Economics Final Exam Flashcards
(22 cards)
What is inflation?
Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power.
What are the main causes of inflation?
Demand-pull inflation, cost-push inflation, and monetary inflation.
How does inflation impact the economy?
It reduces the value of money, erodes purchasing power, can increase interest rates, and affects savings and investments.
What is a free market economy?
An economic system where prices are determined by unrestricted competition between privately owned businesses, with little government intervention.
What are the main characteristics of a free market economy?
Private property rights, voluntary exchange, consumer sovereignty, competition, limited government involvement.
What are the benefits of a free market economy?
Efficient resource allocation, innovation, consumer choice, and incentives for hard work.
What is a command economy?
An economy where the government makes all economic decisions and owns most of the property.
What are the main characteristics of a command economy?
Centralized control, no competition, limited consumer choice, fixed prices.
What are the drawbacks of a command economy?
Inefficiency, lack of innovation, shortages/surpluses, reduced freedom.
What are the benefits of competition?
Lower prices, better quality, innovation, consumer choice.
What are the dangers of competition?
Monopolies, profit over people, exploitation, environmental harm.
What is the law of demand?
As price decreases, quantity demanded increases.
What is the law of supply?
As price increases, quantity supplied increases.
What is equilibrium price?
The price at which quantity supplied equals quantity demanded.
What is socialism?
An economic system where production is owned by the state/public and wealth is distributed more equally.
What are the problems with socialism?
Less incentive, inefficiency, government overreach.
Why is socialism accepted?
Reduces inequality, ensures universal services, promotes welfare.
Why is saving money important?
Financial security, emergencies, future planning, interest growth.
What are the types of savings?
Personal accounts, retirement funds, CDs, bonds, emergency funds.
What is scarcity?
Limited availability of resources versus unlimited wants.
What is utility?
The satisfaction or benefit from consuming a product.
How do scarcity and utility affect value?
Scarcity raises value due to low supply; utility raises value based on need or desire.
