A

Responsible for regulation, contract enforcement and consumer protection

19
Q

Provide examples (countries) for each of the different economic systems.

A

Command-North Korea, Cuba
Market-US
Traditional- Britain

20
Q

Describe Adam Smith’s Invisible Hand and how these concepts contribute to our economic concept of
capitalism.

A
  • Self regulating nature of the market place

- Competition controls, regulate economy, profit, and private property motivate free people within the economy

21
Q

Explain the concept of laissez faire according to Adam Smith’s Invisible Hand.

A

Laissez Faire- Doctrine that states government shouldn’t intervene in the market place

22
Q

What are the three primary goals of a capitalist economic system?

A
  1. Economic growth
  2. Price stability
  3. Unemployment
23
Q

How are economic growth, price stability, and unemployment measured?

A

Percentages of unemployment, inflation and GDP

24
Q

Define and describe the three factors of production.

A

Land-Natural resources (rent)
Labor-people who are employed to work (wages)
Capital- human & physical (interest)

25
Q

Define an entrepreneur.

A

Ambitious leader who combine land labor and capital to create new market and goods

26
Q

Explain the difference between scarcity and shortage

A

Scarcity- Limited resources for unlimited wants

Shortage- Unavailable; Quantity demanded is greater than supplied

27
Q

Explain the concepts of opportunity cost and trade-offs.

A

Trade offs- all alternatives lost when making decision

Opportunity cost- The most desirable alternative

28
Q

Define the economic term “Guns and Butter.”

A

Guns- Defense/military

Butter-Consumer goods

29
Q

Explain the concepts of comparative advantage and absolute advantage.

A

Comparative- lowest opportunity cost

absolute- Can produce the most

30
Q

Describe the process of finding the opportunity costs for a country producing two products.

A

Total Butter - Butter at point A = Oppritunity cost of butter

31
Q

Define the importance of specialization for trade.

A

Key to trade

32
Q

What is the difference between trade deficit and trade surplus?

A

Deficit- imports more than exports

Surplus- exports more than imports

33
Q

List and define the different types of trade restrictions (trade barriers).

A

Quota- Limit the amount
Embargo- Ban on imports/exports
Tariff- tax

34
Q

What is the Current Account and what does it indicate about a country’s trade?

A

Value of imports and exports

35
Q

Describe how foreign exchange of currency and exchange rates affect trade.

A

When US dollar appreciates in value, less goods will be sold

36
Q

Explain how the exchange rates affect the value of the dollar and demand for U.S. products.

A

Appreciation- value increases

Depreciation- value decreases

37
Q

What are the pros and cons for “Protectionism and Free Trade” advocates?

A

Protectionism-concerned with job protection

pros-protect domestic jobs, infant industries, national security

38
Q

What is NAFTA is, who does it involve, and what does it do?

A

NAFTA-north american free trade agreement

-eliminates all tariffs and other trade barriers between Canada, mexico and US

39
Q

Explain the major trading blocs (free trade zones) in the world.

A
  • NAFTA- north america
  • EU- european union
  • APEC- Asia pacific
  • MERCOSUR- Brazil, argentina, paraguay and uraguay
40
Q

Define Infant Industry

A

Industry just developing

41
Q

Who are the Asian Tigers and why are they important?

A
  1. Hong Kong
  2. S. Korea
  3. Singapore
  4. Taiwan
    Have created double digit growth by
    -focusing exports on highly industrialized countries
    -high tariffs
    -education
    -land reform
42
Q

Human Capital

A

The knowledge and skills a worker gains through education and experience

43
Q

Physical Capital

A

Human made objects used to create other goods and services (Shoe factory and all the machines for making shoes)

Economics (5 decks)

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