Unit 1 - Understanding Economics

Question 1

scarcity

Answer 1

the condition where unlimited human wants face limited resources (fix thru economic growth, improving resources, or reducing expectations)

Question 2

economics

Answer 2

the study of how people satisfy needs and wants with scarce resources

Question 3

opportunity cost

Answer 3

the cost of the next best alternative among a person’s choices

Question 4

producers

Answer 4

creates and supplies goods and services

Question 5

consumers

Answer 5

a person who purchases goods and services

Question 6

economic system

Answer 6

how a society chooses to distribute limited resources to meet the needs and wants of the people

Question 7

what questions are needed in society to ask to set up an economic system?

Answer 7

what good will be produced, how will the goods be produced, and for whom will they be produced

Question 8

traditional economy

Answer 8

bartering and trading, customs and trading

Question 9

command economy

Answer 9

one central authority makes all decisions (+ availability of services, - limited customer input)

Question 9

market economy

Answer 9

individuals make the decisions (+ choice, - wealth disparity)

Question 9

mixed economy

Answer 9

combination of elements from market and command economics, 95% of all (+ freedom w/ limited government, - difficult to balance)

Question 10

american economy

Answer 10

we take (command- public v. private, monetary aid, regulation, collecting taxes) (market- private property, freedoms)

Question 11

why do we collect taxes?

Answer 11

fund public goods and services, redistribute income, influence behavior, stabilize the economy

Question 12

how are prices chosen?

Answer 12

production cost, competition, supply and demand

Question 13

factors of production

Answer 13

land, labor, capital, entreupeneurs

Question 14

factors of competition

Answer 14

quality, customer service, selection, lower prices

Question 15

demand

Answer 15

willingness and ability for a CONSUMER to buy a product, p up Q down

Question 16

supply

Answer 16

willingness and ability of sellers to produce a good/service, p up Q up

Question 17

shortage

Answer 17

demand is greater than supply

Question 18

surplus

Answer 18

supply is greater than demand

Question 19

business cycle

Answer 19

ups (booms) and downs (recessions, severe recession –> depression) in the economy, economists work to eliminate it and soften vitality

Question 20

factors affecting the ups and downs

Answer 20

*consumer confidence, technological innovation, *government policy, war

Question 21

what are the measurements of economic performance?

Answer 21

GDP, CPI, unemployment

Question 22

GDP

Answer 22

measures everything as a country we have produced in a year (final goods and services), natural output, best measure of overall economic health

Question 23

inflation

Answer 23

prolonged rise in the average price of goods and services, losing the value of the dollar

Question 24

average inflation rate for the U.S.?

Answer 24

3-4%

Question 25

price index

Answer 25

created by selecting a base year and a representative market basket of goods, prices generally rather than just one

Question 26

CPI

Answer 26

what we paid in one year compared to other years

Question 27

unemployment

Answer 27

people over 16 who are not working but are actively seeking employment

Question 28

federal government

Answer 28

the president and congress will try to stabilize the economy using taxes and spending, FISCAL POLICY (taxing up or down, changing spending patterns)

Question 29

federal reserve system

Answer 29

central banking system in the U.S., monetary policy, regulating banks, maintaining payments, lowering interest rates/buying bonds OR increasing interest rates/selling bonds

Question 30

monetary policy

Answer 30

controls $ supply, total amount in circulation

Question 31

budget

Answer 31

estimate of anticipated income and expenses

Question 32

budget surplus

Answer 32

more money collected than spent

Question 33

budget deficit

Answer 33

more money spent than collected

Question 34

national debt

Answer 34

total amount of U.S. gov. owes, grows yearly

Question 35

regressive tax

Answer 35

a tax for which the percentage of income paid in taxes decreases as income increases

Question 36

proportional tax

Answer 36

a tax for which the percentage of income paid in taxes remains the same for all income levels

Question 37

progressive tax

Answer 37

z tax for which the percentage of income paid in taxes increases as income increases