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Economics Final Exam

Term	Definition
Economics	The social science that deals with the study of how people satisfy seemingly unlimited and competing wants with the careful use of scarce resources.
Microeconomics	The part of economics concerned with single factors and the effects of individual decisions.
Macroeconomics	The part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.
What happens when supply increases and demand stays the same (or decreases)?	A surplus occurs and the price will decrease. It exists at any price above equlibrium.
What happens when demand increases but supply stays the same (or decreases)?	A shortage occurs and the price increases. It exists at any price below equilbirum.
What happen when both supply and demand increase?	The equilibrium quantity rises but the change in equilibrium price is ambigous. Both the supply and demand curve shift rightwards.
What happens when both supply and demand decrease?	The equilibrium quantity falls but the change in equilbrium price is ambiguous. Both the supply and demand curve shift leftwards.
Market Equilibrium	A situation in which prices are relatively stable and the quantity of the goods or services supplied is equal to the quantity demanded.
When is equlibrium present in a market?	When the quantity demanded equals the quantity supplied.
Needs	A necessity such as food, water, shelter, clothing, etc.
Goods	Merchandise or possessions. Items that are economically useful or that satisfy an economic want.
Market Economy	People or firms act in their own best interest to answer the what, how, and for whom questions.
Examples of what, how, and for whom questions	What are we purchasing, who are we purchasing it for, and so on.
Free Market Economy	Consumption and investment decisions shape the future course of the national economy.
Consumer Price Index (CPI)	Is used to measure price changes for a market basket of frequently used consumer items.
Specialization and Exchange	A country can produce beyond its production possibility curve. Resources can be used more efficiently. Larger quantites of goods and services can be produced.
Conglomerate	A firm that has at least 4 businesses, each making unrelated products (none of which are reponsible for the majority of its sales).
Conglomerate goods	In most cases, a conglomerate supplies a variety of goods and services that are not necessarily related to one another.
Which capital markets is the stock market associated with?	Ownership in companies. The NASDAQ. 401(k)s and individual retirement companies.
Financial Capital Account	It contains domestic individual investment from foreign countries. It is a key component of the balance of payments. It contains foreign investment in the domestic sector.
Human Capital	The education and experience of the labor force.
Subsitiution Effect	The change in quantity demanded because of the change in the relative price of the product.
Expenditures	An amount of money spent.
Theory of Rational Expectations	Theory that states that one should use past experiences along with all of the information available to him or her.
Liability	Something a person or company owes, usually a sum of money.
Central Bank	The bank that can lend to other banks in times of need.
Why do banks choose to borrow directly from the Federal Government?	They need additional resources and cannot borrow from other banks. For example, they might not have enough money on hand to hand out to customers all at once because the money is being used as interest for other customers.
Internal Revenue Service (IRS)	Branch of the U.S Treasury in charge of collecting taxes.
Disposable Personal Income (DPI)	The total income that a consumer sector has at its disposal after personal income taxes.
Losses and Business Failures	Help redirect resources away from unproductive projects.
Industrial Union	An association of all workers in the same industry regardless of the job each worker performs.
Modified Union Shop	When workers do not have to belong to a union to be hired and cannot be made to join one to keep their jobs.
Theory of Negotiated Wages	Theory that states that organized labor's bargaining strength is a factor that helps determine wages.
Secondary Effect	Producers will increase production. i.e. if more of a product/service is needed, producers will meet the need by increasing the availabilty of that product or service.
What will decreasing personal tax rates do?	Increase personal income, increase spending, and economic growth.
Inflation	A rise in the general level of prices.
Scarcity	Condition that results from society not having enough resources to producs all the things that people would like to have.
Scarcity Partnership	Condition that results from society not having enough resources to produce all the things that people would like to have.
Cooperative	A voluntary association of people formed to carry on some kind of economic activity that will benefit its members.
When the government funds a project that creates jobs, it does what?	Either tax or borrow from the private sector.
Trade-offs	People face these or alternative choices when they make an economic decision.
Opportunity Cost	The loss of potential gain from other alternatives when one alternative is chosen. i.e. if you stay home to study for an exam, you may miss out on other events.
Marginal Utility	The extray usefulness or satisfaction that a person gets from acquiring or using more units of a product.
Laissez-faire	The philosophy that states that the government should not interfere with commerce or trade.
Fixed Cost	The cost that a business incurs even if the plant is idle and the output is zero.
Comparative Advantage	Specialize in the production of that good.
Law of Comparative Advantage	Specialization in goods and services one can produce at a low cost makes it possible for trading partners to produce a larger output joint.
Federal Budget	The annual plan outlining proposed revenues and expenditures for the coming year prepared by the federal government.
Municipal Bond	Bond issused by the state and local governments.
Trust Funds	Created a beneficiary who receives the benefits (such as assets, income, etc) from the trust. The fund can contain nearly any assets imaginable, including stocks, cash, bonds, property, or other types of financial assets.
Lorenz Curve	The curve that shows how much of the actual distribution of income varies from an equal distribution.
Commodity Money	Money that has an alternative use as an economic good.
When will income and living standards of a nation increase?	When the availabilty of goods and services that people value increases.
Perfect Competition	Characterized by a large number of informed, independent buyers and sellers who exchange identical products.
Elasticity	A measure of responsiveness that tells us how a dependent variable (such as a quantity) responds to a change in an independent variable (such as price).
Demand curve	Shows the relationship between the price of a good and the quantity that cosumers are willing to purchase at each price.
Supply curve	Price and quantity supplied are directly related. As price rises, the quantity supplied rises. As price falls, so does the quantity supplied.

Created by: chloe.07

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