74 terms

Economics EOCT Review (ALL TERMS)

For Coach Hussion's Economics Classes.
STUDY
PLAY
Economics
The study of the allocation of scarce resources and goods
Resources/Factors of Production
The inputs used by a society to produce outputs. Such as: Land, Labor, Capital, and Entrepreneurs
Physical Capital
The factor of production that includes tools, machinery, and buildings. Ex: warehouses, computers, money
Land
The factor of production that includes all NATURAL RESOURCES (timber, oil, iron ore)
Human Capital
The factor of production that includes the knowledge, experience, and skills of workers. Can be improved with training and education.
Scarcity
The BASIC CONDITION that exists because of unlimited wants and limited needs.
Opportunity Cost
The value of the best alternative that could have been chosen but was not. The SATISFACTION missed out on.
Specialization
Concentrating on a single activity or area of expertise
Ex: Dividing labor in an assembly line.
(Free) Market System
Private individuals and firms control all resources and the price and quantity of all goods are determined by the interaction of suppply and demand
Mixed System (Capitalism)
An economy that incorporates aspects from different economic systems
Traditional Economy
A type of economy in which people tend to barter goods and services and stay in their classes. The son of a farmer would be a farmer.
Ex: 10th Century England, The Middle Ages
Production Possibility Curve
A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.
Microeconomics
The study of how individuals and businesses interact within an economic system
Firm
Another word for businesses
Law of Supply
As price goes us, supply goes up.
As price goes down, supply goes down.
Causes of a right shift (increase) in supply
Improved technology
Government subsidies
Favorable growing conditions
Law of Demand
As price goes up, demand goes down
As price goes down, demand goes up
Causes of a left shift (decrease) in demand
Decreased population
Consumer expectations of lower future prices
Fads or consumer tastes changing
Decreased income
Equilibrium price (Market Clearing Price)
The price where demand exactly equals supply.
Substitute Good
A good that satisfies most of the same needs as the original good. Ex: Laura Lynn or Store Brands
Complementary Good
Goods that tend to be used together
Ex. hotdogs and hotdog buns, skis and ski boots
Price Floor
A minimum price, (that the gov't. sets), for which a product can be sold. Ex: minimum wage
THESE CAUSE SURPLUSES
Price Ceiling
A maximum price, (that the gov't. sets), at which a good can be sold. Ex: rent control
THESE CAUSE SHORTAGES
Inelastic Demand
When the demand doesn't change very much even with a high price change. These are typically needs.
Ex: cancer medication
Elastic Demand
When the demand changes greatly even with a small price change. These are typically wants or luxuries.
Ex: a yacht
Sole Proprietorship
A single owner who takes all the financial risks and reaps all the financial rewards. Unlimited liability!
Partnership
Divides up the risk and reward among a group of people. Limited Liability. Most common type is a GENERAL PARTNERSHIP.
Corporations
Issue STOCK to raise money. The major weakness is DOUBLE TAXATION!
Monopoly
Market structure with ONE producer, high barriers to entry, and no competition. They have full price control. They are illegal in the U.S. due to Ant-Trust Laws.
Pure (perfect) Competition
Market structure with many producers, low barriers to entry, unlimited competiton, and identical products.
Ex: Vegetable Stands
Monopolistic Competition
Market structure with many producers, low barriers to entry, much competition, and differentiated products.
Ex: Fast Food, Same type of product with different QUALITIES!
Oligopoly
Market structure with only a few producers, high barriers to entry, and little competition
EX: Coke and Pepsi
Watch out for price fixing with these!
Natural Monopoly
Allowed to exist because it would be inefficient / chaotic to have more than one provider. Ex: Power Company, Water Company.
The Main Function Of Money
Money is mainly used as a medium of exchange.
Macroeconomics
The STUDY of the economic issues of an entire nation
GDP, Trade Deficit, Fiscal and Monetary Policies!!!
Gross Domestic Product Formula
Consumer Spending + Investment + Government Spending + Net Exports (Xports - Mports) :)
Net Exports
Exports - Imports (X - M)
Inflation
A rise in the price level
Consumer Price Index
Used to measure the monthly inflation rate of regular goods that we use everyday.
Aggregate Demand
Demand for ALL goods and services within a nation
Aggregate Supply
Supply of ALL goods ans services within a country
The Business Cycle
The normal ups and downs of the economy.
Expansion - Peak - Contraction - Trough
Recession
A temporary decrease in GDP that lasts for more than two consecutive quarters
Depression
A steep fall in GDP (more than 10%) combined with a high unemployment rate for more than a year
Structural Unemployment
Occurs when you have job skills that do not match the job requirements.
EX: Jobs getting shipped to other countries
EX: Losing your job to a robotic arm
Frictional Unemployment
Unemployment that occurs while peole are looking for a job that is a good fit.
Cyclical Unemployment
Unemployment that rises during a downturn in the economy. The government is the MOST concerned with this type!
EX: Jimmy loses his job. His auto plant closed due to a recession.
Deficit
When government spends more money than it takes in.
We have had one every year except ONE over the last three decades.
National Debt
When a government operated with a deficit for many years, they build and form this.
Ours is OVER 16 TRILLION!
Federal Reserve System
Created by Congress and acts as the nation's central bank. It controls the nation's money supply through monetary policy.
Monetary Policy
Refers to changes in the money supply of a nation in order to influence its economy. The Federal Reserve controls it.
Fiscal Policy
Government expenditures, taxes, and borrowing in order to influence an economy
Progressive Tax
The tax rate increases as income increases.
THIS IS THE UNITED STATES FEDERAL ICOME TAX SYSTEM. (The more you make, the more you get taxed)
Regressive Tax
Tax rate decreases as income increases. This type of tax hurts poor people the most.
EX: Sales Tax
Proportional Tax
A flat tax; it does not change with respect to income and is based on a flat percentage.
Comparative Advantage in Trade
When countries make decisions as to which goods to produce and which to trade for based on the lowest OPPORTUNITY COST. It is the reason for ALL trade!
Absolute advantage
The ability to produce more of a given product using a given amount of resources
Balance of Trade
The value of all products exported from a country minus the value of all products imported
Balance of payments
The value of all the money $$$ that enters and leaves the country.
Tariff
A tax on an imported good
Quota
A limit on the amount of a good that is allowed into a country. EX: Only trading a certain amount of rugs with India to protect U.S. carpet jobs.
Embargo
A government completely prohibits the import of an item. EX: Cuba
Standards
Used by governments to ensure the safety of imported goods. Ex: Recalling toys made in China with lead filled red paint.
Subsidy
Government payments to a supplier to reduce the production costs of the supplier and INCREASE SUPPLY! Ex: Paying farmers or gas producers to keep costs down for the consumer.
Exchange Rate
The measure of the price of one nation's currency in terms of another nation's currency
Investment
Money used with the expectation of some future return or benefit usually for RETIREMENT!!!
Bank
A safe means to store earnings, keep checking accounts, and get loans.
Government Securities
Also known as Treasury Bonds. The Federal Reserve buys and sells these with the Open Market Committee.
Stocks
Corporations issue these in return for partial ownership of the company, the investor gives that corporation their money to spend
Simple Interest
Interest is only applied to the value of the principal of the loan. Interest accrued is typically an even number.
Ex: $1000 loan for one year = $75.00 interest
Compound Interest
Interest is applied to the value of the loan PLUS other interest!
Ex: $1000 loan for one year = $115.73 interest
NAFTA
(North American Free Trade Agreement)
Broke down the trade barriers and allowed free trade between The U.S.A., Mexico, and Canada
Fixed Exchanged Rate
When the value of a currency is set to the value of another currency.
Floating Exchange Rate
Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand. Sometimes call free exchange rates or floating exchange rates.
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