Fundamental Topics

FOP- Land, Labor, Capital & Entrepreneurship Scarcity- issue all societies deal with Use a Price system to allocate resources Public Goods- Schools, roads, fire, police, parks, national defense Human Capital: Training for employees, schooling; example- college or on the job training Capital Investments: Investing in technology, equipment, machinery

Command Economy- run by the government (Communism) Examples- Cuba, North Korea Market- based on private ownership, prices determine distribution of goods/services Examples- U.S., Australia Mixed- mix of both, private ownership but government services also provided (roads, fire, police) Examples- India, Norway

Production possibilities Curve

Marginalism comparing the additional costs with additional benefits Law of Diminishing Marginal Utility Marginal utility is greatest with the first unit consumed. After that, each unit consumed produces less satisfaction.

Micro Topics

Supply- price and supply move in the same direction Demand- price and demand move in opposite directions, INVERSE relationship Supply- price and supply move in the same direction P D P S P S

Change in Qty Supplied change in price causes movement along the supply curve

Increase, Right, Decrease, Left IRDL Increase, Right, Decrease, Left

Shifts (IRDL) Demand Supply 3 2 1 1 3 2

Price Floor/ Ceiling Price Floor (above the EQ) Lowest legal price Causes surpluses Example: Minimum Wage Price Ceiling (below the EQ) Highest legal price Causes shortages Gas prices in the 1970s

Market Structures Pure Competition- all the same products, agricultural (eggs) Monopolistic Competition- lots of businesses, branding is important (shampoo, shoes, jeans) Oligopoly- few large firms (car manufacturing, drink industry) Monopoly- one company has total control (patent Natural Monopoly- (utilities)

Macro Topics

GDP total market value of all goods and services produced in a nation over a specific period of time, usually a year Formula for calculating GDP: GDP=C+I+G+Xn

Inflation CPI = cost of today’s market basket X 100 Cost of market basket in previous year

Monetary Policy Conducted by the FED Tools: Reserve Requirement (banks), Discount Rate (interest rate on loans), Open Market Operations (savings bonds) Speed up the Economy: Lower the reserve req. and discount rate; buy Bonds Slow down the Economy: Raise the reserve req. and discount rate; sell Bonds

Fiscal Policy Conducted by Congress Tools: taxes and gov’t spending Speed up the Economy: lower taxes, increase spending Slow down the Economy: raise taxes, decrease spending

Unemployment Structural- skill sets are out dated or not educated enough Frictional- waiting for something better Seasonal- lifeguard, snow plow driver Cyclical- flows with the ups and downs of the business cycle

Terms Inflation- general rise in prices Stagflation- inflation at the same time as a stagnant economy Recession- economic downturn Depression- recession that last a very long time National debt- money owed by the national gov’t Deficit- gov’t spends more than it takes in a year Surplus- gov’t saves more than it spends in a year

International Topics

Absolute Advantage Able to produce more of a good or service than another country Corn Soybeans U.S. 75 100 Russia 60 40

Comparative Advantage Able to produce a good or service at a lower opportunity cost than another nation can Put what you are looking for on BOTTOM – find ratio for each country Corn Soybeans U.S. 75 100 Russia 60 40

Exchange Rates Price of one nation’s currency in relation to another nation’s Determined by the demand for each countries exports at any given time Make sure to look at each column to see which currency is which Euro U.S. Year Value of 1 euro in U.S. Dollars Value of $1 in euros 2006 1.25 .79 2007 1.42 .70

Vocab to know Tariff- tax on imported good Embargo- stopping trade with a country Quota- limit on amount of imports that can come in from a country Standards- Regulation to keep consumers safe Export Subsidy- gov’t aid to a domestic company No Lead Paint!!!!!

Appreciation- dollar is strong Depreciation- dollar is weak How will this affect our imports and exports?

Personal Finance Topics

Investment types: Look at the pyramid in you notes to see about risk/return Taxes: Progressive- income (more you make, more tax you pay) Proportional: Social Security (6.2%) Regressive: Sales (Hurts low income and not rich) Know the affects of Inflation Credit Worthiness