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U2 Study Guide Econ

CG U2 Economics Study Guide

What type of economics is about the big picture and economic choices made by large groups? What type is about how individuals make economic decisions? Macro/Microeconomics
What is scarcity in your own words? Don’t copy from the notes. We have limited resources that sometimes run out.
What is an opportunity cost? The value of the next best choice.
What is an example of an opportunity choice? The value of Assassin’s Creed III is the same as three trips to Buffalo Wild Wings because that is what I would spend the money on if I didn't get the game.
What is the difference between capital goods and consumer goods? Capital goods are goods used to make other things and consumer goods are sold directly to the consumer.
What does GDP stand for? What does it mean in your own words? Gross Domestic Product, the total value of all the goods and services produced in a country in a year.
Which country has the highest GDP? 2nd? 3rd? 4th? US, CHN, JPN, GER (updated since PPT)
Credit get goods now and promise to pay later
Natural resources Anything from the Earth that has an economic value
Market economy an econ system where the consumers make decisions
Command economy an econ system where the gov makes decisions
Budget a plan for how money will be spent and earned
Want things for which you desire or wish but life, health, and safety don't depend
Services things done for you to meet your needs
Producers businesses that grow or make goods
Suppliers businesses that buy goods from producers and sell them to consumers
Consumers the people who buy goods and services
Wholesale prices of products when producers sell to suppliers
Retail prices of products when suppliers sell to consumers
Taxes money paid to gov from citizens
Expenses money that is spent
Income money that is earned
Gross the amount of money earned before taxes and other deductions are taken out
Commerce another word for business
Barter to trade without using money
Capital the money used to start a business
Needs things upon which your life, health and safety depend
Which economic system is based on individual profit? Capitalism
Who owns the production in capitalism? Individual
Who was the father of capitalism? Where was he from? Adam Smith, Scotland
What was Smith’s book called? Wealth of Nations
What did Smith think was the role of the government in the economy? It had no role. It should stay out of the economy.
What is physiocracy? Wealth is based on how much land you have.
What did Smith say was the major source of wealth? Labor
Why did Smith say workers would work hard in factories? To raise production, which raises profits, which raises their wages.
What is “the invisible hand”? How does it work? The way the market balances itself out by shortages raising prices, which entices others to sell the product which brings prices back down and brings variety.
Why could competition in the market help people? It keeps prices down and a wide variety.
What does laissez-faire translate to? What does it mean? “let them do”. It means that the government should let the marked be free and not interfere.
What did Smith say about import taxes? They make prices go up.
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. – Smith, Wealth of Nations – What does that mean? People don’t sell you things because they like you, they do it for profit.
What are three criticism of capitalism? Workers can be treated unfairly., Some people become very poor, Some must lose for some to win.
In communism, what does “To each according to their needs” mean? Everyone will get what they need.
How does ownership work in communism? Everyone shares everything. No one person owns anything.
Who is the father of communism? Where was he from? Karl Marx, Germany
What did Marx think history was all about? Class struggles. The poor man being kept down by the rich man.
Name three countries that adopted Marx’s ideas. France, Russia, China
What did Marx say about religion? What did that mean? He said it was the “opiate of the people” which means that people focus on religion and the afterlife when they should be fighting for this life. He saw religion as something that the rich invented to keep the peasants down.
What is the proletariat? The working class
What is the bourgeoisie? The land and factory owners
What did Marx say would happen among the proletariat and the bourgeoisie? A war would happen with the proletariat winning. Then, everyone would be equal and there would be no government or social classes.
What are four criticism of Marx’s Ideas? In the 20th century, it is estimated that 50 million people were killed in the name of communism. Most of Marx’s predictions haven’t came true yet. It is inconsistent with human nature. It degrades religion.
As of June 2012, how much US debt did China own? Actual dollars? $1.164 trillion
What percentage of the US debt does China own? 25%
Who else owns US debt? American people, or by the U.S. government to itself.
Why would China want its currency weaker than the US dollar? This keeps products exported from China cheaper than U.S. products, creating jobs for the Chinese people.
Why won't China cash in all of its debt to the US at once? the demand for the dollar would plummet and China's economy would suffer along with everyone else's.
Google and find out what "treasury notes" are AKA bond. The government sells the notes to someone and the person/company/country holds the note for a certain amount of time. The note purchaser gets a fixed interest rate paid back yearly or semi-yearly.
How much has China's economy grown annually for the past three decades? 10% annually for three decades.
What are the three largest economies in the world? in order? U.S, European Union, then China
Why can China pay its workers so little? Low standard of living.
What is China's yearly average income? What is the US's? China- $8,500 per person. U.S- 49,000 per person.
Why do large companies have to sell bonds instead of borrowing from banks? Banks don’t have enough money.
Who issues bonds and who invests in them? The organization that sells a bond is known as the issuer. a public market. an investors lends the money to the organisation.
Why would anyone buy a bond in the first place? You are guaranteed to get your money back plus interest.
Google and explain in your own words "fixed income". Getting the same income every year/month etc.
If you bought a bond for $1000 with a coupon of 10% and a maturity of two years. What would be the total money you have back at the end of two years? $100 for year one, $100 for year two, plus your $1000 back at the end of year two equals $1200
If you bought a bond for $100 with a coupon of 5% and a maturity of five years. What would be the total money you have back at the end of two years? $20 for each year = $100 plus your original $100 = a total of $200
If you bought a bond for $250 with a coupon of 2% and a maturity of twenty years. What would be the total money you have back at the end of two years? $5 for each year = $100 plus your original $250 = a total of $350
Based on the chart, what year was the public debt 100% of the GDP. 1941-1945
In your own words, define GDP. Not just Gross Domestic Product, but what does it mean? You may have to google it the total amount of goods or services produced in a year in a country
Write out 16 trillion. How many zeros are in a trillion? 16,000,000,000,000 twelve zeroes
How does a country get in debt? (answer under How did the debt problem get so big?) several rounds of tax cuts, the war on terrorism, and a Medicare prescription drug benefit -- all of which were financed through borrowing. We didn’t make enough in taxes to cover what we have spent it on.
Google and explain "entitlement spending" in your own words. Money the government pays for people who qualify as low-income. E.g. Welfare, food stamps.
Why did the US originally borrow money? to pay for declared wars
Google "debt ceiling". Describe it in your own words. The agreed-upon amount that the government can borrow. If they try to borrow more, Congress will not allow it.
Do you think we should raise the debt ceiling? Why or why not? Yes = we need time to work things out. No = we have got to figure this out now.
What does Obama think about the national debt ceiling? Voted against it.
What is one way the US can get out of debt? Why could it help? Opening borders could raise productivity.
What is another way the US can get out of debt? Why could it help? Increasing income taxes could get the government more money to pay its debts.
What is another way the US can get out of debt? Why could it help? Reducing regulations for businesses could make it easier for businesses to stay in the US and not be outsourced.
What is another way the US can get out of debt? Why could it help? Closing loopholes for rich taxpayers could save around $1 trillion.
Created by: rockcastle