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Economics Final Study Guide
Terms in this set (37)
economic problem of having unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs.
Shortage (excess demand)
is when the demand for a product or service exceeds its supply in a market. It is the opposite of an excess supply (surplus).
the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you cannot spend the money on something else.
Production Possibilities Curve
Give an example.
representation of the amount of two different goods that can be obtained by shifting resources from the production of one, to the production of the other. The curve is used to describe a society's choice between two different goods. A graph or economic model that shows the maximum combinations of goods and services, any two categories of goods, that can be produced from a fixed amount of resources
TRUE/FALSE: If a country spends too much money on its military, it will have less money to spend on consumable products?
ups and downs in economic activity, defined in terms of periods of expansion or recession. During expansions, the economy, measured by indicators like jobs, production, and sales, is growing-in real terms, after excluding the effects of inflation.
What does an economic system answer?
What to produce, how to produce it and who gets it when it is produce
Law of Demand
that, all else being equal, as the price of a product increases (↑), quantity demanded falls (↓); likewise, as the price of a product decreases (↓), quantity demanded increases (↑)
TRUE/FALSE: If your income goes up, your demand to spend money on inferior products goes down?
market, the seller faces no competition, as he is the sole seller of goods with no close substitute
the benefits of the highest-valued alternative forgone.
What is the opportunity cost of a decision?
Give an example.
the next best thing given up.
TRUE/FALSE: The Federal Reserve System improved the U.S banking system by serving as a central bank with the power to lend to other banks in time of need.
What is the role of the government in a free enterprise system?
role of protecting the rights and liberties of it's citizens, allows individuals to make most of the economic decisions.
Rule maker: government makes and enforces laws governing the conditions under which voluntary transactions are made. These laws are designed to protect the rights to private property and individual freedom and to preserve and promote competition
Umpire: government acts to settle disputes resulting from conflicting interpretations of the rules.
the reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry
no essential value nor can it be redeemed for specie. Its value originates from government decree, or fiat. The best example of fiat money is paper currency. The paper itself has very little essential value, so fiat money can only serve as money if its production is tightly controlled. The production of fiat money is mostly controlled by governments.
any official medium of payment recognized by law that can be used to extinguish a public or private debt, or meet a financial obligation. The national currency is legal tender in practically every country. A creditor is obligated to accept legal tender toward repayment of a debt. Legal tender can only be issued by the national body that is authorized to do so
Why does fiat money or "legal tender" have value?
the total amount of a specific good or service that is available to consumers. Can relate to the amount available at a specific price or the amount available across a range of prices if displayed on a graph.
If the selling price of a product goes up, what will happen to the quantity supplied?
using resources in such a way as to maximize the production of goods and services
Why does competition improve efficiency?
Competition among buyers forces sellers to charge their minimum supply price for the given quantity exchange
competition motivates businesses to produce efficiently (use resources wisely), cater to the views of consumers, and search for innovative improvements. This implies that firms will minimize costs, produce what consumers value most, and strive for new ideas to stay ahead of competition
The North American Free Trade Agreement is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America.
TLCAN: Tratado de Libre Comercio de América del Norte ALÉNA: Accord de libre-échange nord-américain, i.
TRUE/FALSE: If unemployment becomes very low, companies will have a difficult time recruiting workers for jobs.
The assumption that factors other than those being considered are held constant.
Assumption used in economic analysis is to keep "all other things equal" or "other things constant"
TRUE/FALSE: The Great Depression ended mainly because of an increase in defense spending related to WWII.
is a type of license that a party acquires to allow them to have access to a business's proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business's name.
Give an example.
a good or service that is characterized by non rivalry and nonavailability; a good or service with these characteristics provided by government
TRUE/FALSE: When a nation's currency appreciates (rises in value), that countries products (exports)will become more expensive in other countries.
List 2 essential characteristics of a market economy
the production of goods and services are regulated by the laws of supply and demand. Producers sell their goods and services at the highest possible price that consumers are willing and able to pay. Workers also bid their services at the highest possible wages that their skills allow.
Negotiations by representatives of a group of employees, often a labor union, pertaining to conditions of employment, such as wages and working conditions.
form of alternative dispute resolution (ADR), a way of resolving disputes between two or more parties with concrete effects. Typically, a third party, the mediator, assists the parties to negotiate a settlement.
agreement between two parties to place a dispute before a third party for a binding settlement
a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding.
TRUE/FALSE: A car is an example of a consumer non durable good
TRUE/FALSE: If the general interest rate rises, there will be a fall in the willingness of business to borrow money and expand.
Federal Deposit Insurance Corporation
a federally sponsored corporation that insures accounts in national banks and other qualified institutions
TRUE/FALSE: Manufacturers often locate their plants where labor is plentiful and cheap.
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