Fundamental Economic Concepts
What are the four factors of production?
Land, Labor, Capital, and Entrepreneurship
Who purchases goods and services on the Product Market?
Households
How do you calculate GDP?
C + I + G + Xn
(consumer spending plus business investment plus government spending plus net exports)
If you are better at producing something than someone else, you have the ____________ ___________.
Absolute Advantage
A for-profit institution that stores deposits and gives out loans is a _________. A non-profit institution that stores deposits and gives out loans is a ___________.
Bank; Credit Union
What is the basic economic problem?
Scarcity - people's wants and needs are unlimited while the resources to meet those needs are limited and scarce
Households receive __________ when business purchase _____________ from them on the factor market.
Income; Resources
What does the consumer price index measure?
The inflation rate
If you have the lower opportunity cost for producing something than someone else, you have the ____________ _______________.
Comparative Advantage
Rank the following investments from lowest risk / lowest return to highest risk / highest return
Stocks - Bonds - Mutual Funds
Bonds, Mutual Funds, Stocks
What is opportunity cost?
The next best alternative given up when making a choice
If price rises, quantity demanded ______________ while quantity supplied ______________.
Falls; Rises
If you lose your job during a downturn, you are experiencing what kind of unemployment?
Cyclical Unemployment
What are the 5 barriers to trade?
Standard, Subsidy, Quota, Embargo, Tariff
What kind of tax is a sales tax? Who is hurt the most by this tax?
Regressive; people with lower incomes/people on fixed incomes
What must the relationship between marginal benefit and marginal cost be in order to make a rational decision?
Marginal benefit must be greater than or equal to marginal cost.
This market structure consists of an infinite number of firms selling identical products.
Perfect Competition
If the economy is currently in a recession, the FED might do what to help?
Decrease discount rate
Decrease reserve requirement
Buy Bonds
If the US dollar appreciates, this group will benefit:
Any of the below:
Americans traveling abroad
American Importers
Foreign Exporters
Banks will pay you _________ interest on your savings accounts while they will charge you _________ interest on loans.
Simple; Compound
OR
Low; High
What 3 Broad Social Goals are found in a Command Economy? What 3 Broad Social Goals are found in a Market Economy?
Command - Economic Equity, Economic Security, Economic Stability
Market - Economic Freedom, Economic Growth, Economic Efficiency
Draw a Price Ceiling and define the situation it causes.
Shortage (price maximum set below equilibrium).
If the economy is fighting high inflation, the government could do what to control it?
Increase Taxes
Decrease Government Spending
If the US dollar depreciates, this group will benefit:
Any of the Below:
Foreign Investors
Foreigners traveling to the US
American Exporters (sort of)
John pays $50 a month for car insurance. After getting in an accident, he has to pay $250 out of pocket. The insurance company pays $2000 for the remainder of the repairs.
$50 is John's ____________ and $250 is his __________.
Premium; Deductible