Untitled Flashcards Set

1. Four Factors of Production

* Land: Natural resources used to produce goods and services.

* Labor: Human effort used in production.

* Capital: Human-made goods used to make other goods.

* Entrepreneur: A person who takes risks to combine resources for production.

2. Production Possibility Points (PPC)

* On the curve: Efficient use of resources

* Inside the curve: Underutilization/inefficient

* Outside the curve: Impossible without growth

* Shifts caused by: Changes in resources, technology, or labor force

3. Production Possibility Curve (PPC)

* Represents max efficiency, resources, and technology at a given time.

4. Opportunity Cost Determination

* The more you produce of one thing, the higher the opportunity cost for the other.

5. Economic Goals

* Growth: Improve standard of living

* Freedom: Ability to choose

* Stability: Controlled, steady growth

* Efficiency: Full employment

* Security: Safety nets

6. Guns vs. Butter

* The trade-off between military and consumer goods.

7. Opportunity Cost Definition

* Value of your second-best choice.

8. Technology

* Tools that improve production.

9. Underutilization

* Producing below efficiency on PPC; unused resources.

10. Scarcity

* Unlimited wants, limited resources.

11–17. Economic System Terms

* Competition: Struggle among producers for consumer money

* Incentive: Motivation to act

* Laissez-faire: Government hands-off approach

* Market Economy: Driven by consumer/producer interaction

* Command Economy: Government makes all decisions

* Traditional Economy: Based on long-standing practices

18. Three Basic Economic Questions

* What to produce?

* How to produce?

* For whom to produce?

19. Economic Systems Pros/Cons

* Traditional: P: Stable. N: Repetitive.

* Command: P: Quick decision-making in crisis. N: Little freedom.

* Market: P: Lots of freedom. N: Inequality, can be unstable.

20. Law of Demand

* Price ↑ → Quantity Demanded ↓

* Price ↓ → Quantity Demanded ↑

21. Law of Supply

* Price ↑ → Quantity Supplied ↑

* Price ↓ → Quantity Supplied ↓

22. Demand Definition

* Willingness and ability to consume at all prices.

23–25. Elasticity

* Elastic: Quantity changes significantly with price

* Inelastic: Quantity changes little despite price

* Allocation: Dividing limited resources (like time)

26–28. Demand vs Quantity Demanded

* Demand: Entire curve

* Quantity Demanded: One point on the curve at a given price

29. 6 Determinants of Demand

1. Price of substitutes

2. Price of complements

3. Preferences

4. Number of consumers

5. Income (normal vs inferior goods)

6. Expected future prices

30. 4 Supply Shifters

1. Resource prices

2. Technology

3. Government policies (taxes, subsidies)

4. Number of suppliers

31. Equilibrium

* Supply = Demand

32. Price Floor

* Minimum legal price (e.g., minimum wage)

33. Price Ceiling

* Maximum legal price (e.g., rent control)

34. Shortage

* Demand > Supply (below equilibrium)

35. Surplus

* Supply > Demand (above equilibrium)

36. Perfect Competition

* Identical products, many buyers/sellers, easy entry/exit

37. Monopolistic Competition

* Many sellers, similar but differentiated products

38. Oligopoly

* Few sellers, high barriers, collusion risk

39. Monopoly

* One seller, controls prices and supply

40. Differentiation in Market Structures

* Perfect competition = identical products

* Monopolistic = differentiated products

41. Price Influence by Market Structure

* Perfect: None

* Monopolistic: Some

* Oligopoly: Significant

* Monopoly: Complete control

42. Patent

* Exclusive right to an invention for 12–18 years

43. Supply & Demand of Wages

Influenced by *Unions** and Minimum Wage

44. Collective Bargaining

* Union negotiates with employer; uses strike, picketing, mediation, arbitration

45. Mediation

* Neutral third party helps; non-binding

46. Arbitration

* Neutral third party decides; legally binding

47. 5 Characteristics of Money

1. Stability

2. Portability

3. Acceptability

4. Divisibility

5. Durability

48. 3 Uses of Money

1. Medium of exchange

2. Store of value

3. Unit of account

49. 3 Sources of Value of Money

1. Commodity (has value itself)

2. Representative (backed by a commodity)

3. Fiat (value by government decree)

50. Current U.S. Dollar Value

* Fiat currency

51. Credit vs Debit vs Check

* Credit Card: Borrowed from bank

* Debit Card: Draws from checking account

* Check: Withdraws from checking account

52. Loanable Funds

* Supply: Saving

* Demand: Borrowing

* Intermediaries: Banks

53. Liquidity

* How accessible money is

54. Diversification

* Reducing risk by spreading investments

55. Risk

* Chance of losing investment

56. Stock

* Ownership in a company

57. Bond

* Loan to a company or government

58. —

59. Investment Tools

* Money Market: Low risk, limited access

* Mutual Funds: Diversified with low investment

* Corporate Bond: Loan to a company

* Treasury Bond: Loan to the U.S. government

60. Junk Bonds

* Extremely risky bonds

61. Municipal Bonds

* Loan to local or state government

62. Corporate Bonds

* Loan to a corporation

63. Treasury Bonds

* Loan to the federal government

64. GDP Definition

Total value of final goods/services *in a country** in one year

65. GDP Exclusions

* Used items, underground economy, financial transactions, intermediate goods

66. GDP Uses

* Compare over time or between countries

67. GDP Limitations

* Doesn't show product type, quality, or distribution

68. Business Cycle (4 Phases)

1. Expansion

2. Peak

3. Contraction (recession = 6+ months)

4. Trough

69. Aggregate

* Total economic activity

70. Recession

* Economic decline (2+ quarters)

71. Depression

* Severe and prolonged downturn

72. Externality

* Unintended economic side effect

73. Employed

* Worked 1 hour of taxable work in last 2 weeks

74. Unemployed

* No job but actively looking

75. Labor Force

* Employed + unemployed

76. Full Employment

* Everyone who can work is working

77. Underemployment

* Working below skill level

78. Cyclical Unemployment

* Caused by bad economy

79. Frictional Unemployment

* Between jobs

80. Seasonal Unemployment

* Work unavailable during off-season

81. Structural Unemployment

* Skill/location mismatch

82. CPI & Market Basket

* CPI tracks cost of goods in an average person’s market basket

83. Cost-Push Inflation

* Production costs increase, businesses raise prices

84. Demand-Pull Inflation

* Consumer demand drives up prices

85. Supply Shock Inflation

* Unexpected event disrupts supply, raises prices

86. Socialism

* Democratic processes with government control of some resources

87. Communism

* Government controls all economic decisions

88. Capitalism

* Private ownership and market-driven; wealth can influence politics

89. Public Goods

* Non-excludable and non-rival (everyone uses, no one excluded)

90. Allocation

* How resources are divided among people

91. Fiscal Policy

* Government taxing and spending

92. Expansionary Fiscal Policy

* Lower taxes or raise spending to grow economy

93. Contractionary Fiscal Policy

* Raise taxes or cut spending to slow economy

94. 3 Tax Classifications

* Progressive: % ↑ with income

* Regressive: % ↓ with income

* Proportional: Same % for everyone

95. Progressive Tax

* Higher income → higher rate (10–20%)

96. Regressive Tax

* Flat taxes (e.g., sales tax); impacts poor more

97. Proportional Tax

* Same % regardless of income

98. Types of Taxes We Pay

* Property tax, sales tax, excise tax (hidden in price), tariffs, gas/sin taxes

99. Mandatory Spending

* Required by law

100. Discretionary Spending

* Optional part of budget (32–38%)

101. Classical Economics

* Adam Smith; laissez-faire; little to no government interference

102. Keynesian Economics

* Government should spend to boost GDP when needed

103. Supply-Side Economics

* Support businesses to grow economy

104. Demand-Side Economics

* Support consumers to grow economy

105. Municipal Bonds

* Used to fund local services like police stations

106. Budget Surplus

* Revenues > spending

107. Budget Deficit

* Spending > revenues

108. Purpose of Fiscal Policy

* Control economy through taxing/spending

109. Tariffs & Quotas

* Tariff: Tax on imports

* Quota: Limit on quantity of imports

110. Who Controls Money Supply?

* The Federal Reserve

111. Tight Money Policy

* Less money in economy = contraction

112. Easy Money Policy

* More money in economy = expansion

113. 3 Tools of Monetary Policy

1. OMO (Open Market Operations): Buying/selling bonds

2. Discount Rate: Interest rate from Fed to banks

3. Reserve Ratio: % banks must keep in reserve