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Econ Final Beck

The study of how people seek to satisfy their needs and wants by making choices Definition of Economics
Something essential for survival, example: food, clothing, shelter Needs
Something people desire, but is not necessary for survival Wants
The most desirable alternative given up as the result of a decision Opportunity cost
Alternatives that we give up when we choose one course of action over another Trade off
What goods and services should be produced, How should these goods and services be produced,Who should consume consume the goods and services Three basic economic questions
A person who decides how to combine resources to create goods and services Entrepreneur
Principle that limited amounts of goods and services are available to meet unlimited wants Scarcity
Resources that are used to make goods and services Factors of production
All natural resources used to make goods and services Land
Any human made resource that is used to produce other goods and services Capital
Effort people devote to tasks for which they are paid Labor
Physical objects that someone produces Goods
Action or activities that one person performs for another Services
Goods that last for a relatively long time, like refrigerator, car Durable goods
Goods that last short periods of time, like light bulbs, food, shoes Non durable goods
Economic system characterized by private or corporate ownership of capital goods Free enterprise
Firms supply households with goods and services-household pay for them,Households supply firms with land, labor, and capital-firms pay for them Circular flow
Economic system that relys on habit, custom, or ritual to decide the three key economic questions Traditional economy
Economic system that allows buyers and sellers to exchange things Market economy
Market-based economic system in which the government is involved to some extent Mixed economy
Trade, industry, and the means of production are controlled by private owners with the goal of making profits Capitalism
Political system in which the government owns and controls all resources and means of production and makes all economic decisions Communism
Range of economic and political systems base on the belief that wealth should be evenly distributed throughout society Socialism
Power of consumers to decide what gets produced Consumer sovereignty
General increase in prices across an economy Inflation
Recession that is especially long and severe Depression
Prolonged economic contraction Recession
Period of economic growth as measured bya rise in real GDP Expansion
Institution that functions much like a business, but does not operate for the purpose of general profit Non profit organizations
Legal entity, owned by individual stockholders, each of whom has limited liability for the firms debts Corporations
Legal document that provides for the creation of a corporate entity Charter
Business owner and managed by a single individual Sole proprietorship
The owner of a business, or a holder of property Proprietor
Person who owns stock in a corporation Stockholder
Type of partnership in which only one partner is required to be a general partner Limited partnership
Business combination merging more than three businesses that produce unrelated products or services Conglomerate
Stock market launch is a type of public offering where shares of stock in a company are sold to the general public IPO(initial public offering)
Amount of goods available Supply
Desire to own something and the ability to pay for it Demand
Supply of a good or service that increases or decreases as the price of an item goes down or up Elastic supply
Supply and demand for a good or service are unaffected when the price of that good or service changes Inelastic supply
Demand for a product or service is sensitive to price changes Elastic demand
Demand for a product or service is not sensitive to price change Inelastic demand
Consumers will buy more of a good when its price is lower and less when its price is higher Law of Demand
Producers offer more of a good as its price increases and less as it price falls Law of Supply
Quantity of output produced by one person Productivity of labor
Federal Trade Commission-federal agency, established in 1914, that administers antitrust and consumer protection legislation in pursuit of free and fair competition in the marketplace FTC
Market structure in which a few large firms dominate a market Oligopoly
Market in which a single seller dominates Monopoly
The percentage of income paid in taxes decreases as income increases Regressive tax
Percentage of income paid in taxes remains the same at all income levels Proportional tax
Percentage of income paid in taxes increases as income increases Progressive tax
Federal Income Contributions Tax- United States federal payroll tax imposed on both employees and employers to fund Social Security and Medicare FICA
Doctine-government should not interfere in the marketplace Laissez faire
First, pay down the national debt, second, pay for national security, third, pay for entitlement programs like Medicare, Medicaid and Social Security Trends in government spending
Raises moral questions concerning welfare, justice and freedom Basic economic Philosophy
Sharply cutting taxes will increase the incentive people have to work, save, and invest. Greater investments will lead to more jobs, a more productive economy, and more tax revenues for the government. Supply side Economics (Trickle Down)
Us government spending programs to increase employment Keynesian economics (Pump Priming)
Bill that authorizes a specific amount of spending by the government Appropriations bill
Tax on production or sale of goods Excise tax
Largest office within the Executive Office of the President of the United States. The Director of the OMB is a member of the executive office of the president. The main function of the OMB is to assist the President in preparing the budget. OMB(Office of Management and Budget)
Budget in which revenue and spending are equal Balanced budget
Financial obligations of a national government resulting from deficit spending - $17,509,691,832,477.53 = 17.5 trillion Size of federal debt
Monetary system of a country Monetary standard
Central banking system of the United States Federal Reserve System
Paper money used in the United States backed by the Federal Bank Federal Reserve Notes
Coined money, usually gold or silver, used to back paper money Specie
Objects that have value because the government decreed that they are an acceptable means to pay debts Fiat money
Objects that have value in and of themselves and are also used as money Commodity money
Monetary system in which paper money and coins had the value of a certain amount of gold Gold standard
Direct exchange of one set of goods or services for another Barter
Anything used to determine value during the exchange of goods and services Medium of exchange-portability, durability, stability
When to high people don't buy and the economy moves into a recession, when low people borrow money and the economy inproves Effect of interest rates
Increase in supply of moneys lowers interest rates, which spurs investment, and through putting more money in the hands of consumers, makes them feel wealthier, and thus stimulating spending, less money has the opposite effect Effect of change in money supply
Organization that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets Mutual funds
Average value of a particular set of stocks Dow Jones Industrial Average
Market for buying and selling stocks Stock exchange
Country's larges and most powerful stock exchange,handles stock and bond transactions for the top companies in the US and in the world New York Stock Exchange
third-largest stock exchange by trading volume in the United States American Stock Exchange
National Association of Securities Dealers Automated Quotations-trades stocks over the internet or by phone, investors buy directly from brokers who search for best prices NASDAQ
Dollar value of all final goods and services produced within a country's borders in a given year Gross Domestic Product (GDP)
Land, Labor, Capital-LAND=lumber, coal, water-LABOR=waitress, mechanic, oil rig worker-CAPITAL=building that houses a computer, tools used to build commputer Four economic resource and example of each
Study of economic behavior and decisions in a nation's whole economy Macroeconomics
Study of economic behavior and decisions in small units, such as a household and a business Microeconomics
Can be expressed numerically Economic Benefit
Why do people need to make choices? Because resources are scarce
Output increases What happens when a shift occurs to the right in a production possibilities curve?
Output decreases What happens when a shift occurs to the left in a production possibilities curve?
Medium of exchange,unit of account for comparing value of goods and services,store of value Functions of Money
Commodity, representative, specie, fiat Types of Money
Revolves around the family unit, decisions are made according to custom, habit, or tradition How are the three basic economic questions answered in a traditional economy?
The government answers all the basic economic questions How are the three basic economic questions answered in a command economy?
Consumers have the power to answer by what they buy and do not buy How are the three basic exonomic questions answered in a market economy?
Decide which choices are most important to us What must a consumer do in order to make an economic decision?
Benefits you could have received by taking an alternative action,ie opportunity cost of college is money you would have earned if you worked instead. You lose four years of salary while getting your degree; you hope to earn more during your career Describe the concept of opportunity costs of making decisions
As price of a product increases, quantity demanded falls; as the price of a product decreases, quantity demanded increases Explain what the law of demand states
Consumers income, consumer expectations, change in the population size,change in demographics of population, consumer tastes, advertising What factors can shift demand for a product?
Price of product went up and demand for product went down What does it mean if a demand curve shifts to the left?
Price of product went down and demand for product went up What does it mean if a demand curve shifts to the right?
Goods that people buy or do not buy according to the price Elastic good
Goods people buy no matter the price inelastic good
People buy the product no matter the price because they consider the product a necessity-example: milk Characteristics that helps to identify if a good is inelastic
Producers offer more of a good as its price increases and less as its price falls What does the law of supply state?
When supply is not very responsive to changes in price and elasticity is less than one - people are buying the product no matter the price Characteristics of inelastic supply
Supply is very sensitive to changes in price, and elasticity is greater than one, people do not buy the product when price goes up Characteristics of elastic supply
Cost of production and natural resources, taxes,technology,subsidies, regulations, changes in global economy, number of suppliers Factors that can shift a supply curve
Availability and costs of resources,labor, and demand Determinants of supply
It creates a shortage or surplus of goods How does shift in supply and demand affect market equilibrium
It keeps the price of goods and service low so consumers can purchase more for their money How do consumers benefit from competitive markets?
Many buyers and sellers participate, sellers offer identical products,buyers and sellers are well informed about products,sellers are able to enter and exit the market freely What are the conditions of perfect competition?
Start-up costs, technology What are the barriers to entry in various markets?
If barriers of production and prices are low the market is close to perfect, if barriers make it difficult for new businesses to enter the market the market is imperfect and the business will fail How do barriers determine if a market is perfect or imperfect
Recognition of design or color to encourage consumer to buy one product over another "Label Power"
Easy to start up and end a business, few regulations,receive all profits, full control of business Advantages of a sole proprietorship
Unlimited personal liability, limited assess to resources, limited life Disadvantages of a sole proproetorship
Study of a large economy involves tracking the Gross Domestic Product, ensure jobs for everyone, managing the amount of taxation of the population, and keeping the economy stable Elements of Macroeconomics
Freedom to make own economic decisions,jobs for all, fairness,limit inflation-keep prices stable,use resources wisely,promote the American Dream U.S. economic goals
Freedom, efficiency, equality, stability, security, growth Goals of Free Market System
Real values are adjusted for inflation, while nominal values are not Difference between nominal GDP and real GDP
Taxes are used to encourage the economy by paying for road construction, education and national defense. The government also uses taxes to influence the behavior of individuals What role do taxes play in fiscal policy?
Democrats promote higher taxation of population to reduce the national debt, republicans promote reductions in taxation of population and reductions in government spending to lower the national debt How do democrats and republicans differ in their fiscal policy strategy to decrease the national debt?
Raise taxes, decrease government spending What methods can the government use to balance the federal budget?
Advantage over another producer if you can produce the same good or service for less cost. Comparative advantage
To receive the materials, products, services, and foods that they are unable to get in their own country Why do countries trade?
Water US's most valuable resource
When a country imports more than it exports Trade Deficit
Larger market to sell goods and services produced and availability of goods and services available for purchase Benefits of trade
They are able to produce all that they need within their own borders Why would a country decide not to trade?
Must be easily taken with when shopping and easily transferred from one person to the next Portability of money
Objects must withstand the physical wear and tear that comes with being used over and over again Durability of money
Easily divided into small denominations Divisibility of money
All versions of the same denomination of currency must have the purchasing power Uniformity of money
Control the amount available Limited supply of money
Everyone in an economy must be able to take the object that serves as money and exchange it for goods and services Acceptability of money
Durability, portability, divisibility, uniformity, limited supply, acceptability Six characteristics of money
Grants in Aid Aid to State Governments
Economic Security
Created by: sudokken
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