Cumulative exam on the material covered in Spring Semester
Quiz yourself by thinking what should be in
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| Traditional Economy | The use of scarce resources stems from ritual, habit, or custom. Economic decisions are made by ancestors or elders.
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| Market Economy | The use of scarce resources is dispersed throughout the society. Economic decisions are made by individuals.
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| Command Economy | The use of scarce resources is determined by a central authority. Economic decisions are made by the government.
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| Mixed Economy | The only kind of economic system that exists in the real world. All other systems are theoretical ideals.
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| Socialism | Basic productive resources are gov't owned, the rest are privately owned. Gov't plans and directs allocation of resources in key industries.
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| Capitalism | Productive resources are privately owned and operated. Resources for production are obtained by individuals' desire for profit but the gov't may promote competition and provide public goods.
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| Communism | All productive resources are gov't owned and operated, centralized planning directs resources, and gov't makes all economic decisions.
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| Name 3 examples of command elements in the US economy: | Monopoly Laws, Emissions Standards, Quality Assurance Laws, Licenses
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| In the circular flow matrix, businesses sell goods and services where? | The product market
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| What is money paid to businesses for goods and services called? | Revenue
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| What is money paid by businesses for resources called? | Costs
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| What is money paid to households for resources called? | Income
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| What is money paid by households for goods and services called? | Spending
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| What kind of income is paid for land? | Rent
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| What kind of income is paid for capital? | Interest
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| What kind of income is paid for labor? | Wages
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| What kind of income is paid for entrepreneurs? | Profits
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| What is government money given as incentives to businesses called? | Subsidies
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| What is government money given directly to households called? | Welfare
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| What is money given by businesses and households in exchange for public goods? | Taxes
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| Monopoly | Market structure with only one seller of a particular product.
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| Oligopoly | Market structure in which a few very large sellers dominate an industry.
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| Monopolistic Competition | Market structure that has all the conditions of perfect competition except identical products.
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| Perfect Competition | A market structure characterized by a large number of well informed independent buyers and sellers who exchange identical products.
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| Benefits of competition: | Higher quality goods and services, improved service, lower prices, increased innovation , more adaptive workforce
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| In the circular flow matrix, households sell the factors of production where? | The resource market
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| Advantages of a command economy: | Capable of quick, dramatic change; many basic public services available at little or no direct cost
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| Disadvantages of a command economy: | Does not meet the needs and wants of consumers; Lacks effective incentives to get people to work; Requires large bureaucracy, which consumes resources; Has little flexibility for day to day change; Inefficient allocation of resources
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| Advantages of traditional economies: | Sets forth clear economic roles for all members of the community; stable, predictable, and continuous life
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| Disadvantages of traditional economies: | Discourages new ideas; Stagnation and lack of progress; Lower standards of living
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| Advantages of market economies: | Individual freedom; capable of gradual adjustment to change; lack of gov't interference; high variety of goods and services; higher degree of consumer satisfaction; higher standards of living
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| Disadvantages of market economies: | rewards only productive resources (not the young, old, or sick); does not produce public goods; workers and businesses face uncertainty from competition or change
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| Good | Tangible economic product that is useful, relatively scarce, transferable to others; used to satisfy wants and needs
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| Scarcity | fundamental economic problem facing all societies that results from a combination of limited resources and people's virtually unlimited wants
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| Economic | social science dealing with the study of how people satisfy seemingly unlimited and competing wants with the careful use of scarce resources
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| Need | basic requirement for survival; includes food, clothing, and/or shelter
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| Want | something we would like to have but it is not necessary for survival
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| Factors of Production | productive resources that make up the four categories of land, capital, labor, and entrepreneurship
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| Land | natural resources or "gifts of nature" not created by human effort; one of four factors of production
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| Capital | tools, equipment, and factories used in the production of goods and services; one of four factors of production
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| Labor | people with all their abilities and efforts; one of the four factors of production, does not include the entrepreneur
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| Entrepreneur | risk-taking individual in search of profits; one of four factors of production
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| Gross Domestic Product | dollar value of all final goods, services, and structures produced within a country's national borders during a one-year period
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| Service | work or labor preformed for someone; economic product that includes haircuts, home repairs, forms of entertainment
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| Value | worth of a good or service as determined by the market
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| Paradox of Value | apparent contradiction between the high value of a nonessential item and the low value of an essential item
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| utility | ability or capacity of a good or service to be useful and give satisfaction to someone
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| wealth | sum of tangible economic goods that are scarce, useful, and transferable from one person to another; excludes services
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| Economic Growth | increase in a nation's total output of goods and services over time
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| Productivity | measure of the amount of output produced with a given amount of productive factors; normally refers to labor, but can apply to all factors or production
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| human capital | sum of peoples' skills, abilities, health, and motivation
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| Specialization | division of work into a number of separate tasks to be preformed by different workers
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| opportunity cost | the loss of the next best alternative use of money, time, or resources when one choice is made rather than another
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| economic model | simplified version of a complex concept or behavior expressed in the form of an equation, graph, or illustration
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| cost-benefit analysis | way of thinking that compares the cost of an action to its benefits
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| Standard of Living | quality of life based on ownership of necessities and luxuries that make life easier
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| Commodity | Kind of money where items of value are traded of other items of roughly the same value:
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| Representative | Kind of money where a paper note can be exchanged at a financial institution for pre-determined amount of valuable goods (i.e. gold, etc...)
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| Fiat | Kind of money based on trust in the stability and power of the government that mints currency:
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| 1900 | When did the first paper money get created in the United States?
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| Three basic questions of economics: | What is the produce? How to produce it? For whom to produce?
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| Inflation | a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency
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| Which statistic measures the total size of an economy? | GDP
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| Which measures (roughly) the average wealth of individuals in an economy? | GDP per capita
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| Which is better for comparing a countries economic growth from year to year? | Real GDP
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| What is generally considered to be a healthy level of inflation for a developed economy? | 3%
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| At 3% inflation prices double every... | 24 years
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| What are the 4 pillars of the American Free Enterprise system? | Economic Freedom, Voluntary Exchange, Private Property Rights, Profit Motive
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| Proportional Tax | imposes the same percentage tax rate on everyone, regardless of income
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| Progressive Tax | imposes a higher percentage rate of taxation on higher incomes than lower incomes
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| Regressive Tax | imposes a higher percentage tax rate on lower incomes than higher incomes
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| Example of Proportional Tax | Medicare
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| Example of Progressive Tax | Federal Income Tax
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| Example of Regressive Tax | Sales Tax
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| Structural | Type of Unemployment that involves changes in the structure of the labor market that make some skills obsolete. Most of these jobs will never come back.
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| Frictional | Type of unemployment where people are temporarily unemployed or between jobs
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| Cyclical | Type of unemployment that results from an economic downturn or recession. Drop in demand for goods & services result in drop in demand for labor and employers are forced to lay off workers.
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| Natural Rate of Unemployment | 3-6%, sum of structural & frictional unemployment (two kinds of unavoidable unemployment)
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| Highest Unemployment in US History | Great Depression 25.6%
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| Name 3 groups of people who aren't considered part of the labor force | retired, children, disabled, military personel, full time students, homemakers, prison inmates & mentally insane (the institutionalized)
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| What 2 categories of people with major financial needs are not calculated in the unemployment rate? | the underemployed and discouraged workers (those who have stopped looking for a job)
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