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LIFE Econ Test 2
Chapter 10, 13, 4, and Personal Financing
| Question | Answer |
|---|---|
| What is the largest source of personal income? | Wages |
| What are transfer payments? What is the largest source of them? | Money from the government with no direct work performed in return; social security |
| What is the difference between a durable good and a nondurable good? | Durable have a lifetime longer than a year. Nondurable have a lifetime shorter than a year. |
| What is a proprietorship? | One-owner business |
| What does unlimited liability mean? What type of business owners face this? | owner's personal assets are usable to pay off debts faced by proprietorship and partnership owners. |
| What is a partnership? Who is liable for the debts of a partnership if it goes into default? | A legal organization with two or more business partners. If fails, the general partner will be liable |
| What are the different types of mergers? | Conglomerate Merger - unrelated; vertical merger - supplier; horizontal merger - competition |
| What is an industry? | Groups of firms producing similar products |
| What is a market? | Firms selling similar products and compete for the same buyers |
| What are the 3 distinguishing factors of a purely competitive market? | Large number of sellers, identical products, easy entry and exit |
| Why are purely competitive firms known as price takers? | Sellers have no control over the price of their products |
| What type of income does each market type have the potential of earning? | Pure and Monopolistic: Normal Profit; Oligopoly and Monopoly: Economic Profit |
| What is the difference between a purely competitive firm and a monopolistically competitive firm? | Purely competitive has identical products. Monopolistic has differentiating products |
| Why does an oligopolist face a kinked demand curve? | Rivals will not follow a price increase but will follow a price decrease |
| What is a natural monopoly? | Entire product in a market coming from one large producer |
| What is a monopoly? | |
| What does the long-run demand curve look like for a monopolistic competitive firm? Is it efficient or inefficient? | Downward sloping; inefficient |
| What are the major macroeconomic goals of the US? | Full employment, full production and economic growth, stable prices |
| What was the Employment Act of 1946 put into place to do? | Provide an environment for the achievement of full employment, full production, and stable prices. |
| What are the different types of unemployment? | Frictional (voluntarily out of work); Cyclical (involuntary unemployment from a downsizing); Structural (involuntary unemployment from a production structure no longer including said job) |
| What is meant by full employment? | Everyone in the labor force except the frictionally unemployed are working |
| Who is included in the labor force? | All people 16 years or older who are working or actively seeking work |
| What are discouraged workers? | People who drop out of the labor force because they have been unsuccessful in finding a job for a long time |
| What is the natural rate of unemployment? | both frictional and structural unemployment exist |
| What is inflation? What does it cause? | an increase in the general level of prices; intensifies scarcity, penalizes some groups, changes the values of assets, politically and socially destabilizing |
| What is demand-pull inflation? | pressure on the prices from the buyers' side of the market |
| What is cost-push inflation? | pressure on the prices from the sellers' side of the market |
| What is the Consumer Price Index? | Measures changes in the prices of goods or services that consumers typically buy |
| What does GDP measure? | Price changes for the entire economy |
| What does Real GDP measure? | Money GDP adjusted to eliminate inflation |
| What are the steps in Dave Ramsey's plan (in order)? | 1. 1,000 dollars in emergency fund 2. Pay off debt 3. 3-6 months of expenses in emergency fund 4. 15% of household income in retirement plans 5. College funding for kids 6. Pay off home 7. Build wealth and give |
| What does the debt snowball say about paying off your debts? | Pay the smallest debt first. Take what you would have on the smallest and add it to the next debt. |
| What should you do about retirement while paying off debt according to Dave Ramsey? | Forego all retirement saving while paying off debt |
| What is an emergency fund? | A fund with money that you can use in the case of emergencies |
| How much should you invest in retirement? | 15% of your income |
| Why should you invest in retirement before saving for you child's college years? | College students can get scholarships and grants. Retired people cannot |
| When should you purchase long-term care insurance? | When you are over sixty |
| How does one determine if they have a positive or negative net worth? | Which is larger liabilities or assets |
Created by:
Jewels17
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