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Flashcards in Econ Final Deck (115):
1

Insurance to help the poor

Medicaid

2

Legal way for a person to walk away from paying some or all of their bills

Bankruptcy

3

Option given up in order to get something else

Opportunity Cost

4

Person who creates a business from scratch

Entrepreneur

5

Insurance to help the elderly

Medicare

6

What does a Form W-4 tell the employer

How much to withhold from your pay each pay period; this form can change how much net pay one gets and change the amount of deductions in one's pay

7

A Form W-2 tells

How much income you have made over the entire year

8

The purpose of a Form W-2 is used to

To file your income taxes

9

Who do you pay federal income tax to?

IRS

10

T/F Taxes are the lowest payroll deduction

True

11

T/F Gross income can be found by hours worked times wages per hour minus payroll deductions

False, hourly rate of pay times wages per hour (gross income is calculated without payroll deductions)

12

What is the difference in net and gross pay

Gross: amount of money you make before payroll deductions,
Net: amount of "take home" money after payroll deductions

13

2 ways a person makes their money "work" for them

Savings, Investing

14

What does a credit report show about a person's finances?

What loans they currently have, previous loans, accepted/denied and paid/unpaid loans. How responsible they are with paying loans.

15

How a person can increase their auto insurance
How a person can decrease auto insurance

Increase: Gender-Men have more accidents, single people have higher rates bc they have more accidents
Decrease: Drive safely, drive a safer car, be a woman, be married

16

T/F A person who buys insurance is agreeing to no loss for protection in case of a problem

False; a person who buys insurance is agreeing to a small loss for protection in case of a problem

17

T/F The shorter a person's loan term, the less the person pays at the end

True

18

T/F When buying insurance, an insurance company transfers risk and responsibility from the individual to the company

True

19

T/F A person can increase their premium by increasing their deductible

False, a person can decrease their premium by increasing their deductible

20

T/F One with higher coverage (insurance) will have a relatively more expensive premium

True

21

Earning interest on interest

Compounding

22

hen someone is willing to loan you money

Credit

23

Amount of money a person actually borrows and must pay back

Principle

24

Amount a person must pay to transfer risk to an insurance company

Premium

25

Amount a person pays out of pocket before insurance

Deductible

26

Savings vs. Investment

Savings: short term, low risk, low return, high liquidity, guaranteed
Investments: long term, high risk, high return, low liquidity, no guarantee
Both are ways to make money work for you

27

Why should a person use diversification when investing

So not all their money is in one place. (ex. stock market crashing)

28

15 vs. 30 year mortgages

Always choose the shorter mortgage if its affordable because they will pay less in the end because they'll have less interest

29

Why is a line graph better than a tabular model

It is more detailed and shows data over a period of time

30

4 factors of production

Land, labor, capital, entrepreneurship

31

4 factor costs

wages, rent, interest, profit

32

What does a PPC (Production Possibilities Curve) help someone determine

How much of one good/service must be given up to obtain more of another, what amount of production is efficient

33

What does a Circular Flow Model show

How an entire nation's economy flows, the relationship between the financial market, government household, and business firms

34

Be able to use a PPC

**

35

Circular Flow Model info

*Review test Ch.2

36

T/F Free market system works best when it is interfered with a lot

False, it works best when it has little to no interference

37

T/F A surplus can be solved or reduced by increasing demand, dercreasing supply, or allowing price to fall to market equilibrium

True

38

3 possible solutions to a shortage

Decreasing demand, increasing supply, allowing price to rise to market equilibrium

39

Principle Diminishing Marginal Utility

(ex. man on island with bag of beans) the more you get, the less useful it is

40

Things that can cause a change in demand

Change in price of related goods, consumer taste, consumer income

41

Things that cause change in supply

Change in technology, price of related goods, price of production materials

42

Change in quantity demanded of quantity supplied results from the change in _____ of a good/service

Price

43

Law of demand

The more expensive something is, the less quantity demanded there is for it. As the price lowers, quantity demanded goes up.

44

**use a demand schedule and create a curve that follows it

Quantity on x, Price on y
As quantity goes up, price goes down

45

**Use supply schedule

Q on x, P on y
As quantity goes up, price goes up

46

Law of supply

The higher the price buyers re willing to pay, the greater the quantity of the product a supplier will produce and vice versa

47

Demand and supply curves and market equilibrium

Supply goes from bottom left to top right, demand goes from top left to bottom right, the market equil. is the point where the two meet-where the market is happy

48

On a curve, what does an increase in supply look like

Entire supply curve moves to the right

49

On a curve, what does a decrease in demand look like

Entire demand curve moves left

50

If a substitute good increased in price does that change quantity demanded or demand of what it replaced?

Demand of what it replaced

51

T/F Market interest rates regulate the flow of money from business households through the financial market and can encourage or discourage saving/spending

T

52

T/F A command economy is likely to raise taxes to redistribute wealth

True

53

A business can produce more because they use what they already have in a more efficient manner

Intensive

54

When prices rise, value of money decreases

Inflation

55

Businesses can produce more because they gained factors of production

Extensive

56

**Look over attributes of command vs. market economy

*Ch. 5

57

3 major economic questions

Input-How
Output-What
Distribution-Who

58

Father of laissez faire economics

Adam Smith, wrote The Wealth of Nations, believed in the invisible hand guiding the market, money is a means to an end not an end itself and that a nation is truly wealthy if its people are wealthy

59

2 arguements for who should control factors of production

1. Individuals own and make decisions
2. Government owns and make decisions

60

Governments selling nationalized businesses back to private owners

Privatization

61

Nation under extreme state capitalism in which high taxes are used to provide social programs

Welfare state

62

Governments acquiring of major industries

Nationalization

63

In Capitalism, who makes the decisions? Socialism?

C: people
S: government

64

Share of portions of ownership in a corporation

Stock

65

Distribution of a portion of a corporations profits

Dividends

66

Original sale of a company's stock through investment bank

Initial Public Offering

67

Group of stocks hat analysts use to help ID stock trends in specific industries

Stock Index

68

Collection of stocks from different individual corporations

Stock portfolio

69

Privately managed stock portfolios

Mutual funds

70

Location where stock is traded

Stock exhanges

71

Why are stock markets important to the economy

1) they show if the economy is balanced
2) they show if the government should save more or spend more

72

Why was the SEC founded?

To ensure correct information about companies worth and business dealings and provide that information to the public. Could have prevented Great Depression bc speculative bubble wouldn't have formed

73

How does one make money on the stock market

Buy low, sell high

74

Made of material worth less than the item is worth

Token Coin

75

Percentage of deposits that must be kept on hand by American banks

Reserve requirement

76

Money supply is increased to combat things like recession and unemployment

Loose monetary policy

77

Money supply decreased to lower inflation

Tight Monetary policy

78

Payment all creditors must accept

Legal tender

79

Money not backed by something like gold

Fiat money

80

Increase o decreasing of money supply to influence economy

Monetary Policy

81

Buys and sells governmental securities, 12 members

FOMC

82

"The Fed" oversees issuing of currency and regulates bank activity and provides bank services

Federal Reserve System

83

Expansion of money supply as result of commercial banks lending their deposits to others

Money multiplier effect

84

Regulatory agency that deals with state banks not part of the Federal Reserve System

FDIC (Fed. Deposit Ins. Corp.)

85

Tool the Fed uses to create money that deals with lending money to banks is changing the

Discount Rate

86

2 checks for the Federal Reserve to keep it from acting irresponsibly

1. Congress can dismiss and elect people to Board of Governors
2. Congress is the only reason the Federal Reserve exists

87

How does money multiplier work

Deposit x 1/reserve requirement = money produced

Deposit=1000, rr= 10%

1000 x 1/.10 = 10,000 the bank will keep 100 of her deposit and loan out 900, cycle continues

88

What depatment mints and prints coins and paper money

US Department of the Treasury

89

What federal bureau prints cash

Bureau of engraving and printing

90

What federal agency creates coins

US Mint

91

Nation's wealth per persn

per-capita GDP

92

Importing more than exporting

Trade deficit

93

Exporting more than importing

Trade surplus

94

Real GDP is better than nominal when comparing nations wealth

*

95

What is included in the GDP

things produced in the past year, new items only, only things produced domestically

96

4 phases of business cycle

Trough, expansion, peak, recession

97

Trough

Can become depression, Depressed national income, highest unemployment rate

98

Expansion

Unemployment rate falls, national GDP rises, income expands

99

Peak

highest wages, lowest unemployment rate,

100

Recession

decrease in purchases, workers are laid off, decreasing production

101

Unemployment occurring at a time of the year

Seasonal

102

unemployment when a person is between jobs

Frictional

103

Unemployment when a workers skills dont match available jobs

Structural

104

Unemployment linked to downs of business cycle

Cyclical

105

Group of figures measuring changes in prices that household consumers pay for purchases

Consumer Price Index

106

Amends payments upward as inflation causes prices to rise

Cost of living Adjustment

107

2 fixes for inflation

Limiting Money Creation-strikes root cause of inflation(expansion of money supply)
Wage-Price Controls

108

**Ch. 14 graphs**

Cost-Push Inflation: supply increases which causes higher demand of items because demanded and higher wages
Demand-Pull: Demand increases and causes decrease in supply
Price on y, GDP on x

109

The less you make the higher you're taxed

Regressive Tax

110

Legislation requiring deduction o social security taxes from worker's paycheck

Fed. Insurance Contribution Act

111

The more you make, the higher you're taxed

Proportional Tax

112

To cause expansion and peak to not be so extreme, the government _____ spending and increases taxes

decreases (opposite for a recession)

113

How does governmental borrowing destroy future productivity

If the government continues to borrow, it will lower and destroy future productivity. It causes the nation to go more into debt and have to pay back with interest which cancels future profit.

114

How does taxation cause confusion in the marketplace?

It gives the economy a false sense of ho much money it actually has

115

How does proportional taxation specifically affect national work ethic?

It makes those who earn more not want to make as much money because they will be taxed more for making more