Econ Test

Sole Proprietorship

owned and controlled by one person; oldest and most common type of business

Partnerships

Require little financial capital to start and operate; shares responsibility between two people

Corporations

Legally distinct from their owners and are treated as if they were individuals (can own land, hire workers, make contracts, pay taxes, be sued and sue, make and sell products)

Franchisees

Enterprise that uses an original company's name to sell goods and services; requirement to uphold parent company standards

Cooperatives

businesses owned collectively by their members

Nonprofits

Provides goods and services with particular goals in mind (typically surrounding education, healthcare, etc.)

What 3 things should be considered when measuring GDP?

Final output (only the final result of a resource), Current year (only new, no used items), Output produced within national borders

What are the three main causes of inflation?

when governments print more money, cost-push (companies charge more), demand-pull (caused by shortage)

What are the 2 ways to measure inflation?

Consumer price index (change in the price of products), producer price index (change in the price of things bought by producers)

Know how to draw a diagram of a business cycle

expansion (going up) > peak (at the top of the curve) > contraction (going down) > trough (at the bottom of the curve)

Gross Domestic Product (GDP)

the total dollar value of all final goods and services produced within a country during one calendar year

Nominal GDP

GDP expressed at current prices of the period being measured

Real GDP

GDP adjusted for price changes

Price Index

a set of statistics that allows economists to compare prices over time

Economic growth

increasing the standard of living; competing in the Global Market; Domestic Resources

Increasing Productivity

Technological advances, capital deepening, educated and skilled labor force

Economic Challenges

Unemployment, inflation, poverty and income distribution

Unemployment

frictional, structural, seasonal, cyclical

frictional unemployment

when workers are moving from one job to another

structural unemployment

occurs as a result of changes in technology or in the way the economy is structured

seasonal unemployment

fluctuations in employment based on seasons (agriculture, retail)

cyclical unemployment

resulting from recessions and economic downturns

Aggregate level

total amount of goods and services produced throughout the economy

Aggregate demand

total amount of spending by individuals and businesses throughout the economy

inflation

increase in the average price level of all products in an economy

deflation

decrease in the average price level of all goods and services in an economy

What are the five economic goals of the Government? (short answer)

Regulating business, providing public goods, promote economic wellbeing, stabilizing the economy, moderate the business cycle

What ways does the Government Regulate Business + *what are some key examples of organizations that help and how? (short answer)*

Prevents abuses (OHSA, EEOC), protects consumers (FDA, CPSC, FTC, FCC), limits negative externalities (EPA, NRC), promotes competition

How does the Government provide public goods?

fix the costs, shared responsibility (departments and commissions), privatization

Privatization

Government selling contracts or private businesses fill gaps in the market

How does Government regulation affect the economy? (short answer)

Price level (Price or production cost increase), Services, Profit, Productivity

What institutions exist in the US Financial Institutions?

Commercial banks, Savings and Loan Associations, Mutual Savings Banks, Credit Unions

How many districts are in the Federal Reserve?

12

How is the Federal Reserve set up?

5 key functions -> 3 key entities -> 1 US Central Bank

What types of tax systems are there?

Proportional Taxes (Flat tax), Progressive Taxes (larger % to wealthy; vice versa), Regressive Taxes (larger % to poor; vice versa)

What tax system does the US have?

Progressive Taxes

How does the Government collect taxes?

Income, corporate income, social security, property, sales

Commercial Banks

lend money, deposits, transfers, other banks, individuals

Savings and Loan Associations

Established to lend money and accept deposits; credit cards and insured deposits

Mutual Savings Bank

Serve who wished to make small deposits that large commercial banks did not want to handle

Credit Unions

Employees of large businesses and institutions and members of large labor unions often belong to credit unions

Revenue tariffs

raise money for the government

Protective tariffs

restrict the number of foreign goods sold in a country

Diminishing Marginal Utility

describes the decline of satisfaction overtime with each additional unit of product

market equilibrium

a situation that occurs when the quantity supplied and the quantity demanded for a product are equal at the same price

Total Product

all of the product a company makes in a given period of time with a given amount of input

Marginal Product

the change in output generated by adding one more unit of input

Be able to draw this graph (marginal)

Be able to draw this graph (equilibrium)

Quantity demanded

amount of a good or service that a consumer is willing and able to by at each particular price during a given time period

Demand

amount of a good or service that a consumer is willing and able to by various price points during a given time period

Law of demand

income effects, substitution effect, and diminishing marginal utility

Perfect elasticity or inelasticity

in order for a good to be considered “in demand” a consumer must be _____ and ______ to buy the good or service

Willing and able

What are the four economic systems and describe

Market, command, mixed, traditional

What are the four facts of production

Human Resources, natural resources, capital resources, and entrepreneurship

Economics

the study of the choices that people make to satisfy their needs and wants

Relationship between price and supply

As price goes up, supply goes up

in order for a natural resource to be considered a factor of production, what must it be considered?

scarce

what are the three questions economic systems and society must answer

what, how, and for whom

relationship between price and demand

as price goes up, demand goes down

supply

the quantity of goods and services that producers are willing and able to offer at various possible prices during a given time period

When considering to buy clothing, you only have enough money to purchase either the shirt or the pants. You make the decision to purchase the shirt. In this scenario, the pants are considered a(n)...

Opportunity cost

Externalities, public goods, and instability are all part of the Price System and are considered...

Market Failures