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Economics Semester Exam
Terms in this set (62)
What is economics?
the study of how we make decisions in a world where resources are limited
A situation in which unlimited wants exceed the limited resources available to fulfill those wants
the most desirable alternative given up as the result of a decision
an alternative that we sacrifice when we make a decision
production possibilities curve
An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
An economic system in which the government controls a country's economy.
Economic decisions are made by individuals or the open market.
An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.
the pattern in which goods and services and resources flow in the marketplace
situations in which the market does not lead to a desired result
enjoying the benefits of some good or action while letting others bear the costs
by-products of consumption or production that benefit third parties
by-products of production or consumption that impose costs on third parties
a good or service that is open to everyone
a good or service that is open to a select few
a good for which it is easy to prevent consumption by those who do not pay
a good for which it is difficult (or very costly) to prevent consumption by those who do not pay
its use by one individual makes it less available for use by others
its use by one individual does not make it less available for use by others
the desire to own something and the ability to pay for it
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
Goods for which demand goes up when income is higher and for which demand goes down when income is lower.
Goods for which demand tends to fall when income rises.
Goods that are commonly used with other goods
Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.
a graph of the relationship between the price of a good and the quantity demanded
Law of Diminishing Marginal Utility
the principle that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time
if price goes up slightly, people stop buying
Very little change in demand for large changes in price
The amount of goods available
Law of Supply
Tendency of suppliers to offer more of a good at a higher price
a graph of the relationship between the price of a good and the quantity supplied
price levels set below the equilibrium prices
price levels set above the equilibrium prices
a market structure in which a large number of firms all produce the same product
a market structure in which many companies sell products that are similar but not identical
A market structure in which a few large firms dominate a market
A market in which there are many buyers but only one seller.
businesses owned and operated by one individual; the most common form of business organization in the United States
businesses with two or more owners
businesses that are owned by many investors who buy shares of stock
Privileges granted by a company or government to sell a product or service under specified conditions.
Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
Real vs. Nominal GDP
real GDP is GDP adjusted for inflation and nominal GDP is measured in current dollars
peak, expansion, trough, retraction
unemployment that occurs when people take time to find a job
unemployment that rises during economic downturns and falls when the economy improves
unemployment linked to seasonal work
unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
a general increase in prices and fall in the purchasing value of money.
a decrease in the general level of prices
A very rapid rise in the price level; an extremely high rate of inflation.
Characteristics of money
acceptability, divisibility, portability, stability, durability, scarce
M1 money supply
consists of currency, travelers' checks, demand deposits, and other checkable deposits at depository institutions
M2 money supply
Includes all of M1 money supply plus most savings accounts, money market accounts, and certificates of deposit.
required reserve ratio; the fraction of a bank's deposits that it must keep in reserve
The cost of borrowing money
When i is low
It grows the economy
When i is high
It slows the economy
the setting of the money supply by policymakers in the central bank
Monetary Policy Tools
open market operations; reserve requirements
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