Economics Course Final Exam Review

Comprehensive vocabulary flashcards covering basic economic concepts, supply and demand, personal finance, and macroeconomics based on the course review transcript.

Scarcity

The condition where resources are limited, but human wants and needs are unlimited.

Opportunity Cost

The value of the next best alternative that is given up when a decision is made.

Land

Natural resources used to produce goods and services, such as soil, plants, and physical space.

Labor

The effort people contribute to the production of goods and services.

Capital

Human-made resources, such as tools, machinery, and trucks, used to create products or services.

Entrepreneurship

The factor of production involving a person who combines other factors to earn a profit while taking financial risks.

Traditional Economy

An economic system based on long-standing customs, beliefs, and history where decisions are made according to the past.

Command Economy

An economy where the government or a central authority controls production and resource allocation.

Market Economy

An economy driven by supply and demand where individuals and private businesses make decisions based on market signals.

Mixed Economy

A combination of market and command systems where decisions are shared between the government and the private sector.

Market Structures

The organizational and other characteristics of a market that determine the behavior and performance of companies.

Perfect Competition

A market structure with many buyers and sellers, identical products, no barriers to entry, and where sellers are "price takers."

Monopolistic Competition

A market structure with many sellers, differentiated products, low barriers to entry, and some control over price.

Oligopoly

A market structure dominated by a few large firms with high barriers to entry and mutual interdependence.

Monopoly

A market structure with a single seller of a unique product with no substitutes and blocked entry.

Sole Proprietor

A business owned and managed by a single individual who keeps all profits but faces unlimited personal liability.

Partnership

A business owned by two or more persons who agree on a specific division of responsibilities and profits.

Corporation

A legal entity owned by individual stockholders who have limited liability for the firm's debts.

Law of Demand

The principle stating that as the price of a good increases, the quantity demanded decreases, indicating an inverse relationship.

Law of Supply

The principle stating that as price increases, the quantity supplied increases, indicating a direct relationship.

Equilibrium

The point where the quantity demanded by consumers exactly equals the quantity supplied by producers at a specific price.

Price Ceiling

A government-imposed maximum price, such as rent control, which can cause a shortage.

Price Floor

A government-imposed minimum price, such as the minimum wage law, which can cause a surplus.

Elasticity

A measure of how responsive quantity demanded or quantity supplied is to a change in price.

Private Good

A good that is excludable (non-payers can be kept from using it) and rival (one person's use reduces availability to others).

Public Good

A good that is non-excludable and non-rival, often provided by the government to solve the free-rider problem.

Positive Externality

An unintended benefit created for an unrelated third party through the production or consumption of a good.

Negative Externality

An unintended cost imposed on an unrelated third party through the production or consumption of a good.

Unskilled Labor

Jobs requiring no specialized training or education, such as a grocery bagger or fruit picker.

Professional Labor

Jobs requiring advanced education, specialized degrees, and professional licensing, such as doctors or lawyers.

Progressive Tax

A tax where the rate increases as the taxpayer's income increases, such as the Federal Income Tax.

Regressive Tax

A tax where the rate effectively decreases as income increases, taking a larger percentage of income from low-income earners.

Proportional Tax

A tax where everyone pays the same percentage of their income, also known as a flat tax.

Checking Account

A deposit account used for daily transactions, paying bills, and frequent access via debit cards.

Simple Interest

Interest calculated only on the initial principal amount of a loan or deposit.

Compound Interest

Interest calculated on the principal amount plus the accumulated interest from previous periods.

Premium

The fixed amount paid, usually monthly or annually, to keep an insurance policy active.

Deductible

The amount a policyholder must pay out of pocket for a claim before the insurance company starts to pay.

GDP (Gross Domestic Product)

The total market value of all final goods and services produced within a country's borders in a specific time period.

Nominal GDP

The total value of goods and services produced measured using current market prices, without accounting for inflation.

Real GDP

The total value of production adjusted for inflation using constant prices from a base year.

Peak

The high point of the business cycle marking the end of an expansion and the start of a contraction.

Trough

The low point of the business cycle marking the end of a contraction and the start of an expansion.

Recession

A period of at least $6$ months of economic decline or contraction.

Inflation

A general and sustained increase in the average price level across an economy, reducing purchasing power.

Consumer Price Index (CPI)

An economic metric that measures the average change over time in prices paid by urban consumers for a fixed market basket of goods.

Structural Unemployment

Unemployment due to a mismatch between the skills workers have and the jobs available.

Cyclical Unemployment

Unemployment caused specifically by a recession in the business cycle.

Full Employment

A target state in the US occurring when the unemployment rate is between $3-4\%$, as some unemployment always exists.

Fiscal Policy

Actions taken by the legislative or executive branch (Congress and President) to influence the economy using the federal budget.

Monetary Policy

Actions taken by the Federal Reserve (the FED) to influence the economy by changing the money supply.

Expansionary Monetary Policy

A "easy-money" policy designed to increase the money supply by decreasing the Interest on Reserves to lower market interest rates.

Contractionary Monetary Policy

A "tight-money" policy designed to decrease the money supply by increasing the Interest on Reserves to raise market interest rates.