ECON FINAL EXAM

0.0(0)
studied byStudied by 0 people
learnLearn
examPractice Test
spaced repetitionSpaced Repetition
heart puzzleMatch
flashcardsFlashcards
Card Sorting

1/45

flashcard set

Earn XP

Description and Tags

Economics

Study Analytics
Name
Mastery
Learn
Test
Matching
Spaced

No study sessions yet.

46 Terms

1
New cards

What is Economics?

The study of how people try to satisfy seemingly unlimited and competing wants through careful use of limited resources

2
New cards

What is the fundamental economic problem facing all societies?

Scarcity

3
New cards

What are the basic questions of economics?

What, how, for whom

4
New cards

What are the factors of production?

Land(natural resources)

Capital (man made tools equipment/machinery)

Labor (people doing the work)

Entrepreneurship (risk takers in search of a profit who do something innovative w/ existing resource)

5
New cards

What are the characteristics of the 3 Economic Systems?

Traditional (doing things the same they’ve always been done)

command( what/how/ for whom the government says to produce)

Market( buyers and sellers make the decisions-most efficient)

6
New cards

What are the features of capitalism, free enterprise?

Market economies are based on a system of capitalism and free enterprise (entrepreneur)

7
New cards

Trade off vs opportunity cost

Trade-off is a list of possible choices

Opportunity cost what you lose when choosing or making a decision your second choice

8
New cards

Adam Smith (1723-1790)

advocated free trade and "the Invisible Hand of competition"

Father of economics

9
New cards

paradox of value

The situation where some necessities, such as water, have little monetary value, whereas some non-necessities, such as diamonds, have a much higher value.

10
New cards

cost-benefit analysis

a study that compares the costs and benefits to society of providing a public good

11
New cards

Law of Demand

Quantity demanded of a good or service varies inversely (higher/lower prices = smaller/larger quantity demanded)

12
New cards

Law of supply

Sellers/producers will normally offer more at higher prices and less at lower prices

13
New cards

What factors cause shifts in DEMAND?

  1. Consumer taste

  2. Number of consumers

  3. Consumer income

  4. Substitute

  5. Complements

  6. Change in expectations( way people thing abt the future)

14
New cards

What factors cause a shift in SUPPLY?

  1. Cost of inputs

  2. Technology

  3. Number of sellers

  4. Government policies (taxes, regulations, subsidies)

  5. Productivity

  6. Expectations

15
New cards

How are supply-demand models used to locate equilibrium?

by finding the point where the quantity demanded equals the quantity supplied. This point, where the supply and demand curves intersect, determines both the equilibrium price and quantity in the market

<p><span style="color: rgb(0, 29, 53)">by finding the point where the quantity demanded equals the quantity supplied. This point, where the supply and demand curves intersect, determines both the equilibrium price and quantity in the market</span></p>
16
New cards

What/how does a shortage look/occur on a supply-demand graph?

occurs when the price is below the equilibrium price, and the quantity demanded is greater than the quantity supplied. This creates a gap between the two curves, indicating that consumers want to buy more than is available at that price

<p><span style="color: rgb(0, 29, 53)">occurs when the price is below the equilibrium price, and the quantity demanded is greater than the quantity supplied. This creates a gap between the two curves, indicating that consumers want to buy more than is available at that price</span></p>
17
New cards

What/how does a surplus look/occur on a supply-demand graph?

The horizontal distance between the supply curve and the demand curve at a price above the equilibrium price. This visual representation indicates that the quantity supplied is greater than the quantity demanded at that specific price, meaning there is more supply than demand in the market

<p><span style="color: rgb(0, 29, 53)">The horizontal distance between the supply curve and the demand curve at a price above the equilibrium price. This visual representation indicates that the quantity supplied is greater than the quantity demanded at that specific price, meaning there is more supply than demand in the market</span></p>
18
New cards

Price ceiling vs Price Floor

Ceiling- below equilibrium, can lead to shortage

Floor- minimum wage, can lead to surplus

<p>Ceiling- below equilibrium, can lead to shortage</p><p>Floor- minimum wage, can lead to surplus</p>
19
New cards

Demand elasticity

how much the quantity demanded of a product or service changes in response to changes in its price, income, or the prices of related goods

20
New cards

Components of GDP

  1. Consumer spending

  2. investment spending

  3. Government

  4. Net exports

21
New cards

Nominal GDP vs Real GDP

Nominal- when GDP is not adjusted to remove the effects of inflation

Real- when distortions of inflation have been removed(reflects what GDP would have been if prices hadn’t changed from base year)

22
New cards

Consumer Price Index (CPI)

Measures the average change in prices over time that consumers pay for a collection of goods and services (widely used to measure of inflation)

23
New cards

GDP

Measure of national output

“Dollar amount of all newly produced finished goods and services within a nations borders each year”

24
New cards

Aggregate Demand

Sum of consumption:

Total demand for goods and services in a national economy

25
New cards

Aggregate supply

Sum of Production:

Total amount of goods and services produced in a national economy

26
New cards

Types of unemployment

Frictional/seasonal - temporary unemployment

Structural/technological- caused by lack of skill need for job or machines take over peoples jobs

Cyclical- caused by economy going down(shrinking)

27
New cards

Business cycle

Periodic expansion and contraction of nation economy

<p>Periodic expansion and contraction of nation economy </p>
28
New cards

Recession

Contractionary that last 2 or more quarters

29
New cards

Labor force

Anyone over age of 16 who works or has looked for a job in the last 30 days

30
New cards

Expansionary/recovery

expansionary policies aim to stimulate economic growth, while recovery refers to the process of an economy bouncing back from a recession.

31
New cards

Demand-pull and cost-push inflation

Demand-pull inflation occurs when increased demand outstrips supply, leading to higher prices. Conversely, cost-push inflation arises from rising production costs

32
New cards

Progressive tax

Tax were percentage of in income paid in tax rises level of income rises

33
New cards

Proportional tax (flat tax)

Tax in which percentage of in income paid in tax is the same regardless of the level of income

34
New cards

Sales tax

a consumption tax imposed by the government on the sale of goods and services

35
New cards

Property tax

Local government revenue sources

For education and public welfare

36
New cards

FICA Taxes

(Federal insurance contributions act)

• second most important federal tax

• levied both employers and employees

•pays for social security and Medicare

37
New cards

Federal Deficit vs. National Debt

Federal-occurs when the government spends more money than it collects in revenue within a given fiscal year

National-the total amount of money a government owes to its creditors

38
New cards

Fiscal Policy

the government's use of its spending and taxation to influence the economy

39
New cards

Monetary Policy

Making decisions to increase or decrease money supply

40
New cards

Expansionary policy

policies implemented to stimulate economic growth by increasing aggregate demand

41
New cards

Contractionary policy

a set of measures taken by a government or central bank to slow down economic growth, reduce inflation, and curb excessive demand

42
New cards

Functions of money

Medium of exchange

Store of value

Measure of value

43
New cards

Reserve Requirements

The percent of a deposit a bank is required to keep by law

44
New cards

Regressive Tax

When the effective tax rate decreases as income goes up

45
New cards

Mandatory Spending

Social Security

Income Security

Medicare

46
New cards