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Economics Post Test Review

Terms in this set (44)

Who answers the economic systems in a market economy?
Buyers & sellers
Based on the Laws of Supply & Demand, what happens when price increases?
Supply increases, Demand decreases
What is the role of buyers and sellers in a market economy?
They determine market clearing price
What type of physical capital would be needed in a bakery?
Oven
How do people respond to incentives?
In predictable ways
Which term describes the situation caused when unlimited wants exceed limited resources?
Scarcity
What is caused by specialization?
Voluntary Exchange
Why are public goods and services provided by the government?
It isn't profitable for private business to produce/provide them
Economic equity and security can be found in which economic system?
Command
What is a rational decision?
When marginal benefits exceed marginal costs
What is opportunity cost?
The next best alternative
What happens during the expansion phase of the business cycle?
Increased capital investments, decreased unemployment, increased GDP
What groups determine monetary policy?
12 district banks, FOMC, Board of Governors
What are the characteristics of monopolistic competition?
Similar(differentiated) products, many sellers, use of advertising
What are the determinants of supply?
Input cost, number of sellers, technology, government regulation, education
Who benefits from inflation?
borrowers
How do you calculate unemployment?
(unemployed/labor force) x 100
What is GDP?
Measures the health of the economy and amount produced in a year
Consumer income is a determinant of which market?
Demand
What are the benefits/advantages of a corporation?
Unlimited life, Limited liability, easy to gain capital
Which tool is the FED using when they use open market operations?
Buying & selling securities
If you get paid and use the money to make a large purchase, what is the function of money?
Medium of exchange
Which type of unemployment occurs when someone lacks the necessary skills for the job?
Structural
What is the FED trying to do when they buy securities on the open market?
Increase the money supply
Which financial institution requires membership and offers low interest rates?
Credit Union
What is a trade surplus?
Trade exports exceed imports
What does it mean when a country has comparative advantage?
They can produce a good at a lower opportunity cost
What type of policy does the government control?
Fiscal policy
Why do people support tariffs?
Protects domestic producers
Which group benefits when the dollar depreciates?
Exporters
How should the government adjust its fiscal policy to resolve inflation?
Increase taxes, decrease government spending
Why do banks pay less on interest than they charge?
To make a profit
What does it mean when a country has absolute advantage?
A country can make the most of a resource using their available resources
What does the term exchange rate mean?
The value of a country's currency compared to another
What are the characteristics of stocks?
High risk, High return
What is the difference between a budget deficit and the national debt?
The budget deficit increases the national debt
How does education affect income?
The higher your education (human capital) the higher income you can expect
What is character, collateral, and capacity used to determine?
Your interest rate
What is the benefit of insurance?
Shared liability
If an investor isn't worried about a large return but scared of taking a big risk, which type of investment is best?
Savings account
As an investor, which type of interest is best?
Compound
In which type of tax structure would you pay more if you earned a high income?
Progressive
Which type of insurance is needed if you want to receive a paycheck while you are injured?
Disability
Which group of people would be harmed the most by increased property and sales tax?
Low income
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