Economics Final Review

How many distinct “factors of production” do economists recognize? four Land Capital Labor Entrepreneurship

Economic growth is most closely associated with an increase in ____ goods and services

Economics is best defined as the study of how societies deal with? the problem of scarcity

Division of labor is practiced because It increases efficiency by ensuring that all workers become good at specific tasks

What questions about production of goods do societies face? what, how, and for whom

What is a can of soup an example of? durable good

a production possibilities curve What do economists use to illustrate all conceivable combinations of output? a production possibilities curve

Gross domestic product The most comprehensive measure of a nation’s wealth is provided by its ______ Gross domestic product

When deciding how to use resources, you need to evaluate the costs and benefits of each choice to decide which meets your criteria. These are called Trade-Offs

the cost of choosing one alternative over another What is the best description to explain the meaning of opportunity cost? the cost of choosing one alternative over another

Paradox of value refers to the high value of an essential item and the low value of a nonessential item

People who hold political power are threatened by fundamental changes Why might people of a command economy resist going to a free-market economy? People who hold political power are threatened by fundamental changes

In a transitioning economy, why would privatization tend to raise a nation’s overall standard of living? People are more likely to be productive when it benefits them personally

A business run by a single person is a sole proprietorship

The economic system of the United States is considered a free market capitalist economy

How is the principle of “There’s No Such Thing As A Free Lunch” illustrated in a socialist economy? Socialist economies tend to offer extensive government services but have high tax rates.

What market structure is defined by a single producer? monopoly

Markets in the free enterprise system are seldom regulated by the government

What is an accurate statement about mixed economies today? There are more mixed economies in the world than any other kind

They set up unemployment compensation programs What have some states done to protect workers from adverse economic events such as layoffs and illnesses? They set up unemployment compensation programs

Government regulations ____________ protect consumers against harm from products on the market Government regulations

A document certifying ownership of part of a corporation is a stock certificate

What is an advantage of a traditional economy? Everyone knows exactly what their function is

What best describes the communist ideal? a classless society in which everyone works for the common good

What is a disadvantage of a market economy? It sustains a high degree of uncertainty

As a borrower, you want to pay _____ a low interest rate

They are an incentive for producers to produce more What best describes the influence of high prices on the behavior of producers? They are an incentive for producers to produce more

A woman borrows money to buy a house A woman borrows money to buy a house. If she does not repay the money the bank loaned her, the bank will take the house. What is the house? collateral

The demand for gas is largely inelastic. Why does an increase in gas prices lead to less consumer spending on other items? The demand for gas is largely inelastic.

What is guaranteed only by a promise? an unsecured loan

The percentage a bank will charge borrowers when they've loaned money is called the interest rate

Name some financial institutions Bank Insurance Company Savings and Loan

A supply schedule lists various quantities of a specific product with all possible prices in the market

Equilibrium is reached when what occurs? quantity supplied equals quantity demanded

A hungry man is willing to pay a high price for food A hungry man is willing to pay a high price for food. After he is no longer hungry, he is not willing to pay the same high price. Which of the following best defines this example? unit elasticity

Producers would make more of it. According to the Law of Supply, which of these would happen to an item as its price rose? Producers would make more of it.

Your portfolio is diversified. You have _____ investments many different

the substitution effect What is it called when you replace a costly item with a less costly one? the substitution effect

When the price of something increases, the quantity demanded ____ decreases

Why is it important to live on a budget? Living on a budget will make your life easier

What do price ceilings and price floors prevent? prices reaching equilibrium

What best describes the effects of price floors on the U. S What best describes the effects of price floors on the U.S. sugar industry? They helped sugar farmers while increasing the price of sugar for the consumer.

One of the disadvantages of a sole proprietorship is that the owner holds unlimited liability

According the Keynesian economics, which sector of the economy could offset a decline in business spending? Government

What is the primary source of revenue for the federal government? Taxes

Which type of tax is levied on specific items or services, including gasoline and telephone services? Excise tax

What is an example of federal mandatory spending? Social Security

Which type of tax is levied on the sale of an asset held for 12 months or longer? Capital gains tax

Of the four sources of government revenue, which is the smallest? Excise taxes

What is the single largest source of federal revenue? Individual income tax

Advocates of supply-side economics argue that spending by the federal government _______ Slows economic growth

According to Keynes, which sector was most responsible for the instability that led to the Great Depression? Investment

A severe economic downturn results in ________ Falling prices

The terms proportional, progressive, and regressive refer to Types of taxes

Sometimes necessary to help stimulate the economy In Keyne’s view, a short-term budget deficit due to government spending or tax cuts is _________ Sometimes necessary to help stimulate the economy

An economist might argue that a progressive income tax is effective because it is Equitable

What is the main purpose of a sin tax? Behavior adjustment

What is the single largest federal expenditure? Social Security

A ______________tax imposes the same percentage rate of taxation on everyone, regardless of income Proportional

The _____________ is the rate that applies to the next dollar of taxable income Marginal tax rate

What describes the Federal Reserve System (the Fed)? It is a mostly independent agency that supervises and manages the financial system

How does new money enter into circulation in the United States? It is distributed by banks, which get it from the Fed.

Which agency manufactures U.S. paper money? the U.S. Bureau of Engraving and Printing

What is a result from the implementation of a tight money policy? an increase in the price of credit

What is true about Federal Reserve System membership? Banks with national charters must join the Fed.

How many Federal Reserve districts are there? 12

loans and financial assistance What two forms of help do both the International Monetary Fund (IMF) and the World Bank offer developing nations? loans and financial assistance

What is the trade-weighted value of the dollar? an index showing the relative strength of the dollar

Exchange rates among the currencies of the world change _____. constantly

What is most directly affected by an embargo established by the United States? U.S. exports

A farmer can grow wheat or corn A farmer can grow wheat or corn. She grows corn because it will make more money than wheat. The value of the wheat crop she chose not to grow could best be described as _____. an opportunity cost

Which countries are most directly affected by NAFTA? the United States, Canada, and Mexico

What does a protective tariff seek to protect? domestic industries

_____ are taxes on _____. Tariffs, imports

both humanitarian and self-interest reasons The concern the international community has about developing countries is based on both humanitarian and self-interest reasons