Econ test 1
As discussed in class, what is economics?
Economics is the study of the use of scarce resources which have alternative uses
What is Gross Domestic Product (GDP)?
the total market value of all goods and services produced within a country at a given time.
At what point do supply and demand intersect?
Market equilibrium point
What is the term for a government buying all of the nation's major businesses? If the government later sells these to private stockholders, what would then occur?
Nationalization. Privatization.
How much is the current official national debt? Including the unlisted debts or unfunded liabilities (social security, medicare), what is the actual true national debt?
$36 trillion. $158 trillion.
What is the difference between a good and a service?
Good: any tangible thing that has a measurable life span. Service: intangible benefit exchanged for payment, consumed immediately.
What are the four factors of production?
Land, labor, capital, and entrepreneurship
What is the difference between a price floor and a price ceiling?
Price floor: A government-set minimum price to prevent prices from falling too low. Price ceiling: A government-set maximum price to prevent prices from rising too high.
The answers to what two questions can determine whether a nation is capitalistic or socialistic?
Who owns factors of production? Who answers the three questions?
What are the three basic forms of business organization? Which is the most popular form of business in the United States? What accounts for this type of business popularity?
Sole proprietorships, partnerships, and corporations. Sole proprietorship; it is popular because it offers owners several freedoms.
What is an opportunity cost?
the satisfaction a person gives up or the regret he experiences by not choosing differently.
What is the principle of diminishing marginal utility?
People tend to receive less and less additional satisfaction from any good or service as they obtain more and more of it during a specific period of time.
How can lower interest rates impact the economic growth of a nation?
boosts borrowing, spending, and investment, driving economic growth
What is a subsidy? Explain your answer.
Government-provided financial benefit, either direct (cash payments) or indirect (tax breaks), aimed at supporting individuals, businesses, or industries.
What are the three kinds of money that can circulate in an economy?
Commodity money, representative money, fiat money
What is the difference between intrinsic and subjective value
Intrinsic value is the value a person believes a product to have because of its nature, its scarcity, and the amount of labor required to produce it. Subjective value is the value of a product based solely upon the opinion of the buyer.
BIEQ: How does Jevons' concept of diminishing marginal utility compare to New Testament' teachings on material satisfaction and perseverance?
Jevons shows material satisfaction decreases with use, God demands that He be our first love and that by committing to glorify Him, we will have lasting rewards.
List four economic goals of most societies
Low level of unemployment, stable price level, healthy rate of economic growth, fair distribution of income.
Why is it extremely difficult for a monopolistic firm to exit the industry? What is the difference between a natural monopoly and a legal monopoly?
The firm is the sole provider of a product or service.
A natural monopoly owns or controls 100% of a resource. A legal monopoly is given an exclusive right to provide a good or service by the government.
What two factors keep a fiat monetary system functioning? What type of money does the United States currently use?
Faith that others will accept the money we have accepted and a limited quantity of money. Fiat money.
Is their such a thing as a free lunch?
No, there’s no such thing as a free lunch because whether through higher prices or some other trade, scarcity means nothing is truly without cost.
Why is it that when the price of an original good rises we tend to purchase more substitute goods and fewer complementary goods? Give an example of a substitute and complementary good.
Once goods rise, the price of complementary goods will likely also rise. Consumers will then purchase more of the substitute good, which likely remained at a lower cost. Substitute: Coke and Pepsi. Complementary: Cars and gas.
BIEQ: How does Adam Smith's concept of the "invisible hand" build upon his moral foundation described in the Theory of moral sentiments?
He suggests that Providential guidance occurs when individuals act justly and pursue their own self-interest, as this unintentionally promotes social good and economic prosperity.
You are the leader of your own country and have the power to establish its economic system. From the six systems explained in this text, choose one that would be economically and biblically ideal. Defend your selection economically and biblically. What kind of economy does the United States have?
A free market incentivizes Biblical values, property ownership, minimal government intervention, and citizens to be fruitful and multiply God's resources.
mixed economy or state capitalism
As discussed in the article, how did tariffs help protect American industries from foreign competition, and how does this relate to the concept of "fair trade" vs. "free trade" as seen in the policies of the past and present? List a reason advocates of free trade believe protectionism to be ineffective or harmful to the economy?
Tariffs can protect U.S. jobs from unfair foreign competition, while free trade can lower prices but risks American industry.
Free trade advocates say protectionism raises prices and causes unprotected job loss.