1. Economics Final Review

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

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

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

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

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

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

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

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

10. 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

11. 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

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

13. 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

14. 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

15. A business run by a single person is a
sole proprietorship

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

17. 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.

18. What market structure is defined by a single producer?
monopoly

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

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

21. 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

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

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

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

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

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

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

28. 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

29. 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

30. 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.

31. What is guaranteed only by a promise?
an unsecured loan

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

33. Name some financial institutions
Bank
Insurance Company
Savings and Loan

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

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

36. 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

37. 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.

38. Your portfolio is diversified. You have _____ investments
many different

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

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

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

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

43. 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.

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

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

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

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

48. What is an example of federal mandatory spending?
Social Security

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

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

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

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

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

54. A severe economic downturn results in ________
Falling prices

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

56. 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

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

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

59. What is the single largest federal expenditure?
Social Security

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

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

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

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

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

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

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

67. How many Federal Reserve districts are there?12

68. 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

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

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

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

72. 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

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

74. What does a protective tariff seek to protect?
domestic industries

75. _____ are taxes on _____.
Tariffs, imports

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