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Economics
Unit 1 Test
| Question | Answer |
|---|---|
| What is scarcity? | Limited resources for unlimited wants/needs. This forces us to make choices. |
| What is opportunity cost? | That which we sacrifice to attain something else (ex. money, time) |
| What is economics? | The study of how individuals and/or nations utilize their scare resources. |
| What is microeconomics? | Deals with how individual consumers make decisions to get the most satisfaction from the goods they purchase given a limited income, and how firms can get the highest return on their investment. Exchange rates, tariffs, minimum wages are microeconomics. |
| What is macroeconomics? | Deals mainly with the distribution of income and how best to achieve the objectives of full employment, price stability, and the elimination of poverty. Ex. Employment, inflation, national debts and deficits, taxation, money supply & interest rates. |
| What is positive economics? | Things people feel can be done in economy. It is provable and indisputable. These ideas can be tested and resolved by appealing to facts and analyzing data. Ex. "Rent control will provide more affordable housing for the poor." |
| What is normative economics? | Things people feel ought to be done. These ideas cannot be resolved by appealing to facts because they deal with values and value judgement. Ex "We ought to build more shelters for the homeless" |
| What is ceteris paribus? | Isolate one variable while the rest remain constant when comparing two variables. Means "all other things being equal" |
| What is fallacy of composition? | What is true for the individual or part of the group is not necessarily good for the whole. Ex. A pay raise is good for the worker in the short term but means higher prices for all in the medium-long term. |
| What is post-hoc fallacy? | Because 2 things happen in succession does not mean the first caused the second. It is the basis of advertising. Ex. New shirt does not necessarily equal success with opposite sex. |
| What is the production possibilities curve? | Graph that shows all possible combinations of two goods when an economy is producing at full potential. |
| What is a consumer good? | Used once by an end user (Ex. eating a pizza => all gone) |
| What is a capital good? | A good that is used in the production of another good/service (Ex. Computer) |
| What is a capital good also known as? | Durable good |
| What is frictional unemployment? | Unemployment by choice |
| What are the goals of the Canadian Economy? | Full employment, stable prices, balance of trade, economic growth, economic justice, economic freedom, economic efficiency, reasonable level of debt, environmental stability. |
| What are productive resources? | Anything that can be used to create or manufacture valuable goods or services. Also know as factors of production. Includes Land, labour and capital. |
| Describe land as a productive resource. | Includes not only the fertile soil found on earth but all natural resources found on or below the surface. Ex. fossil fuels, forest reserves. These provide the raw materials needed to produce goods/services people want. |
| Describe labour as a productive resource. | Not only physical labour but mental effort and other elements humans contribute to production process. Ex. high-caliber employees.Resources of knowledge and entrepreneurship now recognized as important factors of production for more efficiency. |
| What is entrepreneurship? | Ability to organize economic activity, assume risks and achieve effective results.This contribution is made by a manager to the production process. Organizes other factors of production & seeks to develop new products Less tangible than physical labour. |
| Describe capital as a productive resource. | Goods that aid in the production of other goods/services (ex. factories, warehouses, machinery & equipment) |
| What is real capital? | Faculties, machinery, equipment. Extremely important to a growing economy. Investment in capital goods leads to expansion in total production/improves productivity/efficiency in future. |
| What is money capital? | Funds to acquire real capital. |
| What is an example of human capital? | Tax dollars spent annually on public education. |
| What are tangible resources? | Physical properties that can be seen/touched, therefore easily quantified. Ex. a hundred tonnes of nickel, 1000 people in labour force. |
| What are intangible resources? | Lack physical properties that make them easy to quantify. Economists have concluded that although difficult to quantify, entrepren. directly affects productivity = important intagible factor. Knowledge also important, has developed an information economy. |
| What is an environment for enterprise? | Examining a country's social/cultural values and political/economic institutions to see if they are conductive of doing business. |
| What is an economic system? | Set of laws/institutions/common practices that help a nation determine how to use its scarce resources to satisfy as many of its people's needs/wants as possible. |
| What does a traditional economy (T.E) entail? | Practice of past determine the answers to 3 production questions.T.E practices/skills passed on from generation to generation usually within same family. Found in static society (little long term planning/focus on survival)*Self-sufficient* Ex. Mongolia |
| What are the 3 production questions? | What to produce? How to produce? For whom to produce? |
| How does a traditional economy answer the production questions? | What to produce determined by needs of family whose members produce goods for own use. Surplus is traded through barter. How goods are produced: parents teach kids skills to assume their roles/responsibilities. Therefore people remain same social class |
| What does a command economy entail? | All production decision made by a small group of political leaders who have the power to enforce their decisions throughout the entire economy. Emphasis on capital goods > consumer goods. Rely on reward/punishment to gain productivity. Ex. Cuba/China |
| How does a command economy answer the production questions? | What/how/Whom decided by state. |
| How does the command economy utilize central authority. | Central Authority rewards people who have made a beneficial contribution to state through special privileges/goods/services or vice versa if bad. |
| What does a market economy entail? | Economic activity coordinated by many individuals who make independent decisions in free marketplace. Aka free enterprise or private enterprise. Basic elements: private property,freedom of enterprise, profit maximization, competition Ex. Hong Kong/China |
| How does a market economy answer the production questions? | What: Consumer demand How: Quest for profit (least cost to make/most expensive to sell for) Whom: Income levels, rich people = more national output |
| What economy does a Canadian economy have? | Mixed economy |
| What does a mixed economy entail? | Includes both private enterprise/state-owned enterprise Ex. In the TV Industry CBC is state-owned while CTV is privately owned. At times both are in direct comp. of each other |
| What is crown land? | Feature of command economics, also permits private ownership of land which is a feature of market economy. good bartering can lead to additional benefit on tax returns during end of fiscal year. In an underground/hidden economy people avoid taxes. |
| What is economics as a discipline? | Social science, borrows mode of investigation (mathematical models) Ex. formulas/graphs, statistical inferences, inductive/deductive meaning. |
| What is a need for abstraction? | "Unrealistic" assumptions that don't reflect the "real world", predicting behavior of people (irrational beings, need to abstract to understand economy (complex), no "right" degree of abstraction - depends on objective of analysis. |
| What are economic models used for? | Representation of a theory or part of a theory often to show cause/effect, operates much the same as "real world" but on smaller scale, viewing workings "up close", to experiment/predict behaviour under different circumstances, make educated guesses |
| Adam Smith | Supports capitalism/"founding father" of capitalism. Believed in local industry. Increased prosperity for industrialist class. |
| Robert Owen | Utopian socialist. Believed in fair wages/free education/free daycare/more affordable groceries, etc.. |
| Karl Marx | Believed in Industrial communism (to overthrow corrupt ruling class). Exploited "evils" of capitalism. Believed class conflict leads to exploitation leads to rebellion. Believed capitalism is self-destructive. |
| John Maynard Keynes | Believed in Capitalism/"saved capitalism" Believed investment encouraged by government spending and low interest rates. Believed gov. spending results in increased public debt/inflation.Believed debt would lead to more profit in private sectors. |
| John Kenneth Galbraith | Believed in consumerism (private affluence & public squalor). Believed in pro government control, spending priorities improve social balance, executive managers hold real decision making power. |
| Milton Friedman | Believed in capitalism/free-market economy. "Father of economic freedom". Believed in importance of money supply (monetarism). Believed free markets resolve economic problems efficiently. |
| Mohammad Yunus | "Banker to the poor" Believed in business for the betterment of society not for own monetary gain (profitable benefit). Created Grameen Bank (loans money through microcredit, mostly to women, 97% of loans paid back) Like Karl Marx. |
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AStasysh
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