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Final Review 2019
Economics Final Review 2019
| Question | Answer |
|---|---|
| Economics is the science that studies _________________________________________ in a world of scarcity. | how people try to satisfy their unlimited wants |
| _________ is the most highly valued alternative forfeited when a choice is made. | Opportunity cost |
| ____________ is the branch of economics that deals with human behavior and choices as they relate to the entire economy. | Macroeconomics |
| _________ is the condition in which our wants are greater than the resources available to satisfy all those wants. (limited resources & unlimited wants) | Scarcity |
| All the natural resources found in nature, such as mineral deposits, water, forests, and animals are _________________ . | Land |
| Labor earns ____________ , land earns ____________ , capital earns ________________ , while entrepreneurship earns ____________________. | wages; rent; interest; profits |
| You should ignore ___________ cost in making economic choices because they are costs that cannot be recovered. | sunk |
| An example of a ___________________ (good or service) would be teaching. | service |
| ________ includes all human creations used to produce goods and services. | Capital goods |
| An __________________________ is a person who develops a new product or process, seeks profit, and assumes the risk of profit or loss. | entrepreneur |
| Human (Labor), natural (land) , capital (tools) resources, and entrepreneurship are called ____________ . (also referred to as inputs and productive resources) | factors of production |
| The physical and mental effort you are using to study for this test is called ______________. | labor |
| The assumption of rational ______________________________ means that people will generally make the best choice for themselves. | self-interest |
| The statement that "Mr. Frost is a good teacher" is an example of __________ analysis whereas the statement "Mr. Frost is a teacher" is an example of __________________ analysis. | normative; positive |
| ________ focuses on the economic behavior of individuals or individual markets, but not on the economy as a whole. | Microeconomics |
| The four main factors of production are _______________, __________________ , ____________________ and ____________________________ . | land, labor, capital, and entrepreneurship |
| _________ analysis is a statement of opinion and states what "should be,” whereas _________________ analysis is a statement that can be supported by facts and states "what is." | Normative; positive |
| Steve Jobs starting Apple would be an example of ______________________ , a tree would be an example of ________________ , the hammer used by a carpenter would be an example of _________ , and a teacher would be an example of ____________________ . | entrepreneurship; land; capital; labor |
| Draw a production possibilities curve showing a company that can make a maximum of 100 laptop computers or 400 tablets. | |
| In a __________________________ economic system the allocation of scarce resources, and other economic activity, is the result of ritual, habit, or custom. | traditional |
| A _____________________ economic system is characterized by a central authority (usually a government) that makes most of the major economic decisions. | command |
| A ____________________ system is an economic system in which supply, demand, and the price system help people allocate resources and make the WHAT, HOW, and FOR WHOM to produce decisions. | market |
| Match the following societies with the type of economic system (market ,command, or traditional) they have: North Korea: _____________________ ; The United States: ___________________ ; Aborigines: _________________________ | command; market; traditional; |
| A _________________________ economic system has the most individual freedom and encourages innovation. | market |
| A __________________ economic system has the most government control over people's lives. | command |
| In a _____________________ economic system, you are most likely to perform work the same way your ancestors did. | traditional |
| Capitalism and free enterprise are other names, or synonyms, for a ______________ economy. | market |
| True or False: Pure market, pure command, and pure traditional systems rarely exist. | True |
| True or False: All economies in the world are mixed because they have a combination of privately-owned resources with some government regulation and control. | True |
| ___________ indicates how much of a product consumers are both willing and able to buy at each possible price during a given period of time. | Demand |
| The law of demand states that price and quantity demanded have an _______________ relationship. | inverse |
| As price goes up, the quantity demanded goes _________________ , and as price goes down, the quantity demanded goes _______________. | down; up |
| The _____________________ effect states that when the price of a product goes up, people will substitute for a cheaper good. | substitution |
| The _________________________ effect is when an individual's income can buy more of all goods when the price of one good declines. | income |
| The law of _________________________________________ states that as a person consumes additional units of a good, eventually the utility gained from each additional unit of the good decreases. | diminishing marginal utility |
| _____________ is the amount of product that consumers are willing and able to buy at a specific price. | Quantity demanded |
| The sum of the individual demands of all consumers in the market is called the __________. | market demand |
| The demand curve slopes down and has a _________________ slope. | negative |
| Elasticity of demand = _______________________ | % change in quantity demanded / % change in price |
| Demand is ___________________ if greater than 1.0, ____________________ if equal to 1.0 and ______________________ if less than 1.0 | elastic; unit elastic; inelastic |
| Total revenue equals ____________ multiplied by the ____________________. | price; quantity |
| Lowering the price of a demand elastic good will _____________________ (increase/ decrease) the total revenue. | increase |
| Factors that affect the elasticity of demand are ____________. | (1) Availability of substitutes; (2) Luxuries vs. Necessities; (3) Share of consumer's budget spent on the good; (4) Time |
| The greater the availability of substitutes for a good, the greater the good's _______________________ of demand. | elasticity |
| Luxury goods tend to be more demand __________________ (elastic / inelastic) as compared to necessities. | elastic |
| The more important a good is as a share of a consumer's budget, the more price _______________ (elastic / inelastic) is the demand for the good. | elastic |
| The less time a person has to adjust to price changes, the more price ___________ (elastic / inelastic) is the demand for the good. | inelastic |
| The elasticity of demand is greater in the ______________ (short-run/long-run) because consumers have more time to adjust. | long-run |
| A _________________________ along a demand curve is caused by a change in price and results in a change in the quantity demanded. | movement |
| A _________________ of the demand curve is caused by one of the determinants of demand other than price and results in a new demand curve. | shift |
| A change in preferences in favor of a good shifts the demand curve to the __________ . | right |
| An increase in income shifts the demand curve of normal goods to the _________ . | right |
| An increase in income shifts the demand curve for inferior goods to the ________. | left |
| An increase in income will not cause a shift in either direction of a demand curve for______________ goods. | neutral |
| With complementary goods, the demand for one good moves in the ___________ direction as the price of the other good. | opposite |
| With substitutes, the demand for one good moves in the_________________ direction as the price of the other good. | same |
| Show a shift in the demand curve of a product due to the lowering of the price of a complementary good. | |
| Show the effect on quantity demanded due to an increase in price. | |
| Factors that cause a shift in demand include ________________ . | (1) Income; (2) Tastes: (3) Prices of related goods (substitutes and complements); (4) Expectations; (5) Size or composition of the population |
| Economists assume producers try to maximize _______________. | profits |
| _____________ is the total dollars received from consumers while ________________________ includes the cost of all resources used by a firm in producing goods and services. | Total revenue; total cost |
| ______indicates how much of a product producers are both willing and able to sell at each possible price during a given period of time. | Supply |
| The law of supply states that price and quantity supplied have a ____________ relationship. | direct |
| As price goes up, the quantity supplied goes _______________ , and as price goes down the quantity supplied goes _______________ . | up; down |
| _________________ is the amount of product that producers are willing and able to sell at a specific price. | Quantity supplied |
| The sum of the individual supplies of all producers in the market is called the ____________. | market supply |
| The supply curve slopes up and has a ______________ slope. | positive |
| Elasticity of supply = _______________________________________________ | % change in quantity supplied / % change in price |
| Factors that affect the elasticity of supply include _______________ . | (1) How costly is it to change output; (2) Length of time to adjust; (3) The ease of increasing quantity supplied in response to a higher price differs across industries |
| The elasticity of supply is greater in the _____________ (short-run / long-run) because producers have more time to adjust. | long-run |
| The more difficult it is for producers to increase quantity supplied in response to a higher price, the more _______________________ (elastic/ inelastic) supply will be. | inelastic |
| Factors that cause a shift in supply include __________________. | (1) Cost of resources; (2) Productivity; (3) Technology; (4) Taxes/subsidies; (5) Government regulations; (6) Number of sellers; (7) Expectations |
| _____ product is the total output or production by a firm and ________________ product is the extra output due to the addition of one more unit of output. | Total; marginal |
| _________ marginal returns is the phase in which the marginal product of each additional worker increases. | Increasing |
| _________ marginal returns is the phase in which output increases at a decreasing rate as more units of variable input are added. | Decreasing |
| ____________ marginal returns is the phase of production where marginal product of each additional worker is negative. | Negative |
| A _____________ cost is is one that does not change in the short run, no matter how much output is produced and is sometimes called _________________. | fixed; overhead |
| ___________ cost changes with the amount of output produced and may include wages paid to labor, payment for natural resources, etc. | Marginal |
| _______ cost is the sum of fixed cost and variable cost (TC = FC + VC). | Total cost |
| __________ cost is the extra cost of producing one additional unit of production. | Marginal |
| ___________ revenue is the change in total revenue from selling one additional unit of output. | Marginal |
| Profit-maximizing quantity of output occurs at the level of production where ______________________ is equal to __________________________ (MR =MC). | marginal revenue; marginal cost |
| The firm needs to find its _______________________________ the level of production that generates just enough revenue to cover its total operating cost (TR = TC). | break-even point |
| A ____________________________ is a business owned by one individual. | sole proprietorship |
| A _________________________ is a firm owned by 2 or more co-owners. | partnership |
| A _____________________________ is a form of business organization recognized by law as a separate legal entity and owned by its shareholders. | corporation |
| A ______________________ is a a business investment that involves renting or leasing another successful business model. | franchise |
| Which form of business is faced with double taxation? | corporation |
| Sole proprietorships and general partnerships face ___________________ , meaning the owner’s personal assets may be used to pay off the debts of the firm and an owner’s house and other businesses he or she may own may have to be sold to pay off debts. | unlimited liability |
| Match the following business examples with the type of business organization they represent. Apple: _______________________________ Major law firm: _________________________ Lemonade stand: _________________________ | corporation; partnership; sole proprietorship |
| The making of a direct funding appeal to a “crowd” of possibly interested investors on a social networking platform is called _____________________________. | crowdfunding ( or crowdsourcing) |
| A provider of investment funds to a start-up business in exchange for partial ownership of the business is called ________________. | venture capitalist |
| Investors who provide funds to less-promising start-ups and are more interested in survival of business rather than return on investment are called _________. | angel investors |
| Places where entrepreneurs can receive the training and other assistance to build a successful start-up business are called ______________. | incubators |
| The total market value of all final goods and services produced annually in an economy is called ______________ , or GDP. | gross domestic product |
| A good that has not yet reached its final user is called an _____________________________, and is not counted in GDP. | intermediate |
| The services of a worker who is always paid in cash, the services of unpaid household workers, and the purchase of a used car is(are /are not) ________________ counted in the GDP . | are not |
| When C stands for ______________________ , I for _______________________ G for government expenditures, X for exports, and M for __________________ equation shows how to calculate GDP: GDP =C+I+G+X-M. | consumption; investment; imports |
| Of the four categories of spending, __________________________ accounts for the largest amount. | consumption (or household) |
| _______ personal income is your personal income after subtracting out taxes paid. | Disposable |
| What do economists call a general rise in prices? _________________ a general decline in prices? _________________ | inflation; deflation |
| GDP adjusted for price changes, or inflation, is called ___________________. | real GDP |
| CPI stands for __________________________ and measures ____________. | Consumer Price Index; changes in prices (or inflation) |
| What is per capita GDP and why is it useful? | per capita GDP is GDP divided by population and it allows for a more accurate comparison between nations of different sized populations |
| ______________ represents the total spending in the economy at alternate price levels and the slope of this curve is _________________. | Aggregate Demand (AD); negative |
| _________________represents the total output of the economy at alternate price levels and the slope of this curve is _________________. | Aggregate Supply (AS); positive |
| ___________ inflation is caused by increasing demand for output while ______________________ inflation is caused by rising costs of production. | Demand-pull; cost-push |
| If aggregate demand falls, the equilibrium level of income (real GDP) ______________and unemployment _____________ . | decreases; rises |
| An increase in aggregate supply leads to a(n) _________________in the equilibrium level of national income and _____________ prices. | increase; lower |
| If income, wealth, and/or population growth increases, then consumption (rises/falls) _______________. | rises |
| Higher taxes lower disposable income and (raises/lowers) __________________ consumption. | lowers |
| If interest rates fall then investment (the amount that businesses spend on capital goods) will (increase/decrease) _______________________. | increase |
| When the price level falls, the value of household and business assets (increases /decreases) . Households and firms spend (more /less) , and aggregate expenditures (rise /fall) . This is called the_________________________ effect. | increases; more; rise; wealth |
| When prices increase, people and businesses need (more/less) money. They (buy/sell) bonds, causing interest rates to (rise/fall) and investment and aggregate expenditures to (rise/fall) ___________. | more; sell; rise; fall; interest rate |
| When the price level falls, domestic goods become (more expensive / cheaper)_ for foreigners. Net exports (rise / fall) , and aggregate expenditures (rise / fall) . This is called the ___________________________________________ effect. | cheaper; rise; rise; international trade |
| The (short/long) _______-run is the period of time when all costs are variable and the (short/long) run the period of time is when all production costs remain constant. | long; short |
| Draw a short-run aggregate supply curve and a aggregate demand curve on the graph below, Label your axes and label the equilibrium income and equilibrium price level. | |
| _________economic indicators change before real GDP changes. | Leading |
| _________economic indicators are economic variables that tend to change at the same time real output changes. | coincident |
| Variables that do not change their value until after the value of real GDP has changed are called ___________________ indicators. | lagging |
| Draw the business cycle and label its four phases on a graph of time versus real GDP. | business cycle includes 4 phases: peak, contraction, trough, and expansion. The y-axis should be labeled Real GDP and the x-axis should be labeled Time |
| A worker changing jobs is considered ______________________ unemployed. | frictionally |
| Increasing use of computers or robots may cause _____________________ unemployment. | structural |
| The labor force includes those ___ yr. of age or older who are _____________ for work or who are currently ___________________. | 16; looking; working |
| A person who loses her job at the mill because the market for wood has hit a recession is considered _________________ unemployed. | cyclically |
| A strawberry picker who is out of work because the season is over is considered _________________ unemployed. | seasonally |
| A civil engineer working as a math tutor would be considered ____________________. | underemployed |
| To lower inflation, the Fed should (buy/ sell) _________ bonds. | sell |
| To fight unemployment, the Fed should (buy/sell) _________ bonds. | buy |
| To increase the money supply, the Fed should (raise/ lower) _____________ the reserve requirement. | lower |
| To increase the money supply, the Fed should (raise/ lower) ____________ the discount rate. | lower |
| The Federal Reserve is (controlled by/ independent of) ____________________ Congress and the President. | independent of |
| The central banking system for the United States is called the ________________. | Federal Reserve System (The Fed) |
| The Federal Reserve System is controlled by the __________________________________ of the Federal Reserve. | Board of Governors |
| If the FOMC decides to expand the money supply it would issue directions to (buy/sell) __________ government securities . | buy |
| What tool does the Fed rely on the most in conducting policy? | open market operations (buying and selling of government securities) |
| To reduce high inflation the government must (increase/decrease) ______________ spending and (increase/decrease) _________________ the money supply. | decrease; decrease |
| Oregon is in the _____ in Federal Reserve District which has a Federal Reserve Bank in the city of __________________. | 12th; San Francisco |
| Graph and label the Money Supply Graph. |
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teacherdavidfrost
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