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LIFE Econ Test 2

Chapter 10, 13, 4, and Personal Financing

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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