Vocabulary
tools used to produce goods and services
real capital
What is an example of dissaving?
a. taking out a mortgage
b. opening a checking account
c. making a payment on a loan
d. making a deposit in a savings account
A: taking out a mortgage
Be able to draw and label the most basic form of the circular flow model. Your model should include two entities connected by four arrows, each labeled.
See the chart on page 29.
What are two primary uses for economic models?
Be able to explain.
Instruction and prediction
the resources necessary to create goods and services
factors of production
From who do businesses ultimately receive the factors of production?
households
What does the acronym PPC stand for? What is the purpose of the PPC graph?
Production Possibilities Curve
Helps economists see the maximum amounts of two commodities that a business can produce
the entire sum that households spend on goods and services
consumer expenditures
Government unemployment payments are an example of what type of payment?
transfer payments
What are the four components of a circular flow model and what is its purpose?
households, business firms, the government and financial markets
the model attempts to visually explain how a complete national economy works.
payments made in exchange for the factors of production
factor costs
What is the chief advantage of the line graph over the schedule?
it contains more data
How does discouraging entrepreneurship affect the flow of new products?
It decreases the flow of new products.
someone that begins a business
entrepreneur
Which of the following does not qualify as a "factor cost"?
1. author royalties, 2. sales taxes, 3. medical benefits, 4. interest payments
2. sales taxes
List and define the four factor costs.
rent: payments for use of an owner's property
wages: payments for labor used to produce goods and services
interest: payments businesses make on borrowed money
profit: difference between revenues from sale of a product and the cost of producing it
action of withdrawing money from an acct or borrowing money
dissaving
1. a business loan, 2. a house, 3. a tractor, 4. a hammer
b. a house
What is the "heart" of the economy that circulates money? p 35
the financial market
representations of objects or concepts
models
Which of the following would not be considered an example of land by an economists?
1. wheat, 2. petroleum, 3. sheep, 4. machinery
D. Machinery
Ludwig von Mises is well known for exploring the economic practice of ...
free markets
another name for a tabular model
schedule
On a PPC graph, any point on the graphed line represents....
production efficiency
Explain/define the economic concept of "crowding out".
"Crowing out" occurs when governmental borrowing reduces the money available money for businesses to borrow, causing businesses to die for lack of capital and an increase in unemployment.
payment for use of an owner's property factors of production
rent
What is the most important factor of production?
entrepreneurship
the human effort that goes into producing goods and services
labor
List the four factors of production.
1. land
2. labor
3. capital
4. entrepreneurship
a situation where governments, business or individual receives less income that expenditures
budget deficit
Which of the participants in and economic system are concered with creation of goods and services?
business firms
situation where more income is received than paid out in expenses
budget surplus
What are three types of models identified in the chapter.
1. PPC
2. Tabular Model (schedule)
3. Line graph
What are the two basic elements of a circular flow model?
business firms and households