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Economics > Econ. 200 Final > Flashcards

Econ. 200 Final Flashcards

1
Q

What is the definition of economics?

A

The study of how people, institutions, and society make economic choices under conditions of scarcity.

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2
Q

What is opportunity cost?

A

The value of the good, service, or time forgone to obtain something else.

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3
Q

What is utility?

A

The satisfaction obtained from consuming a good or service.

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4
Q

What does marginal mean?

A

marginal analysis: The comparison of marginal (“extra” or “additional”) benefits and marginal costs, usually for decision making.

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5
Q

What is the law of diminishing marginal utility?

A

The principle that the amount of extra satisfaction (marginal utility) from consuming a product decline as more of it is consumed.

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6
Q

What is microeconomics?

A

The part of economics concerned with
individual decision-making units, such as a consumer, a worker, or a business firm.

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7
Q

What is macroeconomics?

A

The part of economics concerned with the economy as a whole or major components of the economy.

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8
Q

Examples of situations you would use microeconomics.

A

Household, circular flow chart

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9
Q

Examples of situations you would use macroeconomics.

A

Federal Reserve, banking, currency rates

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10
Q

What is the production possibility curve?

A

A curve showing the different combinations of goods and services that can be produced in a fully employed economy, assuming the available supplies of resources and technology are fixed.

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11
Q

What is a command system?

A

An economic system in which most property resources are owned by the government and economic decisions are made by a central government body.

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12
Q

What is a market system?

A

An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities.

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13
Q

What are characteristics of a market system?

A
  • private property: The right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property.
  • freedom of enterprise: The freedom of firms to obtain economic resources, to use those resources to produce products of the firms’ own choosing, and to sell their products in markets of their choice. - freedom of choice: The freedom of owners of resources to employ or dispose of them as they see fit, and the freedom of consumers to spend their incomes in a manner they think is appropriate.
  • self-interest: The most-advantageous outcome as viewed by each firm, property owner, worker, or consumer.
  • Specializations
  • Markets
  • Division of Labor
  • Money, Bartering
  • Limited Government
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14
Q

What is competition? What is its purpose in a free market?

A
  • The presence in a market of independent buyers and sellers vying with one another, and the freedom of buyers and sellers to enter and leave the market.
  • Competition diffuses economic power within the businesses and households that make up the economy. The diffusion of economic power also inherently limits the potential abuse of that power.
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15
Q

Do free market systems have high barriers to entry? Exit?

A

NO- Since there is competition occurring businesses can always enter and exit markets according to their business practices. This might be influenced by consumer taste, technology, or input availability.

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16
Q

A market system conveys the _______ made by ______ and sellers of products and resources.

A

Decisions, buyers

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17
Q

What is Adam Smiths “Invisible Hand” theory?

A

The tendency of firms and resource
suppliers that are seeking to further their own self-interest in competitive markets to also promote the interest of society as a whole.

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18
Q

What book did Adam Smith write? When was it published?

A

Wealth of Nations, 1176

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19
Q

Draw the circular flow chart.

A
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20
Q

Describe the circular flow chart.

A

Products flow from businesses to households through the product market, and resources flow from households to businesses through the resource market. Opposite those real flows are monetary flows. Households receive income from businesses (their costs) through the resource market, and businesses receive revenue from households (their expenditures) through the product market.

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21
Q

What is the resource market?

A

A market in which households sell and firms buy economic resources.

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22
Q

What is the product market?

A

A market in which goods and services (products) are sold by firms and bought by households.

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23
Q

What is demand?

A

A schedule or curve that shows the various amounts of a product that consumers will buy at each of a series of possible prices during a specific period.

24
Q

What is the law of demand?

A

The principle that, other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls.

25
Q

What is the demand curve?

A

A curve illustrating the inverse relationship between the price of a product and the QUANTITY of it demanded, other things equal.

26
Q

What are determinates o demand?

A

Taste, Incomes, Number of Buyers

27
Q

What is a substitute good?

A

A good (or service) that can be used in place of some other good (or service) - Off brand items

28
Q

What is a complementary good?

A

A good (or service) that is used in conjunction with some other good (or service). Chips and salsa or pen and paper

29
Q

If the price of a complement (for example, lettuce) goes up, the demand for the related good (salad dressing)
will ______.

A

decline

30
Q

What is supply?

A

A schedule or curve that shows the amounts of a product that producers are willing to make available for sale at each of a series of possible prices during a specific period.

31
Q

What is the law of supply?

A

The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease.

32
Q

What are determinants of supply?

A

Resource prices, Technology, Taxes
and subsidies, Prices of other goods, expected price, and the number of sellers in the market.

33
Q

If technology improves, supply will______

A

Increase

34
Q

If taxes and subsidies increase, supply will ______

A

Decrease

35
Q

If prices of other goods increase, supply will ______

A

increase, because they are cheaper

36
Q

If there is an increase in the number of sellers, supply will ______

A

Decrease

37
Q

What is GDP?

A

Gross domestic Product: The total market value of all final goods and services produced annually within the borders of the United States, whether by U.S. or foreign-supplied resources.

38
Q

What are sources of Economic Growth?

A

Efficiency, technology, education

39
Q

What is the purpose of economic growth?

A

Higher living standards

40
Q

Draw the phases of the business cycle.

A
41
Q

What are the categories of unemployment? Define them.

A
  • frictional unemployment: Unemployment that is associated with people searching for jobs or waiting to take jobs in the near future.
  • structural unemployment: Unemployment that is associated with a mismatch between available jobs and the skills or locations of those unemployed.
  • cyclical unemployment: Unemployment that is associated with the recessionary phase of a business cycle.
42
Q

What is fiscal policy? Describe some effects.

A

Deliberate changes in government spending or taxation to promote full employment, price level stability, and economic growth.
- expansionary fiscal
policy: An increase in government spending, a decrease in taxes, or some combination of the two for the purpose of increasing aggregate demand and real output.

43
Q

What is crowding out?

A

A decrease in private investment caused by higher interest rates that result from the Federal government’s increased borrowing to finance deficits (or debt).

44
Q

What is a budget deficit, surplus, and balanced budget?

A
  • Deficit: The amount by which expenditures of the Federal government exceed its revenues in any year
  • Surplus: The amount by which revenues of the Federal government exceed its expenditures in any year.
  • Balanced Budget: Equal
45
Q

What is public debt?

A

The total amount of money owed by the Federal government to the owners of government securities, equal to the sum of past government budget deficits less government budget surpluses.

46
Q

What is external public debt?

A

The part of the public debt owed to foreign citizens, firms, and institutions.

47
Q

What is money or its functions?

A
  • medium of exchange: An item that sellers generally accept, and buyers generally use to pay for goods and services.
  • unit of account: A standard measurement unit in terms of which prices can be stated and the relative value of goods and services compared. – store of value: An asset set aside to purchase items in the future.
48
Q

What is the federal reserve system?

A

A central component of the U.S. banking system, consisting of the Board of Governors of the Federal Reserve and 12 regional Federal Reserve Banks.

49
Q

What is the board of governors?

A

The seven-member group that supervises and controls the money and banking system of the United States; the Board of Governors of the Federal Reserve System; the Federal Reserve Board.

50
Q

What is the Federal Open
Market Committee?

A

The 12-member Federal Reserve group that determines the purchase and sale policies of the Federal Reserve Banks in the market for U.S. government securities.

51
Q

What is monetary policy?

A

A central bank’s changing of the money supply to influence interest rates and assist the economy in achieving price level stability, full employment, and economic growth.

52
Q

What are tools of monetary policy?

A
  • Open-market operations: The buying and selling of U.S. government securities by the Fed for purposes of carrying out monetary policy.
  • Reserve Ratio
  • Discount rate: The interest rate the Federal Reserve Banks charge on the loans they make to commercial banks and thrifts.
53
Q

What is the difference between trade deficit and trade surplus?

A
  • A trade deficit occurs when imports exceed exports.
  • A trade surplus occurs when exports exceed imports.
54
Q

What is comparative advantage?

A

A lower relative or comparative opportunity cost than that of another person, producer, or country.

55
Q

What is the exchange rate?

A

The prices of foreign currencies in terms of one’s own currency.

Economics (1 decks)

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