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Economics Review
| Economics is the science that studies _________________ in a world of scarcity. | how people try to satisfy unlimited wants |
| Economists believe that nearly everything we do has _________________________. | trade-offs |
| ___________ is the most highly valued alternative forfeited when a choice is made. | Opportunity cost |
| Many economists think in terms of a ______________ , an economy in which economic actions taken anywhere in the world may affect your standard of living. | global economy |
| __________ is the condition in which our wants are greater than the resources available to satisfy all those wants. | Scarcity |
| Utility is another word for ________________. | satisfaction |
| All the natural resources found in nature, such as mineral deposits, water, forests, and animals are ______________ . | land |
| Produced goods that can be used as resources for further production are _________________. | capital |
| Labor earns _________________ . | wages |
| Entrepreneurship earns ______________________ . | profits |
| It is useful to refer to the U.S. economy as a free-enterprise system, even though it includes some features of socialism and is therefore technically a _____________ economy. | mixed |
| In a free-enterprise economy, goods are produced for people who are _______________ to buy them. | willing and able |
| The five major features that define free enterprise are private property, choice, competition, economic incentives, and ___________________________ . | voluntary exchange |
| Total revenue can be calculated by multiplying the ________________ of the good times the number of units of the good sold. | price |
| When total revenue is _______________________ total cost, there is a profit. | greater than |
| Supporters of the free enterprise system believe that an ethical economic system produces goods and services preferred by both the ___________________ and the __________________ . | majority and the minority |
| Economists call someone who receives the benefits of a good without paying for it a _____________________ . | free-rider |
| The circular flow of economic opportunity shows that the parts of the economy are _________________________ . | interrelated |
| A ____________________ is any place where people come together to buy and sell goods or services | market |
| A ______________________ is an intangible item that gives a person utility or satisfaction. | service |
| According to the law of demand, as the price of a good rises, the quantity demanded of the good _____. | falls |
| According to the law of ________________________ , as a person consumes additional units of a good, eventually the satisfaction gained from each additional unit of the good decreases. | diminishing marginal utility |
| A _______________ is a numerical chart that illustrates the law of demand. | demand schedule |
| A rightward shift in a demand curve indicates that buyers are willing and able to purchase _____________ a good at the original price and at all other prices. | more of a good at all prices |
| Important factors that can cause demand curves to shift include income, prices of related goods, and _________. | tastes |
| Two goods are ______________ if they are consumed together. | complements |
| When demand is _______________________ , the percentage change in price is greater than the percentage change in quantity demanded. | inelastic |
| According to the law of supply, the quantity supplied of a good rises when the ________________ of that good rises. | price |
| Important factors that can cause supply curves to shift include resource prices, technology, quotas, and _____________________ . | number of sellers |
| The resources used to produce goods and services are ___________ , _______________ , and _____________ . | land, labor, and capital |
| Price is determined by _______________ and ________________ together. | supply and demand |
| When the quantity supplied is greater than quantity demanded, a ________________________ exists. | surplus |
| A market is in equilibrium when the quantity demanded of a good ______. | equals quantity supplied |
| Graphically, equilibrium in a market is shown as _________________. | the intersection point of the supply and demand curves |
| When a shortage exists, prices will ______________________ . | increase (rise) |
| If nothing else changes, and the supply of a good rises, the price of that good will ________________ . | decrease (fall) |
| A business that is owned by one individual who makes all the business decisions and is legally responsible for the debts of the firm is a ____________________________ . | sole proprietorship |
| When a business owner faces _______________________ , his or her personal assets may be used to pay the debts of the firm. | unlimited liability |
| In a limited partnership, the ________________ partners are responsible for the management of the firm. | general |
| A corporation is owned by its ________________________ . | shareholders (stockholders) |
| A firm’s ____________________ include everything of value to which the firm has legal claim. | assets |
| A _____________________ is a statement of debt issued by a corporation. | bond |
| A __________________________ is a contract by which a firm lets a person or group use its name and sells its goods in exchange for certain payments being made and certain requirements being met. | franchise |
| Expenses that vary with the number of units of a good produced are called ________________. | variable costs |
| In deciding how many units of a product to produce and sell, firms compare ___________________ and __________________________. | marginal benefit and marginal cost |
| The objective of a business firm is to maximize _________________ . | profit |
| The unemployment rate can be calculated by dividing the number of persons unemployed by the number of persons ____________________. | in the labor force |
| When each of two parties has something to exchange that the other party wants, a __________________________ _________________________ exists. | double coincidence of wants |
| Money has value because of its ____________. | general acceptability |
| The most basic function of money is as a ______________. | medium of exchange |
| Another name for checking accounts is _____________. | demand deposits |
| The largest component of the money supply is the ______________________ component. | currency |
| One example of near money is _________________. | credit cards |
| A person using a credit card is actually placing himself or herself in ______________ . | debt |
| The central bank of the United States is the ______________________ . | Federal Reserve |
| One of the major responsibilities of the Fed is to supply __________services. | check-clearing |
| Banks can make loans with their _______________________ . | excess reserves |
| A bank’s reserve requirement is a percentage set by ______________________ . | the Federal Reserve |
| When banks _______________________ , they are increasing the money supply. | make loans |
| If the reserve requirement is increased, the money supply __________________. | decreases |
| When the Fed conducts an open-market sale, the money supply _______________________ . | decreases |
| If the discount rate is raised relative to the federal funds rate, the money supply will eventually ________________ . | decrease |
| Gross Domestic Product, or GDP, is the total market value of ____________________produced annually in an economy. | final goods and services |
| The services of _____________________ are not counted in the GDP. | households |
| The purchase of a used car is _______________ in the GDP. | not counted |
| GDP that has been calculated in base-year prices to adjust for price changes is called ______________________ | real GDP |
| When C stands for consumption, I for investment, G for government expenditures, X for exports, and M for imports, the following equation shows how to calculate GDP: GDP = _______________. | C+I+G+X-M |
| To calculate the consumer price index, the Bureau of Labor Statistics uses a _________________________ , a representative group of household goods. | market basket |
| The forces of _______________ determine the equilibrium price level and equilibrium output in an economy. | aggregate demand and aggregate supply |
| The price level is the ________________ of all the prices in an economy. | average |
| A decrease in the price level is called_________________ . | deflation |
| Demand-side inflation can be caused by an _____________________ in the money supply. | increase |
| People who have been laid off by one firm but who have skills that are needed by other firms are _________ unemployed. | cyclically |
| A drop in aggregate demand generally leads to a(n) _____________ in unemployment. | increase |
| The changes government makes in spending and/or taxation to achieve particular economic goals comprise _________________ policy. | fiscal |
| ____________________ is the occurrence of inflation and high unemployment at the same time. | stagflation |
| The federal budget can be balanced by cutting government __________________ and/or raising _________ . | spending; taxes |
| In the free enterprise economy of the United States, most economic decisions are made by: ___________________ | individual consumers and producers |
| He wrote Wealth of Nations and is considered the father of economics: | Adam Smith |
| The four phases of the business cycle usually occur in the following order:_____________________ | expansion; peak; contraction; trough |
| An entrepreneur is an individual who:____________________ | assumes the risks of running a business |
| The Federal Reserve could tighten the money supply by:______________ | increasing the reserve requirement; or increasing the discount rate; or selling bonds |
| Private property, competition, and the profit motive are common in economies that are:_________ | capitalist (free-enterprise or market) |
| In socialist economies, most capital goods are owned by:____________________ | the government |
| According to the law of demand, as the price of a good or service increases:__________ | the quantity demanded decreases |
| The government’s fiscal policy includes decisions on:_____________________ | taxation and spending |
| When inflation occurs in the economy, fiscal policy should be to:______________ | increase taxes and/or decrease government spending |
| All of the following causes shifts in demand:__________ | price of related goods; changes in tastes or preferences; changes in income; number of consumers |
| All of the following causes shifts in supply:____________ | changes in technology; price of resources change; number of sellers; |
| An item’s demand curve will be inelastic when:_________________ | they are necessities, when there are few or no substitutes, when there is a time constraint; when price is small relative to income |
| __________ is the branch of economics that deals with human behavior and choices as they relate to the entire economy. | Macroeconomics |
Created by:
teacherdavidfrost
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