Name______Gabriella Ramos________________________________ Period____ Date_______

Economics Final Review

What is Economics?

What are the three basic economic questions?

1. what goods and services are produced?

2. How are goods and services produced?

3. Who consumes the goods and services?

2. The fundamental problem of economics is scarcity. What is scarcity?

The state of being in short supply

List the four factors of production:

1. land 3. capital

2. labor 4. entrepeneurshp

5. For something to have value, it must have ___utility_______________ (usefulness).

6. Give an example of a service:

Haircut

7. Give an example of a good:

book

8. What is a market?

a location or other mechanism that allows buyers and sellers to exchange a specific product.

9. The ____gross domestic product_______________________________________________ is the dollar

value of all final goods and services and the most comprehensive measure of a countrys total production
output.

10. What is a trade-off?

An alternative choice

11. What is an opportunity cost?

The cost of the next-best alternative.

12. How are trade-offs and opportunity costs related?

They are inevitable in the world of economics

Economic Systems

13. ____voluntary exchange_____________________ is a characteristic of capitalism in which buyers and

sellers freely and willingly engage in market transactions.

14. What type of economic system has private citizens that own the factors of production with no government
control?

capitalism

15. What is inflation?

Rise in prices in general

16. ___profit motive_____ is the driving force that encourages people and organizations to improve their
material well-being.

17. A _____free market_________ economy is one in which the government controls some major industries,
but still allows private ownership of businesses. The United States is an example.

18. A _____communist_________ economy is one in which government controls all industries and makes all
of the major decisions. North Korea is an example.

19. A _____Traditional economy_______________________ economy is based on ritual, habit, or custom.

The Australian Aborigines are an example.

Demand

What three things must exist for there to be demand?

20. People want a good 22. People have the resources to buy the
good

21. People are willing to buy the good

22. According to the Law of Demand, consumers will buy __goods_____ at low prices.

23. The demand curve is always ___downward___ sloping on a graph.

24. Give an example of a complement:

Cereal to milk

25. Give an example of a substitute:

Butter and margarine

Supply

26. The supply curve is always __upward___ sloping on a graph.

27. The Law of Supply states that producers will make __more___ goods at high prices.

List two examples of when supply would decrease:

28. When price increases

29. when quantity decreases

List the three stages of production in order:

30. increasing average product production 33.
Decreasing marginal returns

31. negative marginal returns

32. If workers get in each others way, then a business is operating at which stage of production?

Decreasing marginal returns

Prices and Decision Making

33. Market equilibrium is reached when supply equals___ demand.

34. If supply is greater than demand, then there is a ___downward spiral__.

35. If supply is less then demand, then there is a ____upward spiral__.

36. What is a price ceiling?

a maximum price that can legally be charged for a good or service

37. What is a price floor?

a minimum price for a good or service

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38. When there is a high price in a market, then producers will produce ____more____ and buyers will buy _
less___.
39. When there is a low price in a market, then producers will produce __less__ and buyers will buy
____more__________.

Money and Banking

40. What is a barter economy?

a cashless economic system in which services and goods are traded at negotiated rates.

What are the three functions of money?

41. Medium of Exchange 43. Store of value

42. Unit of account

To be a successful medium of exchange, money must have the following characteristics:

44. portable 46. durable

45. divisible 47. Limited in supply

48. What is fiat money?

inconvertible paper money made legal tender by a government decree.

49. What is commodity money?

money whose value comes from a commodity of which it is made.

50. If money becomes too plentiful/abundant, it loses__ value.

51. Which federal agency insures bank deposits in the event of a bank failure?

Federal Deposit Insurance Corporation

Which two substances make up the paper for our dollar bills?
52. Cotton 53. Linen

54. What is legal tender?

coins or banknotes that must be accepted if offered in payment of a debt.

PERSONAL FINANCE:
55. If you get a high return on an investment, then you also take a __big___ risk.

56. Why is savings important?

Prevents inflation from happening and gives you money in case of emergency

57. A ___broker dealer____ is a person who buys or sells shares in a company.

58. _____portfolio diversification_____ is important because it allows you to hold a large number of stocks so
that increases in some will offset unexpected decreases in others.

59. What is a 401(k) plan?

a defined contribution plan where an employee can make contributions from his or her paycheck either before
or after-tax, depending on the options offered in the plan.

60. _____403 b___ are not available through an employer but still allow you to set aside money for retirement.

61. What is a mortgage?

a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the
debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

62. What is the maximum percentage you should spend on housing out of your monthly income?
30%

63. Is a fixed rate or variable rate loan better for buying a car or house?
variable

64. What is credit?

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be
made in the future.

65. ______interest____ is the amount a borrower must pay for the use of someone elses money.

66. A ____debit card___ allows customers to transfer money electronically from their checking account to a
store or restaurant.

Federal Reserve

67. Which institution issues paper currency in the US?

The Federal Reserve
68. What is FSIC?
is a publicly traded business development company (BDC) focused on providing customized credit
solutions to private middle market U.S. companies.

69. What is US currency made of?

Cotton and Linen

Business Organizations

70. What is the most common form of business organization in the United States?
A sole proprietorship

71. Which business organizations has a limited life and a greater potential for conflict?
Partnerships

72. A _______conglomerate_____ is a corporation that has at least four businesses, each making unrelated
products, none of which is responsible for a majority of its sales.

73. A ____Multinationals_____ corporation is present in multiple countries and is oftentimes a

conglomerate.

74. A ___horizontal____ merger is when competing companies that make the same product join together
as one.

75. A __vertical_________merger is when corporations involved in different steps of manufacturing or

marketing join together as one.

List two examples of nonprofit organizations:

76. amnesty international

77. oxfam

Competition

List 4 characteristics of perfect competition:

78. a large number of small firms 81. Identical
products sold by all firms

79. perfect resource mobility or the freedom of entry into and exit out of the industry

80. perfect knowledge of prices and technology

82. Define collusion =

secret or illegal cooperation or conspiracy, especially in order to cheat or deceive others.

83. A ___geographic_______ monopoly is based on the absence of other sellers in a certain location, such
as one drugstore in a small town.

84. A _____technological__monopoly is based on the ownership or control of a manufacturing method,

process, or other scientific advance.

85. Give an example of an oligopoly.

Phone service providers

86. In a monopoly, who determines prices?

The head of the monopoly

87. Product prices tend to be __high__ when there are a small number of businesses in an industry.

88. What was the first federal law to outlaw monopolies?

Sherman Antitrust Act of 1890

Economic Instability

89. Draw a label a graph showing the two phases of the business cycle:

90. A severe recession is known as a _depression___.

91. What type of graph is used to predict changes in business cycles?

Aggregate Demand and supply graph

92. If a flood washes over a construction site and a worker loses his job, then the worker is

___frictionally_____ unemployed.
93. If Diego loses his job as a receptionist after an automobile company installs a computerized

phone system, then he is __structurally__ unemployed.

94. If Vanessa is laid off during a recession, then she is ____cyclically_______ unemployed.

95. At what percentage is full unemployment reached?

5.1%