Econ - Exam Review Short Answers

three factors of production

land labor and capital; land - clay, labor - potter making it, capital - selling the pot

law of supply and demand

prices are determined by relationship between these two; if there is too much of a good prices will drop and opposite is true.

three functions of money

medium of exchange, unit of account, store of value

difference between bond and stock; and what does each offer an investor?

bond you get your investment back and it offers investor safety; stock have unlimited rate of return and offers investors possible large amounts of money.

three characteristics of savings and investment how do they interact?

safety, liquidity, and rate of return; cannot have all three high one is always low.

three c’s of credit

character, capital, and capacity

difference between pension fund and 401k

a pension fund is controlled by employer while a 401k is more in your hands and employer just gives money for it.

why does a stock split and how?

it splits because the price is too high; each stock is split into two ex. 1 100 dollar stock into 2 50 stocks.

how does life insurance work?

you pay money each month to the company and when you die your relatives will get money to stay afloat.

difference between progressive, proportional, and regressive taxes

progressive: takes more from those who make more, proportional: takes same from everyone, regressive: takes more from those who make less.

different forms of taxation

flat, progressive, and regressive

major types of life insurance

term life policy, whole life policy, universal life policy

major types of economic systems

traditional, command, and mixed

major tools the FED uses for monetary policy and how they work

open market operations: buying and selling of bonds, discount rate: interest rate charged on banks, reserve requirements: minimum amounts of reserves banks have to hold.

four major market structures and differences

perfect competition, monopolistic competition, oligopoly, and monopoly; pc: many firms same product, mc: many firms different products, o: few firms high barrier to entry, m: one firm lots of power.

three major forms of business ownership, disadvantages, and advantages

sole proprietorship: owe all debts, but get all profit, partnership: more ideas, less control, corporation: limited liability, but increased costs