Name_________________ Period _____

Economics Final Study Guide

1. What is economics (economic reasoning)?It is the study of how people seek to
satisfy their needs and wants by making choices.

2. What is the basic problem in economics? Scarcity 3. Why/When are resources scarce? The principle that limited amounts of goods and
services and available to meet unlimited wants

4. Why is scarcity a problem in economics? Scarcity forces people to make choices. 5. What are the 3 basic economic questions? What goods and services should be
produced? How should these goods be produced? Who consumes the goods and services?

6. Who answers the 3 basic economic questions in a traditional economy? A command economy? A market economy? In a market economy they are answered
by individuals and in a command economy the gov answers the questions and in a traditional economy they are answered by habits 7. What is opportunity cost? Best alternative to your decision 8. What is the difference between a tradeoff and an opportunity cost? Trade offs are all the other options that you didnt choose. And opportunity cost is the next best choice 9. Value is determined by two factors, __scarctiy_ and ____Utility___.

10. What is meant by a free-enterprise economy? What are the characteristics of the US economy (free enterprise system)? 11. What is a public good? Give an example. A commodity or service provided
without profit to al members.

12. What is income redistribution? Give an example for the US economy? A way a
nations total income is distributed among its population.

13. What does the circular flow model illustrate?the circular flow model illustrates the
monetary and physical flow from firms to households and households to firms.

14. What is the role of an entrepreneur? A person who decides how to combine
resources to create goods and services.

15. What are the 4 factors of production? Give an example of each. 16. What is a production possibilities curve? A graph that shows alternative ways to
use an economies productive resources

17. What are marginal costs and marginal benefits? How do they influence economic decision-making? Marginal costs are the costs of producing one or more unit of a
good. Marginal benefits are the extra benefit of adding one unit. 18. What is the Law of Demand? Give an example. Law of Demand states that consumers will buy more of a good when its price is lower and less when its price is higher. 19. The demand curve shows the relationship between_Price_______ and ______Quantity demanded_______ 20. Will an increase in price affect demand or quantity demanded? Increase in price affects quantity demanded.

21. What are the determinants that will shift the entire demand curve? 22. If demand for a product increases, what will happen to price and quantity of that product? 23. What is the difference between substitute goods and complementary goods? How is demand affected by a price increase for each? 24. What is the Law of Supply? Give an example. 25. The supply curve shows the relationship between__________and _____________ 26. What are the determinants that will shift the entire supply curve? 27. If supply for a product decreases, what will happen to price and quantity of that product? 28. A shortage exists for a product when ___________________________________. How will a shortage affect the price of the product? 29. A surplus for a product exists when price is __________ than the equilibrium price. How will a surplus affect the price of the product? 30. A product is at market equilibrium when_____________________ 31. What are a price floor and a price ceiling? What are the likely unintended consequences of each? 32. What are the four market structures? Define and give an example of each. 33. Which market structure is most efficient? Why? 34. What is the main difference between perfect competition and monopolistic competition? 35. Which market structure engages the most in non-price competition? 36. What is the difference between an oligopoly and a monopoly? 37. What is collective bargaining? 38. How do oligopolies and monopolies hurt consumers? 39. What is the difference between arbitration and mediation? 40. What five issues do unions mainly negotiate on? 41. Why do partnerships most often fail? 42. What advantages does an LLC have over the other types of business organizations? 43. What is the formula to calculate GDP? 44. What types of products and services are not counted in GDP in the United States? 45. What are the four phases of the business cycle and what is happening to the business cycle in each phase? 46. What are the four influences of the business cycle? 47. What are the leading indicators in a business cycle? 48. Why do unemployment rates increase? 49. What is the difference between frictional/structural/seasonal/and cyclical unemployment? Define and give an example of each. 50. What type(s) of unemployment are governments and economists most concerned about? 51. What are the 3 causes of inflation? 52. How are purchasing power and savings affected by inflation? 53. High rates of inflation in the U.S. will negatively impact what groups of people? 54. What group would be hurt the most by inflation? 55. What are the sources of revenue for the U.S. government?

56. What does it mean when the government has a budget deficit? 57. What are two ways the government could reduce or eliminate the national debt? 58. What is the difference between a progressive tax and a regressive tax? Give an example of each. 59. When the federal government takes money out of a workers paycheck to distribute their income tax bill over time, this is called a __________________. 60. What taxes are designed to provide a source of income, insurance, and survivor benefits to retired, disabled or widowed/orphaned American citizens? 61. What are the tools available to the Fed in monetary policy? 62. How can the government influence the economy in fiscal policy? 63. When would the government and/or the Fed use contractionary or tight money policy? What actions might each take? 64. When would the government and/or the Fed use expansionary or easy money policy? What actions might each take? 65. What is the FDIC? Why did the federal government create the FDIC? 66. How can countries raise their standard of living? 67. What is the difference between comparative advantage and absolute advantage? 68. When do countries benefit from trade? 69. What advantage do developing countries have over developed countries in terms of the factors of production? 70. What are the advantages and disadvantages to using credit to make purchases? 71. How does risk affect potential earnings when investing? 72. What is a mutual fund? 73. What types of investments are the most liquid (easily converted to cash)? 74. What are the two ways to make money in the stock market? 75. The longest measured decline in GDP in American history is known as_________________________.