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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