Basic Economic Concepts
What is the fundamental economic problem of having limited resources to meet unlimited wants?
What is scarcity?
What is the law of demand?
as the price of a good increases, quantity demanded decreases, and vice versa
What is a market structure where many firms offer a homogeneous product, and there are no barriers to entry?
What is a perfectly competitive market?
What is the total market value of all final goods and services produced within a country in a given period?
What is Gross Domestic Product (GDP)?
What is the use of government spending and taxation to influence the economy?
What is fiscal policy?
What is the next best alternative foregone when a decision is made?
What is the opportunity cost?
What is the law of supply?
as the price of a good increases, quantity supplied increases, and vice versa
What is a market structure where a single firm is the sole producer of a product with no close substitutes?
What is a monopoly?
What is a general increase in prices and fall in the purchasing value of money?
What is inflation?
What is the process by which the central bank controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency?
What is monetary policy?
What is a graph that shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized?
What is a production possibilities curve (PPC)?
What happens to the demand curve when there is an increase in consumer income?
the demand curve shifts to the right
What is a market structure where many firms sell products that are similar but not identical?
What is monopolistic competition?
What is the percentage of the labor force that is unemployed and actively seeking employment?
What is unemployment rate?
What are government programs that automatically help counteract economic fluctuations (e.g., unemployment benefits, progressive taxes)?
What are automatic stabilizers?
What does the law of increasing opportunity costs state?
as production of a good increases, the opportunity cost of producing an additional unit rises
What are input prices, technology, expectations, number of sellers, and government policies?
the determinants of supply
What is a market structure where a few large firms dominate the market?
What is an oligopoly?
What is a measure that examines the weighted average of prices of a basket of consumer goods and services?
What is the Consumer Price Index (CPI)?
What is the Federal Reserve's role in the U.S. economy?
to manage the nation's money supply and regulate the banking system?
A ___ economy is when the government makes all economic decisions, whereas a ____ economy is where economic decisions are made by individuals and businesses based on supply and demand?
command, market
What is the price at which the quantity demanded equals the quantity supplied?
the equilibrium price
What is the difference between short-run and long-run in terms of production?
the short-run is a period during which at least one of a firm's inputs is fixed, while in the long-run all inputs can be varied
What is the difference between nominal and real GDP?
nominal GDP is measured in current prices, whereas real GDP is adjusted for inflation
What is the difference between expansionary and contractionary fiscal policy?
expansionary fiscal policy involves increasing government spending and/or decreasing taxes to stimulate the economy, while contractionary fiscal policy involves decreasing government spending and/or increasing taxes to slow down the economy