2011 Economics Exam Flash Cards Denbrock
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| What is the basic problem in Economics? | Scarcity
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| 2. What is a good or service that governments get from households? | Buildings, machinery, equipment, jobs
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| What are the 4 factors of production? | Land, labor, capital, and entrpreneurship
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| What is an opportunity cost? | The best opportunity or alternative forfeited or given up when a choice is made.
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| What are the 3 basic economic questions that every society must answer? | a. What to Produce? b. How will goods be produced? c. For whom will goods be produced?
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| How are goods and services distributed in a free market economic system? | They distributed through exchanges between households and businesses.
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| What are the benefits of having several gas stations at a major highway intersection? | Competition, price, choice
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| In a free-market system, price functions as what? | An incentive for producers to increase or decrease demand.
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| What is the major incentive in the free market system? | Profit
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| Who wrote about communism? | Karl Marx
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| In a command economy, prices are et by the forces of supply and demand. TRUE or FALSE | FALSE
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| Write the Law of Demand in symbols where P=price, and Qd=quantity demanded | P Qd P Qd
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| Write the Law of Supply in symbols where P=price and Qs=quantity supplied | P Qs P Qs
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| What is "equilibrium"? | When the supply curve crosses the quantity demanded curve; Qs=Qd;
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| What happens to price when a surplus exists? | Price falls
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| What happens to price when a shortage exists? | Prices rises
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| What is the Law of Diminishing Marginal Utility? | As one consumes additional units, eventually satisfaction gained from each additional unit of good diminishes.
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| Draw a new demand curve for a popular musical group's new CD. If supply stay the same, what happens to price? Quantity? | DRAW AND AND ANSWER QUESTIONS
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| Draw a new supply curve for a new development in technology. If demand stay the same, what happens to price? Quantity? | DRAW AND ANSWER QUESTIONS
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| What is a "surplus"? | Market conditions in which quantity supplied is greater than quantity demanded.
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| What is a "shortage"? | Market conditions in wchih quantity demanded is greater than quantity supplied.
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| What is the most common form of business organization? | Sole Proprietorship
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| Which type of business makes most of the money? | Corporation
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| From "least concentrated" to "most concentrated", label the market structures. | Perfect Competition---Monopolistic Competition---Oligopoly--Pure Monopoly (Based on many suppliers to one supplier)
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| Which market has the least degree of price control? | Perfect Competition
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| Which market has the greatest degree of price control? | Pure Monopoly
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| Which act passed by Congress in 1891 prohibits contracts and agreements that "restrat trade"? | Sherman Anti-Trust Act
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| Explain what happens at each stages of the business cycle. | a. Expansion:GDP,new home construction, consumer confidence, money supply, inflation, company reinvestment rise; unemployment goes down. PEAK: all of the above are have peaked at the top and unemployment is at its lowest;
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| PARTS OF BUSINESS CYCLE CONTINUED | RECESSION: consumer confidence, new home construction, GDP, money supply, inflation, company investion go down; unemployment rise; DEPRESSION (trough): all of the above are at their lowest and unemployment is very high
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| What does GROSS DOMESTIC PRODUCT measure? | Total market value of all final goods and and services produced in a country during a year.
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| What does the UNEMPLOYMENT RATE measure? | Percentage of people in the civilian population labor force who are without jobs and are actively seeking jobs.
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| What does the CONSUMER PRICE INDEX measure? | Measures change in overall cost of a variety of consumer goods and services.
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| 32. According to the chart, when were periods of economic expansion? | 2005-2006
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| When were periods of recession? | 2008-present
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| Based on the information in the graphs, describe the state of the economy today. | In a RECESSION.
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| Describe the TWO problems with a centrally-planned (COMMAND) economy. | No competition; no product competition; no product variety; price setting; government assigned job; government controls factors of production; individuals make no profit
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| What is the role of government in the ideas of Karl Marx and Adam Smith? | Karl Marx: government takes over role of production; keeps country on road to communism; country run by one political party; economy run by government who controls factors of production and 3 basic questions of production;
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| Role of government according to ADAM SMITH? | ADAM SMITH: Nations attain wealth and value from individuals using their own skills and capital and self-interest and discipline to achieve; no government interference allowed.
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| What typeof unemployment is experienced by a welder in a car factory who is replaced by a robot welder? | Structural unemployment
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| What is STRUCTURAL UNEMPLOYMENT? | UNEMPLOYMENT caused by people who don't have the skills to match the job openings that are available.
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| What is FRICTIONAL UNEMPLOYMENT? | UNEMPLOYMENT that occurs when people look for a job and eventually find a job.
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| What is SEASONAL UNEMPLOYMENT? | UNEMPLOYMENT that occurs as a result of harvest schedules or vacations.
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| What is CYCLICAL UNEMPLOYMENT? | ENEMPLOYMENT as a result of overall decreased demand for good and services, causing a downturn/recession in the economy that is reflected in the business cycle.
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| What is INFLATION? | The rise in the general level of prices.
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| An increase the money supply can lead to which type of inflation? | Demand-side inflation
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| A sudden rise in the cost of oil to produce a product is called what type of inflation? | Supply-side inflation
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| How does inflation hurt people on fixed-incomes? | It hurts their buying power. Prices go up, but the people's money does not.
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| The FED controls _____ policy and regulates____ rates to achieve national economic goals. | monetary,interest
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| If the unemployment rate is 10%, what will the FED do? | Lower the interest rate
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| If the inflation rate is 9%, what will will the FED do? | Raise the interest rate
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| What are the 2 tools used by in FISCAL POLICY to achieve national economic goals of low unemployment, stable prices, and a growing economy? | Expansionary fiscal policy, Contractionary fiscal policy
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| If the unemployment rate is 10%,what type of FISCAL POLICY would be recommended? | Expansionary fiscal policy
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| What do Social Security taxes for for? | Benefits for retirees and people with disabilities
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| What specific monetary and fiscal policies would you recommend to President Obama if he were given the following economic information: GDP: -6%; Unemployment Rate:9.5%; Consumer Price Index: 1% | Monetary Policy: Expansionary monetary policy
Fiscal Policy: Expansionary fiscal policy
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| Why do governments have taxes? | Taxes are used to pay government loans, pay for government programs which create jobs and increase productivity in specific areas.
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| Describe the location of resources around the world, and pattern of trade as a result. | Resources around the world are unequally distributed around the world. This prevents them from producing everything for their own country and then they must trade with what they need and other countries can provide.
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| What is the LAW OF COMPARATIVE ADVANTAGE? | The ability to produce a good or serv ice at a lower opportunity cost than other investor.
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| How do trade barriers, such as TARIFFS and QUOTAS, increase the price of products available in the United States? | TARIFFS(tax on incoming goods): puts a tax on imported goods; therefore, we have to pay more for these goods from other countries;
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| How do QUOTAS increase the price of products available in the United States? | QUOTAS (restriction on the amount of goods that can be imported). Based on supply and demand. If there is less supplied than we demand from an imported good, the prices will go up and we will pay more.
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